Big Pharma Investments in RNA Editing

When it comes to new platform technologies, investors generally like to see their belief validated by large pharmaceutical companies.  In addition to confirming the soundness of the scientific approach, in times when access to capital is constrained, such partnerships also provide an important financing source.

In RNA Editing, Venture Capital certainly has taken the charge (and risk) by investing close to $600M in Series As and Bs spread between Korro Bio, Shape Therapeutics, EdiGene and ADARx (the last two are not pure-plays) largely in 2020-1.  There have, however, been two notable Big Pharma deals that materialized in the second half of 2021.

 

Shape Therapeutics-Roche

In August 2021, Shape Therapeutics announced its first Big Pharma partnership.  Shape apparently has been working on the DNA-directed expression of editing RNAs harnessing endogenous ADARs, especially in the CNS.  Their favourite delivery vehicle is AAV viral delivery.

It is an interesting approach, since despite of going through the trouble of gene therapy-type delivery, they choose not to bring exogenous ADARs along for the ride.  This makes sense since overexpression of ADARs is linked to widespread off-targeting and the molecular size of ADAR may be a vector capacity issue, too.  As it would have involved essentially naturally occurring ADARs (plus/minus a few optimizing mutations), the cost in terms of immunogenicity though may have been tolerable.  This is in stark contrast to genome editing technologies like CRISPR where, because of delivery in the CNS, you would likely have to deal with the extended expression of entirely foreign proteins.

Shape and Roche will tackle a number of neuronal diseases together, likely Alzheimer’s, Parkinson’s and more rare indications like Rett Syndrome.  Of note, Roche has suffered a major setback in oligonucleotide-based neurodegenerative drug development when efficacy and tox issues derailed a late-stage Huntington’s disease drug candidate based on the intrathecal administration of phosphorothioate antisense molecules.  So for them opting for AAV-based expression of targeting RNAs is worth taking note of.

Rett Syndrome is a truly intriguing indication highlighting a few of the unique advantages of RNA Editing.  Rett Syndrome affects ~1 in 10-15k female births.  It is a severe, early onset neurodevelopmental disorder caused by too little MeCP2 expression due to mostly spontaneous (as opposed to inherited) mutations.  Nevertheless, persons suffering from this X-linked gene condition can still live into their 40s and 50s- with severe disabilities. There are no drugs approved specifically addressing Rett Syndrome. 

Rett Syndrome would seem like an ideal candidate for the development of gene therapy.  What makes, however, gene therapy particularly challenging in this setting is that while too little of the master epigenetic regulator that MeCP2 is gives you Rett Syndrome, too much of it is neurotoxic.  Add X chromosome inactivation mosaicism into the mix and the therapeutic window of MeCP2 expression narrows dramatically:

for each (neuronal) cell just enough to give you MeCP2 function, but not more, certainly not >2x normal MeCP2 expression.

As a technology that does not change the rate of gene transcription, RNA Editing is ideally suited for Rett Syndrome and it is estimated that 40-50% of cases can be addressed by the technology.  The downside is that in order to address all of those mutations, similar to Duchenne’s and exon skipping, a number of RNA editing molecules would have to be developed.

 

ProQR-Eli Lilly

A month following the Shape deal, ProQR announced a partnership with Eli Lilly for up to 5 targets in the liver and CNS. This was accompanied by a $20M upfront consideration and a $30M equity investment.

Unlike Shape, ProQR (pronounced ‘Procure’) is pursuing a more traditional approach to drug development in the form of synthetic oligonucleotides for A-to-I editing.  Eli Lilly has shown great commitment to RNA Therapeutics for a while now with for example two RNAi compounds licensed from Dicerna (now part of Novo Nordisk) in clinical development for two cardiometabolic indications and a recent whopping $700M investment into a Genetic Medicine research site for RNA- and DNA-based drug development.  In the CNS, Eli Lilly will be interested in applying the new platform to the usual suspects including Alzheimer’s and pain.

 

As RNA Editing is moving into the clinic (Wave Life Sciences, alpha-1-antitrypsin) and more people hear about the platform and come up with great ideas of where to apply it, but also as oligonucleotide therapeutics more and more becomes part of the mainstream pharma mindset, I expect additional Big Pharma deals to materialize soon.

