The Potential for AAV-mediated RNAi Therapeutics

There is good reason to believe that synthetic siRNA-mediated RNAi Therapeutics should emerge as the most commonly used form of RNAi Therapeutics. Nevertheless, DNA-directed RNAi Therapeutics also has a number of potential uses where it should not only be competitive with, but even superior to synthetic RNAi. Unfortunately, the commercial development of DNA-directed RNAi Therapeutics has been somewhat hampered due to litigation and other management issues as well as funding problems that all things “gene therapies” face. In an effort to dispel some of the myths surrounding DNA-directed RNAi Therapeutics and since I’m somewhat familiar with particularly AAV-mediated DNA-directed RNAi, I would like to take the opportunity here to briefly highlight some of the potential applications for this particular technology.

DNA-directed RNAi can either by delivered by non-viral or viral means. For the most part, current systemic non-viral delivery technologies for DNA vectors that need to get into the nucleus for functional activity may not be adequate as a result of their inability to transfect sufficient cell numbers as well as support long-term expression. By contrast, viral vectors, particularly AAV and lentivirus, are capable of very efficiently and stably transducing many cell types. In fact, in vivo potencies are often greater than with most current synthetic RNAi methods with essentially knock-out phenotypes in the liver and eye observed for months and years using self-complementary AAV8 vectors in work reported by the laboratory I work in and collaborators to name just one example.

Before focusing more on AAV with which I am most familiar with (learning by osmosis), lentivirally delivered RNAi has much potential for disease of the CNS, largely for the same reasons as outlined for AAV below, and in combination with cell therapeutics. The latter would involve the ex vivo transduction of lentiviral RNAi constructs for example into stem cells similar to the ongoing phase I HIV-RNAi trial by the City of Hope and sponsored by Benitec, or also to enhance dendritic cell cancer vaccine strategies. Many of these applications take advantage the stable integration of lentiviral vectors into the host genome such that the vector and its expression/knock down will be maintained even in dividing tissues.

By contrast, due to its largely episomal nature, AAV gets rapidly during cell division thus limiting their applicability for cancer therapy or in other situations that involve cell division (regenerating liver, stem cell differentiation etc). Moreover, in certain settings humoral and T-cell mediated immune responses against AAV viral proteins present another challenge for achieving persistent gene silencing (the transduced cell may be recognized by the immune system and be eliminated) and where repeat-administration is desirable (due to neutralizing antibodies generated following the first administration).

For these reasons, AAV RNAi appears most promising for diseases of the eye and CNS as immuno-privileged sites. Although infusion pumps may address some of the challenges of allowing for long-term intracranial gene silencing by synthetic means, due to the ability to mediated sustained gene silencing for 6-12 months if not several years as suggested by canine AAV studies for hemophilia, the prospect of maybe having to subject a patient only once or very few times to an invasive operation makes AAV and lentivirus attractive alternatives for diseases such as Huntington’s Disease and other neurodegenerative disorders.

Not coincidentally, Targeted Genetics and the University of Iowa are currently pursuing an AAV RNAi program (pre-clinical stage) for Huntingon’s Disease that has shown promise. A critical factor for the success of this program should be the design of the shRNA expression cassette, and I personally would feel more comfortable with an H1 promoter-driven instead of a U6 promoter-driven construct that has been the front-runner so far. Another interesting application may be for the treatment of PML viral infection. Biogen Idec and Alnylam have been working on an siRNA-mediated approach, but due to serious nature of JC virus reactivation during PML, rapid onset of gene silencing by self-complementary AAV RNAi and the efficient vector delivery achieved for a number of neuronal cell types, AAV-mediated RNAi warrants consideration for this devastating disease.

Suitable non-CNS applications for AAV ddRNAi candidate may be instances where a single administration may already be therapeutic without the need for sustained gene silencing and repeat administration. HCV infection of the liver may be one such case as it is now possible to essentially transduce every liver cell, at least in mice, and effect long-term silencing after a single administration. AAV-medicated RNAi could therefore be an important component of combination therapies for patients that do not respond to current therapies and could also quite easily be tailored to the different HCV genotypes. Pfizer just recently acquired co-development rights for the pre-clinical stage AAV RNAi program for HCV from the Benitec spin-off Tacere.

