Monday, November 30, 2009

Has mdRNA Found a Way around Alnylam’s RNAi Trigger IP Wall?

mdRNA has to be The RNAi Therapeutics corporate success story of 2009. At the brink of bankruptcy at this time of last year after problems with their former nasal delivery business sent the company into a breathtaking tailspin, the new management, critically made up of former Sirna Therapeutics executives, was able to save the company by quickly cashing in on some non-core assets, attracting upfront payments of about $12M in two non-exclusive RNAi Therapeutics deals with RNAi heavy-weights Novartis and Roche, and an opportunistic financing shortly after final approval of a partnered legacy generic (calcitonin-salmon nasal spray for osteoporosis) caused an irrational spike in mdRNA’s share price. Although I perceive mdRNA’s lack of RNAi Therapeutics publications as a clear weakness, also in light of its history of later unsubstantiated scientific claims, these developments are signs that not only is the management apparently well connected, but that the company has been able to establish a quite decent RNAi Therapeutics drug development platform and with IP that cannot be dismissed out of hand. Since the Novartis deal on delivery involved not only IP, but also the transfer of liposomal formulation know-how, but the Roche deal on RNAi triggers appears to be an IP-only deal, I have looked more into mdRNA’s claim of having freedom-to operate with its ‘proprietary’ RNAi trigger designs. Out of fairness, I should add here that a lot of this change had been set in motion with the old management.

It has become a popular game in the RNAi Therapeutics industry to design ways around Alnylam’s dominant RNAi trigger patent portfolio. While corporate strategy is the driving force behind these supposedly proprietary designs, given that intellectual property is not always guided by the spirit of science and since new trigger designs might have unexpected beneficial properties for certain applications, it is prudent to pay attention when Roche is willing to pay mdRNA non-refundable $5.0M for a non-exclusive license to mdRNA’s RNAi trigger IP claims after having just paid more than $300M for much less of Alnylam’s RNAi trigger IP. Of course, one might also view this deal, which was also largely free of downstream obligations, as a move by Roche to cover all their bases- just in case.

At the time of that deal, mdRNA had three RNAi trigger designs in its stable: certain rights to City of Hope’s Dicer substrates, the three-stranded meroduplex siRNA design after which mdRNA takes its name, and unlocked nucleic-acid-modified siRNAs (usiRNAs). Subsequent to that deal it emerged from regulatory filings that, perhaps because Dicerna appears to own most of the Dicer-substrate IP, that mdRNA has dropped Dicer substrates from their portfolio. Furthermore, since Dicerna would probably have been quite happy to make a deal with Roche, it would appear that Dicer-substrates, although part of the deal, was not the main motivation for Roche. This leaves us with meroduplexes and usiRNAs.

If you assembled five PhDs in molecular biology for a weekend, presented them with the main claims of Tuschl I and II, and asked them to come up with RNAi trigger design-arounds, in principle the result may have looked similar to what mdRNA arrived at. That the various designs should also likely to be functional biologically, at least to a certain degree, is a testament to the robustness of the RNAi pathway when it comes to relatively short double-stranded RNAs, a realization that has only sunk in subsequent to the Tuschl publications, but that was already heralded by the findings of Kreutzer and Limmer.

Both Tuschl I and II essentially claim double-stranded RNAs of 21-23 (T-I) or 18-24 (T-II) (contiguous?) NUCLEOTIDES in length. Besides size and overhangs which had been the main theater of the RNAi trigger IP war thus far, one might argue that an RNAi trigger that does contains a number of NON-nucleotides or in which the dsRNA is made up of three, and not two strands, does not literally violate the Tuschl claims.

I have long been puzzled why mdRNA would think that using unlocked nucleic acids (UNA) per se would be the solution, as I considered UNA just another nucleotide-modification alternative in the armamentarium of the siRNA synthetic chemist: UNAs are simply nucleic acids in which the C2-C3 bond has been disrupted (that is apparently also the process by which they are generated). But when the company’s CEO Michael French at the BMO Capital Markets Focus on Healthcare Conference made a point that it is the fact that UNAs supposedly are not nucleotides is indeed what underlies mdRNA’s interest in UNAs. A quick, non-representative survey among scientists that I know, however, was consistent with my initial assumption that UNAs clearly have to be considered ‘nucleotides’ as they look and behave like such. Moreover, there are numerous quotes by the inventor of UNA, Jesper Wengel of Denmark, and by the Danish company RiboTask from which mdRNA has exclusively licensed the UNAs for therapeutic applications that UNAs are modified nucleotides. The question therefore appears to boil down to whether potential partners first and then the patent offices can be convinced of that a ‘nucleotide’ that does not contain an intact ribose or deoxyribose strictly is a nucleotide no more. Although I am skeptical that any one nucleotide modification is sufficient to get around the Tuschl patents, I could imagine that the possibility alone of their literal interpretation could motivate others to come up with similar non-nucleotide siRNAs.