At the Core of Highly Active RNA Editing Oligos

 Increasing the inherent potency of ADAR guide RNAs (AgRNAs) through chemical and structural means is critical for the success of RNA Editing. For activity, the AgRNAs need to pair with the elements around the target Adenosine (A) and activate resident cellular ADAR enzymes.

There are 3 ADAR enzymes that are relevant for therapeutic RNA Editing: 2 isoforms of ADAR1 (p110, and the longer p150) and ADAR 2.

ADARs fundamentally comprise of N-terminal double-stranded RNA binding domains (dsRBDs) and a C-terminal deaminase domain which itself can also recognize structural features of the double-strand RNA elements around the target 'A'.  

ADAR1 p110 is fairly uniformly expressed in the nucleus across tissues (possibly least in muscle; Picardi et al), but appears somewhat less effective in oligo-guided RNA editing compared to its interferon-induced cytoplasmic bigger brother p150.  Of note, the lung, one of the initial attractive target organs for this new therapeutic modality is an exception as it naturally expresses more p150 than p110.  Finally, ADAR 2 (mostly nuclear) is most highly expressed in the CNS and also quite effective in oligo-mediated RNA editing.

ADAR expression levels are important as more ADAR means more effective RNA Editing.  It is therefore important to use clever chemistry in the design of AgRNAs to make the most of what ADAR is present in a cell. 

ADAR structure

A breakthrough step in that direction was the structural elucidation by the Beal laboratory at UC Davis of hADAR2 in complex with its dsRNA substrate (Matthews et al 2016).  Although the structures of the hADAR1 isoforms have not been solved yet, the high sequence similarity between the ADARs as well as mutation experiments with hADAR1 (Park et al. 2020) suggest that the deamination reaction is highly similar between the enzymes.  Chemical strategies successful for one enzyme should therefore be directly applicable to the other one.

Having said this, it remains an open question whether one ultimately ought to tailor AgRNAs depending on which ADAR is most relevant in a given target tissue and disease setting.

After capturing the structure of human ADAR2 with substrate dsRNA in which the target 'A' (actually a more easily trapped nucleoside analogue replacement 8-azanebularine) is flipped out of the double-strand into the catalytic deaminase pocket of ADAR2 ready for deamination, Matthews and colleagues noted that this rate-limiting step was apparently facilitated by hydrogen bonding between a glutamate residue of ADAR2 with the base originally opposite target A.  This base is also referred to as the orphan base at this stage of the reaction and cytosine is thought to be preferred at this position.

The structure provides an explanation for the base preference as the nitrogen 3 (N3) in the cytosine base ring can hydrogen bond with the acidic side chain of ADAR2 glutamate 488.  This functions as a firm handshake thus displacing and keeping target A out of the double-strand and pushed into the deaminase pocket.

This model also neatly explains the 60x increased activity of a hADAR2 mutant in which glutamate 488 has been replaced with a glutamine amino acid residue as the amide group of glutamine very happily provides a hydrogen for hydrogen bond formation.

Cytidine analogs

While co-delivery of (engineered) ADAR was strongly considered in the early ADAR RNA Editing days, it suffered from widespread off-targeting and delivery challenges.  So to still take advantage of this structural insight for improving therapeutic RNA Editing efficiency, the Beal group, this time in collaboration with Dutch RNA Editing pure-play ProQR investigated whether nucleoside analogues, in particular cytidine analogues with improved hydrogen donating ability could similarly enhance AàI editing (Doherty and colleagues 2021).

I can only imagine the excitement in the lab when it was found that, indeed, cytidine analogues Benner’s base Z and pseudoisoC could increase the rate of deamination.  Importantly, it was shown for Benner’s base Z that this benefit translated to improved AàI editing in living cells.

It should be noted that the deoxy forms of the nucleoside analogues were used as this is known to be tolerated in the orphan position and should make the AgRNAs more stable. 

Of interest, a bulkier adenosine analogue that should be a ready hydrogen donor impaired deamination in the test tube.  Curiously, Wave Life Sciences successfully used this 8-oxodA in their efficacious alpha-1-antitrypsine AgRNA in the recent Nature Biotech paper discussed in this blog (Monian et al 2022).  It remains to be seen whether the discrepancy is explained by sequence and modification context or whether the in vitro deamination assay is not always predictive of performance in cells.

