Thursday, October 22, 2009

Refocusing on the Fundamental Promise of RNAi Therapeutics

Certainly, the world’s economy has been going through a phase of heightened uncertainty and investors might be forgiven if they focused on the near-term rather than long-term endeavors such as the development of a new biotechnology. However, it would not be fair to blame the current apathy towards RNAi Therapeutics entirely on the economy and investor schizophrenia. Instead, the valid apprehensions about the platform with respect to delivery and innate immune stimulation need to be addressed in a scientifically rigorous manner, and then be followed up with a growing pipeline of highly innovative, targeted therapeutic candidates. Moreover, the focus of management and investor communication should be on the therapeutic opportunities rather than raising expectations about IP monetization and non-core business opportunities.

If this reminds you somewhat of Alnylam and appears to be an unfair characterization of other companies in the space, it is no coincident. Alnylam is widely regarded as the bellwether of RNAi Therapeutics and greatly influences the general perception of the technology. Personally, I’m always surprised how high the keyword ‘Alnylam’ ranks, usually among the top 2 search items, when it comes to visitors to this blog. Maybe I shouldn’t be, since Alnylam has certainly earned its place at the top through their vision of accumulating fundamental RNAi trigger IP early on and their ability to monetize on this through their platform partnerships. With close to $450M in the bank, however, and the scientific challenges that have come to the fore, the world would like to see more evidence that Alnylam has conviction that RNAi Therapeutics has real positive net present value.

Playing the devil’s/short’s advocate, what specifically makes one wonder whether Alnylam has lost its enthusiasm about RNAi Therapeutics? Besides the perceived focus on IP monetization over expanding the clinical pipeline, it is a lead program (ALN-RSV01) that targets an organ for which RNAi delivery does not appear to be as robust as e.g. in the liver and appears to be artificially kept alive to buy time until improved follow-on candidates or other programs fill the void; moreover, clinical results that indicated that ALN-RSV01 has an uphill battle in front coincided with the dark days when innate immune stimulation was thought to be a major class effect of RNAi Therapeutics and Alnylam was not seen to be sufficiently proactive; $20-25M of upfront and near-term payments to ISIS Pharmaceuticals for access to its single-strand RNAi Therapeutics-related IP, a technology that lags years behind dsRNAi Therapeutics- contrast this with its reluctance towards spending similar amounts on nearer-term dsRNA delivery opportunities; directing too much (public) focus on non-core business opportunities such as vaccines, stem cells, and even Regulus; no insider purchases in years, and real insider selling (not just option exercises) that makes you wonder about the personal commitment of management and whether they consider Alnylam a good investment at all. As a potential platform licensing partner I would ask myself that if IP monetization and non-core businesses are where Alnylam sees most value in, why should I invest $300M for a simple therapeutic platform license, particularly at a time when events surrounding the Tuschl and Kreutzer-Limmer patents appear to weaken Alnylam’s ability to exclude, and when $600M in payments to Alnylam has not been enough for a Big Pharma partner to enter a single program into the clinic?

The problem is that Alnylam has become the victim of its own IP success, diluting its efforts by trying to lead in all things RNAi Therapeutics, playing it safe by spreading its risks widely, maybe tempted by its enviable financial position. I am aware that there is a conflict between investing in the most valuable near-term opportunities and demonstrating the broad capabilities of a biotechnology platform. While the latter should not be neglected, and Alnylam is already doing a tremendous job by outsourcing much of it to academia and industry by providing siRNA reagents and playing the role of a facilitator, the scientifically limited capacity of a 150+ company could be focused on de-risking the technology further by showing unambiguous on-target RNAi knockdown in vivo, something that it is well placed to do due to its leading siRNA chemistry know-how and siRNA sequence design engine (a nice demonstration of this is the RNAi Roundtable on RNAi Lead Development). Such capability can also be harnessed for being an attractive platform licensing partner (besides having unambiguous freedom-to-operate for its RNAi triggers), as it is obvious that Big Pharma is looking for enablement first when evaluating RNAi Therapeutics partnerships.

