Tuesday, April 30, 2013

RNAi Therapeutics Companies Cashed Up and Ready to Strike

With the $36M fund-raising last night, Arrowhead Research has become the 4th publicly traded RNAi Therapeutics company in short succession to cash up for a real shot at drug development success.  The other companies are Tekmira, RXi Pharmaceuticals, and as it was made official this morning, Silence Therapeutics.

The money will be spent on promising drug candidates in the cancer field (TKM-PLK1, Atu027), chronic HBV (ARC520), and scarless wound healing (RXI-109) without having to take dangerous short-cuts or partner the crown jewels prematurely.  Moreover, it will help to advance critical delivery technologies such as DPC, SNALP, and self-delivering RNAi triggers which should provide for non-dilutive partnering opportunities without having to entertain low-ball offers.   

It is notable (and not surprising) that unlike Marina Biotech and Benitec which so far have failed to similarly escape the financing maelstro, Tekmira, Arrowhead and Silence all sport healthy in-house R&D operations.  RXi does not have such operations- yet.  However, they were critical for bringing RXI109 into the clinic on which the company’s ~$80-90M market cap rests.   

The cash infusions should also give the companies, which among them own most of the leading platform technologies, the opportunity to make up for the 20-30 fold gap in valuation to the likes of ISIS Pharmaceuticals (2.3B market cap in antisense), Alnylam (1.5B market cap in RNAi), and Sarepta (1B market cap for a phase II orphan indication).  If monoclonal antibodies are any guide, this will not play out as the winner-takes-all the public markets have it right now.

Below is a quick rundown of the newly cashed-up crop of RNAi Therapeutics companies for those new to the field.

Disclosure: I am long Tekmira and Arrowhead Research. 
Disclaimer: Investments in RNAi Therapeutics carry more risks than you want to know and think about.  The following can only be a very brief teaser for you to start your own due diligence.

Arrowhead Research: In the pursuit of a cure for chronic HBV

Market cap: ~60-70M (of which ~$35M in cash)

Unless Arrowhead Research comes up with a compelling orphan drug application of its technology when it will disclose its second development program in H1 2014, investment success will hinge on the fate of ARC520.  ARC520 is Arrowhead's unique attempt at a functional cure for chronic HBV that will enter clinical development shortly.  I interpret last night’s fund raising in that the IND-enabling tox studies were positive.  The results of these will be critical in determining whether ARC520 can be dosed high enough to safely achieve the type of 90% HBsAg reductions that will be required for that lofty goal.

With cash of around $35M, Arrowhead can now retain full rights to that program at least after value-inflecting phase I proof-of-concept knockdowns have been achieved.  To extend the cash runway beyond the predicted ~2 years, Arrowhead owns the exciting Dynamic PolyConjugate delivery technology, particularly the subcutaneous version and potential new developments for cancer applications.  DPC offers an obvious non-dilutive funding opportunity.

Having slept over the announcement of the PIPE financing which doubles the share count near multi-year lows, I believe it still was a good one in a difficult situation.  Potential partners would have liked to exploit the financial weakness of Arrowhead and the fast-money crowd (think Dawson and Rodman) would have liked to reap risk-free gains from trading around a public offering.  Instead, Arrowhead seems to have found one or more significant investors that share the vision with management.  It is comforting that besides the sweet entry price, no special gifts in the form of warrants and otherwise seemed to have been handed out.  No wonder Arrowhead closed up 13% the day after the financing.

Upcoming catalysts:

  - Determination of maximally tolerated dose in volunteer study with ARC520;
-          - DPC partnering (always on the table);
-          - Modest ALN-TTRsc results would emphasize value of DPC (mid-2013) and may get Alnylam into  play;  
-          - DPC data on cancer (probably H1 2013);
-          - Nominating new development candidate (Q2 2014);
-          - ARC520 viral knockdown results in the Hong Kong trial (H1 2014).

