Going into 2018, OligoRx Has Become Mainstream Drug Modality

When I became interested in drug development almost 2 decades ago, I just didn’t get it: why was it that gene-centric biotech was seen as an esoteric, money-losing endeavor, and why did shot-in-the-dark small molecule drug development represent the pharmaceutical elite?  After all, biology has fully moved into molecular gear and how could medicine not follow that?

After a quarter of a lifetime I now understand that what makes sense often takes a decade or two to manifest.  So if you are dead sure about your view of the world, stick to your conviction and resist the urge to follow the herd.

The gene-centric drug development revolution has occurred, long live Oligonucleotide Therapeutics

In 2018 though, gene-centric drug development has taken the pharmaceutical world by storm.  This just 8 years after gene therapy, RNAi, and oligonucleotides were widely ridiculed for having been hyped and supposedly failed.

Yes, in 2017, antisense drugs Spinraza (for spinal muscular atrophy) and Exondys 51 (for Duchenne muscular dystrophy) made a big commercial splash, RNA knockdown for TTR amyloidosis proved positive in 2 large phase III trials, all the while the first gene therapy products (2 CAR-T cell/gene therapies and 1 ocular gene therapy) got approved.

This momentum will only pick up speed on 2018.  The year is already starting with an onslaught of drug development VC investments prominently featuring mRNA and gene-modulation startups (e.g. $270M investment in personalized/mRNA oncology Co bioNTech, and ~$100M for gene processing plays ExpansionTherapeutics and Stoke Therapeutics).

 

Further down the pipeline, we should see approvals and commercializations for at least 3 important oligonucleotide therapeutics drugs: Patisiran (RNAi/Alnylam) and Inotersen (RNaseH antisense/Ionis) for TTR amyloidosis in addition to Volanesorsen (RNaseH antisense/Ionis-Akcea) for lowering triglycerides.  At the same time, Sarepta will continue to walk the tightrope with their first-generation PMO splice skippers for DMD hoping for approvals of additional exons.

RNAi drug Givosiran should also be speeding towards approval in 2018.  After a sweet and brief phase I/IIa study sponsor Alnylam is pursuing a laser-like direct-into-pivotal study/biomarker-based approval strategy.  Expect this to become quite commonplace rather than the exception, especially under the new FDA.

Adding gravitas to all these activities will be the further commercialization successes of Spinraza and Exondys51 that will break down pretty much all commercialization barriers that may have been put up by payors.  After all, these are all delay tactics intended to save the system a few billion dollars (at the cost of childrens’ lives mind you), get a few bureaucratic underlings promoted, but really won’t stand a chance against the desire of patients and their families to get access to such foundational drugs.

It is my belief that with the commercial successes of Spinraza and Exondys51, all previous reservations with regard to oligonucleotide therapeutics being mere scientific tools rather than real-world drugs have disappeared among pharma and investors.

RNAi Therapeutics Stock Thoughts for 2018

Moving on towards the investment end of the business, Alnylam will be a show-me stock which will have its ups and downs as the market will challenge Patisiran sales numbers against its $12B market cap.  Alnylam knows this and is throwing everything behind the commercialization of Patisiran to the extent that it renegotiated its platform deal with Sanofi to retain full global responsibility for commercializing Patisiran and follow-on ALN-TTRsc02.

The easiest RNAi money in my opinion will be made with Arrowhead Pharmaceuticals (~400M market cap) which has impressed me recently with the vengeance with which it is getting back into the clinic (IND equivalents filed recently for its HBV and AAT drugs) and between it and Amgen it could have brought half a dozen drug candidates to the IND stage within the span of just one year (from having zero in the clinic!).  Just by executing on bringing these drugs to the clinic, Arrowhead’s market cap should exceed those of genome editing high-fliers like Sangamo and Editas (~$1.5B).

The topping on the cake, however, will come from potentially first proof-of-concept biomarker data from their GalNAc programs by the end of the year.  And who knows what will happen to the stock if they can declare HBsAg seroclearance based on the legacy HBV program (ARC-520/1)!  And this is not all as we have yet to learn more about Arrowhead’s lung delivery platform which could be a very big franchise onto its own without much competition.

In terms of striving towards first proof-of-concept and critical biomarker data for its GalNAc RNAi platform, Dicerna is similar to Arrowhead.  The difference is that Dicerna’s goals are not as grandiose as those of Arrowhead (Arrowhead is built to become a $50-100B biotech juggernaut) focusing its resources on a few (ultra-)orphan indications which they are addressing with much care and detail.  At a market cap of $450M after the recent conversion of their convertible debt, the downside could be enormous should the lead program for primary hyperoxaluria stumble.  The upside, however, is also significant as they have their eyes set on 2 orphan drug approvals by 2023.

Critically for Arrowhead, Dicerna, and other companies in the space, given the positive news from Spinraza and Exondys51 sales and TTR trial results, the resistance of more conservative investors to invest in second-tier companies so they can grow into substantial multi-billion companies themselves should also be alleviated.

Finally, investors in Ionis Pharmaceuticals face a critical year.  No, this time it’s not about hitting clinical endpoints and how well their drugs are selling.  Instead, Ionis will have to decide its corporate future.  Run away if it makes the mistake of continuing to try and dominate every area of oligonucleotide therapeutics development.  It is this ambition and resulting lack of focus that is responsible for the company giving away much of the commercial upside of its drugs to its partners.

As the basic oligonucleotide chemical building blocks and designs are coming off patent and more and more disease-focused, nimble companies come online, this train has left the station.  Boy, this company is in dire need of fresh management blood from the outside world. 

The macroeconomic environment also bodes well for a blockbuster oligonucleotides stock year: low inflation and interest rates, good economic growth at low unemployment, lowered corporate taxes in the US and an FDA that seeks to speed up and protect innovation in exchange for ensuring that off-patent drugs are highly affordable.  It is probably this blue sky, however, that scares me most and it is my New Year’s resolution to take it easy on my margin balance for a change.