Regardless, 8-oxodA is one of the analogues covered in the patent applications by UC Davis and ProQR (WO 2020/25237641).

Disclosure: I own shares in ProQR.

Landmark Chemical Modification Study Shows RNA Editing Ready for the Clinic

At this stage, providing investors and the pharmaceutical industry with a clear line of sight that RNA Editing can be readily translated from concept into therapeutic reality is key to unlocking the next step-up in valuation.

A landmark study in March earlier this year by scientists from Wave Life Sciences (Monian et al, Nature Biotech) on chemically modifying ADAR guide RNA oligos (I will abbreviate them from now on AgRNAs due to missing consensus nomenclature) should go a long way in this regard.  It shows that applying a plethora of standard oligonucleotide stabilization chemistries (e.g. PS, PN backbones, 2’-O-methyl-, 2’-F-ribose) which are critical to enabling delivery and desirable durability do not compromise endogenous ADAR enzyme activity.

In fact, backbone stabilization for example via phosphorothioates, especially when in the SP stereopure conformation can actually greatly increase activity.  In a luciferase model system, editing activity of a fully (stereorandom) PS-modified AgRNA was 10x that of a corresponding AgRNA with an unmodified PO backbone.

Accordingly, when GalNAc-conjugated AgRNAs were tested in non-human primates, ~40% editing rates were observed for at least 2 months.  For this, a loading dose of 5mg/kg per day for 5 days was used.  This is on the higher end of what should be clinically acceptable, but as we know from experience with RNAi, what GalNAc works in non-human primates works even better in humans.

Illustrating the value of further refined chemical optimization of high-value candidates, impressive ~70% mRNA editing efficiencies were seen for a AgRNA against mutant SERPINA1 in primary mouse hepatocytes resulting in a concomitant increase in corrected protein.  SERPINA1 is also the target for Wave’s and possibly the industry’s first clinical RNAEditing program and addresses alpha-1-antitrypsin liver and lung disease.

What piqued my interest was that this AgRNA involved a 8-oxo-deoxyadenosine mismatch base opposite the adenine to be modified and a nearby inosine.  What this means will be addressed in my next blog entry...

So congratulations Wave Life Sciences on this study, but also they will admit that the study still only scratches the surface of what gains in potency will be possible with more detailed structure-activity studies.

RNA Editing Emerging as a Broadly Applicable Oligonucleotide Therapeutics Modality

This feels like RNAi all over again. 20 Years after my life-altering journey in RNAi Therapeutics started, I can’t shake a similar sensation for the almost boundless therapeutic opportunities around RNA Editing.

RNA Editing in our context refers to the directed change from Adenine (A) to Inosine (I) in an RNA molecule with ‘I’ being read as a ‘G’ by the molecular machineries inside a cell.  This process harnesses endogenous ADAR enzymes (Adenine Deaminases Acting on RNA) which recognize certain double-stranded RNA features upon which nearby ‘A’s are converted to ‘I’s.  These recruiting features can be created in a sequence-directed manner through the interaction of exogenously applied oligonucleotides with complementarity to cellular target RNA, typically mRNA.

Other types of RNA editing, for example ‘C’ to ‘U’ are also being explored, but as a readily sequence adaptable platform, ‘A’ to ‘I’ excites me the most right now and appears ready for prime time.

 

Boundless therapeutic opportunities

When I was first pitched with the concept of RNA Editing, I was skeptical.  I merely saw it as a gene therapy alternative for ultra orphan applications aiming to revert pathogenic ‘A’s into wildtype or less pathogenic ‘G’s. 

Even fairly common genetic diseases like Duchenne muscular dystrophy and cystic fibrosis for example can be caused by hundreds of different point mutations and it would seem overly cumbersome to develop different oligos to address unique mutations of individual patients.

Also, how would it compete here with genome editing technologies like CRISPR that aim for one-time treatments to achieve the same?

It was during a recent trip back to Stanford when I voiced such concerns as Billy Li remarked in passing that RNA Editing was not limited to such genetic therapies in the traditional sense, but could also be used more widely to modulate wildtype mRNAs to influence processes such as signaling pathways for diseases involving much larger target populations.

