The RNAi Therapeutics Money is in the Product Candidates

If you believe, like I do, that the RNAi Therapeutics money ought to be in delivery, the track record suggests that you are mistaken: with the exception of what was euphemistically referred to as a $65+10M 'restructuring' of the agreement between Tekmira and Alnylam, over the last 4 years there has not been one deal where an RNAi delivery company reaped substantially non-dilutive funding for their delivery technology.  By contrast, the money was to be made in RNAi triggers and especially in partnering/licensing out RNAi Therapeutics candidates (for more details, see the RNAi Therapeutics in 2013 Report).

The failure of companies like Tekmira, Arrowhead Research, Silence Therapeutics, and Marina Biotech (plus many others not so much in the spotlight), to capitalize on the uncontested value of delivery may be due to one of the following factors:

1) their respective delivery technologies do not meet the expectations of the pharmaceutical industry;

2) RNAi Therapeutics has lost its attraction as a platform technology. Consequently, an investment in platform technologies such as delivery is not compelling;

3) Potential partners want a One-Stop Shop. Licensing in delivery AND the RNAi triggers separately can be burdensome and may mean decreased potential profits down the line (royalty stacking);

4) intellectual property issues around the payload when monetizing delivery; Alnylam and ISIS have famously sued Tekmira for their delivery deal with BMS (litigation terminated now) claiming that Tekmira was indirectly selling RNAi triggers it did not own.

I believe that all the above factors have contributed to some degree with the relative weight of the issues varying depending on the specific technology, geographies, and other company-specific factors such as the trade secret litigation between Tekmira and Alnylam that has delayed deal flow related to the most advanced RNAi delivery technology.

However, RNAi Therapeutics is regaining favor as a platform technology and I am hopeful that this will translate into the long overdue transactions, also involving the SNALP and DPC technologies by Tekmira and Arrowhead Research, respectively, which have technologies of clinical maturity (disclosure: I am a shareholder of both companies).  The two most likely customers here are Novartis and Merck.  Novartis has an active interest in RNAi Therapeutics, but the scientific and patent literature suggest that they have no tangible delivery technologies and their internal efforts are not even half-hearted so that I expect them to go out and buy in the technology instead of replicating Merck's inreasingly costly mistake of investing hundreds of millions in internal delivery research, including SNALP and DPC lookalikes, when the combined market caps of the originator companies is a fraction of that (please somebody explain that logic to me).

Nevertheless, RNAi delivery companies cannot rely on such platform partnering and need to push ahead with creating RNAi Therapeutics candidates.  This last mile is currently the most rewarding way to monetize on their delivery technologies.  Alnylam has long understood this (see recent partnering around TTR, PCSK9 and VSP), and is now reaping the rewards. 

What Alnylam has done, however, is no magic, far from it: identify genetically attractive gene targets, formulate into established delivery tech (e.g. SNALP, GalNAc), and do some biology around them to build a scientific story to be sold to the pharmaceutical and investor world.  With an established delivery technology, the hard work, or maybe better, the most uncertain factor has been removed, so it's pretty smooth sailing from there as long as the gene target is good and desired by the industry.

It is thus ironic that platform companies get loved for their specific product candidates (not just in RNAi Therapeutics it seems), and not for the technologies that critically enabled them. For RNAi delivery companies, it is important to swallow this scientific toad and invest the additional $5M or so it takes to build that IND-enabled package to reap disproportional rewards.