Thursday, September 24, 2009

Run-Down of Companies in the RNAi Therapeutics Portfolio

Alnylam: As the bellwether of RNAi Therapeutics due to its IP position, maturing pipeline, strong balance sheet and a generally broad outlook on RNAi Therapeutics, a must for those (institutional) investors with significant funds to invest in the RNA Therapeutics space. Data from Alnylam’s Huntington’s Disease and RSV programs suggest that they have potential on their own, independent of how they contribute to the learning of RNAi for CNS and lung disorders in general. Surely, the hiring pattern of Big Pharma argues that the perception of RNAi as a therapeutic modality has not gone out of fashion there, immediately adding potential licensees to Alnylam’s leading RNAi trigger portfolio.

However, as it is delivery that potential licensees and investors are increasingly paying attention to and even cash-rich Big Pharma/Biotech will question whether it should spend $300M for an RNAi trigger license now that there have been a few decisions that did not go in Alnylam’s favor, I am not sure whether we will see a simple pre-packaged RNAi trigger platform deal. Rather, such IP access may be packaged with access to Alnylam’s know-how on the delivery, chemistry, and safety of RNAi Therapeutics, somewhat reminiscent of the Roche deal and the Kulmbach component. To set up such deals may take longer, but ultimately provide more value not only for the licensee, but also for Alnylam. Certainly, positive SNALP clinical data should prove as a catalyst for these negotiations and the stock.

Tekmira: If you did not know already, my favorite RNAi Therapeutics investment right now. Pioneered the, in my opinion, most advanced systemic RNAi delivery technology, SNALP, which renders the Canadian $50M market cap company fully exposed to the major value drivers in the space near- to mid-term. The well validated ability to deliver oligonucleotides to the liver with SNALP will make Tekmira not only an attractive collaborator and acquisition target in RNAi Therapeutics, but should offer it new business opportunities outside the traditional siRNA structure. This includes various forms of microRNA mimics and inhibitors, immunostimulatory oligonucleotides, and oligos for targets based on emerging non-coding RNA pathways or other knockdown mechanisms. Mir-122 inhibition with SNALP may be an interesting pharmacologic alternative to the naked LNA-anti-miR122 by Santaris now in late phase I studies. Demonstrating the utility of SNALP outside the liver, such as for solid cancers and cells of the immune system (maybe by using targeted delivery) could further increase the perceived value of this conservatively managed company. With about two years’ worth of burn in a relatively good financial position.

I should temper my enthusiasm, however, as there are no sure things in biotech and the first use of SNALP in Man may well yield some unpleasant surprises and could dramatically change the outlook for the company. Similarly, it needs to think ahead about how to access a broader investor audience outside of the Canadian market as its own pipeline is growing in size and capital demand. A good bet nevertheless.

Benitec: Faces an uphill battle with regards to their core DNA-directed RNAi patent, essentially pitting it against mighty Fire-Mello. However, as time progresses and the ’099 Graham patent not getting any younger, I’m starting to have doubts as to how important this patent will prove to be. Other patents assigned to Benitec, the HIV programs, and potentially the Biomic collaboration may prove to be of more immediate practical value to the company. What is needed, of course, is a re-capitalization of the company.

Targeted Genetics: This cat has 8 lives. I had been quite confused that after almost everything scientific and clinical was going in Targeted Genetics’ favor, the company was rapidly approaching bankruptcy. Society and the investment world are not always fair, which is a warning to those investing just according to scientific principles. Now, Genzyme has come to the rescue, but it remains to be seen how committed the company is to its RNAi pipeline. It would make sense for RNAi to be part of a company focusing on diseases of the eye (and CNS) for which AAV and lentiviral gene therapies currently have most promise (the eye as the liver of DNA-directed RNAi).

