If You Like Dicerna, You Will Love This Company

Yesterday, RNAi Therapeutics platform company Dicerna went public and following a wildly oversubscribed offering, popped 200% from the issue price.

It was a day to celebrate for the RNAi Therapeutics sector.  Following years of starvation and neglect, the going public of a private RNAi company marks another milestone in the technology’s recovery and vindicates activities in the early VC rounds seen last year (e.g. Solstice and Arcturus; correction: as rightly noted by Arcturus, the source of Arcturus' early-stage funding was not classical VC funding).  This is because venture investing in biotech really only pays off when the exit is on the public market- and very rarely by means of Big Pharma takeovers.

Sorry Bruce, but planning your company’s on the assumption that they will be Big Pharma takeover targets is flawed as you are dealing with miser companies failing to see the Big picture for their discounted cash flow obsession.  And how can you trust a counterpart which for years have refused to pay small biotechs based on the value of their discoveries and instead preyed on their need of capital, only to cry foul now that the public markets provide a more attractive alternative source of capital to them.

The bullish view: potential

The $700M market cap for a preclinical-stage company, however, does raise some legitimate questions.  Supporting such a valuation is the realization that this is a platform company and that once it has clinically relevant delivery figured out, it can roll out an Alnylam-type broad pipeline in a short period of time.  Or think of a pipeline with not just one Alexion-type drug (one-rare-orphan-drug wonder with a >$30B market cap), but a handful of those. Thus, valuing the company merely based on the number of development products and their development stages would be woefully short-sighted. 

It is obviously a mistake to apply the same risk discount based on the stage of development regardless of technology and drug target.  Hence, once delivery is validated (e.g. through extensive non-human primate experience), you should significantly increase your valuation of an RNAi Therapeutics company that wisely seeks to minimize target risk by taking advantage of RNAi to choose from a plethora of targets.  And under such circumstances when capital and not technology becomes limiting, a capital raise should even increase shareholder value and not be viewed as shareholder dilution.

So if you speculate that Dicerna will have a TTR amyloidosis-type program and will have generated impressive proof-of-concept knockdown in a clinical study by the end of 2015, a $700M market cap would seem acceptable if not on the low end.  

The bearish view: limited de-risking and relative valuation

On the other hand, it seems easy to challenge the view that Dicerna has fulfilled a key criteria for the $700M valuation: clinical de-risking.  

By clinical de-risking, I do not even mean SNALP-type gene knockdown results in humans (e.g. >90% with ALN-TTR02).  By that criterion, an Arrowhead Research, with a market cap similar to Dicerna, would fail the test, too.  However, ARWR's valuation is supported by solid non-human primate efficacy data and human safety data, plus Arrowhead is leading the way in the important area of ligand-targeted polyconjugates (for more on my view on Arrowhead Research and much more, please consult the RNAi Therapeutics Investment Guide 2014).

By contrast, the degree of validation of Dicerna’s delivery system is essentially limited to rodents, although I expect them to have collected at least some non-human primate safety data as they are about to enter clinical development in the first half of 2014.  Non-human primate data is required in RNAi Therapeutics as it has been shown again and again that rodent data often do not translate into humans. 

Accordingly, it can be argued that Dicerna’s lipid-based (Encore) delivery system will be at a similar stage to that of Tekmira’s lipid-based (SNALP) delivery technology 5 years ago.  As Tekmira’s (TKM-ApoB) experience with SNALP illustrates, there can be time-consuming lessons to be learned before a suitable formulation and administration solution are found.  On top of that, Tekmira controls some fundamental patents covering Encore delivery technology (Semple/Wheeler), although their expiration date is certainly approaching fast.

In terms of pipeline strategy, Dicerna and Tekmira are also not all that different either, both of them pursuing indications targeting gene expression in the liver and cancer, with an increasing focus on orphan diseases.  In all respects, Tekmira can be considered more advanced although RNAi companies do not like to talk about their specific orphan indications for competitive reasons.

The analysis thus far has shown that the overall strategies of Dicerna and Tekmira are quite similar, but Tekmira is (much) more advanced in practical terms.