Aside from the IP considerations of usiRNAs, it is premature to judge the scientific value of this modification over others. The fact that ‘unlocking’ a nucleotide is a quite distinct modification should allow it to endow an siRNA with unique properties with respect to recognition by the RNAi machinery, target specificity, the potential to be recognized by innate immune receptors etc. What can be said based on the limited publication record (Bramsen et al., 2009: Large-scale screen....; Kenski et al., 2009: Analysis of acyclic nucleoside modifications...), UNAs like many other modifications are best tolerated in the passenger strand and can reduce off-targeting by the passenger-strand, whereas the use in the guide strand is much more position-dependent. Whether its judicious incorporation can indeed largely abrogate innate immune responses and/or allow for a better differentiation of on-target cleavage over microRNA-like off-targeting as claimed, remains to be seen and especially published (also because mdRNA/Nastech has a track record of making similar claims which tend to silently disappear over time). On the other hand, since Sirna Therapeutics (Merck) is evaluating UNA-modified siRNAs (Kenski et al., 2009), despite its access to Tuschl I, may be interpreted as a sign that there may indeed some unique scientific merit to usiRNAs, and mdRNA may derive value from controlling its use for RNA therapeutic applications.

Moving on to 3-stranded siRNAs, the other pillar of mdRNA’s RNAi trigger strategy, from an IP point one has to probably say that this stands a better chance of surviving Tuschl scrutiny with Tuschl II explicitly claiming double-stranded RNAs consisting of two strands. The double-strandedness of Tuschl I, however, could be more broadly interpreted in that a nick should not make a difference in determining the length of a double-stranded region. In this case, it will be interesting to find out how 3-stranded siRNAs with a gap instead of a nick would perform.

When I first heard of the 3-stranded siRNAs in 2006, I thought that this was based on the observations by a number of labs at the time that the passenger strand of the siRNA is cleaved as part of RiSC activation and that the objective of 3-stranded siRNAs thus was to hi-jack the RNAi machinery downstream of the intact siRNA. However, looking at the history of the relevant patents, it appears that this was not the case, but was merely a coincidence. There is, however, an interesting twist to the story. RiboTask, which happens to also be mdRNA’s partner in usiRNas, filed for almost identical patent protection, but with a priority date that appears to be a couple of months ahead of mdRNA’s. In the case of RiboTask, which calls the 3-stranded siRNAs not meroduplexes but small internally segmented interfering RNAs/LNAs (sisiRNA/sisiLNA), I do not want to be as dismissive about their scientific motivation, as they address a major concern of 3-stranded siRNAs related to their potential instability. Since short segments of double-stranded RNAs should be relatively unstable, they demonstrated (Bramsen et al., 2009: Improved silencing properties using small internally segmented interfering RNAs) that it is possible to restore ‘duplex’ stability by modifying it with locked nucleic acids, the mirror-image of UNAs and curiously invented by the same people. Moreover, they show that while heavy modification of both strands renders most siRNAs inactive (with the exception of 2’F and 2’-O-methyl), converting such a modified siRNA into a 3-stranded siRNA often restores at least some of the knockdown activity (also quite interesting from an RNAi mechanism point of view). The ability to heavily modify an siRNA without losing activity may be particularly useful for applications where the siRNA is exposed to nucleolytic degradation such as for conjugate-siRNA approaches. From a scientific perspective, I should also mention that the 3-stranded siRNA design is a way to abolish passenger strand microRNA-type off-targeting, although this is no more a considerable challenge for RNAi Therapeutics. It should also be of interest to evaluate how nicked, and particularly gapped siRNAs are recognized by the various innate immune receptors. The above demonstrations may also help RiboTask and mdRNA in their way through the patent offices, particularly in the US and in light of the mentioned academic research that might have started before RiboTask’s work, and I am curious whether the usiRNA relationship between RiboTask and mdRNA will be extended also to sisiRNAs/meroduplex technology.

Since IP is subject to interpretation and therefore fraught with some uncertainty, it remains to be seen whether mdRNA can achieve certain freedom-to-operate in the RNAi trigger space. Although usiRNAs are the current focus of the company, keeping the meroduplex as an alternative design option open seems prudent. More broadly, RNAi Therapeutics in general can only gain from investments in evaluating new modifications and designs as unforeseen beneficial properties could emerge from this. Until then, however, it is unlikely that any Big Pharma would want to risk their RNAi Therapeutics future entirely on mdRNA’s RNAi triggers. This also explains why mdRNA sees more partnership potential in its RNAi delivery efforts, the currently more pressing need in RNAi Therapeutics and for which the financials should continue to grow. mdRNA urgently needs such a partnership since although the company had just averted bankruptcy, with cash running out over the next 3 months, the struggle to get out of the bankruptcy quicksand has not stopped. Based on management, while a number of early-stage technology evaluations are ongoing, no significant upfront payments from partnerships can be expected until the middle of next year by which time it hopes to have more non-human primate data to satisfy a more discriminating Big Pharma audience. Given the positive developments of the company over the last year and management’s track record, investor interest should be sufficient to support a PIPE within the next 30-45 days so that the company gets a shot at achieving its partnership goal. If one indeed wanted to make the gamble on mdRNA’s management, from an investment perspective, waiting until more is learnt about the terms of the financing may be prudent, unless valuations continue to fall much further.

