Sunday, January 13, 2008
Portfolio Review: RNA Therapeutics Deals Help Sector amid Recession Fears
One was for ISIS’ mipomersen for the treatment of hypercholesterolemia, which although an antisense and not an RNAi compound further highlighted interest in RNA-based therapeutics in general; the other was for Tacere’s AAV-shRNA TT-033 gene therapy for HCV and represented the first licensing of an DNA-directed RNAi Therapeutics program by Big Pharma (Pfizer). This happened the same week that I attended a presentation by a VP responsible for RNA therapeutic drug development for a major pharmaceutical company, who admitted that the pharmaceutical industry was a failing business model which may only be saved by technologies such as RNAi (stressing especially the potential cost and time savings). Clearly, RNAi Therapeutics is and will continue to be a hot commodity in 2008 and beyond.
Interestingly, while earlier RNA therapeutics deals tended to lift the entire sector, two companies that particularly live on partnering hopes failed to participate in the rally: Silence Therapeutics (-11.4%) and Nastech Pharmaceuticals (-4.5%). It seems that the lift in Alnylam’s share price (+8.8%) indicates that investors are starting to focus on the proven players with solid balance sheets at a time when biotechs may find it difficult to raise funds in the capital markets.
Benitec: I will take profits from Benitec by selling 1/3 after it exploded on the Tacere deal (Benitec retains significant stakes in TT-033 after it spun out Tacere). This will also avoid Benitec becoming too large a position. Moreover, the exclusive license award to the fundamental Fire-Mello patents to Oxford Biomedica this week for lentivirally-delivered expressed RNAi further may be interpreted as a negative development for Benitec’s IP position on DNA-directed RNAi, including its phase I program for HIV which makes use lentiviral RNAi technology. Still, Pfizer has now repeatedly shown interest in Benitec’s RNAi technology, and one has to wonder whether more deals are in store.
Nastech: The company announced this week, without giving an explanation, that Philip Ranker resigned as CFO. My motivation for including Nastech in the portfolio was based on hopes for a successful spin-out of RNAi Therapeutics subsidiary MDRNA. A delay in the mdRNA spin-out, however, may force Nastech to seek the capital markets for a secondary, thereby risking massive dilution at current price levels. Seeing the CFO go at this juncture forces me to reduce my position from 8.8% to 5% of my portfolio.
Oxford Biomedica: Four years ago, Oxford Biomedica first piqued my interest when they presented impressive data on targeting SOD1 for the treatment of a form of amyotrophic lateral sclerosis (ALS; subsequently published in Nature Medicine in 2005: Ralph et al. Nature Medicine 11:429). Finishing up my D.Phil. in Oxford I even enquired whether they were looking for scientists working on RNAi gene therapy, but was told that they were pursuing this more as a tool, not a therapy. Clearly, with the new license, the Alnylam of lentiviral gene therapy technology is now officially part of the RNAi Therapeutics community. A broad clinical pipeline, a solid financial position following a high-profile deal last year with Sanofi-Aventis for the phase II/III cancer immunotherapy Trovax, their track record of scientific accomplishments and an unparalleled IP estate in lentivirus technology are worth 6% of my model portfolio.
ISIS Pharmaceuticals: The remaining cash from the sales of Nastech and Benitec will be invested in ISIS since I believe that the markets have not fairly valued the Genzyme transaction. In the long-run, it will not only help validate ISIS’ antisense chemistry in investors’ eyes, but also finally gives ISIS the financial strength to realize the full potential of their technology.
Disclaimer: This blog is not intended for distribution to or use by any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the author or any of his collaborators and contributors to any registration or licensing requirement within such jurisdiction. This blog expresses only my opinions, they may be flawed and are for entertainment purposes only. Opinions expressed are a direct result of information which may or may not be accurate, and I do not assume any responsibility for material errors or to provide updates should circumstances change. Opinions expressed in this blog may have been disseminated before to others. This blog should not be taken as investment, legal or tax advice. The investments referred to herein may not be suitable for you. Investments particularly in the field of RNAi Therapeutics and biotechnology carry a high risk of total loss. You, the reader must make your own investment decisions in consultation with your professional advisors in light of your specific circumstances. I reserve the right to buy, sell, or short any security including those that may or may not be discussed on my blog.