Why Marina Biotech Deserves a Chance

Oligonucleotide Therapeutics is hot.  Outside of immune-oncology which is breaking new ground in cancer, Oligonucleotide Therapeutics is where the real innovation in drug development happens today. In fact, Oligonucleotide Therapeutics already has become the third major drug discovery engine and I posit that at the development stage it has already surpassed monoclonal antibodies.

   

This is also reflected by the valuations of the two best known proponents in the field, Alnylam and ISIS Pharmaceuticals which are both worth around $8 billion, a valuation that given its purchasing power that comes along with it positions them to become major pharmaceutical companies.

It is then long after the behemoths and mid-tier companies like Arrowhead Research and Regulus Therapeutics which struggle for similar recognition with market caps in the 0.5 to 1 billion dollar range, that Marina Biotech comes in with an anemic, fully diluted market cap of ~30M.

Vicious circle

A 300x valuation difference to the leaders will put off most investors from conducting more in-depth research.  Surely, a $30M valuation shows that its technology does not work.

  

This detrimental circular logic extends into business development where Marina Biotech has essentially given away valuable pieces of its technology stable for pennies.  Licenses to CRN technology to Novartis for a mere $1M or UNA technology to Arcturus for a few hundred thousand dollars are sad examples of this.

Of course, at the time the deal were done, Marina Biotech was in dire straits financially and this was exploited in cold blood by its partners.

OK, that’s business, nothing personal, and good on Novartis and Arcturus for their bargains.

Overall, Marina Biotech is probably one of the two most prolific deal makers in the industry along with ISIS Pharmaceuticals, reflecting its broad assets in Oligonucleotide Therapeutics.

UNA-CRN Antisense Oligos, it’s as simple as that

This, however, is also a distraction for management and I am afraid that the CEO, Michael French, keeps looking under the wrong lamp posts for capital.

In his opinion, Marina Biotech should be the one-shot shop for Big Pharma looking for solutions against certain disease targets where the best mechanism of action is not apparent. 

Myotonic dystrophy type I, a muscle wasting disease caused by a toxic nuclear RNA, is probably a good example of this, and this is also Marina’s lead development project if we ignore for a moment its legacy program in familial adenomatous polyposis (FAP) now in phase I clinical development.

I, however, struggle to come up with many more examples of this, and if I were a Big Pharma, I would just evaluate the different strategies in-house and, if necessary, then gain access to that one most promising mechanism of action.

This blogger, on the other hand, believes that the public markets should be Mr French’s audience.  Times have changed and the public markets have become a much more attractive source of capital for supporting platform companies like Marina Biotech. Big Pharma, on the other, likes to talk about innovation, but ends up acquiring only specific development candidates close to the finish line.  And if it engages in innovation, it usually fails as a result of their organizational rigidity and leaders better suited to run fast-food companies than technology companies.

Imagine how the simple message that Marina Biotech has a chemistry strategy that can do what ISIS Pharmaceuticals has achieved would resonate with investors?  

I am referring here to the potential of combining UNA with CRN (similar to 2.5 cET by ISIS Pharm or LNA by Santaris/Roche) chemistry which just as proposed for usiRNAi triggers  could evade some fundamental IP in the field by virtue of UNAs not being your typical modified base, an idea that has gained wide support in RNAi Therapeutics (à Tekmira, Arrowhead Research, Arcturus).

It should also be noted that only Marina Biotech has the ability to combine both UNAs and CRNs. Despite their licenses, neither Arcturus nor Novartis can do that.

What I also like about the UNA-CRN antisense focus is that such a simple molecule is ideal for a small company like Marina Biotech which does not have much research to speak of.  The antisense concept is so simple that even a blogger would be able to translate it into the clinic from the comfort of his home.

Marina Biotech, of course, is no ISIS Pharmaceuticals, and I should state that my ‘never-touch portfolio’ which I established last summer almost exclusively consists of ISIS Pharmaceuticals which, at the time, accounted for more than half of my stock holding.

Marina’s Outlook

Depending on risk tolerance (an investment in Marina Biotech is still a survival play), however, Marina Biotech has its rightful place in the investment space which explains this blog entry in the first place.  If Michael French could only get himself to commit to a simple CRN-UNA ASO strategy and show some data from its Myotonic Dystrophy program, Marina’s severe undervaluation relative to peers would instantly become obvious.

It’s OK, however, to analyze clinical data from its FAP program as long as it does not cannibalize investments in the ASO platform.  It may also be an excuse to enter the GI ASO space which, following a $700M+ license from Nogra Pharma to Celgene, has come into high demand among Big Pharma.  Although I do not think GI-ASO is technically a robust opportunity as the liver and CNS, if Big Pharma likes to part with $$$, why not cater to them?