RXi Pharmaceuticals: Experienced management and scientific team, access to Tuschl I and preferential treatment by the state of Massachusetts, yet for some reason very little drive towards the clinic and financially challenged. Instead of a clinical pipeline, a pipeline of ‘interesting’ RNAi trigger and delivery approaches. I’m still not sure about what their rights to Tuschl I are that have recently been characterized as ‘limited’ in scope. This, however, and the Massachusetts/Mello connection are probably the biggest draws for the stock. Still, without being able to offer complementary practical know-how I would think Big Pharma is not too anxious to access RXi as a partner.

Silence Therapeutics: Similar to RXi Pharmaceuticals, stands to greatly benefit depending on the messiness of the Tuschl patent outcomes where Silence’s ability to operate in the 21-23nucleotide space is at stake. Also reasonably successful in battling the patent that most likely imposes most constraints on the company, namely Kreutzer-Limmer. While nobody would doubt Alnylam’s freedom-to-operate (however questions have been raised as to the degree of being able to exclude), my fundamental question about Silence Therapeutics is whether what may be a patent work-around also makes for the best scientific approach. Their underlying patent application is based on quite limited data, so I have yet to be convinced of any real generally applicable scientific advantage of the Atu-RNAi design (nevermind, at least in terms of IP, my opinion does not matter much since the European and US patent offices appear to concur with Silence). Things have been looking up recently for the company and its Atu-027 program for advanced solid cancers has started phase I dosing. This program aims at silencing the PKN3 kinase in the endothelia of solid tumors which apparently inhibits metastatic spread through reduced lymphangiogenesis. An interesting approach towards RNAi cancer therapy and has been described in a detailed company publication late last year that provided reasonable support for bona fide in vivo gene knockdown using lipoplex delivery (Aleku et al., 2008). One interesting point I found in that publication was that in cynomolgous monkeys, the circulation time of the particles was greatly extended to what they found in rodents. This can only be a good thing for the prospect of lipid-based nanoparticles.

mdRNA: Together with Targeted Genetics, another unlikely survivor from the financial crisis coming from Seattle. Two deals with Big Pharma, one on delivery (Novartis), and one on siRNA structure (Roche), early this year contained enough upfront to give the company another couple of months to get itself on sounder footing. Similar to Silence Therapeutics, their main delivery approach consists of essentially the same chemistries as contained in SNALP and apparently lends itself to targeted delivery (which, however, is not a unique property of their technology). Also, I would be cautious about claims that putting UNA-modified nucleotides in the 3’ overhang of siRNAs would liberate them from claims in Tuschl II. UNA modifications appear to be a viable option for the siRNA modification toolbox, but I would be cautious in how far they are uniquely advantageous over other chemistries at last according to an excellent, comprehensive siRNA modification screen as published by Bramsen et al. this year. In any case, the fresh, and apparently well-connected management team can be congratulated for rescuing the company, and the scientific team for their skills in being able to rapidly adopt oligonucleotide modification and liposomal delivery skills at least to the degree that Big Pharma is curious enough to look under their hood. I would like to speculate that if RXi e.g. had built such practical skills in-house, we may have seen some deals that would not have been as dilutive as recent efforts to raise capital.

Rosetta Genomics: After having apparently staked their future on a blood-based test for colorectal cancer screening, it has reported that these plans have been slightly delayed due to technical issues. The poster on the colorectal cancer-related microRNAs in blood that had been presented previously certainly showed initial proof-of-concept for blood-based microRNA diagnostics, but more robust detection methods are needed in order to make such tests a commercial reality. It is debatable whether the one-shot strategy was a wise one, instead of churning out a series of tissue-based Dx albeit with a much smaller target market. If blockbuster products like a screening test for colorectal cancer were a primary business goal, then an alternative route may be to collaborate on Rx-Dx combinations which however are much onerous to develop than home-brew Dx and may require a partner like Roche. There may be a number of regulatory and health care reform issues that could affect the future prospects of being able to sell and get reimbursements for home-brew Dx. On a positive note, according to my literature, I have stumbled across enough references by Big Pharma on the potentially unique utilities of microRNA Dx that I believe the concept has well arrived in the minds of important constituencies for Rosetta. A pick-up in sales of their first products would also be welcome by investors. Due to a number of synergies, companies like Regulus may also be a good home for Rosetta Genomics.