The second area of (publicly declared) focus could be on identifying and validating a series of high-value gene targets expressed in organs for which delivery risk is currently lowest: liver, solid cancer, and the eye (the latter maybe even with a dual siRNA/ddRNAi approach). This effort includes hiring appropriate leading disease experts. While Elan Pharmaceuticals has too many management problems to even start elaborating in this blog, one thing that it has done well and what turned out to be a major attraction for investors and pharma partners is to build a world-class scientific team in neurology. In the end, 5-6 therapeutic target areas in which the company intends to develop its own therapeutics is more than enough, a number that many even much larger companies do not go beyond.

While it is possible that competition for therapeutic targets in the liver is intense and one would not like to be too open about specifics, the message right now appears to be that the liver is just one of the areas it views as equally promising, while the reality is that it is likely that after RSV01, the next 3 INDs will be for that organ (VSP02, TTR, PCSK9). One possible way to further catalyze the potential of RNAi Therapeutics for liver-related diseases would be by consistently raising awareness at a meeting like the upcoming American Association for the Study of Liver Disease annual meeting coming up in no other place than Boston, by maybe organizing/sponsoring a session dedicated to progress made thus far in RNAi knockdown in the liver. Emerging public health problems such as non-alcoholic steatohepatitis and HCV are just two examples of very important liver diseases that beg to be evaluated with RNAi. And just perusing the program makes me think ‘just how many more liver-related diseases could there be?’. Again, it may pay here to have a leading therapeutic focus area team in-house and/or dedicated liver disease SAB, lest Big Pharma snatches away the best targets. From an investor relation’s point of view, the message should be that this initial concentration on the liver is very consistent with the fundamental promise of the RNAi Therapeutics platform, namely that once you have identified suitable delivery for a particular organ, you can then rapidly roll out an entire suite of related programs. At the same time, other delivery technologies will mature and eventually start to produce equally numerous drug candidates, with one delivery wave after another feeding the overall RNAi Therapeutics pipeline. Certainly, the consequences of such a strategy if it does not work for the liver at all it won’t be pretty, but working on one problem intensely might get you a higher risk-adjusted probability of success than working on 3 different areas less so intensely.

RNAi delivery is a natural third area of investment focus. Much of the innovation will come from the outside, and Alnylam, as do the Roches and Mercks, needs to have a discerning eye about what could work or not. Of course, relative to other pure-play RNAi Therapeutics companies, having deep pockets and having probably seen close to a hundred if not many more collaboration requests and with its own scouting and experience with delivery, it is in a good position to do well in this game. Nevertheless, Big Pharma has even deeper pockets, although not necessarily the same deep know-how, and the $120M that Roche paid for Mirus’ early-stage DPC delivery technology demonstrates what a large company that cares about RNAi Therapeutics is willing to pay for a differentiated delivery platform that has shown potential in rodents. What may be more in the hands of the company is the study of basic siRNA uptake mechanisms (see the Max-Planck collaboration), and the development of more broadly applicable endosomal release technologies.

The good news is that the perception of RNAi Therapeutics could soon take a positive turn. In my mind, Tekmira’s JCI paper of achieving anti-cancer efficacy in mice through a rigorously demonstrated RNAi mechanism of action can be regarded as a turning point and is for everybody’s benefit. Before that, it almost started to look like non-specific class effects could prove to be a huge headache for RNAi Therapeutics not least from a regulatory point of view. The reason why you see me so excited about Tekmira at the moment is that they have anticipated the two main challenges of RNAi Therapeutics, namely delivery and avoiding innate immune stimulation, years ahead of the rest of the field, and frankly, without them it would be much darker in the lands of RNAi Therapeutics now. I will acknowledge, of course, that without Alnylam it would likely look much darker in some of Vancouver's neighborhoods, too. By achieving similar standards of target validation and being generally forward looking, Alnylam could again set themselves apart from its competitors and almost like a side-effect increase its partnership value. Further events that could soon contribute to this change in perception are the demonstration of clear knockdown efficacy with a reasonable safety profile, with Tekmira’s SNALP-ApoB results expected early next year and Alnylam’s TTR study results probably in late 2010. ALN-VSP02 safety data could add to the safety package. Equally important to me is to see a Big Pharma initiating an RNAi Therapeutics clinical program coming out from its own R&D. This is because RNAi Therapeutics-only companies are tempted to initiate clinical programs just to suggest their scientific prowess with often doubtful scientific rationale (we’ve seen a lot of this), while a technologically more diversified Big Pharma will think long and hard about whether RNAi Therapeutics is ripe for the clinic. Roche's intention for a SNALP IND in 2010 is therefore very encouraging.