One obvious difference between the companies is the nature of the RNAi triggers employed.  As the name Dice-RNA implies, the company was built on the Dicer-substrate technology that was once pushed by some to be superior in terms of knockdown potency to other RNAi triggers.  I believe I can safely say that most would agree that this is not the case and that the main advantage of Dicer-substrates may be in conjunction with certain conjugation strategies. 

The argument that Dicer-substrate RNAi triggers are commercially so valuable because they are the only alternative to Alnylam’s RNAi trigger IP, is also outdated.  This is because Alnylam has lost its standing in RNAi trigger IP and there have been other developments, such as the issuance of the Baulcombe patents that showed that Dicerna does not have the automatic freedom-to-operate when it comes to its RNAi triggers. 

In an intriguing twist of events, the IPO document (S1) filed by Dicerna with the SEC describes how the fact that Alnylam has acquired the RNAi assets of Merck unexpectedly could have a chilling effect over business development efforts involving Europe.  This is because the opposition has relied on Merck to do the heavy lifting in revoking Kreutzer-Limmer once and forever.  It teaches me to never count Alnylam out as they seem to have always one more Machiavellian move up their sleeves.  And it should hardly surprise you that (according to the S1), yes, Dicerna in 2010 also received a not-so-friendly reminder from Alnylam’s lawyers that it does not have freedom-to-operate.

In addition, as I had observed before, the S1 also describes that Dicerna is not the only one with access to the fundamental Dicer-substrate RNAi trigger IP licensed from the City of Hope, but that Arrowhead Research enjoys similar access.  If Arrowhead Research wanted to hurt Dicerna as a competitor, it could frivolously sub-license the Dicer-substrate IP and thus destroy its scarcity value.  By contrast, Tekmira can play it safe by utilizing the Alnylam-type RNAi triggers to which it has access in addition to usiRNAi triggers which appear to be a simple and cheap way to get around all of the otherwise fundamental RNAi trigger IP.

So what is left to justify the $250M vs $700M market cap difference between Tekmira and Dicerna?  Not much since Tekmira’s relationships with regard to Ebola, ALN-TTR02, Monsanto, and Alnylam (and quite likely more to come...mRNA), easily outweigh the Kyowa Hakko relationship of Dicerna.  

So yes, to come to the point of this blog entry, if you like DRNA, you should love TKMR (which, of course, I own and selfishly choose to promote).      

Less Is Sometimes More: Roche Brain Shuttle Technology for Drug Delivery into CNS

After Roche and ISIS Pharmaceuticals announced last April that a co-development effort to apply Roche’s Brain Shuttle technology for the systemic delivery of antisense oligos would form part of their Huntington’s collaboration, I started to pay some attention to this technology.  This is because despite the already enormous promise of Oligonucleotide Therapeutics for CNS disorders (think of all the neurodegenerative diseases) with the direct administration of single-stranded oligonucleotides into the CNS, its value could be further enhanced with a systemic delivery approach such as the Brain Shuttle tech.

This is not only because intravenous administration methods would be preferable over the more invasive direct intra-CNS injections/infusions, but also because a systemic delivery approach promises a more uniform drug distribution and would minimize the importance of diffusion.  It is the limited diffusion of current RNAi delivery techs that is holding back RNAi Therapeutics in this important therapeutic area.

Monovalent antibody binding to transferrin receptor allows for efficient transcytosis

The fundamental principle behind Brain Shuttle is actually not that novel at all. Companies like Armagen have long attempted to target receptors such as the insulin receptor and the transferrin receptor on brain capillary endothelial cells as in normal physiology these receptors function to shuttle transferrin/iron and insulin across the notoriously recalcitrant blood-brain-barrier.

Based on newly published data by Roche scientists (Niewoehner et al. 2014), a conventional antibody approach does not work.  To wit, a conventional antibody consists of two binding sites (divalent) and such engagement apparently causes receptor trafficking to be re-directed to the degradative lysosome compartment of the brain endothelial cells, at least in the case of the transferrin receptor tested.  By contrast, when receptor targeting occurs via monovalent interaction, the normal receptor physiology, including transcytosis, is maintained.  Using this strategy, it was shown that the intra-parenchymal delivery, i.e. delivery into the brain proper, of an antibody against beta-amyloid (related to Alzheimer’s disease) that had been tethered to the monovalent transferrin receptor antibody was enhanced on the order of 50-fold.