ISIS Pharmaceuticals: There is certainly a flood of ISIS-related antisense in various stages of clinical development, some with interesting results indicating efficacy. Mipomersen meanwhile blazes the trail for ApoB as a target for hypercholesterolemia, and assuming it will confirm phase II results, I am curious about how much of the patient audience Genzyme is able to capture. This should also have implications for the financial potential of follow-on ApoB therapeutics. ISIS also was successful in monetizing their IP for ssRNAi with almost $21M (! a high number considering the stage of ssRNAi and other deals that Alnylam has done in the past) in upfront and near-term payments from Alnylam, while still being able to develop ssRNAi Therapeutics itself. OK, you know that I have some problems with how ISIS likes to interpret RNAi as an antisense technology, so please allow me this comment: if RNAi already was a single-stranded antisense technology, how is it then possible to claim ssRNAi as a separate technology without running afoul double-patenting rules? Anyway, I acknowledge that ISIS is on a good way of becoming a sustainable, profitable oligotherapeutics company and probably should be part of a diversified RNA Therapeutics portfolio.

Oxford Biomedica: Despite disappointing cancer vaccine results causing partner Sanofi-Aventis to give up on Trovax, Oxford Biomedica must have been able to impress Sanofi-Aventis with their core leniviral delivery technology (note: Trovax is not a lentiviral technology). Sanofi-Aventis thus seems to agree that lentiviral delivery has significant potential for applications of the CNS, including the eye. However, as I hear little about Oxford Biomedica using its IP and know-how in RNAi, I will consider replacing it with companies like Genesis R&D in my next portfolio update. There is certainly a lot of DNA-directed RNAi Therapeutics technology and IP looking for a well-funded home.




[Please note that the following is a run-down of my own impressions of companies in the portfolio and links are not necessarily provided for all major assertions. Please use the comments section if you believe that there are factual inaccuracies]

7 comments:

Anonymous said...

Dirk,

a very balanced assessment.

I have a question relating to Rosetta and microRNA applications.

As you are likely aware, about a year ago, Rosetta started a division focused on the development of agro applications of micro RNAs called "Rosetta Green". Since then, very little information came from the company in regard to Rosetta Green and its projects, except recently, in that Mr.Avniel is stepping down as the CEO of the company and, instead, will head the Rosetta Green division (the question that obviously presents itself in this context is this: Was this a PR stunt with the aim to cushion the arguably negative impact of having to replace the CEO or is this the endorsement of the potential for agro microRNA applications? - in view of the very limited information coming from Rosetta Green, I suspect it is the former rather than the latter but the fact is that no one outside the company really knows).

My question to you is what is your take on the potential for microRNA applications in the agricultural business and has there been any research published in peer reviewed journals that would support this potential.

Thanks,

Martin

Dirk Haussecker said...

Hi Martin,

I also find it strange to create a Rosetta Green division and then let the world in the dark about specific targets and stage (pure bioinformatic predictions?).

Genetic engineering, needless to say, in general is a valuable technology for agriculture, and should be so for the development of biofuels as well. The modulation of microRNAs may be another tool for this next to RNAi knockdown and 'gene therapy', the latter of which, of course, is much easier to do in plants than humans.

One fundamental thought about microRNAs is that they have evolved to regulate entire pathways. As in agronomic traits are largely the outcome of lengthy biosynthetic pathways, it is possible that a number of plant microRNAs turn out to be key regulators of these pathways and represent good targets for Rosetta Genomics. Unfortunately, I am not familiar enough with this literature to know which targets in that space may be hot already.

Dirk.

Ken said...

As always, many thanks for sharing your informed and considered perspective on the RNAi landscape.

