Is Dendrimer-siRNA Delivery Reaching Critical Mass?

Dendrimers are branched, nanometer-sized, spherical modular structures that, depending on the monomers, surface and internal modifications, can be engineered to carry out various functions, including nucleic acid delivery. Although dendrimers as a platform for the delivery of siRNAs is still in its late infancy, with maybe another 3-6 years before we will see first clinical trials using such technology, there are a couple of advances that have been reported in the literature that make it seem to be a promising versatile platform for therapeutic siRNA delivery.

Like cationic lipids and polymers (in a way a dendrimer is a highly branched polymer), dendrimers of positive charge can be generated to bind to the nucleic acid. Similar to most first-generation siRNA delivery approaches, siRNA-dendrimer delivery borrows heavily from the experience in delivering plasmid DNA. In addition to the well-known advantage that siRNAs do not have to get into the nucleus in order to be functional, the major hurdle of non-viral DNA delivery, the relatively small size allows that siRNA not only to be positioned as a polyplex on a positively charged dendrimer surface, but also to be well hidden within the sphere. This is an advantage since many polyplexes are prone to aggregation with adverse consequences to the pharmacology of the particle (RES uptake; predisposes to triggering innate immunity; size becomes too big to escape circulation etc).

Internal siRNA packaging, for example by removing the positive charge on the surface and positively charging the interior as demonstrated by Tamara Minko’s group from Rutgers (Patil and colleagues 2008: Surface-Modified and Internally Cationic Polyamidoamine Dendrimers for

Efficient siRNA Delivery), is just one of the strategies to help the dendrimer nanoparticle stay intact in the body. Other approaches include caging the siRNA-dendrimer polyplex via disulfide linkages which at the same time would allow for the timed release of the siRNA presumably in the reducing environment of the cytoplasm. This technology was very neatly demonstrated in yet another paper by the Minko group (Taratula et al 2009: Surface-engineered targeted PPI dendrimer for efficient intracellular and intratumoral siRNA delivery). In addition to caging, the particles were further stabilized by the addition of, you guessed it, PEG.

Since removing the positive surface charge will reduce interaction with the negatively charged cell surface and subsequent uptake of the nanoparticle, the addition of a targeting ligand (e.g. onto the PEG) directed against a cell surface receptor may ensure that the particle is taken up via receptor-mediated endocytosis. This approach, of course, is not exclusive to dendrimer delivery and there appears to still be significant potential for the entire field of RNAi Therapeutics delivery to test the utility of a number of target receptors and targeting ligands (e.g. peptide display libraries as done by mdRNA; MAb display libraries- how about a collaboration with a company like Morphosys?; or also other libraries such as small molecules and sugars). What was curious about Taratula et al’s result of adding a synthetic LHRH peptide analogue for targeting cancer cells is that it also reduced uptake of the particle by LHRH-negative cells with corresponding tissue culture knockdown results. Increasing the ratio of siRNA uptake in target vs normal cells is particularly important for cancer RNAi Therapeutics as these are typically aimed at killing cells.

But what really caught my attention in the Taratula paper was the biodistribution of the caged-PEG siRNA-dendrimer particles in a mouse model of cancer. By elegantly labeling individually siRNA, the dendrimer, and the cancer cells, it was convincingly shown that LHRH-targeted particles were very selectively targeted towards the cancer. It goes without saying that getting the siRNA to the place in the body where you want it to act is a very important first step. What was less convincing, however, was the efficacy of functional siRNA release into the cytoplasm with unfortunately no in vivo knockdown results shown. Also, the tissue culture cell microscopy experiments to me do not demonstrate efficient siRNA release, but mostly show the particles to be stuck in the endosome.

Endosomal release, of course, is a huge problem with a lot of the siRNA delivery technologies, but I am hopeful that the improvements in the pharmacologies as demonstrated by these papers can be combined with technologies imparting the dendrimers with endosomolytic activity. Due to the modularity of the dendrimer system this seems to be a realistic goal as there are now a number of technologies that allow for endosomal release, that incorporated into Mirus’ DPCs being one, and the generation of nanoworms (‘dendriworms’: Agrawal et al 2009: Functional Delivery of siRNA in Mice Using Dendriworms) being another of them. I am also encouraged by what appears to be a quite favorable safety profile of dendrimers.

