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.