Following the filing of an S-1 securities registration statement and in light of Marina’s financial position (cash runway until mid-2015), it is obvious that Marina Biotech will raise capital in the near future.  It will be telling on what terms this will be done and who will participate.  While you will read in most biotech investment textbooks not to invest in those times, remember that in 2013 somewhat similar circumstances set up Arrowhead Research for a more than 10x return in less than a year.

The Tide May Have Turned for ARWR

Arrowhead Research emerged as a major RNAi Therapeutics player due to its- at least publicly- single-minded focus on HBV.  During this time (early 2013-early 2014) it saw a meteoric rise in its stock by more than 10-fold.

Management got so caught up by their own campaign of pushing Arrowhead Research as an HBV stock that they set themselves up for failure by setting overly ambitious goals for that program. 

As a result, the stock plummeted almost as rapidly as it had risen first by the Fed-induced biotech sell-off in spring 2014, and especially after first clinical results (see here and here) of ARC520 in HBV-infected patients did not live up to the hyped-up expectations.  90% HBsAg knockdowns had been the stated goal for a single-dose 2mg/kg.  This was despite preclinical studies which suggested that more than 2mg/kg of the endosomolytic DPC component was needed to achieve such robust knockdowns.

While my jaws certainly dropped in disbelief when I heard this, in my mind this has to be chalked up to a lack of full understanding of their company's own technology rather than gross misconduct.

…but for me it has always been subQ, subQ, subQ, extrahepatic

While I very much liked the fact that Arrowhead Research was at the very cutting edge of the ‘HBV-The-Next-HCV'  wave, what originally got me all fired up about Arrowhead Research was an OTS presentation in late 2012 where they presented impressive (robust and long-lasting) knockdown in non-human primates with a subcutaneous, most likely single-molecule version of their DPC delivery technology.  Knockdown that was more potent than anything out there (Alnylam GalNAc-STC at the time) combined with the convenience of subcutaneous instead of intravenous administration.  The latter is practiced with their more advanced two-molecule DPC version underlying ARC520 and ARC-AAT in the clinic already.

Single-molecule DPCs should also be the foundation for reaching tissues beyond the liver, making the transition back to single-molecule DPC all the more valuable.  Given that the liver has been solved for oligonucleotide therapeutics with Alnylam’s and ISIS’ GalNAcs, opening up new tissues to RNAi is obviously all the more attractive.

It is unclear what held the company back from taking the non-human primate achievements almost 3 years ago into the clinic.  Scale-up manufacturing issues rank highest on my list of possibilities.

Company guides for 2015 IND for either subQ liver or extrahepatic i.v. candidate  

During this week’s Q4 earnings conference call, the company indicated that they have finally achieved long-awaited technological breakthroughs so that we can now expect them to file an IND for either a liver target using for the first time a subcutaneous DPC formulation or an IND for an extra-hepatic target. 

Correction/clarification (2 Feb 2015): The company contacted me to clarify that what they said was that they will file an IND in 2015, and in addition to that, nominate a new development candidate that will either be extrahepatic or a subQ liver candidate.

Interestingly, if the extrahepatic program should make it to the finish line first, it would still be administered intravenously, which leads me to believe that it is a target in the kidney which I consider the only other obvious target tissue amenable to 2-molecule DPC.  If the target cell is not the proximal tubule cell, it would suggest that Arrowhead has identified a GalNAc-ASGPR-type ligand-receptor pair for the kidney.

ARWR 2015 playbook

Be it as it may, the prospect of both a highly competitive delivery technology for the liver and the availability of a new target tissue makes this a highly attractive re-entry point into ARWR.  At $6+ down from the mid $20s not even a year ago and with almost half of its valuation in cash, I do not see much downside from the 3-4mg/kg results of ARC520 to be reported in Q2 2015. 

Personally, I expect an 80-90% knockdown at 4mg/kg, but since I have no idea how the market would react to an 80% knockdown, the results are a coin toss to me, but with a somewhat larger upside (up to $14) than downside (down to $5) from here.

If the stock trades down, but somewhat dependent on the safety data, it may be an opportunity to snap up ARWR for the ARC-AAT phase I results coming up by the end of the year.  I consider ARC-AAT a very robust program with increased knockdown potency compared to ARC520 and much less ambiguity around what an X% knockdown means.

 

Right now, Arrowhead Research is an ARC520-only story and that should change once ARC-AAT becomes recognized as a medically and commercially very attractive product candidate (e.g. an orphan indication with an estimated 100.000 patient population in the US alone).  And I am convinced that I'm not the only investor to recognize subQ and extra-hepatic as the ultimate value drivers for ARWR all of which could propel the stock back to its 2014 highs over the next year.