For the investors among you, you will probably be asking about the commercial landscape for dendrimer-siRNA delivery and how to profit from it. The Australian dendrimer company Starpharma has been on my radar, but besides stating their interest in siRNA delivery, I have seen little material emerge from this. Due to geographic proximity and the fact that Benitec has a few InterfeRx picks, maybe they should be talking to Benitec. Then, of course, it is possible that one of the elephants in the room, particularly Alnylam, Roche, and Merck, will be looking hard to round up the IP and know-how in the field.

Important Decision for Silence Therapeutics Looms

In another sign that deal activity is also picking up in the RNAi Therapeutics space, Silence Therapeutics announced this morning that trading has been suspended awaiting the outcome of M&A talks with a private US investor group. It is not the first time that rumors around Silence Therapeutics have had a major influence on the trading of the stock. This time, however, there appears to be a factual basis for the rumors and if the deal materialized it would qualify as a reverse takeover according to the company.

It will be interesting to see whether the deal was negotiated from a position of strength or weakness, and whether there will be a change of scientific direction or IP strategy of Silence Therapeutics, one of the older players in the field. Clearly, their position should have been hampered due to their unfavorable cash and uncertain IP positions. A reverse takeover may thus allow the rumored private investor group from the US to access the public equity markets through Silence Therapeutics and at the same time re-capitalize the company. This may also mean that AtuRNAi will be replaced by another biotechnology as the company’s scientific foundation.

On the other hand, events over the last year may have given Silence Therapeutics investors increased confidence in their freedom-to-operate, and given that the phase I trial for solid cancers has just commenced, they may not want to give up their technology hopes just yet. The US investor group may thus gain access to Silence Therapeutics’ scientific and IP portfolio, although the money they would infuse into the company would mean that they are now the majority owners. A third scenario may be that the US investor group brings with it a complementary RNA Therapeutics asset, be it another set of RNAi triggers, targets (e.g. microRNAs) or delivery technology.

In any case, I am very curious to hear about the news as it should provide for some tantalizing insight into some of the dynamics moving the RNAi Therapeutics financial market. Tomorrow, at the latest, we should know more as the company was to announce its half-year report then.

Note added in proof (9/30/09): at the end of June 2009, Silence's cash position stood at ~US$5M.

Moving Rapidly from Target Discovery to Lead Development: RNAi in the Context of the Emerging Drug Development Paradigm (Journal Club)

That RNAi is now widely employed in the Pharma world for target identification and validation purposes is no longer a secret. That RNAi may immediately lend itself as the therapeutic agent as well has been recognized by Merck, Novartis, and Roche, and it is this widespread familiarity with the technology that is also a major driver for more Big Pharma companies embracing RNAi as a therapeutic platform technology, too.

Today, I’d like to use a paper by Dan Cao on the identification of new host factors for Hepatitis Delta Virus (HDV) replication to illustrate how easy it is now, in theory, to exploit RNAi to dramatically shorten drug development timelines, especially in an environment that demands the rapid development of drugs based on new, innovative targets (Dan et al.: Combined proteomic-RNAi screen for host factors involved in human hepatitis delta virus replication. RNA [epub ahead of print]).

HDV is typically found in the context of a Hepatitis B Virus (HBV) infection as HDV requires HBV to introduce its genetic material into the host cell. Viral replication, however, is independent of HBV, and there are indeed a few patients that have got rid of HBV, but still harbor HDV. While this is uncomfortable already, having both active HBV and HDV is not pleasant at all. Because HDV is a condition thought to be of little pharmaco-economic importance, there is no HDV-specific drug. The identification of viral host factors therefore would immediately yield candidates for the development of RNAi-based drugs specific for HDV, in addition to the basic molecular biology insight they might provide for the study of RNA-directed transcription for which HDV is a great model system.

Targeting host factors is especially attractive for RNA viral infections, because it should be much more difficult for the virus to escape the drug by mutation. There are a number of well-publicized studies identifying host factors for HIV through genome-wide RNAi screens. This, however, demands a dedicated RNAi screening facility and a lot of hard work. Moreover, relying on just one technology, albeit RNAi, should increase false negatives, and especially false positives. The alternative approach would be to search the literature for reported viral host factors and then target such a list of genes by RNAi. The draw-back of this approach is that it will not include new factors and that the quality of reported factors can be quite ‘variable’.