Tekmira Pharmaceuticals: Quality Technology, Quality Financial Management

Market cap: ~$70M (of which ~$40M in cash)

If you are looking for relative stability in RNAi Therapeutics, Tekmira could be attractive.  It was its SNALP technology that enabled the current revival (with well over $300M capital inflows in the industry in the first 4 months of this year) and remains one of the two leading systemic delivery technologies with the value possibly shifting towards oncology indications.  Its leading development candidate, TKM-PLK1 for solid cancers, is about to enter phase II studies and has yielded promising dose-related evidenceof efficacy in phase I. 

The company’s aerosolized LNPs could be an unanticipated windfall for investors, although I have yet to see the all-important safety data.  Its Ebola biodefense program is not valued much by the market, but has been an important stabilizing factor for the company in terms of funding and represents an attractive commercial opportunity in its own right.  

Upcoming catalysts:

-          - TKM-PLK1 data from the expansion cohort (H2 2013);
-          - Design and initiation of phase II studies for TKM-PLK1 (H2 2013);
-          - Follow-up candidate and potentially data for TKM-EBOLA (H2 2013);
-          - Nomination of new development candidate;
-          - $5M milestones each if ALN-TTR02 by Alnylam enters phase III development and Ascletis   initiates a trial in China with ALN-VSP02 for primary liver cancer (both H2 2013/H1 2014);
-          - Partnering of SNALP delivery technology, also for non-RNAi, non-therapeutic applications (always on the table);
       - Monetization of Talon royalties (uncertain timing if at all) 

Silence Therapeutics: A novel cancer approach and strong purchasing power

Market cap: ~150M (of which $30-35M in cash)

Following a remarkable financial turnaround and management reshuffle, Silence Therapeutics has become a force to be reckoned with once again.  Unlike in the early days, it is the product candidates, and not RNAi trigger IP, that is the focus of the New Silence.

First and foremost is Atu027, an endothelially targeted RNAi Therapeutics aimed at preventing cancer metastasis.  The company believes that Atu027 will be most useful in combination with small molecules that aim at killing primary tumor cells and consequently is about to initiate phase Ib/phase II combination trials.

According to the information in the latest financing (which was approved today), a significant investment will be made in building a broader pipeline.  This will take advantage of the company’s three lipid-based delivery technologies: Atuplex (broad endothelial cells), DACC (lung endothelial cells), and DBTC (cells in the liver).  In general, the market cap and cash infusion position the company well to pick up some distressed RNAi and other assets.

Upcoming catalysts:

-          - Initiation of pancreatic cancer combination trial with Atu027 (H2 2013);
-          - Nominating new development candidate(s) (H2 2013);
-          - Pre-clinical data on liver delivery technology (2013);
-          - Partnering, also for non-RNAi, non-therapeutic applications

RXi Pharmaceuticals: Just dermal anti-scarring no more  

Market cap: $80-90M (of which ~$20M in cash)

RXi Pharmaceuticals is the company that popularized the self-delivering RNAi trigger concept.  Unfortunately for the company, it made a critical IP mistake of staying clear of the most potent versions it could have created with its ideas (√† dsRNA length).  Furthermore, it seemed that it never was able to get anything into the clinic.

This changed last year with phase I initiation for RXI-109, a potentially superior alternative to Pfizer’s antisense-based dermal anti-scarring candidate.  However, as part of a reorganization, it essentially got rid of its R&D to focus all resources on RXI-109.

As you know, getting rid of in-house R&D is a mortal mistake if you want to be a platform-based company.  With the recent $16.4M cash infusion by OpkoHealth it will be interesting to watch whether they can become a self-delivering RNAi trigger platform-based candidate again, or whether the claimed company growth will largely be around expanding the indications of RXI-109 to other anti-fibrotic indications, especially ocular ones.

Upcoming catalyst:

-          Presentation of phase I data from RXI-109 (any day).


Nick P said...

Great post, appreciate all the work you do, just wondering if you could elaberate on these 2 points you made:
1) Modest ALN-TTRsc results would emphasize value of DPC (mid-2013) and may get Alnylam into play--> even if data is modest, they arent going to drop aln ttro2(SNALP) completley and switch to DPC

2)DPC data on cancer (probably H1 2013)--> ?? where would this come from?

sorry if this sounds like a dumb question, just trying to clear up my thoughts
again, thanks for sharing your thoughts, honestly look forward to reading all your blog posts
-nick pearson

Anonymous said...