Simply Good: Regulus Therapeutics’ MicroRNA Inhibitor for HCV

Last year’s European Liver Meeting in London (EASL) was all about progress made in the treatment of HCV.  In addition to the expected buoyant mood among participants, questions were asked about a) affordability and even more so, b) the complexity of the treatment landscape. 

We have heard a lot about certain pricing pressures in the HCV space recently.  Although more and more observers are now calling an annualized $14-18B market in the US and Europe alone over the next 10 years one not worth pursuing, I happen to disagree, especially if you are talking about an $800M market cap company like Regulus Therapeutics (unlike $90-150B for Gilead and Abbvie) and the continued unmet need in this market.

Practicing physicians want simplicity

Part of the unmet need is the noted complexity of the treatment landscape.  These days, which drug and for how long you take it depends on a number of factors such as your HCV genotype and liver fibrosis score.  Based on  today’s data, RG-101, a microRNA inhibitor developed by Regulus Therapeutics may change this and simplify the life of the busy practicing physician.

Add to this the fact that some subpopulations, e.g. genotype III (~12% of the 3-4 million US HCV population) have standard of care cure rates (12 week daily Harvoni plus much-hated ribavirin) of just over 80% in clinical trials, not counting those who either do not get their prescriptions filled, nor the ~5% that get them filled, but then do not adhere to daily pill regimens. Real life, not clinical studies.

RG-101 potency paves the way for simplified regimen

Accordingly, mean viral load reductions of 4.8log were achieved following a single (!) subcutaneous administration of 4mg/kg (4.1log for 2mg/kg), making RG-101 the single most potent HCV drug ever tested.  Moreover, every subject responded, regardless of genotype and fibrosis score. 

Almost as impressive, for the 2mg/kg single dose cohort where day 84 (SVR12) data is now available, 4 out of the 14 given RG-101 were undetectable for the virus and could well turn out to be cured from just a single dose of drug.  In the same cohort, two were below the level of quantitation (BLOQ) on day 57, but rebounded thereafter.  This is hardly surprising given that liver concentrations at that time are predicted to be around 6% of the starting dose.      

Importantly, such a rebound is not the same as treatment failure due to the development of viral drug resistance.  A previous mutation analysis by miR-122 competitor Santaris (Ottosen et al. 2015) which has been developing a less potent anti-miR122 drug has shown that in Man (unlike in prolonged tissue culture experiments), no drug-resistant escape mutant to a miR-122 inhibitor is generated.  Such a high barrier to resistance can be expected from targeting a host factor rather than acting as a direct antiviral.

In cases of viral rebound, a simple second shot on day 28 or a higher dose of say 8mg/kg as I have been whining about for weeks now* would have kept the virus in check, if not eradicated it.

* Parenthetically, today’s data showed that I was right that there would likely be a further dose response from 2mg/kg to 4mg/kg with particular benefit with longer duration (see diverging curves particularly after day 22), also because in preclinical animal data, the liver concentrations increase linearly between 1mg/kg to 10mg/kg.  This is why I am surprised the company Is not talking more about the potential of 8mg/kg even though that dose was found to be safe in the healthy volunteer part of the study.

A sandwich regimen for all

The current data thus support that RG-101 could be the foundation for a universal HCV treatment regimen that looks something like that:

When a patient walks into the doc’s office to discuss his HCV treatment options, the doc convinces him that he should get treated and offers to give him the first shot of RG-101 at that visit that sits in his fridge.  This would take into account that some patients first say ‘yes’ to treatment, but then don’t get their prescriptions filled.  The doc then writes a prescription for 28 days of a potent oral DAA pill such as Harvoni and instructs him to start the pills any time within the next 14 days and asks him to come back after a month.

On that second visit, the patient will receive his second dose of RG-101, just to make sure and torch the earth for for the virus another 30+ days.  He then tells the patient to finish his pack of pills and come back in 6 months to confirm that he got rid of HCV.

Sounds simple enough to me.

Sarepta, Biomarin Move Over- Here Come tcDNAs

In a head-to-head comparative study in NatureMedicine, Goyenvalle and colleagues claim that tricycloDNAs (tcDNAs), a relatively unexplored constrained nucleic acid analogue commercialized by SYNTHENA have superior efficacy over 2’-O-methyl oligos and PMOs for therapeutic splice modulation in mouse models of Duchenne Muscular Dystrophy (DMD). 

In addition to ~3 to 5-fold enhancements in dystrophin exon skipping in various muscles compared to the competing chemistries, the authors report that only with tcDNAs there was splice modulation also for the dystrophin isoform expressed in the brain.  This was accompanied by improvements in the behavioral and cognitive abnormalities in this model.   Apparently, these neurological defects are another important treatment goal in DMD.

