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.