RNAi Therapeutics A Bright Spot In Dark Biotech Winter

Over the last couple of weeks, we have seen business development activities in the RNAi space that made me realize that the modality has firmly established itself as the third drug development pillar next to antibodies and small molecules.  At the same time, surviving RNAi variations DNA-directed RNAi and microRNAs are catching a bid.

Biogen and Abbvie invest

Most Big Pharma companies have a history of making significant investments in the sector.  The early (2004-2009) significant moves by Roche, Novartis, Takeda, and Merck were not well rewarded.  This was partly because they lacked patience and the willingness to protect early platform development from the incongruent demands from their in-house therapeutic area groups.  Novo Nordisk got the timing right when acquiring Dicerna in late 2021.  Similar to Eli Lilly (through license to Dicerna IP and subsequent in-house work), they are now well placed to capitalize on the promise of RNAi for large cardiovascular and metabolic disease applications.

Amgen and Takeda stand to benefit from two opportunistic deals with Arrowhead Pharmaceuticals for candidates that are now in advanced phase 3 clinical development.  The RNAi agents for alpha1-antitrypsin-related liver disease (Takeda) and Lp(a) (Amgen) for cardiovascular disease will read out as early as next year.  Both companies speak highly of these products.  Amgen in particular highlights the Lp(a) program as its most exciting development candidate in corporate presentations and I expect the company to be back for more RNAi.

Two pharma/big biotech companies that stood out for having watched the developments from the sidelines are Biogen and Abbvie. 

Biogen has gone out of their way and tried it seems every oligonucleotide modality but RNAi.  This includes RNaseH antisense and splice modulation with Ionis and Stoke Therapeutics and microRNAs with Regulus.  It had done so after laughing off RNAi as a scientist’s sandbox idea when presented with it early on by Phil Sharp, scientific co-founder of both Biogen and Alnylam, and thus turned down the opportunity of a life-time to take a major stake in it.  

Instead, a certain former Biogen employee, John Maraganore would go on to build Alnylam into a major biotech player with Alnylam's market cap now exceeding Biogen's.  In a personal anecdote to illustrate the lack of appreciation of RNAi at Biogen at the time (2002), when I did an internship at Biogen and attended a job interview presentation there by a scientist on his RNAi work at Cold Spring Harbor, I was pretty much the only attendee not directly involved in the hiring process.   

It took a leadership generation and a realization that Biogen has become a dinosaur in the drug development industry that it recently finallyinvested $46M in a deal for a CNS target with you would not believe it: City Therapeutics, co-founded by John Maraganore. 

2 weeks before it, Abbvie did a broader collaboration and license option agreement with ADARx for $335M upfront.  Abbvie’s predecessor Abbott had dabbled a little bit in RNAi delivery around the early RNAi bubble, but with no serious intention behind it, really.

MicroRNA dinosaur Regulus taken out by Novartis

As with CRISPR now, the early RNAi bubble phase saw numerous start-ups not only around the core RNAi platforms, but also derivative technologies.  One of them was microRNA therapeutics, a technology targeting or mimicking the endogenous small RNAs of the RNAi apparatus. When the RNAi industry went through the 2010-12 financial bottleneck most of these companies either died or were well on their way. 

Regulus Therapeutics co-founded in 2007 by Alnylam and Ionis around microRNA-targeting oligonucleotides, had the good fortune of having deep-pocketed, influential backers that eventually enabled them to doggedly progress anti-miR17 antisense oligonucleotide farabursen for autosomal dominant polycystic kidney disease (ADPKD) to a stage where the FDA aligned with them on a speedy pivotal trial development plan earlier this year.

This triggered a bidding war between Novartis and an undisclosed bidder that on April 30 resulted in a ~10x premium over its 52-week low that will be paid by Novartis, including a $800M upfront and contingent value rights.