For all these reasons, but particularly because the life-span and budget of a post-doc are limited, Dan decided to take a slightly different tack. The approach relies on employing two functionally independent screens for HDV host factors, but which because they were serially coupled should increase the quality of the identified factors while reducing the overall workload.

In a first screen for HDV-related host factors, the only viral protein (HDAg) was immunoprecipitated and associated proteins identified by mass-spectrometry. Over 100 proteins were such identified, although some were more and some less abundant. Among the most abundant ones were several subunits of the host RNA Polymerase II complex, which carries out viral replication and this therefore was a great validation for the validity of the immunoprecipitation results. The proteome-wide IP-mass spectrometry was relatively painless since the IP eluate could be handed over to the mass-spec core facility almost unprocessed and was then analyzed by a skilled specialist using standard methods (about one week, i.e. negligible turnaround for somebody that has gone through the process once).

Dan then picked about 60 genes from the list and got about 3 siRNAs for each. These were used in a screen for their ability to inhibit HDV replication. Although this still requires hard labor, 60 is a number that is within the reach of a single worker and no complicated screening facility is required. All you basically need is a good screen. Thanks to the existence of genome-wide siRNA libraries (which, of course, is a result of the interest in RNAi), the cost of siRNAs has also come down dramatically compared to 5 to 7 years ago (from $250 an siRNA to about $15-20 an siRNA). In summary, ~1 ½ man years identified about 5-10 genes that both interacted with HDAg and when knocked down strongly inhibited HDV replication.

Although not done in this study, these candidates could now be vetted in the literature for whether they may make for good targets (based on predicted requirement for cell viability etc), and then tested in small animal models of HDV infection for pre-clinical in vivo proof-of-concept using existing siRNA delivery technologies for the liver. After another 2 years of siRNA chemistry and pre-clinical pharm/tox (which will be routine in a company with an established RNAi Therapeutic platform) you could imagine to be in the clinic.

This is just a small example of how RNAi may be ideally suited as a therapeutic modality in an age of personalized medicines where pharmaco-economic principles would demand efficient drug development. An article mentioning GSK’s intention to announce next month an orphan-disease initiative is another sign of the times, and gets me a little bit more excited about Alnylam’s prospects for a platform deal- maybe even this year (see also blog on the neglected disease patent pool donation). Who knows, one day it may not just be the government of Taiwan that is interested in treating HDV anymore.

Abstract:

Combined proteomic-RNAi screen for host factors involved in human hepatitis delta virus replication.

Cao D, Haussecker D, Huang Y, Kay MA.

Department of Pediatrics, Stanford University, Stanford, California 94305-5164, USA.

Human hepatitis delta virus (HDV) is the only animal virus known to replicate its RNA genome using a host polymerase because its only virally encoded proteins, the small and large hepatitis delta antigens (HDAg-S and HDAg-L), lack polymerase activity. Although this makes HDV an ideal model system to study RNA-directed transcription in mammalian cells, little is known about the host factors involved in its replication. To comprehensively identify such host factors, we created a stable cell line carrying a functional FLAG-HDAg-S. Anti-Flag immunopurification and mass spectrometry identified >100 proteins associated with FLAG-HDAg-S, many of which had predicted roles in RNA metabolism. The biological relevance of this screen was strongly supported by the identification of nine out of the 12 subunits of the RNA polymerase II complex thought to mediate HDV replication. To further investigate the significance of these factors for HDV replication, we selected 65 proteins to look for factors that would also affect the accumulation of HDV RNA following siRNA knockdown. Fifteen and three factors were found to regulate HDV RNA accumulation negatively and positively, respectively, upon RNAi knockdown. Our results provide a valuable resource for future research to advance our mechanistic understanding of HDV replication and RNA-directed transcription in mammalian cells.