The way how this research can be translated into RNAi Therapeutics is to simply append an RNAi trigger instead of the beta-amyloid antibody to the transferrin receptor antibody.  Or you could do away with proteins altogether and replace the transferrin receptor antibody with an aptamer-RNAi trigger combo (e.g. a Dicer-substrate in the spirit of tomorrows IPO by Dicerna Pharmaceuticals).  Hence, the irony of the ISIS-Roche delivery collaboration is that ISIS could- to put it just slightly hyperbolically- be shoveling its own grave by eroding the current advantage of phosphorothioate antisense over RNAi for gene knockdown in the CNS.

Antisense Comparison Provides Hope for RXi’s Dermal Scarring Drug Candidate

In early December, RXi reported phase I data from new cohorts that were added to the multi-dose study of RXI-109 in dermal scarring.  Accordingly, by increasing the dose to 10mg self-delivering RNAi trigger from previously 7.5mg per injection site, the company was now able to achieve a 50% target CTGF gene knockdown (5 and 7.5mgs: 43%). 

Based on the meager 30-40% knockdowns and apparent efficacy that were observed in comparable clinical studies targeting the same CTGF with a phosphorotioated antisense compound at 5mg per cm scarline_­, the prospects of RXI-109 would suddenly appear to be much brighter.  Of course, the ISIS compound was spun out into Excaliard which was then acquired by Pfizer in late 2011 for the apparently promising data observed with the dermal scarring candidate EXC001.  EXC001 is now in late-stage clinical development.

Of course, there are a number of caveats with this reasoning.  For one, although the study protocols appear very similar, it is possible that the tissue biopsies taken to obtain the CTGF knockdown measures were of dissimilar sizes.  Given that CTGF knockdown can be expected to wane quickly away from the injection site, such differences could have a material effect on the apparent knockdown efficacy. 

On the darker side, when you consider a nice visual therapeutic effect (see picture) in light of a 30-40% knockdown, you start to wonder whether the actual effect on scarring was less due to blunting of CTGF expression and more due to some non-specific immune-related effect of the phosphorothioate backbone in the antisense compound.  The RXI-109 compound may not ‘benefit’ from such an effect.

Nevertheless, the 10mg dose results are a step forward and form a useful basis for the phase II studies that RXi Pharmaceuticals will be rolling out this year in lower abdominal scar revision (already initiated), keloid scar revision, and scar revision following cosmetic breast surgery.  

Unfortunately, prospects would have been even brighter had the company employed a more potent RNAi trigger design.  And when the CEO, in 2014, still shows a slide with Kreutzer-Limmer controlling dsRNA lengths of 15bp and over (to justify the use of dsRNA < 15bp), I would suggest they update their presentation slides.  Similarly, it would be honest to not talk about a market cap of $50M, but to present their more meaningful capital structure, including preferreds and the like.

Silence Therapeutics DACC Lipoplexes for Lung Endothelial RNAi Delivery

After having shown for some time now deep and long-lasting gene knockdown in lung endothelial cells, Silence Therapeutics has finally published (Fehring et al. 2014) more detailed chemical and pharmacokinetic information on the DACC formulation.  This formulation could be useful for indications such as cancer involving the lung and acute lung injury.

Chemistry: cholesterol replaces helper phospholipid DPhyPE

Atuplex has long been the workhorse delivery technology of Silence Therapeutics.  Atuplex has been shown to target pretty much all vascular endothelial cells independent of tissue/organ system and enables the company's lead candidate, Atu027 for the prevention of cancer metastasis currently in phase Ib/IIa in combination with gemcitabine in pancreatic cancer.  Unlike the four-lipid formulation pioneered by Tekmira, Atuplex consists of just three lipids:

-          the cationic lipid AtuFECT01 for cell attachment and penetration (proprietary);

-          a pegylated lipid to prevent aggregation;

-          and the helper phospholipid DPhyPE for structural stability.

To my surprise, the DACC formulation contains the same cationic and pegylated lipids as Atuplex.  The main difference is in replacing the helper phospholipid DPhyPE with another helper lipid, in this case cholesterol.  With this change (and some adjustments in the lipid ratios), 40% of the DACC ends up in the lung with the concomitant silencing of genes in resident endothelial cells.