ISIS insiders make top 10 list of most sales by insiders for the week ending April 26, 2013. Below is the name of insider, number of shares, sale price per share, total sale amount in dollars, and date of sale:

Crooke Stanley T (Chairman, CEO and President) 10,000 22.12 221,200 2013-04-24
Hougen Elizabeth L (SVP, Finance & CFO) 10,417 22.38 233,132 2013-04-24
Parshall B Lynne (COO, Secretary) 30,000 22.12 663,600 2013-04-24
Parshall B Lynne (COO, Secretary) 25,854 22.50 581,585 2013-04-25
O'neil Patrick R. (SVP, Legal & General Counsel) 15,000 20.22 303,255 2013-04-19
O'neil Patrick R. (SVP, Legal & General Counsel) 27,320 22.13 604,591 2013-04-23
Geary Richard S (SVP, Development) 2,042 20.80 42,473 2013-04-19
Hougen Elizabeth L (SVP, Finance & CFO) 17,656 21.43 378,403 2013-04-22
Crooke Stanley T (Chairman, CEO and President) 30,000 20.01 600,180 2013-04-19
Crooke Stanley T (Chairman, CEO and President) 30,000 20.99 629,700 2013-04-22
Crooke Stanley T (Chairman, CEO and President) 30,000 22.10 662,910 2013-04-23
Monia Brett P (SVP, Antisense Drug Discovery) 2,500 21.25 53,125 2013-04-19
Monia Brett P (SVP, Antisense Drug Discovery) 17,000 21.26 361,420 2013-04-22
Parshall B Lynne (COO, Secretary) 30,000 20.01 600,180 2013-04-19
Parshall B Lynne (COO, Secretary) 30,000 20.99 629,700 2013-04-22
Parshall B Lynne (COO, Secretary) 30,000 22.10 662,910 2013-04-23

Dirk Haussecker said...

Reply to 1) TTR02 for FAP; subQ version for FAC; 2) preclinical cancer data, ARWR's been talking about releasing such data for a while now

Anonymous said...

If Marina Biotech decided to sell itself to another RNAi company, which one is the best fit in your opinion?

Dirk Haussecker said...

I'd have some ideas for Silence Therapeutics and Tekmira, but it would have to involve some shares and future milestones and then maybe just some of the assets. Problem is that they have given away so many rights for so little already.

Anonymous said...

Dirk - Regarding ARWR catalysts, why aren't you including Adipotide phase 1 results? As far as I know, these haven't been released or hinted at yet.. Have you seen otherwise?


Dirk Haussecker said...

Arrowhead has so much exciting going on, it's difficult for me though to get excited about weight loss in cancer patients.

Anonymous said...

As far as I know, Adipotide would not be limited to treating weight loss in cancer patients, the real goal is a general obesity treatment.

If there are positive results from the Phase I, that will be a significant catalyst higher. Look at OREX.

tufulipo said...

Betting on Adipotide is like cheering on a new kind of candle right after Edison came out with the first commercial incandescent light bulb. The chances of success for this as an obesity treatment in the general population isn't even a pimple on the ass of the DPC/HepB elephant. Time to educate yourself to the real issues here.

Anonymous said...

Anonymous obviously misconstrued Dirks wry comment on adipotide. Cancer patients will lose weight as the disease progresses with or without the administration of adipotide.

Anonymous said...

tufulipo - I don't care about what, where, or how ARWR establishes value. At this point, there is NOTHING firm in terms of value. Its all speculation, hope and potential.

If you're going to ignore the Phase 1 results for this 70mn market cap company, thats your choice (an idiotic one IMO). Here's some education: when looking at such a small firm, anything that supports a valuation is important. This isn't all unicorns and rainbows.

OREX is trading at 10x the value of ARWR with only one obesity drug candidate at least 1.5yrs away from market.

Dirk was mentioning catalysts. The Adipotide results are a catalyst.

Anonymous said...

What do you know of Biopath?

Ashlyine Brooke said...

It's not my very first time to visit this blog; I’m visiting this
daily and acquire superb info from here day by day.Monument

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.