12 comments:

Anonymous said...

MRNA is trading at $.83..ALNY could do a deal or buy them if they wanted...I am not sure MD is far enough along and they said in a past conference they are out of money in December...

While IP on constructs are nice, the key is still delivery and from what I see, no one is close.

Dirk Haussecker said...

There would be no point for Alnylam to deal with or even buy mdRNA. No added scientific value to Alnylam really, and no point in having ambition to take out all the competition. Some will disappear on its own.

I agree with you on the importance of delivery, disagree with you on the current state of delivery. What do you think e.g. about SNALP delivery to the liver? This seems close enough to me.

Anonymous said...

Dirk

I listened to Mark Murray at a conference a month or so ago and did some due dilligence into their technology. I think they are the leader in delivery that has been announced. What big pharma is doing is always a mystery.

I have heard they are things happening in the nanoparticle arena with companies such as NANX regarding RNAi. Have you heard anything clear along these lines?

All said next year will be a big year in the RNAi space in terms of data.

I like TKM by the way..Financed and
moving in a very directed way. They need U.S. investors and I have expressed to the company the need to get a NASDAQ listing.

Dirk Haussecker said...

I agree with you on the US listing of TKM. How else can one explain that despite the critical role of Tekmira to the RNAi Therapeutics NPV calculation and the promise of an entire pipeline on top of ApoB and PLK1, its market cap is less than that of Silence Therapeutics when it stopped trading in London over 2 months ago? London...not even Nasdaq. It is not that the analysts are not aware of the company. I believe I don't need to disclose here that, personally, Tekmira is currently my RNAi Therapeutics core holding.

I can't speak to NANX directly since I am not familiar with their technology. I can say, however, that there are literally hundreds of companies that evaluate, or just pretend to evaluate for PR reasons their technologies for RNAi Therapeutics delivery. Unfortunately, the development of any RNAi Therapeutics delivery technology will take years and a lot of investments, and it is through publications, peer validation and other de-risking events that a technology has to emerge from that noise. Take Mirus/Roche's DPC technology: quite elegant principle, yet you still need to go through all the motions to determine a valid clinical valuation. Liposomal delivery alone had a 20+ year development history. It did not happen overnight.

I agree, however, the value of any differentiated delivery technology that can make it is of immense value to the industry.

Anonymous said...

Dirk

There are domestic biotech funds and some index funds that would like to buy TKM but it has no U.S. listing, or at least that is the reason they give for not owning it.

It is also one of my " shots on the RNAi goal " so to speak. I have a small position and would rather buy it higher after data and after a U.S. listing. Murray seemed a very capable guy and not one tending to the typical biotech CEO hyperbole.

I do like Santaris but they are private. Silence, MRNA, RXII do nothing for me. ALNY and ISIS have war chests and staying power and I do own a recent position in both when they hit 52 week lows.

I enjoy your commentary. Only a few outside the industry have your insight and competence of the space.

Anonymous said...

I find it hard to believe that 'MRNA' is the success story of 2009 as the article states. Today, 12/07 the
stock is-.03 cents and is $.83 cents at 11.am. The
company can not issue new stock again to raise money and right now it doesn't have the 2010 expense money for 2010. With all the wonderful news releases in 2009, why does management only own less than 3% of the stock? Their real success has been that management has been able to keep the doors open and get paid for the past 26 years. No serious earnings Income and still very early pre-clinical stage company. Pretty soon stock will have been under $1 dollar for more than 30 days.
Success story is a joke, look forward to their end of the year earnings report and see the reality very clear. A waste of time for investors for three years straight. All downward and it will continue to be in a downturn until February earnings report. By then maybe they will get an offer for $.48 cents per share buyout!

Anonymous said...

It's interesting to see RNAi experts are finally looking into the science MdRNA and Jesper Wengel have. I'm a novice and learned all this (and more) in a few days of reading a few months ago! (And enthusiastically posted it all my revelations on the Investors Village board - posts from which i believe this author is drawing here, actually!). Parenthetically, I seem to recall that MRNA is already combining the meroduplex and UNA. (Maybe that was just my speculation at the time.) Considering the expert tardiness in any appreciating their science (seen in print anyway), I'm more encouraged then ever in my initial belief that Jespers and MRNA have assembled the necessary ingredients (with the addition of nano-particle versions of their DiLA2 delivery stuff) to be the breakthrough company in RNAi.