It seems you are asserting ALNY has become such a relatively mature company that retail investors with more finite funds (and risk tolerance?) should shop elsewhere in the space. An interesting perspective since the other common knock against ALNY is that it's too early to invest here because nothing in ALNY's pipeline has advanced very far and RNAi, in general, still has not conclusively validated the hype it has generated.

I don't dispute the notion that an upcoming ALNY deal could likely be "packaged" and therefore more cumbersome to negotiate. Obviously, ALNY doesn't have another drug sufficiently advanced to partner right now. However, here it **seems** the emphasis on complex deals, slowed by patent disputes and awaiting clinical SNALP data puts you in the camp skeptical of any impressive deal coming this year. If this is your contention, I disagree and once again point to the myriad statements about deal negotiations the company continues to make regarding "two or more" deals for 2009.

My beef with that company is that while they have never said "Sooner than later" this year about when to expect a deal, they should have managed expectations better by bracing investors to not look for deals until the latter part of the year. Certainly by June they should have known how the pace of the negotiations was trending and provided investors with a more informative outlook based on that.

Lastly, I wonder what your NT expectations are for Tekmira unrelated to ALNY and the deals ALNY may do that include SNALP in the package. That company has not given investors much hope for more to happen this year and for the reasons he mentioned, that stock seems to be more likely than ALNY to flatline for a while.

Certainly, they haven't guided for any more unilateral deals this year even if they may benefit from something ALNY does. The major positive for TKM, however, is that they will be the first to release clinical SNALP data with their Ph1 ApoB trial expected to end late this year/early next year and that's not too far off.

Dirk Haussecker said...

Hi Ken,

Thank you for your comments. Here are my thoughts about the issues you brought up:

You comment:
"It seems you are asserting ALNY has become such a relatively mature company that retail investors with more finite funds (and risk tolerance?) should shop elsewhere in the space. An interesting perspective since the other common knock against ALNY is that it's too early to invest here because nothing in ALNY's pipeline has advanced very far and RNAi, in general, still has not conclusively validated the hype it has generated."

My response:
Not sure whether I can follow the logic of your first sentence, maybe you can clarify the assumption: ‘mature company --> not good for somebody with finite funds/risk tolerance’.

In any case, it was not my intention at all to suggest that Alnylam was a mature biotech company, but, yes, compared to other RNAi Therapeutics-focused companies they can be considered a relatively mature and diversified company with a long-term focus of creating value from RNAi Therapeutics and related pathways. This also means investments by the company into areas that are probably not all near-term value drivers thus creating some extra weight which makes a $1B market cap company somewhat more sluggish to move in terms of share price.

Turning to a company like Tekmira, I believe it is an example of a company in a reasonable financial position and that has invested almost all its assets into a technology that for better or worse will undergo a significant re-eValuation quite soon. Let’s say results in 4 months show that ApoB can be knocked down in Man at safe dosages. This event could be immediately applied across their entire pipeline. Also, at the same time it will become very attractive to Big Pharma as a leader in systemic RNAi Therapeutics, not only because they may have already collaborations with Tekmira, but also because to have such expertise in-house would accelerate the broad development of RNAi Therapeutics and would therefore be so much more invaluable. If the safety will turn out to be unacceptable, Tekmira may have no choice but to take its $30M in cash and re-invent itself. This event, however, would not be the end of Alnylam, of course, despites its own bets on liposomal delivery.

It thus depends on the perspective. Alnylam is a very good option for somebody with a more finite risk tolerance, as you call it, and who is still somewhat unfamiliar with RNAi Therapeutics, a space where dozens of smaller companies clamor for attention.

As to RNAi Therapeutics and hype, I believe it is not much different than the financial markets in that highs/greed and lows/fear change and a $1.5B valuation for Alnylam 2 years ago, or Merck’s acquisition of Sirna Therapeutics for $1.1B may appear pre-mature in retrospect. Lean times like these can be good in that they can motivate people to search for solutions more urgently than before. There are certainly a few technologies that are being invented and maturing that have the potential to provide reasonable follow-ups to grow the market for RNAi Therapeutics for years to come.

