RNAi Therapeutics Stocks (Part 2)

Having covered the most developed RNAi companies (Alnylam, Arrowhead, Dicerna) yesterday, this blog entry will discuss RNAi plays that are somewhat less established, but nevertheless could represent interesting investment opportunities.

Silence Therapeutics (SLN.L)

This London-listed company is roughly 2 years behind Arrowhead Pharmaceuticals and Dicerna.  Similar to those, Silence has set its sights on exploiting targets in liver hepatocytes using GalNAc conjugate technology.  Its first program targeting TMPRSS6 for iron overload disorders should enter the clinic in the first half of 2019.

The strength of Silence is partly its RNAi trigger IP position which, if the claims stand, should read on Alnylam’s 3-4 drug candidates that could come on the market over the next 2-3 years.  In my opinion, it would take a generous interpretation of what constitutes a ‘pattern’ for LNP-enabled Patisiran to fall under Silence IP, but it is much less of a stretch for the more stabilized GalNAc-enabled Givosiran, Fitusiran, and Inclisiran molecules in late-stage development.

Part of the potential upside could  therefore come from a settlement of the IP litigation that Silence has filed against Alnylam as it could hamper the commercialization of Alnylam's RNAi drug, especially as it ramps up for the launch of Patisiran. 

The reason why such revenues would be meaningful to the company is that Silence is run extremely well in financial terms such that these funds would neatly feed into Silence's operations as it is about to expand clinically all the while minimizing shareholder dilution. 

This, however, could also be viewed as a necessity since it is much more difficult for a London-based company to raise the kind of biotech ‘risk capital’ that allows companies like Alnylam in the US to really press down the gas pedal to pursue a grand vision without killing shareholders.   

Silence Therapeutics is an investment for those that value the pursuit shareholder return instead of mere market cap growth (=management bragging rights).  While I support this strategy, I am still largely on the sidelines as the company needs to address the anemic trading volume which makes it very costly to trade in and out.

RXi Pharmaceuticals (RXII)

Who doesn’t dream of striking it rich overnight?  If so, RXII is the type of stock that in the right biotech environment could be your daily biotech double in the not-so-distant future.

After all, which other biotech with a market cap of ~$15M can boast about 3 clinical data read-outs before year-end and one additional in early 2018?

1) Q4 2017: phase II results dermal scarring (RXI-109)

2) Q4 2017: phase II results warts (samcyprone, non-RNAi)

3) Q4 2017: UV-induced hyperpigmentation results, consumer testing (RXI-231)

4) Q1 2018: phase I/II results retinal scarring (RXI-109)  

It is possible that the first 3 data read-outs could show that the agents are active and well tolerated, but where there will be a discussion about the commercial adoption of these agents in the real world.  Therefore, the real fireworks may occur following the results from the retinal scarring phase I/II trial in early 2018.  Here, the self-delivering RNAi trigger technology is tested for the first time in the eye where for reasons of technical feasibility (more equal biodistribution throughout eye than in the skin) and clinical application I see the most potential for this technology.

Downside risk comes from management that is pitifully ignorant about the workings of the financial markets and shareholder value creation.  If RXi fails to ignite investor interest in the wake of any of these 4 shots on goal, we could well see a continuation of the financial death spiral that has seen RXII lose 98-99% of its value in the last 3-4 years!!!

I own approximately 3% of the outstanding shares of RXII and will try to add on any weakness ahead of data release.

Arcturus Therapeutics (ARCT)

In sharp contrast to RXi, I view management of Arcturus as far more savvy when it comes to the financial markets and building a biotech company of decent size.

Arcturus, which has recently gone public via a reverse merger, has its roots in RNAi technology, largely by copying liposomal delivery technology from Tekmira (now Arbutus) and then licensing related RNAi IP from Marina Biotech.  In light of the Patisiran APOLLO results, you could view the platform as fundamentally de-risked.

In fact, its lead program was an RNAi program to address TTR amyloidosis.   Since then, however, Arcturus has largely re-tooled itself as an mRNA Therapeutics company using LNP delivery technology.  Although its pipeline is not as prolific as that of much-better known Moderna, it appears impressive for a company with a market cap of still less than $100M just as its partnering activities.

Therefore, Arcturus is a bet on a management that can take average science to build a significant biotech as it talks the language of Wall Street and Pharma deal makers.  It was one of my early biotech investment mistakes to undervalue big-mouthed management relative to science. The best science can always be acquired once you have lowered your cost of capital by growing market cap.

I have a starter long position in ARCT as I wait for it to be discovered by larger hedge fund manager.

The final instalment of this series will cover oligonucleotide therapeutics companies Ionis Pharmaceuticals, Wave Life Sciences, Regulus Therapeutics, and Sarepta.