 

DNA-directed RNAi Therapeutics create tremendous value for uniQure

In the vibrant field of developing disease-modifying medicines for Huntington’s disease, uniQure stands out with its chance to gain FDA approval in less than a year should 3-year data replicate that seen after 2 years.  This is the big regulatory news of the day for genetically-targeted therapeutic development as uniQure aligned on a path towards accelerated approval, including a comparison with an external natural history cohort.  Turns out, new CBER chief Vinay Prasad is actually human and has compassion for those suffering from severe genetic diseases.

What few people are talking about is that AMT-130 is an RNAi Therapeutic.  It is a DNA-directed RNAi version where the RNAi trigger is expressed from a DNA template following AAV delivery.  The key to uniQure’s success is that delivery is done locally by intracranial access to where the gene suppression is thought to be required (Spronck et al 2021; cool video illustration here).  In the case of Huntington’s disease, it is the striatum; in the case of AMT-260 for mesial temporal lobe epilepsy where uniQure presented intriguing seizure reductions in the past week, the hippocampus. 

By precisely following how the target structure is filled up with the AAV solution, potential toxicities in off-target tissues can be avoided.  Obviously a big advantage at a time when the AAV field is struggling with toxicities due to systemic administration of large vector doses.

What is more, DNA-directed RNAi allows for durable, potentially permanent gene silencing without the need for an exogenous protein.  This comes as genome editing, be it via CRISPR or Sangamo’s zinc fingers, are hammering away at solutions for gene knockdown that require exogenous protein expression.  Sometimes the old ways are more elegant after all.  Being out of fashion has the advantage of allowing you to build value with less friction. uniQure is about to capitalize on that in a big way.

 

Pure-play RNAi stocks budding during biotech winter

All this is happening as RNAi bellwether Alnylam ($40B market cap) is hitting new all-time highs and is about to catch up with and likely overtake Regeneron ($53B market cap) to become the 3^rd most valuable biotech behind Amgen and Vertex Pharmaceuticals.  Besides the ATTR amyloidosis opportunity, this prices in the potential of Alnylam's pipeline to address huge markets such as Alzheimer’s and obesity with well tolerated, infrequently administered RNAi.

Silence Therapeutics has also risen slowly, but surely over 200% in the last 2 months.  As Lp(a) RNAi is increasingly seen as a must-have in the cardiovascular disease space, its phase 3-ready candidate SLN360 alone could be well worth a multiple of its current $275M market cap.  Add to this its 25 year experience as a pure-play RNAi developer and inhibinE for obesity being an easy target with their technology, Silence Therapeutics is ripe for an acquisition.

Arrowhead Pharmaceuticals is also up over 80% in the same period as revenues in the form of ApoCIII knockdown for high triglyceride-related disease and co-commercialization and royalty/milestone revenues come into closer focus.  Amgen would be an obvious candidate to make a play for Arrowhead, also because Arrowhead can now manufacture large amounts of RNAi triggers within the US.

There are a lot of lessons to be learned from the history of RNAi Therapeutics.  One is that financial bottlenecks can richly reward those that persevere, also because it creates scarcity value and reduces competition.  In general, the current biotech winter which forces companies to focus on their most promising and competitive product candidates will translate into greater profitabilities down the line.  In a twist of irony, as the CRISPR field is going through its own bottleneck, CRISPR Therapeutics now spending money on a non-core RNAi asset, thus keeping spend unnecessarily high and losing focus, is not what the doctor would order based on RNAi history. 

I believe that as long as Trump’s trade war does not result on a run on the US dollar pushing interest rates up, anticipation of Fed Chief Powell’s replacement in May 2026 will allow these assets to come to fruition in a much less capital-constrained environment for biotechs.

Small Molecules and Gene Therapy Muscle Out Oligonucleotide Therapeutics

Over the last two days, breathtaking data were reported for the treatment of two severe, inherited muscle-wasting diseases affecting children.  The investigative agents were a small molecule splicing modulator and a gene therapy both of which appear to achieve superior results compared to approved Oligonucleotide Therapeutics agents. 