Billy Li is an associate professor at Stanford University and a leading researcher on ADAR molecular biology and genetics.

To influence signaling pathways, you may for example target RNA Editing to abolish phosphorylation sites or other amino acids critical for protein-protein interaction.  Often, this will have gain-of-function effects such that editing only a fraction of the target RNAs may result in dramatic upregulation of a pathway.

Tunability and temporary modulation as opposed to the binary nature of genome editing is another attraction of RNA Editing.  You can easily see for example that having a signaling pathway permanently fully switched ON could pose a safety issue.

In addition to changing the coding potential of a target mRNA, RNA Editing can also be used for altering RNA processing sites, especially those regulating splicing, RNA stability and transport.

 

Ready to shine

While it has taken RNAi Therapeutics roughly 15 years from the early start-up phase to having its first drug approved for clinical use, the timeline for realizing the therapeutic potential of RNA Editing should be shortened. 

In particular, much has been learned about the delivery of oligonucleotides such that related oligonucleotide stabilization and conjugation chemistries can be rapidly translated to RNA Editing.  First clinical trials will likely be for applications in the liver and CNS, followed by the eye and lung.   

Similarly, the modification toolbox and the dramatically lowered cost of large-scale oligo synthesis and screening can be exploited to improve targeting specificity and to identify highly active RNA Editing oligos.

   

Investment opportunities

I get my adrenaline kick when science and the stock market come together.  After seeing RNAi Therapeutics mature into a widely accepted therapeutic modality, I had increasingly turned my stock market trading to biotech in general.  While this allowed me to learn much about the regulatory and late-stage aspects of drug development and marketing, I have come to miss the passion I felt while diving into the molecular biology and competitive dynamics of RNAi as it was still developing.

I know many of you are biotech investors and feel the same.  So while RNA Editing investment opportunities are not limited to the stock market, this blog will shine particular light on publicly traded biotechs in the field. 

For full disclosure, I have started a position in ProQR (ticker: PRQR; market cap: $62M), to my knowledge the only public pure-play RNA Editing biotech.  After a failed trial involving antisense oligo-mediated splice modulation it now trades at ~50% below cash suggesting that all that was left is an empty biotech shell.  It couldn't be further from the truth as ProQRians have been working on RNA Editing for almost a decade and now find themselves leading the charge of a hot new biotech platform.  Along the way, ProQR has been working on potentially critical IP and it is also for this reason that Eli Lilly has partnered with it on up to 5 RNA editing programs.  ProQR has been in a quiet period.  The next catalyst will be the announcement of more concrete development timelines and programs.  While we are waiting, the projected 2026 cash runway and partnering potential provides the company and investors with a nice cushion in these turbulent times.

Wave Life Sciences (ticker WVE; market cap: $320M) may be first into the clinic with alpha-1-antitrypsin, but as a most diverse oligonucleotide therapeutics company it is burning through its cash much more rapidly, spending it on less promising antisense knockdown and exon skipping programs.  For RNA Editing, I like it for their deep expertise in oligonucleotide chemistry and their editing efficiencies appear leading.

Stoke Therapeutics (ticker STOK; market cap $520M) is another ticker to watch as it uses oligonucleotides in more general for gain-of-function purposes.

Reuters Article on Novavax: a Rebuttal

 [disclosure: I own shares in Novavax]

The protein-based vaccine by Novavax is about to become the gold standard covid vaccine: proven to be highly efficacious and better tolerated than existing options with 3-shot and ease of multiplexing making it ideally suited for fighting variants along with flu in the future.

Unfortunately, Nuvaxovid (aka Covovax) has not been widely available as manufacturing a protein is not as straightforward as making an mRNA-LNP particle.  Still, with partners such as the Serum Institute of India and SK Bioscience now making commercial-grade product, approvals are being granted globally and the broad roll-out is on its way (Indonesia since last December; South Korea from February 14; EU and Australia from February 21 etc).

Curiously, while there is little controversy about the suitability as a covid vaccine, it has been under constant attack from media articles trying to tarnish the image of this company and vaccine.  Politico and Reuters in particular stand out by publishing harmful articles seemingly whenever the stock price is gathering momentum.

Today, I will exemplify just how bad this has become by dissecting the latest hit piece by Reuters paragraph by paragraph.