Dirk Haussecker said...

(response to Ken's comments continued...)

Your comment:
"I don't dispute the notion that an upcoming ALNY deal could likely be "packaged" and therefore more cumbersome to negotiate. Obviously, ALNY doesn't have another drug sufficiently advanced to partner right now. However, here it **seems** the emphasis on complex deals, slowed by patent disputes and awaiting clinical SNALP data puts you in the camp skeptical of any impressive deal coming this year. If this is your contention, I disagree and once again point to the myriad statements about deal negotiations the company continues to make regarding "two or more" deals for 2009.

My beef with that company is that while they have never said "Sooner than later" this year about when to expect a deal, they should have managed expectations better by bracing investors to not look for deals until the latter part of the year. Certainly by June they should have known how the pace of the negotiations was trending and provided investors with a more informative outlook based on that."

My response:
Alnylam’s management has high credibility in my eyes, and I believe that these comments were not made frivolously and are well founded- even now. It is impossible, however, to ever ‘promise’ a deal, since if it were a sure thing, then the deal would have already been done. It is therefore all based on probabilities, and while probabilities may still be high, I have to take into account developments that make me personally lower my expectations. At the same time, while negotiations may have slowed down, I still believe Alnylam to be in active talks and it would therefore not be helpful to first tell the market to possibly expect less this year and then turn around in a month and retract the retraction.

Your comment:
"Lastly, I wonder what your NT expectations are for Tekmira unrelated to ALNY and the deals ALNY may do that include SNALP in the package. That company has not given investors much hope for more to happen this year and for the reasons he mentioned, that stock seems to be more likely than ALNY to flatline for a while.

Certainly, they haven't guided for any more unilateral deals this year even if they may benefit from something ALNY does. The major positive for TKM, however, is that they will be the first to release clinical SNALP data with their Ph1 ApoB trial expected to end late this year/early next year and that's not too far off."

My response:
I believe that while it is good for Tekmira to continue their dialogue with potential partners, it appears to me that for a company of its size, to do the things that it has committed to very well, it has to focus on the most urgent tasks at hand which in my opinion are foremost the ApoB program and gearing up towards PLK1. If ApoB is good, then the deal-making and collaborating should happen by itself. It would also be difficult for either party to put a value on the technology now that human proof-of-concept data is imminent.

Anonymous said...

In response to your comment that companies like Regulus might be a good home for Rosetta Genomics, I think it would be difficult at this point to determine an acquisition price for Rosetta that accurately and fairly values its' assets and commercial products.

We learn every week about new ways that microRNAs regulate cellular processes. I believe that Rosetta has discovered hundreds of novel microRNAs over the years. How can someone accurately know the true commercial value of these microRNAS years from now when mimic and inhibition methods may be more effective?

We also don't know the true market potential of their molecular diagnostics tests since they are new to the world. My concern about a buyout now is that any price paid might severely undervalue the company's true worth.

Have you seen any reliable valuation methods for proprietary microRNAs?

Dirk Haussecker said...

I agree with you that it would be difficult to assign a value to ROSG, but in the same vein it would be even more difficult to assign a value to Regulus (establishment of microRNA Rx platform still pretty much work in progress and less mature than RNAi Therapeutics e.g.). At least the path for microRNA Dx is pretty much established, with a few Dx already out. Use, pricing, and distribution does not appear to be that much different from other types of Dx. One important variable may be the robustness with which microRNAs can be quantitated when taken straight from the blood.

You are right in that ROSG should sit on a treasure trove of information on microRNAs and is ideally positioned to leverage that for building IP. However, I believe that in a different setting/management the full value could be better realized (wearing the hat of a diplomat). Due to the size of ROSG not a takeover, but maybe some kind of consolidation.

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