Run-Down of Companies in the RNAi Therapeutics Portfolio

Alnylam: As the bellwether of RNAi Therapeutics due to its IP position, maturing pipeline, strong balance sheet and a generally broad outlook on RNAi Therapeutics, a must for those (institutional) investors with significant funds to invest in the RNA Therapeutics space. Data from Alnylam’s Huntington’s Disease and RSV programs suggest that they have potential on their own, independent of how they contribute to the learning of RNAi for CNS and lung disorders in general. Surely, the hiring pattern of Big Pharma argues that the perception of RNAi as a therapeutic modality has not gone out of fashion there, immediately adding potential licensees to Alnylam’s leading RNAi trigger portfolio.

However, as it is delivery that potential licensees and investors are increasingly paying attention to and even cash-rich Big Pharma/Biotech will question whether it should spend $300M for an RNAi trigger license now that there have been a few decisions that did not go in Alnylam’s favor, I am not sure whether we will see a simple pre-packaged RNAi trigger platform deal. Rather, such IP access may be packaged with access to Alnylam’s know-how on the delivery, chemistry, and safety of RNAi Therapeutics, somewhat reminiscent of the Roche deal and the Kulmbach component. To set up such deals may take longer, but ultimately provide more value not only for the licensee, but also for Alnylam. Certainly, positive SNALP clinical data should prove as a catalyst for these negotiations and the stock.

Tekmira: If you did not know already, my favorite RNAi Therapeutics investment right now. Pioneered the, in my opinion, most advanced systemic RNAi delivery technology, SNALP, which renders the Canadian $50M market cap company fully exposed to the major value drivers in the space near- to mid-term. The well validated ability to deliver oligonucleotides to the liver with SNALP will make Tekmira not only an attractive collaborator and acquisition target in RNAi Therapeutics, but should offer it new business opportunities outside the traditional siRNA structure. This includes various forms of microRNA mimics and inhibitors, immunostimulatory oligonucleotides, and oligos for targets based on emerging non-coding RNA pathways or other knockdown mechanisms. Mir-122 inhibition with SNALP may be an interesting pharmacologic alternative to the naked LNA-anti-miR122 by Santaris now in late phase I studies. Demonstrating the utility of SNALP outside the liver, such as for solid cancers and cells of the immune system (maybe by using targeted delivery) could further increase the perceived value of this conservatively managed company. With about two years’ worth of burn in a relatively good financial position.

I should temper my enthusiasm, however, as there are no sure things in biotech and the first use of SNALP in Man may well yield some unpleasant surprises and could dramatically change the outlook for the company. Similarly, it needs to think ahead about how to access a broader investor audience outside of the Canadian market as its own pipeline is growing in size and capital demand. A good bet nevertheless.

Benitec: Faces an uphill battle with regards to their core DNA-directed RNAi patent, essentially pitting it against mighty Fire-Mello. However, as time progresses and the ’099 Graham patent not getting any younger, I’m starting to have doubts as to how important this patent will prove to be. Other patents assigned to Benitec, the HIV programs, and potentially the Biomic collaboration may prove to be of more immediate practical value to the company. What is needed, of course, is a re-capitalization of the company.

Targeted Genetics: This cat has 8 lives. I had been quite confused that after almost everything scientific and clinical was going in Targeted Genetics’ favor, the company was rapidly approaching bankruptcy. Society and the investment world are not always fair, which is a warning to those investing just according to scientific principles. Now, Genzyme has come to the rescue, but it remains to be seen how committed the company is to its RNAi pipeline. It would make sense for RNAi to be part of a company focusing on diseases of the eye (and CNS) for which AAV and lentiviral gene therapies currently have most promise (the eye as the liver of DNA-directed RNAi).

RXi Pharmaceuticals: Experienced management and scientific team, access to Tuschl I and preferential treatment by the state of Massachusetts, yet for some reason very little drive towards the clinic and financially challenged. Instead of a clinical pipeline, a pipeline of ‘interesting’ RNAi trigger and delivery approaches. I’m still not sure about what their rights to Tuschl I are that have recently been characterized as ‘limited’ in scope. This, however, and the Massachusetts/Mello connection are probably the biggest draws for the stock. Still, without being able to offer complementary practical know-how I would think Big Pharma is not too anxious to access RXi as a partner.