Again, it is ironic that it is the success of Alnylam thus far that has facilitated a situation in which it is sometimes regarded as sluggish as a Big Pharma when compared to companies like Tekmira and even the New mdRNA both of which have looked into the abyss before and appear to be highly motivated and make efficient use of their capital. There is no more bullish signal to me when the Chief Scientific Officer of a company invests a significant chunk of his personal wealth into his company’s stock in the midst of the economic crisis and when the company is trading at half its cash. And sometimes I look back in nostalgia to the good old days when the Alnylam-Sirna rivalry kept both companies on their toes and increased investor interest.

Focus on platform partnerships was a necessary stage in the history of the company, but with $450M cash guiding for a platform deal is not essential and has only downside potential. It is now late October and we have yet to hear of the first of the two significant partnerships promised for this year and this is hurting share price. Unfortunately, this diverts attention from what this company is really about: applying the ability to down-regulate essentially any protein-coding gene towards the treating virtually any disease at its root and in a cost-efficient manner. If the excitement can be restored through clear scientific and clinical progress, share price will follow, partnerships will be regarded a pleasant surprise, all of which is good for investors and for speeding up the development of RNAi Therapeutics.

11 comments:

Anonymous said...

Dirk,

this is clearly one of the best posts on your blog.

Thanks,

Martin

Jerry M. said...

If it weren't for Kyowa Hakko and Cubist having skin in the RSV game, I would definitely think Alnylam is just running the clock out with that program until something else (i.e., VSP) gets advanced far enough to hold the spotlight.

Regardless, Alnylam increasingly does seem to be following a "mile wide, inch deep" business strategy. I'm really starting to wonder whether it has the gravitational heft to keep it's growing solar system from being set adrift and if it is trying to expand too fast in too many different directions.

Anonymous said...

Guru

I liked your most recent commentary.
I have been very disappointed with the management after they sold $350MM in assets to Roche they never added any assets. They could ( and should ) buy TKM and use stock to do it.

You are as smart as they come in the RNAi space where there are few if any analysts who understand the space.

I have established a position in ALNY and TKM. Both for the first time.TKM suffers one problem. They need a NASDAQ listing and good IR in the U.S. It is not followed by any WS firm.


Taylor

Dirk Haussecker said...

Taylor- I'm not sure what you mean with having sold $350M in assets to Roche. The only hard asset they 'sold' was Kulmbach at the time, the rest was for a restricted and non-exclusive platform license. 'Sold' because it was for a mere $15M and considering the price almost looked like Roche was doing Alnylam a favor taking over their foreign subsidiary. But I believe this is just semantics and we are on the same page. I also agree that when Alnylam's share price marched up to $35, I would have forgiven them if they did a say $100M secondary and used the proceeds to make a friendly offer to Tekmira as part of its merger with Protiva and use it as a hub for the development of RNAi Therapeutics delivery solutions. This is just one illustration of the value of a strong share price.

Gerry said...

Dirk

Thanks for your response..

I think you see this space very clearly. I know plenty of WS firms that would hire you in a second as their RNAi analyst.

Going on, I read the ALNY IV board and see lots of frustration from the inactivity on the deal front. Let me ask you. Has big pharma set the deal bar higher where rodent and even non human primate data won't create a collaboration? I have seen very little on the deal front but I know big pharma has its back against the wall in terms of patent expirations and maybe their focus is for now away from R&D and onto M&A and new revenues. DO you agree?

The power of ALNY and even Tekmira is their balance sheets. That said if they do not use it smartly it will be such a waste.

