Friday, November 12, 2010

The Race between RXi, Marina, and Silence to Do Deal by Year-End (RNAi Therapeutics Portfolio Update)

It is not the first time in RNAi Therapeutics history that we hear of promises that cash-generating deals will be closed by the end of the year. This year is no different: RXi Pharmaceuticals, Marina Biotech, and to some degree Silence Therapeutics by disclosing an approach 2 months ago, all have the markets expect lucrative Big Pharma partnerships or even acquisitions as the year winds down.

Judging by the number of early-stage technology evaluations, there is good reason to believe that some partnerships will eventually materialize. However, because these 3 companies are likely to compete for a similar set of partners, the RNAi Therapeutics portfolio has been updated to take advantage of the recent increases in the shares of RXi and Silence Therapeutics, and after selling some of these shares add back Marina Biotech which is relatively attractively valued followed the share price decline ever since the merger with Cequent. Benitec was also added back following the re-grant of a fundamental ddRNAi patent in the US.

Marina Biotech

With the initiation of trials for the trans-kingdom RNAi Therapeutics candidate CEQ-508, Marina Biotech now sports a clinical program and that the Company may be able to develop all on its own. In addition, they have a good-quality program in synthetic RNAi trigger molecular biology and chemistry as exemplified by the recent publication on the utility of unlocked nucleic acids (UNAs), exclusively licensed from RiboTask, for siRNA trigger design. As previously indicated and supported by research from other groups, including Merck, these modifications can be used to abolish off-target effects mediated by the passenger strand. Even more importantly, UNAs can also mitigate microRNA-type off-targeting by the guide strand when judiciously placed in the seed region without compromising on-target RNAi-type silencing. Interestingly, inhibiting passenger strand incorporation by 5’ end UNA modification may simultaneously increase the potency of the guide strand. Hence, it fulfills is similar function as the Zamore thermodynamic end-stability rule.

While this molecular biology makes sense, the IP situation around ‘usiRNAs’ is less than apparent. I have long been puzzled by the usiRNA freedom-to-operate opinion that Marina had said a venerable intellectual property firm provided it with. I finally learned more about this during a Q+A session at an investor presentation by Marina where CEO Michael French answered this question as follows: usiRNAs are blunt-ended siRNAs with non-nucleotide 3’ overhangs (and thereby do not infringe the Tuschl-II 3' overhang IP)! Wow, somebody apparently got paid for this opinion. but who knows maybe Merck might subscribe to this interpretation of the scope of Tuschl-II should they lose access to it as a result of the Tuschl Litigation.

Whether you buy it or not, by committing itself to 3’ UNA overhangs, Marina consciously compromises siRNA activity, especially with 3' UNAs in the guide strand (typically some reduction in activity). UNAs in the passenger strand 3’ overhan, however, appears to make scientific sense and it will be interesting to see whether Marina will adopt asymmetric overhang designs in the future.

With CEQ-508, and maybe also relatively soon the topical bladder cancer candidate, Marina has bought itself some time to try and catch up on the systemic delivery front where it still seems to be stuck at the rodent stage and behind the likes of Tekmira and Alnylam.

As the number one wheeling-and-dealing company in the space, Marina Biotech has to be considered a serious contender in the race to find a partner by year-end.

Silence Therapeutics

Following the exciting news of a possible takeover, I am getting a bit concerned that the longer a deal takes to materialize, the weaker the negotiating position for Silence Therapeutics and the more complex for the company to secure alternative capital. In light of the recent positive development in Silence’s share price, it might not be a mistake to reduce the exposure should no deal materialize any time soon.

On the IP front, it appears that one can now expect more of the same also for Zamore: patent litigation galore. At least it shows that somebody, I wonder who, considers Zamore to be a threat. It cannot be Alnylam, of course, since it stated that the Zamore end-stability rule patents are of no concern at all. I guess the RNAi trigger players harvest what they sow. In the big picture, everybody could benefit from preserving IP around the fundamental discoveries in RNAi biology.

RXi Pharmaceuticals

My view on their technology hasn’t changed, but as the clock runs down one is reminded by RXi’s history of missed partnership promises. Whether Pfizer’s recent comments that intravenous delivery is not a viable delivery route makes a deal with RXi more or less likely is an open question. Since RXi has a new CEO, however, I will give him the benefit of the doubt.

Tekmira

Hopefully a highlight for the RNAi Therapeutics portfolio for the rest of the year will be the NASDAQ listing of Tekmira. With Tekmira being a well recognized player in RNAi Therapeutics, the US listing and a share price above $5 could mean that US institutions like Fidelity take meaningful positions in the company.

