Although we are still only in the middle innings of the RNAi
Therapeutics resurgence according to my Mayan RNAi investment calendar (late 2011-late 2014), the investment
appetite in the space shows no signs of letting up. With over $400M raised since 2012, privately held Dicerna today announces a
record $60M venture capital investment. This follows an $18M VC investment in RNAiTherapeutics start-up Solstice Biologics and confirms that VCs, a group for
which RNAi Therapeutics had become untouchable following the Roche pull-back, have
now fairly good visibility regarding RNAi Therapeutics drug development and Big
Pharma interest in the space.
Persistence paying off
Although the valuations of the fund raising are unclear,
given the recent, in many ways similar private offering by Arrowhead Research,
those investors holding through the dark days and who are adding capital now are
standing to be rewarded handsomely for their persistence. In fact, all five existing investors
(Abingworth, Domain Associates, Oxford Bioscience Partners of Sirna
Therapeutics fame, Skyline Ventures, and GSK VC arm SR One) have participated
in this Series C. It is their investments
plus a few milestone payments from Japanese partner Kyowa Hakko that have kept
the company alive.
Oversubscribed offering
It is important to note that this capital raise was oversubscribed. Remarkably, it was led by RA Capital which featured prominently in the Arrowhead Research ~36M secondary. It thus seems that aside
from Alnylam, the size of the other RNAi Therapeutics players and their
offerings are not large enough (yet) to satisfy the investment appetite of some
funds. Witness also the rapid increase
in the share price of Arrowhead Research (almost a double over the last month) which strongly suggest that at least one good-sized
fund is gobbling up shares on the open market.
There are a number of factors driving this interest. Firstly, it is the clinical gene knockdown
results by Alnylam, utilizing Tekmira’s SNALP delivery technology, which
de-risked the once ridiculed RNAi Therapeutics approach for many observers.
The ~$3B market cap by Alnylam also represents a juicy target for those
that believe 20-30x differences in valuations grossly undervalues the likes of
Arrowhead Research, Tekmira, and Silence Therapeutics.
For those companies that have technology ready for prime time and are thus only capital constraint in terms of expansion, the lowered cost of capital makes them even better investments.
Of course, this is happening within the context of a wider boom in
biotechnology investments, orphan drug development, and an environment where
small caps are outperforming large caps on the public markets. However, it is my strong opinion, supported
by the fact that RNAi Therapeutics share prices have lagged the general market
recovery, that none of that would have helped without the clinical results by
Alnylam.
Dicerna, just a cancer company?
Dicerna stated that the proceeds would be used to
bring at least two RNAi Therapeutics candidates into the clinic starting in 2014. An interesting question will be whether
Dicerna will exclusively focus on oncology or whether it will also
embrace severe orphan diseases which are so attractive for a genetic platform like
RNAi Therapeutics. Based on their work
in delivery, liposomal nanoparticles for cancer delivery, it would surprise me, however, if the first two clinical candidates were not in oncology.
In any case, congrats to the fund raising, and who knows,
maybe we will see a Dicerna IPO in the not-too-distant future.