T

Anonymous said...

Dirk

UBC collaborates with MRNA and Tekmira...

Dirk Haussecker said...

Gerry-

Rodent data alone probably won't get you a great deal, although if precedent exists that the technology should also work in primates, you may be in a better position, or so at least appears to be the thinking of e.g. mdRNA's mgmt with their liposomes. But yes, I believe that the bar has been set higher and that Big Pharma would like to convince itself first that RNAi Therapeutics could be a broadly applicable platform, be it in the way of clear-cut human proof-of-concept (again- upcoming SNALP-ApoB results in focus), or by conducting its own research on delivery and immune stimulation, before doing large deals for access to RNAi trigger IP and delivery.

As you know, not all Pharma are created equal. Roche e.g. has been in a relatively benign situation where it could afford to invest more long-term, including RNAi Therapeutics. Pfizer, however, was in worse shape and decided for a large acquisition. As Wyeth has refreshed their overall profile, it may have regained a greater appetite for RNAi Therapeutics. In general, unless Big Pharma intends to buy back all shares and close down shop, they are forced to keep innovating and RNAi Therapeutics should represent to them a natural, calculated gamble.

Gerry said...

Dirk

I know the collaborative negotiations time out a lot longer than anyone imagines, and I think in the present environment big pharma may debate themselves to death. I think this is the wall ALNY management hit. I have heard of deals that took 6-8 months. BOD's are not as fast to listen to CSO's who seem more to protect in-house bureaucracies.

Wyeth has a great program according to my sources and I expect they will supplant Krieg and the PFE guys in short order. Would not surprise me to see an ALNY Wyeth deal next year.

I look forward to TKM's Q1 data and I think they can focus a lot of interest in the RNAi space with even reasonable clinical data.

Re ALNY..Has it surprised you that they have not used their stock as an acquisition medium going after cheap RNAi assets? I have to think they know all the players..Is there anything out there to acquire in your opinion that would improve ALNY's platform???

Gerry

Anonymous said...

"Is there anything out there to acquire in your opinion that would improve ALNY's platform???"

Great comments Gerry
mdRNA must be on its knees!

I kind of like ALNY's land grab policy, since it has allowed them to create the strong position that subsequently gave them the deals that they've commanded.


However, as Dirk points out, you need to then really push certain areas and commercialise sufficiently so as to maintain investor and industry interest.

Essentially, I'd want to see a good balance. Progression of the science AND sensible acquisitions. Not using the previously high share price to acquire something does seem an opportunity missed - perhaps indicates they couldnt find anything else to acquire??

Looking forward, I think ALNY could do well by securing further key target rights and also, delivery.

Dirk Haussecker said...

Gerry- You are right, of course, Alnylam would be ill advised not to continue and vigorously pursue their IP and use partnerships to fund their own pipeline. With RSV in most analysts’ minds back to square one, however, Alnylam has now fight the perception of being an IP monetization company only with a platform that has just failed them.

"Is there anything out there to acquire in your opinion that would improve ALNY's platform???"

Complementary RNAi delivery technologies is clearly an area where Alnylam will continue to invest, including through relationships with outside companies. If you are thinking of Silence Therapeutics and mdRNA, they would probably be the worst candidates for Alnylam as these companies really do not offer anything that Alnylam does not have access to. RXi? That would probably depend on how strong their claim is on Tuschl I, but based on RXi’s recent strategy, I don’t think that it is too much. Occasionally you hear John Maraganore talk about Alnylam’s relationship with Calando, and I will certainly take another look at that delivery technology, although from memory, based on the actual animal data the technology never struck me as a breakthrough. Endosomolytic technologies appear to be hot, justifiably so IMO, as evidenced by Roche’s acquisition of Mirus and VC investments in Seattle start-up PhaseRx.

Anonymous said...

Can anyone tell me....what are the length, modification & conjugates of CALAA-01,CALAA-02, ALN-VSP, QPI 1002 / AKIi-5, ApoB SNALP?

Sorry its bit long query but am tired of searching now :(

cheers

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