Wednesday, June 1, 2011

Big Pharma Support for RNAi Therapeutics Growing

In case you have not noticed: “Big Pharma” is slowly coming back to RNAi Therapeutics. This marks a fourth phase in the delicate relationship of the small pure-play RNAi Therapeutics companies with their larger counterparts.

The relationship in the first phase (2002-5) may be characterized as one of benign neglect and certain curiosity. Sure, RNAi was a hot emerging scientific area, but Big Pharma preferred to let the small companies kick the tires and take the risk while continuing to do what they were most comfortable with: small molecules along with some monoclonal antibody work. The patent cliff still seemed like a management generation away.

In the second phase (2005-8), some pharmaceutical companies like Novartis and Merck started to see the light. It became apparent to them that as small molecules alone won’t cut it any more that a technology like RNAi Therapeutics may ideally fit into the personalized medicine paradigm of the future. Following their initial investments in the space, other companies like Roche, Pfizer, and Takeda began to worry about being left behind and looked to catch up, in some cases frantically so. The Nobel Prize added fuel to the fire and a small bubble developed where investments were often not made based on the best science. Big Pharma companies wanted to be seen as being at the fore-front of this technology and were happy to advertise their association with the technology in public.

The US real estate-triggered global financial meltdown marked the beginning of the 3rd phase (2008-2011). If that and subsequent widespread healthcare rationing did not inflict enough pain on the pharmaceutical industry, major blockbusters were falling off the patent cliff. Investors in Big Pharma demanded much reduced R&D spending and instead share buy-backs and dividends. Ironically based on the productivity with small molecules, it was often believed that R&D per se is a money-losing proposition. It’s therefore somewhat understandable that companies like Merck and Novartis that continued to put considerable resources into RNAi Therapeutics preferred to keep this quiet. In addition to pacifying shareholders, another objective for their secretiveness was, of course, to cool down market prices for the technology. The interview with Alan Sachs in Xconomy early last year about Merck’s view of RNAi technology as a target validation technology initially was a good example of this policy.

RNAi Therapeutics did not fare well in this climate. As larger companies realized that they made some bad investments in the technologies, some probably feeling that they have been deceived by some of the pure-play companies. I believe that the blame is to be shared between Big Pharma companies too lazy to undertake not only proper IP, but also scientific due diligence, and the bad actors in the RNAi Therapeutics industry of which there were without doubt quite a few (but definitely decreasing in numbers now).

It was then especially those Big Pharma companies that got into the game relatively late and consequently with often less conviction in the technology that were the first to curtail their RNAi Therapeutics spending. The most dramatic example of this is Roche spending north of half a billion US dollars and then calling it off already after only 3 years. It may also be that even if the scientific progress was considered acceptable, having agreed to paying hundreds of millions in milestones for RNAi triggers at the pre-clinical stage made RNAi drug development not economical considering that RNAi triggers are only one part of the equation.

Unfortunately, the backlash hit the entire industry hard, including those few companies that have done the real work underlying many of the promising drug candidates that have recently started to enter the clinic.

There are, however, increasingly signs that companies like Takeda, BMS, and Genentech are willing to show support for the technology (phase 4). It must have occurred to these companies that RNAi Therapeutics has been making some progress over the last couple of years in addressing issues such as delivery, immune stimulation, and building clinical experience, all the while prices for the technology were plummeting to what I consider highly attractive price points.

It has also become clear that in terms of RNAi trigger structure and IP, Alnylam is not the only game in town any more.

From a Big Pharma perspective, this is probably the best time to invest. Pipeline productivity problems remain the same. Many of Big Pharma’s current blockbusters based on small molecules turn out to bring little or no benefit to patients and if they are honest to themselves, the future of healthcare won’t support, i.e. reimburse, me-too drugs with only little if any incremental benefit even if you can take them only once a day in pill form. I believe this will be borne out in the multiple sclerosis field where oral pills are all the rage at the moment and some analysts believe this to be the end of the incumbent treatments that are administered parenterally. In the end, medicines that stall and reverse severe diseases will win out, and for scientific reasons, targeted technologies like RNAi Therapeutics should have an edge. There had been similar concerns about technologies like monoclonal antibodies, and now cell-based therapeutic cancer vaccines, but in the end social acceptance is greatly driven by how much the industry establishment and thought leaders endorse a technology.