The developments highlight the risk that while gain-of-function changes (here by splice modulation) may have proved to be low-hanging fruits for Oligonucleotide Therapeutics, they, unlike gene knockdown approaches, face increased challenges from other technology platforms.

Small molecule splicing modulation for Spinal Muscular Atrophy (SMA)

In 2011, Roche started collaborating with PTC Therapeutics on small molecule splice modulators for the treatment of SMA.  The idea is to screen small molecules for their ability to bring about changes in RNA processing that would hopefully be gene-specific enough so as not to cause widespread off-targeting.

I had always considered this to be a monumental, if not insurmountable task.  This is because a given splicing event brings together a set of proteins that each in turn also function at other genes.  So surely a small molecule that may bias splicing from SMN1 to SMN2, as does antisense oligonucleotide SPINRAZA from Ionis and Biogen through highly specific base pairing, would also affect a range of other genes.

If that were not enough of a challenge, a small molecule carries the extra baggage of being more widely available across tissue types such that off-targeting is a risk to not just the CNS as with SPINRAZA, but many other cell types where there may be no benefit from SMN upregulation.

Accordingly, the first compound in the PTC-Roche collaboration to enter clinical development, RG7800, had to be discarded last year due to retinal tox concerns.  Another small molecule competitor, branaplam from Novartis, had similarly been put on hold due to tox concerns although this compound has resumed development late last year.

It was therefore amazing to see updated results from the FIREFISH study of the follow-on compound RG7916 in type I SMA infants.  They show that 90% of children had an improvement in the CHOP-INTEND measure of physical functioning after 6 months on the drug.  The results are particularly impressive considering that treatment had been initiated relatively late compared to the new standard of care with SPINRAZA and the soon-to-be-approved gene therapy by Novartis (àAvexis).   

Not only that, there had been no treatment discontinuations due to safety issues with RG7916.

Given that SPINRAZA has to be given intrathecally while RG7916 can be given orally, and given that both the gene therapy and the orally available RG7916 appear to be somewhat more efficacious than the oligonucleotide, the focus of Biogen and Ionis should now be on testing combinations of SPINRAZA with both modalities.  Ideally, there is added efficacy from using the agents together either because due to higher achievable SMN protein levels and/or due to complementary biodistribution (note: the value of SMN increases outside motor neurons is debated).  If not, the SPINRAZA franchise may have a limited shelf-life.

Fake-it-‘til-you-make-it Sarepta with gene therapy breakthrough

The other piece of great news for families dealing with neuromuscular disease came yesterday at the Sarepta Therapeutics R&D Day. 

To wit, Sarepta had used dubious data and a lot of political lobbying to get the controversial exon skipper eteplirsen approved under accelerated approval.  While delaying the confirmatory study that is supposed to be part-and-parcel of an accelerated approval, Sarepta has been raking in billions in sales and added market capitalization.  This has allowed the company to build a veritable DMD powerhouse with a number of candidates that look much more promising than ordinary PMO-based eteplirsen.  They include peptide-conjugated PMOs and especially gene therapies.

If you are involved in drug development, better get used to the dubious morals of the industry.  If things go well, you behave like the paragon of virtue, if things don’t go so well you fake it until you get another chance at succeeding.  I digress…

Before the initial gene therapy data were to be presented by Jerry Mendell from Children’s Nationwide of SMA fame, I had dreaded the thought of having a hyped-up R&D Day being about divining the meaning of a biopsy slide or two on the barely-above-background expression of the microdystrophin transgene.

However, what was presented was anything but borderline.  Unlike with eteplirsen where we were dealing with debatable 1%-type absolute expression levels, there was robust microdystrophin expression: ~75% of cells expressed the transgene (by IF) with roughly 30% absolute expression of microdystrophin relative dystrophin from a normal person (by Western blot).