Rebuttal: On January 10 at the JP Morgan Healthcare conference, the CEO of Novavax Stan Erck told the audience that the EU had orderd 27 million doses for Q1 2022.  According to an Indian government site that tracks vaccine exports, Novavax' main manufacturing partner the Serum Institute of India (SII) has shipped 26 million doses into the EU during January.  These will have to be cleared following batch testing and checking the paperwork.   Unless the Indian government laboratories (CDL Kasauli) have passed and shipped bad product, it is unlikely the the SDS-PAGE and similar standard techniques will find something substantially different.

Regarding the Philippines situation, the vaccine is likely to be shipped in March once the 3-step process before roll-out has been satisfied:

1) approval (EUA on Nov 17, 2021)

2) HTAC recommendation for inclusion in national vaccination plan and DOH financing (29 December, 2021)

3) supply negotiations (ongoing)

Before that has occurred, Novavax and Serum will not send vaccine to places where it cannot be immediately used as they have only begun to turn stockpiled antigen and adjuvant into fully formulated products (~150M monthly capacity for SII sites alone).

The 10 million doses here likely refer to the 10 million doses that Novavax on January 10 confirmed have been shipped to Indonesia where they have been used already.  The doses are also shown on the Indian government export site.  Reuters, however, knows that it purposefully omitted that in fact 38 million doses have been shipped and that the balance (28 million doses) are currently undergoing batch release- some of which, as we will see later in the Reuters very own article, have actually been released for shipping.

That’s the normal process.  It’s great that Reuters acknowledges here that additional doses outside the 10 million in Indonesia are sitting in places like the EU ready to go out to healthcare providers once the paperwork is finished.  In Germany, many states are still planning with a February 21 start of vaccinations.  In Korea, SK Bioscience has today received batch clearance of the first batch of 840000 doses with vaccinations starting after Chinese New Year.

  

Standard cut-and-paste paragraph by Reuters, sadly adopted by the wider press, to ridicule the company. Which other company the size of Novavax 2 years ago has achieved what they did?  How about them filling in a major vaccine gap on the order of 2 billion doses, especially in countries that either cannot afford or do not have the cold chain required for mRNAs?

‘Tiny company’...well yes, if you consider Novavax 2 years ago on the brink of bankruptcy (biotech is a very high risk-high rewards business), but a company that will  soon hire their employee No 2000 is actually not so tiny in biotech terms.

But, of course, this is just part of Reuters ridiculing the company.

The only new information here as the broad roll-out is about to commence is that ‘individual vaccine batches’ have been cleared already in the EU.  Great to hear!  You are starting to contradict yourselves, Reuters.

Ominous mystery country will be revealed later in article. A bait for the reader to stay with article (spoiler alert: no, it's not the US or the EU).

 

80 million doses of the 1.1 billion doses promised to COVAX in Q1 as the company starts turning antigen + adjuvant into product and rich countries incentivizing the company to prioritize them.  Between Serum, SK Bioscience, Novavax' own sites that they had to set up and various other partners, a monthly run-rate of 200 million doses can be expected in the following quarters and should be able to satisfy the COVAX order.

 

 

Stan Erck said on January 10 that 10 million doses have been shipped in accordance with Indian government data.  An ‘Indonesian official who declined to be named’ apparently is only aware of the first November 26 shipment of 137500 doses, but not the subsequent December 98 million doses.  I guess fact-checking is optional for Reuters ‘journalists’.

But don't take it from Stan, but see it on the Indian government site or the United Nations OCHA January 5 Indonesia status update for yourself.

As I had noted before, Novavax and Serum will only send vaccine to countries that are ready to vaccinate.  The Philippines is not yet as it still needs to conclude its supply negotiations.

 

OK, if the Philippines regret having purchased other unused vaccine then by all means try and find reasons to renegotiate. We have all been there, done that.

 

Yes, I also had hoped that the vaccine would become available earlier than that after the December 20, 2021 approval, but the messaging in Germany has been February 21 for the first vaccinations and many states are making appointments accordingly.  Some are planning for February 28 and only a few early March.  ‘Early March’ would therefore indeed represent a delay.  We will see. Next up is South Korea next week.