It is therefore critical for Big Pharma to support pure-play RNAi Therapeutics companies. All the important innovations in the field have come from the smaller companies, and if those that have developed them disappear, everybody will be worse off. While I expect Big Pharma investment to increase from now onwards, especially in light of the clinical progress that should become particularly apparent over the next couple of months, this time should be different from the 2005-8 scramble to buy a piece of RNAi Therapeutics. The focus will be more than ever on quality, and companies that have shown hands-on ability to overcome the challenges in developing viable RNAi drug candidates should be well rewarded for their contributions to the space.

19 comments:

Anonymous said...

Interesting timing call.What shares do we buy?

Anonymous said...

Perhaps those with the biggest patent space? Benitec comes to mind; owns the viral vector shRNA space, it has just recapitalised and is gathering increasing shareholder interest. Tiny market cap for the IP that it owns.

Anonymous said...

Benitec's much earlier stage than many other listed RNAis and its approach has many uncertainties as far as I can tell.How about Alnylam,Silence or Tekmira.These companies all have far more partnerships and their shares have all fallen alot the past year or two.

Anonymous said...

Benitec technology has been tested in humans and is safe ! Viral vector shrna space is expanding rapidly more research papers are been published, the momentum is with ddrnai, and if you cant see that you shouldnt be investing in Rnai at all !Alny, million of dollars in the bank and burning through it like it grows on trees. It is easy maths millions of dollars spent to discover that sirna doesnt work as good as ddrnai. Can you imaging where benitec would be right now if that kind of funding had side stepped big pharma politics and landed on Benitec lap...Wake up fire and mello are about to lose there noble prize.

Anonymous said...

If it's upside potential you are after Benitec has to be the standout - it owns expressed RNAi, it's got rid of patent&court battles, and money worries, and it's got a fast track pipeline. But it's share price only reflects where it was when it had these worries. Not for much longer though - it was asx most traded stock Monday.

FMS said...

I am long Marina, Arrowhead and Silence.

Anonymous said...

I'll have a look at Benitec,sounds interesting but very early stage and along way and time to go.Looking forward to ASCO and the latest data from Alnylam and Silence.Could be signalling the bottom for them.Alyn have an EV of $150m and Silence only $10m,having spent more then £50m.

Anonymous said...

Yes, I think Silence should be a long way higher given their activity. The lack of a deal is an opportunity to get in BEFORE a deal; when the next deal happens with an RNAi company and big pharma that company will be boosted massively, more than even good results, Benitec seems ripe for a deal (or a takover).

Anonymous said...

Isn't that Ian Ross involved with Benitec?I remember Silence shareholders might have reasons to be glad to be shot of him.Do Aussie baby pharmas and techs have the intl cred needed to be taken seriously?I think alot of people think of the mining,oil and gas stocks there and think ho,hum is this right?

Anonymous said...

it probably doesn't even matter what the international perception is of them (i suppose you mean for their own drug pipeline),as they own the expressed RNAi foundational patents in most of the world.

Anonymous said...

I don't agree that RNAi is heating up again. If you go to indeed.com, arguably the Google of job searches, and look for RNAi jobs nationally (leave the city/state blank) you'll see there is a grand total of 42 jobs currently posted across the country at all companies. This includes everything from entry research level associates to skilled PhD level scientists.

This is a very bleak reality for the job market in RNAi translational or research science. The vast majority of the jobs are seeking cell culture experience to perform target validation work.

I know you're a strong supporter of the science Dirk, and I'm with you on this. But the reality doesn't bear out that the field is hot or getting hotter again, and the fact is times are extremely tough.