Dirk Haussecker said...

"I find it hard to believe that 'MRNA' is the success story of 2009 as the article states."

I believe we are largely in agreement here, and that what you perceive as differences is more the result of a difference in perspectives rather than substance. Without a change of managements, I do not believe that mdRNA would still be here. As I indicated, however, at the end of the blog was that the fight has not stopped there, and in the end you might be right in that all it did was to extend the life of the company without any real-world impact.


"I'm a novice and learned all this (and more) in a few days of reading a few months ago! (And enthusiastically posted it all my revelations on the Investors Village board - posts from which i believe this author is drawing here, actually!). Parenthetically, I seem to recall that MRNA is already combining the meroduplex and UNA."

I do use the IV boards also as a way to gauge the sentiment of investors and for scientific and corporate insights. If you really believe your posts had such an impact on me- then congratulations!

The combination of the meroduplex and UNA was described in the Bramsen et al NAR paper of 2007, so I conclude that your insight rests on being able to read scientific papers?

matt24d said...

"Anonymous said...

I find it hard to believe that 'MRNA' is the success story of 2009 as the article states. Today, 12/07 the
stock is-.03 cents and is $.83 cents at 11.am. The
company can not issue new stock again to raise money and right now it doesn't have the 2010 expense money for 2010. With all the wonderful news releases in 2009, why does management only own less than 3% of the stock? Their real success has been that management has been able to keep the doors open and get paid for the past 26 years. No serious earnings Income and still very early pre-clinical stage company. Pretty soon stock will have been under $1 dollar for more than 30 days.
Success story is a joke, look forward to their end of the year earnings report and see the reality very clear. A waste of time for investors for three years straight. All downward and it will continue to be in a downturn until February earnings report. By then maybe they will get an offer for $.48 cents per share buyout!
"


I find it hard to base how the company is going to do when the new CEO has only been in charge for a little over a year or so. Under his leadership the company got their patents back from GE by paying off their debt to them. They have signed a handfull of pharma deals and with some large players. They sold their FDA approved salmon drug and negotiated royalties off this drug. This have gaines major traction in their cancer research. They own a huge patent portfolio in RNAi patents. If your going to base share price on actual company value you have no clue about stocks what so ever. Share price almost never shows a companies true value either on the upside or downside. Just look at the team they brought aboard some of these people are very well recognized. Do you really think the science officer of merck would of left to come here if he did not see opp. I really doubt it. The CEO is very smart and has done very well for shareholders in the past. Either way Try doing a little DD on the stuff they have done the past year. New leadership goes a long way and so far has had proven he can deliver.

Anonymous said...

IN THE CASE OF 'MRNA' THERE ISN'T SUFFICIENT MONEY AT THIS TIME TO PAY 2010 EXPENSES.
MUST SHAREHOLDERS ALWAYS HAVE TO HOLD THEIR BREATH EVERY YEAR TO SEE IF THE FUNDS CAN BE ATTAINED THROUGH PARTNERING? THIS IS A SERIOUS PROBLEM AND THE COMPANY IS PLAGUED WITH CURRENT AND SHORT TERM OTHER PROBLEMS WITH NASDAQ AND YEAR END EARNINGS REPORT. A STEEP 3 YEAR STOCK PRICE DECLINE IS THE ICING ON THE CAKE. THIS IS NO WAY TO RUN A COMPANY!
12/11/09 FURTHER LOWER SUPPORT LEVELS OF $.82 CENTS AND THEN $.77 CENTS WILL BE REACHED BEFORE YEAR END. THEN NASDAQ WILL ISSUE YET ANOTHER LETTER FOR STOCK PRICE STAYING UNDER $1 DOLLAR FOR MORE THAN 30 DAYS. A NO WIN SITUATION FOR INVESTORS!

matt24d said...

I guess we find out soon enough. I know the "new" CEO has done wonders for shareholders in the past. He has also done wonders for MRNA in the short time he has been in charge.

Anonymous said...

Me: "Parenthetically, I seem to recall that MRNA is already combining the meroduplex and UNA."

You: 'I do use the IV boards also as a way to gauge the sentiment of investors and for scientific and corporate insights. If you really believe your posts had such an impact on me- then congratulations!

The combination of the meroduplex and UNA was described in the Bramsen et al NAR paper of 2007, so I conclude that your insight rests on being able to read scientific papers?"

That paper was not written by MRNA. It dealt as I recall with Wengel's version of the meroduplex. MRNA has not stated anywhere that they are combining the two I don't believe. But I tend the believe that they are or soon will. I also now think that they are working on putting the guide strand to work in some - perhaps in a "combo drug" for cancer.

By Dirk Haussecker. All rights reserved.

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