Silence Therapeutics’ strategy of utilizing a given cationic lipid in new lipid combinations therefore stands in contrast to previous efforts by the likes of Tekmira and Dicerna which have focused on the discovery of new cationic lipids to increase potency and the therapeutic index.

Rationale of DACC over Atuplex for lung endothelial RNAi not fleshed out

Although the new research clearly shows that the lung is the most important physical sink for DACC, the study did not investigate whether this translates into a tissue-specific knockdown effect as well [correction 28Jan14: Figure 4 of the paper does show preferential knockdown in endothelial cells of the lung versus other tissues].  This would be an important additional safety-related rationale for using DACC over Atuplex for lung endothelial gene knockdown, especially for target genes that might have critical functions in normal physiology as well. 

Atuplex, in contrast, has previously been shown to mediate lung endothelial gene knockdown, not just in mice (as DACC in this study), but also non-human primates.  What is more, the previous Atuplex studies showed comparable (~70-80%) knockdowns at ~10-fold reduced dosages (0.3mg/kg vs 2.8mg/kg).  It will therefore be important to test whether lower dosages are feasible for DACC knockdown in non-human primates, potentially with the use of slow infusions instead of bolus injections as was the preferred method in the present study.  And as is my pet peeve when it comes to Silence’s delivery technologies, why not attempt them with other, non-AtuRNAi trigger technologies when a factor of 2 could make all the difference in whether you have an acceptable therapeutic window or not.   

It should be noted, however, that unlike Atuplex, DACC appears to have a more reliable dose-response and seems to be tolerated at up to 6mg/kg so I trust that Silence has good reasons for choosing DACC for programs such as acute lung injuries (ALI). Based on the data revealed by the company thus far, it appears that the ALI candidate Atu111 is the prime candidate to be Silence's next clinical development candidate.

Alnylam Acquires Merck’s RNAi Assets and Gets a $700M Investment from Genzyme

I have expected RNAi Therapeutics business development activities this January, but I have to admit that when these deals are actually announced it gives me an adrenaline rush each time.  For $175M plus some milestones and royalties, it was announced a few hours ago that Alnylam will acquire the RNAi assets from Merck.  Merck had just undergone a corporate re-organization that I had speculated could spell the end of Merck’s RNAi Therapeutics platform development efforts, especially since protein guy Roger Perlmutter replaced RNAi supporter Peter Kim as Merck’s head of R&D (Merck’s RNA(i) Therapeutics Unit on the Chopping Block).  That's how it sometimes works, no complex science, just tastes and egos.

In addition to cultural issues, the transaction also solves the problems that the bean counters in Big Pharma face when justifying investments in emerging technologies.  How e.g. do you take into account that much of the value of a platform technology could be outside of your core areas of therapeutic interest?  Who e.g. would have predicted that TTR amyloidosis and HBV would materialize as the two commercially most attractive near-term opportunities when Merck acquired Sirna Therapeutics in 2006?  As an added sweetener for the bean counters, the write-off will allow Merck to exceed financial guidance in one of the coming quarters.

The $175M price tag has two important implications.  Firstly, for a biotech company the size of Alnylam, putting that much into the acquisition of largely IP is a vote of high confidence in RNAi Therapeutics.  This is in sharp contrast to the days when Alnylam made deals with Roche and Takeda and must have felt as if they made out like bandits by selling IP of uncertain value given the questions around Alnylam’s access to delivery at the time.

Secondly, the $175M indicates that there was competitive bidding going on for the assets, most likely by other Big Pharma companies.  In fact, I had suggested to some of the other RNAi companies to take a look at the assets in the hope of another Roche-Arrowhead-like 'steal of the century'.  The fact that Alnylam won out is likely explained by Merck being the best strategic fit for Alnylam whereas other Big Pharmas may be better off in getting unfettered access to RNAi Therapeutics via the likes of Tekmira and Arrowhead Research as Merck's RNAi assets, by largely copying the efforts of others, always seemed to overlap with others (except for modification chemistry) 

So what will the $175M get Alnylam?  The most valuable aspect to Alnylam should be Merck’s development efforts in polyconjugate technology where Merck has been copying Arrowhead’s efforts.  Thus, instead of spending something like $1B, likely the current acquisition value of Arrowhead Research, it was able to get access to a similar technology for much less.  Although Merck also pursued liposomal delivery, since Alnylam already has access to Tekmira’s technology, the add-on value of Merck’s liposomes to Alnylam is more limited.  Finally in terms of technology, Merck has conducted a deep screening of nucleic acid modifications which can now be incorporated into Alnylam’s RNAi trigger discovery and conjugate development efforts.

