RNAi Therapeutics Companies Cashed Up and Ready to Strike

With the $36M fund-raising last night, Arrowhead Research has become the 4^th 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 (à 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).