Not only this, the microdystrophin was functional at the molecular level as judged by restoring dystrophin-related protein complexes serving to protect the muscle from damage by acting as shock absorbers.  Accordingly, CK levels in the blood, a marker of muscle damage and elevated in children with DMD, were robustly (9x) and uniformly lowered in all 4 boys between the ages of 4 and 7.  Add to this the obligatory before-and-after videos and there is little doubt already at this relatively early stage already (~1-3 months after gene transfer) that AAVrh74.MHCK7.microdystrophin is a powerful agent applicable to essentially all types of DMD.

On the safety side, there were considerable, but transient and manageable increases in liver enzymes.  This was to be expected, however, considering the very high doses of AAVRh74 needed to achieve widespread transgene expression in muscles throughout the body and treating physicians know to look for it.

If the safety holds up and expression continues to be long-lived, AAVrh74.MHCK7.microdystrophin could render many exon-specific oligonucleotide splice modulators obsolete. The duration of action is the most concerning issue to me at this point given the attendant cell turnover and attendant risk of losing episomal gene therapies in patients with muscle damage.    

Ionis Re-Sells Neuro Assets to Biogen for $500M and Improved Terms

This morning, Ionis Pharmaceuticals rattled my world by announcing an update to its neuro parnership with Biogen.  After recovering from a shock reaction thinking that $6B market cap Ionis Pharmaceuticals had sold the rest of its crown jewels in the neurological space for $500M and little more (upfront and premium paid by Biogen for the stock consideration), I noticed that this was merely the renewal of an earlier partnership that was about to expire in 2019.

Clearly, Biogen was eager to continue the partnership with sales gushing in from its first neurological disease partnership candidate, SPINRAZA for the treatment of spinal muscular atrophy, and other neuro antisense programs such as the one for Huntington’s Disease showing great clinical promise.  

As time was running out on the previous deal, Biogen wanted to buy itself additional time to be able to pick the right neuro antisense candidates.  In return for the 10-year extension, Biogen will now have to make its picks already by the end of IND-enabling studies instead of with clinical proof-of-concept.  This makes it likely that as Ionis can be expected to churn out IND-enabling studies one after another, quite a few candidates will slip by that deadline and become wholly owned by Ionis Pharmaceuticals.

Equally exciting is the fact that despite the earlier exercise term, instead of earning single digit to midteen royalty on drug sales, Ionis now stands to receive midteen to 20% royalties on sales.

On the downside, in the wake of the latest Akcea deal re-arrangements and this neuro deal extension which effectively shuts off other suitors to become owners of a significant part of the Ionis neuro franchise, we can wave good-bye to any hopes of a quick buy-out.  More likely, Ionis will largely remain a royalty play for the next 8-10 years by which time it surely will have a new CEO.  And then Biogen.

Biotech M&A Heating Up, But Only One Oligo Company In-Play

The M&A activity in biotech has picked up additional steam this week with Celgene buying CAR-T player Juno Therapeutics for $9B and Sanofi buying blood disorder biotech Bioverativ for $11B (the latter shining a positive light on the recent Alnylam-Sanofi deal restructuring). And according to insiders, an unusually high number of additional deals are being finalized following the JP Morgan conference.

RNAi, ASO, genome editing, gene therapy platforms not in-play

Although another CAR-T player, Kite Pharmaceuticals, got acquired late last year by Gilead for $12B and both Juno and Kite had been billed as CAR-T platform plays, these acquisitions are unlikely to read through to gene-targeted platform technologies that are more broadly applicable across disease areas.  These include RNAi, antisense oligo, genome editing, and traditional gene therapy.

This is because the CAR-T acquisitions were driven by the desire of the acquirer to add near-term revenue growth to the topline while strategically positioning themselves in the blood cancer arena.  Of course, the underlying CAR-T platform technology will continue to be further utilized, but it is the near-term revenue streams from their drug sales that justify the multi-billion price tags to the bean-counters inside these companies and like-minded investors.  

These deals therefore do not signal to me a willingness of Big Pharma and Biotech to shell out $3B or so that they would have to acquire companies like Editas, Sangamo, and CRISPR in genome editing or Arrowhead and Dicerna in RNAi in the current marketplace.  This may also be informed by their experience in the RNAi space a decade ago when companies like Merck and Roche made large investments in the platform only to literally die in their hands while it was much smaller, nimbler pure-play companies that have now advanced the technology to commercial maturity.   