Tekmira under its new leadership is the only company in the space that has never explicitly promised a partnership and also happens to be the only 2nd tier RNAi Therapeutics company that does not desperately need a deal at this moment. In recent weeks I am starting to get the impression that Alnylam understands the value of an amicable relationship with Tekmira. On the other hand, this could mean that upcoming deals will have to be Roche-like deals, possibly with Novartis and Takeda, deals that are focused on developing specific LNP-formulated candidates.

OK, it’s now time for the companies to wow us with scientific results and the promised deals. No pressure, of course. RXi, Marina, Silence…which one is most likely to close a deal by year-end? Have your say by participating in the poll on the top right hand side.

Notice: None of the above is meant as investment advice, and as always, do your own due diligence before considering an investment in RNAi Therapeutics. Also, please read the important disclaimer at the bottom of this blog page.

13 comments:

Anonymous said...

Dirk

Marina just did an awful $8.7MM financing...That tells me they have no chance of a deal before year end..

And I think the time has come in the RNAi space where big pharma will not do deals withot some great data ad later stage clinicals..Of course they will pay up, but the onus is certainly on the Marinas of this space to show something.

You see where NVS lost $120MM on a promising cancer drug they just wrote off? I do not see these guy paying much if anything for early stage progress. Just the present day common sense view.

Anonymous said...

Dirk:

I was startled by your reference to Pfiser's statement that the intravenous route is not a viable way to deliver siRNAs. What was the basis for this claim and could it be responsible for the decline in Alnylam's stock price? How much credence should we give this claim? Where could your readers go to read the full text of this statement? It is very disturbing.

Anonymous said...

Dirk
The SLN share price might have risen recently - but that was from all all-time low. For any shareholders unfortunate (or, like me, stupid) enough to have bought at over a 100p a share several years ago, we're still very significantly underwater.

I share your concerns about the length of time being taken by SLN management to inform shareholders what is going on. The approach was RNSd on 6th September - as I write it is the 15th November - more than three months later.

How long do they need to decide whether an approach fairly values the company or not? Much longer and it will start to look like management incompetence that they can't even tell us what's going on...

When the approach was first RNSd I was sure we'd hear one way or the other by Christmas. I am no longer so sure. What the hell is taking them so long?

Anonymous said...

...as regards my previous post: not 3 months of course, but ten weeks. It just _feels_ like three months...

Anonymous said...

I think the gentlemen who posted the hype cycle may be right, the hoe for rnai is at an all time low.....best time to buy.

Tekmira, will soar on any good news and sln is at rock bottom, nowhere tomgombut up, someone would want their ip estate.

Sam

Disclosure, long tkm, sln, alny

Anonymous said...

Looks like Marina is following in the venerable footsteps of Alnylam and walking back from their promised partnership goals.

http://www.genomeweb.com/rnai/marina-pipeline-track-fap-trial-2010-could-miss-partnership-guidance

Anonymous said...

Folks

ALNY looks like a wounded animal..
They are hemmoraging cash..have awful management and have no clue.

I think they are vulnerable to a takeout around $15...

Kevin CC said...

Dirk, what do you make of the news that ALNY has terminated the ssRNAi collaborative effort with ISIS?

Dirk Haussecker said...

ssRNAi…Kevin, thanks for letting us know about the Alnylam-ISIS ssRNAi termination. IMO, in the current climate, Alnylam wants to focus on its core double-stranded RNAi mission and save costs by cutting many of the peripheral business development projects it had once initiated. The decision to cut ssRNAi-related costs is a good one IMO, because of the unfavorable economics in their deal with ISIS given the sage of that technology. I always felt that by comparison, Tekmira got treated quite shabbily while providing much more value to Alnylam than e.g. the ISIS deal did.

SLN…time is not on SLN’s side and as the approach situation was dragging out, the price-volume spike on the research publication seemed like an opportunity to manage the risk of no deal happening, or on very unfavorable terms, thereby giving away all the recent gains.

Pfizer…have a look at how many intravenously administered drugs, many of them very profitable, are out there. I acknowledge that there are some challenges with RNAi delivery, but you have to start somewhere.

too early said...

The sector is dying, the problem is shRNa not siRNA is the valid approach, but big Pharma having got it wrong time and time again has lost all confidence. Big Pharma is all about yesterday a big problem as it was 20 yrs ago that most of their IP issued.

Anonymous said...

Dude, quit pumping your Benitec stock here.

Anonymous said...

Pfizer has the Tacere Hep C program , I wonder when it will start Phase 1 trials ? the animal studies are apparently most promising, their head of division is an antisense guy hence there seems to be an anti RNAi bias from him which may limit the extent they pursue other programs in the space.

Anonymous said...

Hi Dirk,

Benitec has been more heavily traded than normal over the last week, with some significant movements in the share price (over 20% today, and one day last week over 30%). A single trade last week bought 5M shares ($180k).

Any thoughts on possibilities driving this?? The re-awarded patent has been known for a while now so it's unlikely that.

Regards.

By Dirk Haussecker. All rights reserved.

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.