Another important aspect to Alnylam will be safe-guarding the value of the Tuschl II IP.  Merck got uncontested access, including sublicensing rights, as part of a legal settlement between the two companies in 2011.  Tuschl II is still an important asset to Alnylam and in a worst-case scenario, Merck’s disposition of their RNAi assets would have meant giving away access to Tuschl II to various competitors.

Genzyme Buys into RNAi Therapeutics Big Time

The Merck technology acquisition will be funded by the $700M investment of Genzyme into new Alnylam stock at a 25% premium to current trading (~12% of the company) plus additional associated biotech goodies to come (correction: only $25M of Merck's $175M was in cash, $150M in shares).

I know that I am starting to come across like a know-it-all, but this transaction did not come all that surprising to me, too.  Importantly, 3-4 years ago Alnylam started to lease out significant lab space to Genzyme in Cambridge, Mass.  This seemed odd to me since Alnylam was not in the business of dressing up its financials by moonlighting as a landlord.  Surely, something more strategic was going on here. 

When a little more than a year ago, Genzyme took the Asian rights to ALN-TTR02, it seemed a bit of a downer.  In retrospect, however, it is apparent that Genzyme took that license as a starter before more validation of the technology in the form of phase II results with ALN-TTR02 and phase I results with ALN-TTRsc would trigger a more expansive deal like the one today.  Specifically, today's deal gives Genzyme Sanofi-Aventis limited commercialization rights to at least 3 additional Alnylam drug candidates in the orphan drug space.

And finally, attention Big Pharma bean counters, a lesson of that transaction is that all you need to do to financially justify investments in RNAi Therapeutics is to create a line item called ‘orphan drugs’ and account for RNAi Therapeutics under that label. 

Welcome to a new pharmaceutical world.

Big Pharma Panic over Nucleic Acid Therapeutics

News this week of Roche licensing antisense technology from Santaris 3 years after having written down a related $500M+ investment in RNAi Therapeutics, is symptomatic for the apparent panic and resulting schizophrenic behavior that grips Big Pharma when it comes to Nucleic Acid Therapeutics (NATs).  Can NATs help rekindle their flagging discovery efforts or will NAT companies leave them in the dust as they advance to the top of the Pharma food chain?   

Meanwhile, Big Biotech in the form of BiogenIdec has also recognized that NATs are critical for their growth in the form of a partnership with Zinc Finger Nuclease specialist Sangamo Biosciences for the treatment of red blood cell disorders (sickle cell and beta-thalassemia).  This follows significant (~$150-200M) recent investments in ISIS’ antisense technology for diseases of the CNS and a deal with microRNA Rx company Regulus Therapeutics.

If you sit back and consider the clinical and preclinical developments in the space (look out for the upcoming RNAi Therapeutics Investment Guide 2014), there can be no doubt that nucleic acid therapeutics (including oligonucleotide therapeutics) are about to materialize as the 3^rd major chemical class of drugs following small molecules and recombinant proteins.  In fact, their mechanistic versatility (gene up- and down-regulation, modulation of RNA processing etc) means that in a few decades, there will be many more NAT-based new molecular entities than small molecules and recombinant proteins combined, in many cases for genetically defined patient populations.  

Interestingly, in 2013, only 2 monoclonal antibody new molecular entities (NMEs) received marketing authorization by the FDA (see here).

Investors do not have to take such a very long view as a number of commercially attractive Oligonucleotide Therapeutics are gearing up to enter the market, including for TTR amyloidosis, Hepatitis B infection, spinal muscular atrophy, and hypertriglyceridemia.