 There is nothing factually wrong with this final paragraph, but it is symptomatic for Reuters to keep focusing on the hard work and challenges of bringing the first global protein-based covid vaccine to market.  Instead, it should have seized the opportunity- even if it was a critical article- to raise awareness of the unique opportunity for global health in front of us:

A better tolerated and efficacious covid vaccine without proven safety risks such as myocarditis and anaphylaxis.

As I look forward to getting my Novavax booster*, it is time to acknowledge the achievements of this tiny company where big ones such as Sanofi have failed.

*1st shot JNJ...rather severe chills, night sweats, headache, fever from 8-36 hours following vaccination; 2nd shot Biontech: better, but muscle ache around upper arm first, then entire body and general malaise 8-30 hours post vaccination. Now waiting for Novavax to reduce my chances of another 'bad day'.

Strong Presumption Moderna Covid Vaccine Infringes on Arbutus IP

News last Thursday that the US Patent Trial and Appeal Board (PTAB) upheld a broad liposomal nanoparticle (LNP)-related patent added an interesting wrinkle to the race to develop a vaccine against covid19.  Given the way that LNP delivery of mRNA is practiced today (see also below), the patent owned by Arbutus Biopharma greatly impacts on the development of some of the most prominent covid19 vaccine candidates, most notably by Moderna, but also BioNTech, CureVac and others.

This blog entry will provide some background on the history of the science and business of LNPs and why there is a strong presumption that the mRNA-1273 formulation by Moderna which is about to enter phase 3 development infringes on the US patent 8,058,069 ('069) in question.

Disclosure: while anybody who has been following RNAi from the early days of IP battles should be able to call themselves an IP expert, I do not have a corresponding certificate hanging on my walls.  Moreover, since I am long Arbutus Biopharma (ticker: ABUS), I have a vested interest in Arbutus prevailing in the present case, but hear me out anyway...

A history of trade secret theft and IP misappropriation

In 2005-6, Protiva (a predecessor of Arbutus) emerged as the leader in the delivery of RNAi Therapeutics by reporting the first clinically relevant success in taking RNAi triggers into cells in the human body.  The delivery formulation, then called SNALP, involved a mixture of lipids that has essentially remained the same until today:

•         the nucleic acid payload;
• an ionizable cationic lipid for formulation and cell penetration;
• a (PEG-)conjugated lipid for stability;
• cholesterol;
• neutral phospholipids.

-           

What has mostly changed since is the nature of the cationic, typically ionizable lipid, but the 4 lipid-component-system has stayed the same despite at times frantic IP workaround attempts like using just 3 lipid components.

Due to the central importance of these LNPs to RNAi Therapeutics, large players (Sirna Therapeutics/Merck, Alnylam, Roche) soon came to collaborate, then misappropriate related IP from the small Canadian biotech company.  A bitter divorce of Protiva and scientists related to Pieter Cullis from the University of British Columbia certainly aided that goal by facilitating the transfer of know-how and trade secrets for peanuts. Divide and conquer.

Despite of what appeared to be a hopeless battle between David and Goliath, a settlement was reached in 2012 with Alnylam and 'Cullis' in which Alnylam got access to (now) Tekmira’s IP mainly for covering ONPATTRO for the treatment of TTR amyloidosis (now approved) in return for allowing Tekmira survive a system that greatly favors the guy with the most financial wherewithal (disclosure: I was an expert witness called on by Tekmira in that litigation).  The settlement also provided for the limited use of certain IP by 'Alnylam Canada' (AlCana, now Acuitas).

LNP going out of favor in RNAi as mRNA gains traction

The fact that Alnylam started to see success with a less invasive conjugate delivery strategy (GalNAc) for RNAi around that time, certainly helped with settling the dispute.  In ~2015 then conjugate technology in the form of second-generation GalNAc technology started to demonstrate superiority over LNPs in RNAi delivery and Tekmira faced the decision of where to take their company.

In my mind, the decision was obvious: leverage the LNP know-how and IP in order to cement their position in messenger RNA (mRNA) Therapeutics, a hot new field in biotech where Tekmira had been generating industry-leading data.

Instead, in what must be one of the most catastrophic business decisions that to this day I fail to grasp, Tekmira in 2015 gave up half of the company in a merger with a paper company called OnCore Biopharma in establishing an HBV therapeutics solutions company.  This shell contained nothing more but a list of untested chemical structures written on the back of an envelope by new biotech Wunderkind Vivek Ramaswamy and his scientific lieutenant Michael Sofia.