Splice modulation was accompanied by ~2 and 20ug/g oligo concentrations in brain and muscle, respectively, following the administration of relatively large weekly doses of 200mg/kg that were necessary particularly for the correction of the neurological symptoms.

Interestingly, such delivery and target modulation was achieved without encapsulation or further modification technologies.  Whereas a 2012 publication by some of the same authors in collaboration with ISIS Pharmaceuticals explored the use of tcDNAs for RNaseH-mediated gene knockdown in conjunction with the phosphorothioate backbone known to greatly improve biodistribution and cell uptake, tcDNAs here were applied in their naked form.

The authors attribute this to an apparently spontaneous tendency of tcDNAs to self-assemble into ~100nm nanoparticles.   

The results seem to warrant the development of tcDNA for DMD exon skipping.  Critical to their success in the clinic will be the safety and tolerability of tcDNAs in Man with the kidney predicted to be the dose-limiting organ.  

The study is also a reminder that there are now a number of other chemistries, including the high-affinity CRN chemistries by ISIS Pharmaceuticals and Marina Biotech, the latter with a stated focus on DMD, which similarly promise improvements over the trail-blazing 2’-O-methyl and PMO chemistries.  

Reading the Tea Leaves on Regulus Insider Sales

Revelations Friday night that the CEO (here) and CSO (here) of Regulus Therapeutics had sold sizeable amounts of Regulus stock just days ahead of an important phase I data release, initially sent shivers down my spine I could soon be ridiculed a 'bagholder' on Twitter and by Benitec shareholders.  

What confidence does it betray in the upcoming results when the CSO sells what appears to be ALL his shares in the company (worth ~$1.5M) and the CEO about a third of his holdings in his Family Trust  slightly more than a quarter of his combined position, including his Family Trust (~$710M for original position).  

Let me be clear, whether the stock goes up or down and regardless of whether these sales occurred according to a 10b5-1 insider trading plan (which can be cancelled anyway and thus makes them a farce), such shenanigans are unwarranted and officers of publicly traded companies should refrain from such actions.

Nevertheless, since I am doing nothing but wait for the results, let me indulge in providing a timeline to provide context to these sales.

October 22, 2014

Regulus reports truly stunning results where they reveal that a SINGLE dose of 2mg/kg of RG-101 was able to knock down HCV virus by over 4logs, with each patient, no matter the genotype, responding to the drug.  The company says that dosing in the next higher dose cohort, 4mg/kg, was ‘ongoing’ and results therefrom would be reported in Q1 2015.

November 5, 2014

On the Q3 2014 conference call, the company updated investors that the 4mg/kg cohort had then been fully enrolled. Maintains guidance of providing results sometime in Q1 2015.

November 12, 2014

At the Credit Suisse Healthcare Conference, the company narrowed down data release to occur in January 2015.

November 25+26, 2014

The two persons most familiar with progress with the clinical progress of RG-101, the CEO and CSO of Regulus Therapeutics, set up 10b5-1 trading plans that apparently foresaw the selling of Regulus shares last week.  IF the January 2015 data release guidance was made in good faith two weeks earlier, this means that they likely hoped to cash in after the results. Fair enough and well deserved- even if the trial is open-label and they thus likely knew where the knockdown curves were headed by that time.

December 3, 2014

A week after setting up the automated trading plans, at the Piper Jaffray Conference, the time frame for data release was widened and shifted back with ‘January-February’ which means that the sales would either occur before or after the results.

January 8, 2015

Regulus Therapeutics announces 2015 goals under their ‘Clinical Map Initiative’ according to which 4mg/kg results would be announced in ‘early February’, i.e. right after the planned share sales.

According to the above, the stock sales can be interpreted both to portend good or bad results.  One scenario is that the CEO/CSO may have originally wanted to cash in on what they knew were good upcoming results, but then lawyers became involved and said that this could draw some unwanted attention and the data release was slightly pushed back.  If the results would be good and the stock were to go up, they would look like heroes anyway and countless bonus options would come their way in perpetuity to more than compensate for the loss.

Another scenario is that they were afraid of an impending stock drop triggered by the 4mg/kg data and simply wanted to get ahead of that train wreck.  Par for the course in biotech.  But in that case, I’m wondering why they wouldn’t just sell their shares well ahead of the event to avoid the attention they now have.

Until now, Regulus Therapeutics has been a comparatively credible and fairly low-key publicly traded biotech company to the degree that until October 2014 they had not even recognized the jewel that RG-101 could become for the company.  Besides the animal pharmacokinetics-human efficacy relationship, it is one of the reasons why I am long RGLS going into the results, believing the market is yet to appreciate the full value of RG-101.  Unfortunately, the insider sales have somewhat shaken this belief and I hope management will learn from it.