Silence Therapeutics: Similar to RXi Pharmaceuticals, stands to greatly benefit depending on the messiness of the Tuschl patent outcomes where Silence’s ability to operate in the 21-23nucleotide space is at stake. Also reasonably successful in battling the patent that most likely imposes most constraints on the company, namely Kreutzer-Limmer. While nobody would doubt Alnylam’s freedom-to-operate (however questions have been raised as to the degree of being able to exclude), my fundamental question about Silence Therapeutics is whether what may be a patent work-around also makes for the best scientific approach. Their underlying patent application is based on quite limited data, so I have yet to be convinced of any real generally applicable scientific advantage of the Atu-RNAi design (nevermind, at least in terms of IP, my opinion does not matter much since the European and US patent offices appear to concur with Silence). Things have been looking up recently for the company and its Atu-027 program for advanced solid cancers has started phase I dosing. This program aims at silencing the PKN3 kinase in the endothelia of solid tumors which apparently inhibits metastatic spread through reduced lymphangiogenesis. An interesting approach towards RNAi cancer therapy and has been described in a detailed company publication late last year that provided reasonable support for bona fide in vivo gene knockdown using lipoplex delivery (Aleku et al., 2008). One interesting point I found in that publication was that in cynomolgous monkeys, the circulation time of the particles was greatly extended to what they found in rodents. This can only be a good thing for the prospect of lipid-based nanoparticles.

mdRNA: Together with Targeted Genetics, another unlikely survivor from the financial crisis coming from Seattle. Two deals with Big Pharma, one on delivery (Novartis), and one on siRNA structure (Roche), early this year contained enough upfront to give the company another couple of months to get itself on sounder footing. Similar to Silence Therapeutics, their main delivery approach consists of essentially the same chemistries as contained in SNALP and apparently lends itself to targeted delivery (which, however, is not a unique property of their technology). Also, I would be cautious about claims that putting UNA-modified nucleotides in the 3’ overhang of siRNAs would liberate them from claims in Tuschl II. UNA modifications appear to be a viable option for the siRNA modification toolbox, but I would be cautious in how far they are uniquely advantageous over other chemistries at last according to an excellent, comprehensive siRNA modification screen as published by Bramsen et al. this year. In any case, the fresh, and apparently well-connected management team can be congratulated for rescuing the company, and the scientific team for their skills in being able to rapidly adopt oligonucleotide modification and liposomal delivery skills at least to the degree that Big Pharma is curious enough to look under their hood. I would like to speculate that if RXi e.g. had built such practical skills in-house, we may have seen some deals that would not have been as dilutive as recent efforts to raise capital.

Rosetta Genomics: After having apparently staked their future on a blood-based test for colorectal cancer screening, it has reported that these plans have been slightly delayed due to technical issues. The poster on the colorectal cancer-related microRNAs in blood that had been presented previously certainly showed initial proof-of-concept for blood-based microRNA diagnostics, but more robust detection methods are needed in order to make such tests a commercial reality. It is debatable whether the one-shot strategy was a wise one, instead of churning out a series of tissue-based Dx albeit with a much smaller target market. If blockbuster products like a screening test for colorectal cancer were a primary business goal, then an alternative route may be to collaborate on Rx-Dx combinations which however are much onerous to develop than home-brew Dx and may require a partner like Roche. There may be a number of regulatory and health care reform issues that could affect the future prospects of being able to sell and get reimbursements for home-brew Dx. On a positive note, according to my literature, I have stumbled across enough references by Big Pharma on the potentially unique utilities of microRNA Dx that I believe the concept has well arrived in the minds of important constituencies for Rosetta. A pick-up in sales of their first products would also be welcome by investors. Due to a number of synergies, companies like Regulus may also be a good home for Rosetta Genomics.

ISIS Pharmaceuticals: There is certainly a flood of ISIS-related antisense in various stages of clinical development, some with interesting results indicating efficacy. Mipomersen meanwhile blazes the trail for ApoB as a target for hypercholesterolemia, and assuming it will confirm phase II results, I am curious about how much of the patient audience Genzyme is able to capture. This should also have implications for the financial potential of follow-on ApoB therapeutics. ISIS also was successful in monetizing their IP for ssRNAi with almost $21M (! a high number considering the stage of ssRNAi and other deals that Alnylam has done in the past) in upfront and near-term payments from Alnylam, while still being able to develop ssRNAi Therapeutics itself. OK, you know that I have some problems with how ISIS likes to interpret RNAi as an antisense technology, so please allow me this comment: if RNAi already was a single-stranded antisense technology, how is it then possible to claim ssRNAi as a separate technology without running afoul double-patenting rules? Anyway, I acknowledge that ISIS is on a good way of becoming a sustainable, profitable oligotherapeutics company and probably should be part of a diversified RNA Therapeutics portfolio.