For those interested in the more particular relevance of yesterday’s deals to RNAi Therapeutics stocks, the Roche-Santaris deal ($10M in upfront plus the usual biobucks and royalties) represents another blow to ISIS’ claim that it owns the IP in the space, especially in light of the ongoing litigations and patent battles between the companies and the fact that not long ago, Roche partnered with ISIS on Huntington’s Disease.  This should provide further comfort to those, including myself, speculating that Marina Biotech’s CRN chemistry is a valid equivalent, if not superior alternative to the ISIS and Santaris antisense chemistries.  Regarding the deal between Sangamo and BiogenIdec ($20M upfront plus the usual biobucks and royalties), it is a validation of the attractiveness of the hemoglobinopathy market that forms an important part of Alnylam’s pipeline options.

In additional RNAi Therapeutics developments...

Bad news for Benitec

In a recent paper by Lisowski et al. from Stanford (Kay lab) which appeared in Nature, very strong evidence was presented that the AAV8 serotype is far from ideal when it comes to transducing human hepatocytes.  This is in contrast to preclinical results mainly in mice that have shown highly efficient, almost 100% transduction of hepatocytes, the transduction level probably needed to achieve an RNAi cure of HepC.

Based on the preclinical work, the AAV8 serotype was readily embraced by gene therapists and adopted for various liver-related clinical studies. Surprisingly, however, the data so far in hemophilia did not support a significant advantage of AAV8 over the old AAV2 workhorse.

The study by Lisowski et al. shows that this is very likely the result of poor AAV8 transduction of human hepatocytes.  Among the multiple striking results, in mice with chimeric human/mouse livers, basically only the murine hepatocytes could be transduced whereas the adjacent human hepatocytes were not.

This is an unfortunate development that Benitec cannot be held responsible for.  It could be a double-whammy though for the company as in addition to the commercial concerns about the HepC indication for TT-034, results from the ongoing phase I study may not even support the delivery technology for other liver applications.  There is, however, light at the end of the tunnel as there are plenty new AAV serotype that appear to be as good in transducing human hepatocytes as AAV8 is in transducing murine hepatocytes.

Tekmira- A Liposomal Delivery Company No More?

Recently, I have begun to wonder whether being known as a liposomal ‘delivery company’, a company that delivers the payloads of others, is starting to hold back Tekmira’s valuation all the while high-quality RNAi Therapeutics advance towards marketing approvals in the field.  Similarly, as SNALP potency has dramatically improved over the years, particularly for gene knockdown in the liver, the effort of improving its potency may have reached a point of limited returns (~1000-fold improvement from 2004-2009, ~3-fold improvement from 2009-now) when aggressively competing with Alnylam, Arrowhead, and ISIS on the already available targets may be more important.

Consistent with such thinking, Tekmira this week announced a re-organization that goes to the core of the company.  Most importantly, former CSO Dr. Ian MacLachlan will cease to be in charge of the overall scientific direction of the company.  It has been his work on developing the various applications of liposomal delivery that defined the company.  Instead, he will now serve as the Chief Technology Officer with a particular focus on the development of medical countermeasures as exemplified by Tekmira’s Ebola program which has just moved into pivotal human safety trials.  I could imagine that with flu being an obvious target in addition to Marburg, some of his liposomal development efforts will be spent on SNALP knockdown in phagocytic cells and aerosolized LNPs for the respiratory epithelium.

Unclear to me is where this move leaves SNALP technology for oncology applications where Tekmira had indicated that they made progress in over TKM-PLK1 which is based on ~6 year-old technology.  This would offer obvious TKM-PLK1 life-cycle management and new target opportunities.  Perhaps MacLachlan will be responsible for oncology platform development as well in the form of business development initiatives just as in mRNA and AgBio that I believe represent exciting partnering opportunities.

The other half of the former CSO position will be filled by former Director Mike Abrams as the Chief Discovery Officer.  This move is clearly consistent with the company’s focus on rapidly expanding its product development pipeline with 2 INDs for new candidates planned in 2014 (HBV, alcohol use disorder) on top of TKM-PLK1 and TKM-EBOLA already in clinical development, and a series of opportunities in the rare and orphan disease space being actively pursued.

Congratulations to Ian MacLachlan for making himself redundant as the CSO and having the integrity to continue to serve in the best interest of the company and shareholders.  