To wit, Vivek Ramaswamy is famous for dumpster diving and buying rights to a failed Alzheimer’s asset from GSK for $5M to then sell it to the public without much additional development for $1.5B soon thereafter.  It then only took one clinical trial to incinerate that value to essentially zero...

Arbutus Biopharma was born.

Unsurprisingly, in what must be one if not the longest string of failures in biotech history, small molecule after small molecule crashed and burned, mostly due to preclinical and early clinical tox issues.

Realizing that their legacy IP and know-how could be quite valuable for financing their string of failures, Vivek took advantage of Arbutus and its shareholders yet another time by spinning out Arbutus' mRNA assets into Genevant (January 2018).  

Arbutus retains a 40% stake in Genevant, a number that Arbutus said needs to be adjusted for 'significant' dilution due to the convertibles that Genevant has issued since.   Possibly equally if not more importantly, Arbutus is eligible to 20% of the revenues (e.g. from damages and royalties payable to Genevant) from the sublicensing of LNP IP by Genevant, for example as the result of a settlement with Moderna, but also other prominent covid vaccine players like BioNTech and CureVac.

BioNTech and Moderna acknowledge fundamental importance of IP controlled by Arbutus

The Genevant creation apparently hinged on a settlement with the rival Vancouver group (now 'Acuitas') announced the following month (February 2018) where it was determined that Acuitas could not sublicense certain fundamental LNP IP under the grand 2012 Alnylam settlement.

Not long thereafter, covid vaccine player BioNTech which until then had worked with Acuitas on mRNA LNP delivery took a license to Genevant's LNP IP in an obvious acknowledgement of the new settlement (note: there has been no explicit disclosure of whether the original license agreement between Genevant and BioNTech has been extended to cover the lead covid vaccine candidates by BioNTech and partners Pfizer and Fosun Pharma; potentially another important puzzle piece of the intrigue).

Importantly, the settlement also provided that Moderna, which similarly had been working with Acuitas, would only retain legacy rights to such IP for 5 viral targets that had been selected by then, well before SARS-CoV-2 was on anybody’s radar.

Unhappy and feeling vulnerable- not surprising since the '069 and other IP may cover most if not all of Moderna's current pipeline- Moderna set out to challenge the validity of Arbutus patents in front of the patent courts.

In a great setback to those efforts, by upholding the ‘069 patent last week, the PTAB not only confirmed the validity of fundamental LNP claims, but strengthened them enormously to the point that Arbutus (the patent owner) would run little risk having its IP found unpatentable (not unusual in IPR proceedings like the one concluded last week) during an infringement lawsuit.

The ‘069 patent

In order for a biotechnology/product to infringe on a patent, it is sufficient that a single claim applies to the technology/product that is being monetized by the infringer.  Receiving government money specifically to develop and manufacture such product like Moderna did in April could be interpreted as such monetization.  More typically, however, it is the actual sale of pharmaceutical products that is viewed as an act of infringement.

The critical claim in the present controversy is as follows (color highlights are mine):

1. A nucleic acid-lipid particle comprising:

(a) a nucleic acid;

(b) a cationic lipid comprising from 50 mol % to 65 mol % of the total lipid present in the particle;

(c) a non-cationic lipid comprising a mixture of a phospholipid and cholesterol or a derivative thereof, wherein the phospholipid comprises from 4 mol % to 10 mol % of the total lipid present in the particle and the cholesterol or derivative thereof comprises from 30 mol % to 40 mol % of the total lipid present in the particle; and

(d) a conjugated lipid that inhibits aggregation of particles comprising from 0.5 mol % to 2 mol % of the total lipid present in the particle.

In order to infringe a ‘comprising’ claim, all individual elements need to be present in a covered product.  As detailed in Moderna’s recent publication in the New England Journal of Medicine on their phase I results with mRNA-1273 (Jackson et al), there is no controversy of whether mRNA-1273 contains all elements covered by the claim:

Messenger RNA -->  nucleic acid

Ionizable lipid --> cationic lipid

DSPC --> phospholipid

cholesterol

PEG2000-DMG --> conjugated anti-aggregation lipid

What then becomes critical is whether the percentages in the mRNA-1273 formulation fall within the ranges specified in the claim.  Curiously, this information is lacking in the publication, in sharp contrast to previous publications. Interesting!