Oxford Biomedica: Despite disappointing cancer vaccine results causing partner Sanofi-Aventis to give up on Trovax, Oxford Biomedica must have been able to impress Sanofi-Aventis with their core leniviral delivery technology (note: Trovax is not a lentiviral technology). Sanofi-Aventis thus seems to agree that lentiviral delivery has significant potential for applications of the CNS, including the eye. However, as I hear little about Oxford Biomedica using its IP and know-how in RNAi, I will consider replacing it with companies like Genesis R&D in my next portfolio update. There is certainly a lot of DNA-directed RNAi Therapeutics technology and IP looking for a well-funded home.

[Please note that the following is a run-down of my own impressions of companies in the portfolio and links are not necessarily provided for all major assertions. Please use the comments section if you believe that there are factual inaccuracies]

RNAi Therapeutics Portfolio: SNALP RNAi Phase I Data and RNAi Trigger IP Questions Likely to Move RNAi Stocks

As the threat of financial apocalypse seems to be behind us, thanks to what authorities can always be counted on in the wake of economic crises, namely printing money and thereby re-distributing wealth, it is time to re-visit the RNAi Therapeutics portfolio.

10 months ago, I would not have necessarily expected to see the likes of mdRNA and Targeted Genetics still in existence today. A number of companies such as RXi Pharmaceuticals, mdRNA, Targeted Genetics, Genesis R&D and others have thus taken advantage of the thawing financial markets and extended their runway by raising capital through secondaries and IP monetizations. Before I calculated the current values in the portfolio, I made a list of the companies and how I would have allocated funds if I were to start the portfolio from scratch, and it turned out that the values more or less corresponded.

The only transactions were selling CytRx and using half of the proceeds for purchasing back their pure-play daughter company RXi Pharmaceuticals, and, yes, Silence Therapeutics with the other half. The first transaction was merely because the anomaly, namely that the stake that CytRx had in RXi had been worth more on paper than CytRx itself, had disappeared. The purchase of Silence Therapeutics was done to take into account their improved IP position following decisions on Kreutzer-Limmer and Tuschl uncertainties in recent months. What I noticed is that, no matter what I think about the merit of the underlying science, I would not discount Silence Therapeutics’ ability to access potential collaborators, and some in Big Pharma may view Silence as a cheap entry-ticket into RNAi Therapeutics.

However, RNAi trigger IP is only one of the RNAi-intrinsic factors that I expect to move RNAi stocks in coming months. More importantly, I expect that, for better or worse, it is the phase I results from foremost Tekmira’s SNALP-ApoB, and then Alnylam’s ALN-VSP02 programs will heavily influence of how investors think about the near-to midterm prospects of RNAi Therapeutics. A positive surprise could come from late-stage preclinical data from the anti-miR122 candidates for the treatment of HCV infection as was alluded to in an interview with Regulus CEO Kleanthis Xanthopoulos, while prospering Santaris is moving ahead with their LNA-based miR-122 inhibitor into late phase I (a likely source of future patent issues).

In tomorrow’s post I will provide a brief run-down of the companies in the portfolio.

The Difficulty of Valuing the RNAi Therapeutics Platform from the Perspective of Monoclonal Antibody Company Morphosys

Sometimes I am asked why it is that I think that RNAi Therapeutics has this special potential to have a big impact on health care. Is it because I only came to know RNAi and simply got excited by it, or was it because I studied every drug technology under the sky and came to the conclusion that RNAi it is?

I have to admit that it is clearly the former: Since the fateful day in late 2000 that I first seriously considered RNAi when my undergraduate plant biology lecturer asked me whether I wanted to design plant RNAi vectors in his lab, I have followed a strong instinct to stay with RNAi, especially its monetary potential (now I prefer to call it ‘therapeutic’ instead of ‘monetary’). Long story short, I realize that I had been somewhat lucky that my initial fervor leading me to discount most other technologies as inferior simply because they weren’t RNAi did not ruin me financially. Some would argue that there is so much equally exciting biology, yet most of it is not suitable as a biotechnology. After having re-evaluated the potential of RNAi Therapeutics in comparing it to other drug technologies and coming to the conclusion that, yes, RNAi Therapeutics has unique characteristics and should have broad applicability for future medicine, the question from an investment perspective still remains: how will the market value this (still unproven) platform technology over time?