Also, more so than a decade ago, Big Pharma/Biotech has adopted a model where they focus on a few disease categories such as oncology, cardiometabolic, or the CNS, in a modality-agnostic fashion.

Target-based technology access 

Accordingly, when technology access for early-stage product development is sought, large companies prefer to partner on a limited number of targets.  This is illustrated by a range of deals over the last year or so such as in the RNAi (Dicerna-Boeheringer for NASH, Arrowhead-Amgen for cardiovascular disease) or genome editing (Sangamo-Pfizer CNS deal) spaces. 

In some cases, such deals may cover multiple targets in the same tissue using the same delivery technology.  These include deals such as the one by Editas Medicine with Allergan in ophthalmology.  

And only in rare cases such as the partnership between CRISPR Therapeutics and Bayer are multiple targets spread across multiple disease types (blood disorders, blindness and congenital heart disease) and may be largely unknown at the signing of the deal.  Such multi-target deals, however, have become less likely as the cost of capital for raising money on the Street has gotten lower and the market caps of these companies commensurately have increased.  At that point, it is advisable for the platform company to forego upfronts and near-term milestone payments that pale relative to their market caps and instead retain maximal low-hanging-fruit target-picking flexibility. 

Only Ionis Pharmaceuticals in-play

According to the above, only Alnylam and Ionis Pharmaceuticals with multiple important drug candidates about to be approved over the next 3-4 years would fulfill the requirement for adding needle-moving near-term revenue growth to a large acquirer.  With a $13B market cap already and a power-hungry management to build the most successful biotech company in history, I do not see large companies ultimately offering the ~$40B it would likely take for a successful bid for the company.

By contrast, Ionis Pharmaceuticals with a market cap of $6B and a likely more robust stream of oligo drugs hitting the market (Spinraza for SMA last year, Inotersen for TTR amyloidosis and an ApoCIII-lowering drug this year alone) appears to me a more realistic target despite its history of engaging in multiple partnerships with a number of large pharmaceutical companies, partly in an effort to make it a less appealing takeover target.

The likely acquirer would be Biogen, of course.  When Ionis and Biogen initially partnered to address in early 2012 on what has become the SPINRAZA blockbuster, Biogen quickly learned how powerful and widely applicable antisense technology could be for addressing CNS disorders.  In less than 2 years, the companies would sign another 3 partnerships ultimately covering numerous targets in the CNS which is where Biogen has gone on to firmly stake its future on.  

As we know today, giving away so fast so much of the upside to the CNS franchise was a mistake on Ionis' part as the CNS has emerged as the area of highest value to the current antisense platform full-stop.  SMA was only the beginning and diseases like Huntington’s, Alzheimer’s, ALS- you name the neurological disorder- suddenly seem within targeting reach.

Still, adding up the royalty payments and milestone payments for such licensed products would add up quite a bit.  In fact, SPINRAZA payments alone would justify Ionis' current market cap as it is growing into a multi-billion annual revenue drug and cornerstone to Biogen's SMA franchise.

Because other Ionis-licensed CNS product candidates would also address the root causes of diseases, they would similarly lend themselves to become cornerstones in new CNS franchises that Biogen is targeting, e.g. ALS.

So when Biogen’s CEO calls M&A valuations being reasonable and not over-stretched as frequently asserted by his colleagues and then goes on to mention recent CNS breakthroughs in SMA (à Spinraza), Huntington’s (watch out for knockdown data from phase I/IIa late Feb/early March), migraine, and multiple sclerosis, I cannot shake the feeling that Ionis will be the target of the big M&A move that everybody is expecting Biogen to make.  $20B and we have a deal. 

it could mean that the company that tried its best in the oligo space not to be an M&A target, Ionis, could be one of the next to be acquired.