But since Moderna is using a platform approach to developing mRNA therapeutics and vaccines and has stated that the development risk of mRNA-1273 is greatly reduced because it relies on already clinically tested LNP formulations, one could simply look up and compare the percentages used in other mRNA vaccine candidates currently being developed by Moderna.  This is just what I did by looking up the hitherto 3 most recent freely accessible mRNA vaccine publications by Moderna as listed on their website and where the ratios were explicitly detailed.

1)      HIV (Moyoet al, 2020)

Ionizable lipid: 50 mol % (i.e. within 50-65% stipulated in claim)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 30.5 mol % (cf 30-40%)

PEG-lipid: 1.5 mol % (cf 0.5-2%)

è The HIV formulation infringes on the ‘069 patent.

2)      RSV (Espeseth et al, 2020)

Ionizable lipid: 58 mol % (cf 50-65%)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 30 mol % (cf 30-40%)

PEG-lipid: 2 mol % (cf 0.5-2%)

è The RSV formulation infringes on the ‘069 patent.

3)      Chikungunya (Kose et al, 2019)

Ionizable lipid: 50 mol % (cf 50-65%)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 38.5 mol % (cf 30-40%)

PEG-lipid: 1.5 mol % (cf 0.5-2%)

è The Chikungunya formulation infringes on the ‘069 patent.

Similarly, since Moderna has referred to the clinical experience with their 1273 formulation, I finally checked on their latest clinical research paper.

4)      Flu (Feldman et al, 2019)

Paper references Richner et al 2017 paper for formulation details.

Ionizable lipid: 50 mol % (cf 50-65%)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 38.5 mol % (cf 30-40%)

PEG-lipid: 1.5 mol % (cf 0.5-2%)

è The flu formulation infringes on the ‘069

As you can see, the preponderance of evidence points to the fact that the covid vaccine candidate by Moderna infringes on ‘069.  Issuing a PR, as Moderna did on Friday, that it is not aware of an IP problem, of course is par for the biotech IP game, not only for public posture, but in particular to downplay the view that Moderna is willfully using somebody else’s IP.  If found to have done so after starting to commercialize the vaccine, this could lead to up to triple the amount the damages awarded to Genevant and Arbutus.  But then again, the motivation behind attempting to invalidate the patent right after it loses access to it following the Genevant-Acuitas settlement and hiding the lipid ratios in the NEJM paper will be obvious to any judge and should lead to the presumption of willful infringement.

What’s next?

In the typical biotech game, what would follow now is a last-ditch attempt by Moderna to still invalidate the patent by appealing the ruling.  Odds, however, are now strongly against Moderna that they will be able to reverse last week’s ruling.  In fact, the ‘069 is now stronger than ever and the above evidence will give them sufficient ammunition to sue Moderna on the presumption of infringement.  Appealing the decision would, however, buy Moderna some time trying to make their smaller adversary willing to settle for more favorable terms (following the Alnylam playbook).

This, however, is happening during a pandemic and IP-related tactical games may not be viewed kindly.  This also means that Arbutus would be well advised not to make a big public fuss out of what could be very valuable to them financially and continue with their low-key, matter-of-fact approach to the issue.

So in short, I don’t know when the issue will be resolved, but it certainly won’t be next week or month, but more likely at least after a first read-out of the phase 3 results before we hear about any resolution to the matter- most likely a settlement.

How much all of this is worth to Arbutus stock is anybody’s guess, too, depending, of course, mostly on the performance of mRNA-1273 in the clinic, the price Moderna could charge for its vaccine (note: Moderna is a proponent of whatever-the-market-will-bear) and whether covid19 vaccines will become an annual re-administration market.  Personally, the current share price of $5 is already justified by the promising HBV-RNAi phase I results disclosed in May (update pending soon) and the optionality from the fact that Michael Sofia from Arbutus, the inventor of the most impactful HCV medicine, polymerase inhibitor sofosbuvir, has now set his sights on inhibiting the SARS-CoV-2 and other coronavirus polymerases.