I think that in this regard there are a number of lessons to be learned from the monoclonal antibody arena of which Germany’s Morphosys is one of, if not the last remaining independent pure-play platform company. What is striking is that even for a platform company with strong IP in an already proven technology like monoclonals, it is the actual proprietary clinical pipeline that is driving valuation. While 60-100 partnered therapeutic programs (mostly in early-stage development) and non-core monetization efforts of its antibody know-how through a diagnostics division, has helped to keep Morphosys cash-flow positive and with a strong balance sheet position of over EUR140M (~210M USD), it is valued at what I consider a modest $570M. Considering the stronger balance sheet of Alnylam, this is probably comparable to if not somewhat less than that of the leading pure-play RNAi Therapeutics company. This strong balance sheet position, however, allows Morphosys to now ramp up its proprietary clinical pipeline without having to worry about the next fund-raising round, again similar to Alnylam.

While overly close relationships with Big Pharma are often seen as constraining the freedom of the platform company to choose its own targets (one of the criticism faced by Alnylam after its Novartis deal), when done properly, the benefit of being able to learn about the technology from the co-development programs on Big Pharma’s budget is not always fairly considered by the market. Tekmira for example is sometimes criticized for not having obtained juicy upfront payments in their deals with Alnylam and Big Pharma. On the other hand, Tekmira’s deals are built around long-term relationships in which they can learn about liposomal delivery from their partners’ programs and make a small profit on each program. Morphosys once more is a good example here with a relationship with Novartis that is very close and, no surprise here, therefore also sometimes condemned for this reason, but that results in dozens of monoclonal drug candidates passing through the early stages of development in their own laboratories, and moreover fosters familiarity between employees of the two companies and the exchange of know-how.

As a result of these personal ties perhaps, Morphosys announced two days ago the appointment of a new head of Clinical Development coming from Novartis and with a strong background in hematology, an area where monoclonal antibodies have had a big impact and Morphosys is focusing on their early proprietary pipeline. Since disease-specific knowledge is something that platform companies tend to be lacking, I would argue that as the liver, oncology, and to some degree the eye, are shaping up as the first fertile fields for RNAi Therapeutics, RNAi Therapeutics companies should begin to build strong expertise in these areas and combine it with their unique insights into the RNAi mechanism of action and specific delivery. This may even mean that as the companies become intimately familiar with the organs and diseases and new targets emerge, RNAi Therapeutics may be complemented with other drug technologies. It is by focusing on a limited number of disease-associated molecular signaling pathways that Genentech e.g. has become interested in small molecules that can address proteins not accessible to monoclonals. TTR is an example where due to the size of the patient population and relatively small research community, it may make sense for Alnylam and Cambridge neighbor FoldRx, which is developing a promising protein-folding compound for TTR amyloidosis, to learn from each others’ experiences.

I’d like to think that the unique challenges faced by platform companies in obtaining a fair valuation from the financial markets, especially after the first honeymoon period is over and in the wake of a severe financial crisis, should provide an opportunity for investors with a long-term horizon to invest in companies that are well capitalized and should therefore make it through this period of skepticism. The best time may be when, as is the case for Morphosys now, the number of clinical pipeline candidates are starting to grow exponentially which in turn will attract the attention of a wider audience of investors. In the RNAi space, Alnylam with its many partners is an obvious case where similar dynamics are in the works, or Tekmira with its SNALP technology which counted one IND last year with two and three more expected this and next year, respectively, by Alnylam, Roche, and Tekmira itself. One factor that may help RNAi Therapeutics to catch up with Morphosys’ monoclonals and compensate for the fact that RNAi Therapeutics are less well validated is the ability to obtain early proof-of-concept in programs such as ApoB and the fact that Big Pharma does not want to miss the boat in RNAi Therapeutics as it did with recombinant DNA and monoclonal antibodies.