I hope this is the proverbial "darkest before dawn" scenario where the only place to go is up, but gene therapy died about 10 yrs ago and really isn't anywhere close to its heyday from the late 90's. Even though there is a trickle of activity, and one could argue it's not "dead" the reality is that the field is still just a fragment of it's former state. People often draw the comparison to MAB's and they say this is the same scenario. I think that may be an optimistic hope, but the challenges here are more significant and this may prove to be more like gene therapy rather than MAB's.

I believe that there will be RNAi based drugs on the market one day, but the timeframe may be more like decades instead of one decade (as people like to think).

Anonymous said...

Very well said. Gene therapy suffered from one well publicized death in 1999. The field regressed since, FDA is stifling cautious on any gene therapy related agents. Dirk's enthusiasm on the ASCO outcome is contageous because the strong potential to reverse the regressive trend. That is not to say we do not need to continue to be cautious, one wrong death can set the whole field back another 10 years. The market certainly does not reflect Dirk's enthusiasm though. Economy? General publice perception of gene therapy? Stem-cell is going to have the first publicized case coming up, hope it work out well. I am with Dirk that the public opinion might change after the ASCO data, but I suspect it will happen gradually. A bad taste is hard to shake off. I think Dirk is doing the right thing for the field to help raise publice interests.

Anonymous said...

that's a bugger if you're a terminally ill patient and RNAi is only option left to relieve your intractible pain, or extend your life expectancy...

Anonymous said...

I totally agree that Dirk is doing a wonderful job cheerleading on the field. Hats off to him and his effort. I hope that the key decision makers at all levela, corporate and government look very carefully at the state of affairs in RNAi and work to make sure it prospers. Without effort here in the U.S., we will certainly cede control to other nations and lose what is in our hands.

RNAI believer said...

Benitecs HIV study with City of Hope was the first Phase 1 systemic use on RNAi (successful - no side effects) so to say it is behind is not true, it was ahead of the SIRNA crew. The Hep C program has 100 successful primate studies done and is ready to go into humans , this will be endogenous rather than exogenous transfection , a new first. The number of non-Benitec shRNA in viro successes is balooning just do a search shRNA cancer treatment on Google. Its patent portfolio is going from strenght to strength , the CSIRO challenge of the Fire Patent continues, with Mellon droping the European aplication by failing to respond to the CSIRO challenge. It is definately worth a look especially as it is now recapitalised ( Dirks previous recommendation). When Ross joined the board he was shocked at how much more substance Benitec had than Scilence thought it had. The new scientific board is world class as is its CEO and Board. Dirk is long the stock maybe you should be too at a 34 m Market cap. Needless to say I am long already.

Anonymous said...

What's happened to the Tacere's ddRNAi Hep C program partnered w Pfizer? Haven't seen any news on it for ages. By the way, great place to read about the latest in RNAi, so glad you have come back to this blog, Dirk, and I enjoy all the contributors on the comments section too.

Anonymous said...

Ditto. We should all help out Dirk's effort by spreading the words on this blog site to establish an useful public forum. Yeah. Whatever happened to Tacere's ddRNAi HepC program? Did they do the 100 primate studies stated by RNAI believer? When will the trial start? Should we put our money on Pfizer?

Anonymous said...

Alynylam's presentation out,any thoughts anyone?Silence will be today.

Anonymous said...

The Tacere Hep C program awaits a definitive answer from Pfizer , Sandwich the facility which amongst other breakthroughs delivered Viagra is being shut down , this was the unit dealing with the program , having said that Pfizer has indicated they are looking for a new home in their smaller but still sprawling organization , but having laid off everything else RNAI related , there is a distinct possibility the Hep C program will need a new home , it says a great deal that Pfizer has yet to drop it, I think the vaccines division would make a logical home as SHRNA could well be the next leg of vaccine development the branch of medical responsible for saving more lives than anything else. The primate work maybe for publication in the not too distant future.

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