Drama and Pipeline Revealed in Dicerna IPO Document

The New Year has barely begun and already we see evidence that the strong capital markets interest in the RNAi Therapeutics turnaround story will be a continuing theme this year.  This is because as the fireworks illuminated the skies, hitherto rather secretive VC-backed Dicerna Pharmaceuticals shined some light on its workings in an S-1 filed with the SEC in preparation of an IPO that is anticipated to take place in Q1 2014. 

Although IPO intentions could have been expected based on the funds that participated in the $60M series C this summer and the fact that the biotech IPO window seems wide open, the S-1 makes for an intriguing read as it suggests that Dicerna might have as well filed for bankruptcy instead of an IPO in 2014 and the pipeline around which the company is being built.

Series C amid downsizing and bridge funding

If you do the math, i.e. taking account of the company’s operating cash usage, the $60M Series C, and the $55M on the balance sheet as of October 2013, Dicerna had just run out of money when the Series C happened.  In fact, a $3M bridge loan had to be put into place to keep the company operating until everything had been properly legalized.  Moreover, Dicerna’s operating expenses had been contracting because of a reduction in activities which you can bet means that there had been lay-offs in the 2012-early 2013 period.

Since most of the existing shareholders were able to participate in the Series C, it seems that in addition to some employees, the real losers on the capital side have been the small fry like company founders that lost out big: a 1-to-250 reverse split (ouch!) in common stock occurred in conjunction with the Series C, and even so, the estimated valuation on August 31, 2013 was $3.42.

The latter leads me to guess that the company will attempt to raise on the order of $30M at a $150-200M valuation giving that this would give the company a ~3 year cash runway when added to the current $50M in cash plus the increased expenses that are part and parcel of growing your product pipeline and going into the clinic.

Increased focus on orphan diseases

In addition to being testament to the last-minute nature by which a number of RNAi companies were bailed out by sector clinical results and the generally positive biotech environment, the S-1 also reflects the shift in RNAi and indeed oligonucleotide therapeutics as a whole from cancer Hail Maries (until now, Dicerna was only known to work on oncology candidates) to clinical candidates in the severe orphan disease space with genetically well-validated targets and early biomarker opportunities.

So although LNP-enabled DCR-M1711 for Myc-related cancers should go into the clinic first (2014), the orphan pipeline is catching up fast, with a 2015 IND predicted for DCR-PH1 in primary hyperoxaluria 1.  This candidate targets glycolate oxidase with a liver-directed LNP formulation and proof-of-concept for therapeutic effect has been obtained in rodent models of the disease.  The incidence of this fatal disease is about 8 in a million persons based on natural mutation rates and the fact that the only non-dietary treatment today is a dual liver-kidney transplant…you got it, premium pricing.

Science and IP

S-1 filings also typically allow you to increase your understanding of the competitive dynamics in a field. 

As such, it should be of interest that Dicerna extensively cautioned that Arrowhead Research through Roche has broad access to the core Dicer-substrate RNAi trigger IP from the City of Hope on which it was originally founded (dsRNA with one blunt end and one 2nt overhang on the guide strand and a 25-30 nt sense strand).  Therefore, Dicerna not only lacks exclusivity in Dicer substrate technology (various other Dicer substrates outside of that IP can be envisioned), it also has to share the features of the probably most advanced Dicer substrate version with another company.  One might reason that getting back exclusivity is of greater value to Dicerna than the loss to Arrowhead if it gave up sublicensing rights related to their access.  Yes, a deal could be a win-win here.

Another RNAi trigger-related IP issue that was raised in the S-1 was Alnylam’s Kreutzer-Limmer patent estate in Europe, although yours truly is of the view that the writing on that patent estate is on the wall and at most could mean paying lawyers when the outcome seems so obvious (works well though if your target is low on cash).

The S-1 similarly is consistent with the notion that LNPs will be Dicerna’s preferred mode of delivery for the near future at least.  Since Tekmira’s IP related to LNP composition of matter is very broad if you consider what has worked scientifically in the area, patent infringement concerns might apply.

A happy and prosperous New Year to Dicerna and everyone else, especially those that have given RNAi Therapeutics companies a fighting chance to establish the category as a major drug development platform and themselves as significant, independent pharmaceutical companies.