Wednesday, November 22, 2017

RNAi Therapeutics Stocks (Part 2)

Having covered the most developed RNAi companies (Alnylam, Arrowhead, Dicerna) yesterday, this blog entry will discuss RNAi plays that are somewhat less established, but nevertheless could represent interesting investment opportunities.

Silence Therapeutics (SLN.L)
This London-listed company is roughly 2 years behind Arrowhead Pharmaceuticals and Dicerna.  Similar to those, Silence has set its sights on exploiting targets in liver hepatocytes using GalNAc conjugate technology.  Its first program targeting TMPRSS6 for iron overload disorders should enter the clinic in the first half of 2019.

The strength of Silence is partly its RNAi trigger IP position which, if the claims stand, should read on Alnylam’s 3-4 drug candidates that could come on the market over the next 2-3 years.  In my opinion, it would take a generous interpretation of what constitutes a ‘pattern’ for LNP-enabled Patisiran to fall under Silence IP, but it is much less of a stretch for the more stabilized GalNAc-enabled Givosiran, Fitusiran, and Inclisiran molecules in late-stage development.
Part of the potential upside could  therefore come from a settlement of the IP litigation that Silence has filed against Alnylam as it could hamper the commercialization of Alnylam's RNAi drug, especially as it ramps up for the launch of Patisiran. 

The reason why such revenues would be meaningful to the company is that Silence is run extremely well in financial terms such that these funds would neatly feed into Silence's operations as it is about to expand clinically all the while minimizing shareholder dilution. 
This, however, could also be viewed as a necessity since it is much more difficult for a London-based company to raise the kind of biotech ‘risk capital’ that allows companies like Alnylam in the US to really press down the gas pedal to pursue a grand vision without killing shareholders.   

Silence Therapeutics is an investment for those that value the pursuit shareholder return instead of mere market cap growth (=management bragging rights).  While I support this strategy, I am still largely on the sidelines as the company needs to address the anemic trading volume which makes it very costly to trade in and out.

RXi Pharmaceuticals (RXII)
Who doesn’t dream of striking it rich overnight?  If so, RXII is the type of stock that in the right biotech environment could be your daily biotech double in the not-so-distant future.

After all, which other biotech with a market cap of ~$15M can boast about 3 clinical data read-outs before year-end and one additional in early 2018?

1) Q4 2017: phase II results dermal scarring (RXI-109)

2) Q4 2017: phase II results warts (samcyprone, non-RNAi)

3) Q4 2017: UV-induced hyperpigmentation results, consumer testing (RXI-231)

4) Q1 2018: phase I/II results retinal scarring (RXI-109)  

It is possible that the first 3 data read-outs could show that the agents are active and well tolerated, but where there will be a discussion about the commercial adoption of these agents in the real world.  Therefore, the real fireworks may occur following the results from the retinal scarring phase I/II trial in early 2018.  Here, the self-delivering RNAi trigger technology is tested for the first time in the eye where for reasons of technical feasibility (more equal biodistribution throughout eye than in the skin) and clinical application I see the most potential for this technology.
Downside risk comes from management that is pitifully ignorant about the workings of the financial markets and shareholder value creation.  If RXi fails to ignite investor interest in the wake of any of these 4 shots on goal, we could well see a continuation of the financial death spiral that has seen RXII lose 98-99% of its value in the last 3-4 years!!!

I own approximately 3% of the outstanding shares of RXII and will try to add on any weakness ahead of data release.

Arcturus Therapeutics (ARCT)
In sharp contrast to RXi, I view management of Arcturus as far more savvy when it comes to the financial markets and building a biotech company of decent size.

Arcturus, which has recently gone public via a reverse merger, has its roots in RNAi technology, largely by copying liposomal delivery technology from Tekmira (now Arbutus) and then licensing related RNAi IP from Marina Biotech.  In light of the Patisiran APOLLO results, you could view the platform as fundamentally de-risked.
In fact, its lead program was an RNAi program to address TTR amyloidosis.   Since then, however, Arcturus has largely re-tooled itself as an mRNA Therapeutics company using LNP delivery technology.  Although its pipeline is not as prolific as that of much-better known Moderna, it appears impressive for a company with a market cap of still less than $100M just as its partnering activities.

Therefore, Arcturus is a bet on a management that can take average science to build a significant biotech as it talks the language of Wall Street and Pharma deal makers.  It was one of my early biotech investment mistakes to undervalue big-mouthed management relative to science. The best science can always be acquired once you have lowered your cost of capital by growing market cap.
I have a starter long position in ARCT as I wait for it to be discovered by larger hedge fund manager.

The final instalment of this series will cover oligonucleotide therapeutics companies Ionis Pharmaceuticals, Wave Life Sciences, Regulus Therapeutics, and Sarepta.


Martin Ponsenby said...

Basic errors re: Arcturus as I understand their situation. They don't license their RNAi IP from Marina Biotech, they bought the rights to this IP from Marina during one of Michael French's fire sales. So they don't pay for it, they own it and others like Arcturus now pay them the license fees that Marina used to get.

George Marshall said...

You did not mention Silence's 9% interest in Arrowhead. What is that worth, re their comparative market caps? Thank you.

Alex said...


Is there anything of particular value in the RXI patent portfolio? With a sub $10 million marketcap, one would think they might be better off just liquidating since the street has no confidence in management. Not sure what the sum of the parts comes out to but it is more than 10 million. I am somewhat surprised one of the larger players in the RNAi space has not taken a substantial equity stake. The pop on thew news alone would probably allow the company making the investment to double the value of their investment on paper overnight.


sabaidii2 said...

Today's announcement stating that RXI will focus solely on immuno-oncology (IO) and halt development all other pipelines (ie, dermal and ophthalmology) is, imo, bad.

Abandoning the previous 5 years' work in favor of pursuing the latest shiny object (IO) reeks of desperation / failure.

So much for Samcyprone and RXI-231 (skin lightener), the most promising of the pipelines.

sabaidii2 said...

Jan 8, 2018 Bio Showcase Conference presentation:
1) RXI-109 (Dermal Scarring): next step is Phase 2B testing (Slide #9, Audio 6:05)
In other words, a) Figure two more years for any Phase 2B results, and b) P2A results were not a runaway success as it's not ready for P3 testing. Btw, no pictures of any results in the last two years.

2) RXI-231 (Skin Lightener)
Gel formulation was a significant step (Audio 7:30, Slide #11)

How well does RXI-231 work? Well, the 11/29/2017 PR states that on live, humans "show ... RXI-231 ... can reduce a change of skin tone triggered by UV".

The PR then immediately switches direction discussion about "in 3-dimensional reconstituted human epidermal culture" (ie, non-live human testing) it lasts "for one week after a single dose". And on the live humans? No mention. And how quickly does it take effect?

This PR was released on 11/29/2017 - more than enough time to shop it to cosmetic companies.

Verdict: Not looking good.

3) Samcyprone 2nd P2 readout due sometime in Q1-Q2 2018

Slide #14 summarizes dermatology Franchise. Looks positive (on paper), but who knows?

4) Ophthalmology: P1/2 Retinal Scarring readout due Q1 2018

By Dirk Haussecker. All rights reserved.

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