AAV gene therapy is relatively new, but it is making rapid progress. Two independent phase I/II AAV gene therapy trial for Leber’s Congenital Amaurosis caused by RPE65 deficiency, a condition that leads to blindness later in life, demonstrated clear improvement in vision and treating children early on promises to even cure the disease. One of the studies was conducted by an academic group in London and was sponsored by Targeted Genetics, the other by a group from the University of Pennsylvania.

It is not clear whether an immune reaction that eliminated transduced liver cells in a hemophilia trial was specific for the AAV 2 serotype used, as most of us will have been exposed to this type of AAV during childhood and may therefore harbor some immune memory for it. A number of strategies have been proposed to minimize the risk of immune recognition in future trials, for example transient immune suppression or the use of alternative serotypes. The search for and development of alternative AAV serotypes is truly exploding and is rapidly yielding new AAV vectors with various tissue tropisms and immune properties.

The less AAV that needs to be administered the better also from an immune point of view. Very promising in that regard is the finding that the self-complementary AAVs which by-pass the rate-limiting second-strand synthesis step during the establishment of gene expression much more efficiently and functionally transduce target cells than conventional single-stranded AAV vectors. While this halves the vector capacity to less than 2kb, a size that is not very practical for expressing many protein-encoding genes, this does not matter at all in the context of small hairpin expression cassettes and appears to be just made for AAV RNAi. Actually, it was this property of self-complementary AAV vectors that was one of the main reasons for me to come to Stanford to conduct post-doctoral research. A patent for this possibly critically enabling technology has been issued to Targeted Genetics.

RNAi Therapeutics Portfolio Review: Increasing Position of Targeted Genetics

The technology is certainly there to be harnessed for therapy, but the development of AAV RNAi Therapeutics is not trivial and is a collaborative effort that requires careful gene target selection, safe and potent hairpin vectors, thoughtful clinical trial designs, and the manufacture of large amounts of high-quality AAV particles. Nevertheless, with the right team and some luck, it should possible to do.

It has both amazed and scared me to learn in a vivid report by RNAiNews that DNA-directed RNAi company Nucleonics whose lead program was a very long-shot (to put it mildly) RNAi program for HBV, was close to raising $25M in a series C round that would have included a venture capital arm from Johnson & Johnson. How that was even a remote possibility given the odds for that particular HBV RNAi program and the uncertain IP of that company is a mystery to me and makes the ~$13M market cap of Targeted Genetics’ look very cheap by comparison.

For this reason and given the promise of AAV-mediated RNAi Therapeutics in general, Targeted Genetics’ AAV gene therapy know-how and IP, including IP directly related to RNAi -especially the one for the double-stranded AAV and apparently another one for the expression of non-coding RNAs- I will add $680 worth of TGEN to the RNAi Therapeutics model portfolio and will pay for this with the sale of some stock in ISIS Pharmaceutcals (-$280), Oxford Biomedica (-$200), Silence Therapeutics (-$100) and Rosetta Genomics (-$100).

Remember, an investment in Targeted Genetics is highly speculative, its balance sheet somewhat ugly which is made worse by current market conditions which make it almost impossible to raise small biotech capital on reasonable terms. This investment thesis therefore is that Targeted Genetics will be able to win the race against the clock by being an attractive partner for other drug companies interested in RNAi Therapeutics with the resulting license fees and development milestones helping the company through the hard times. Maybe Genzyme with its considerable AAV gene therapy efforts and orphan disease management expertise or Biogen Idec with its long-standing ties to Targeted and interest in PML will bite.

Disclosure: The lab that I work in has an interest in AAV-mediated RNAi Therapeutics. The author has also been accumulating shares in Targeted Genetics between $0.58 and $0.72. The stock is not suitable for most due to adverse market conditions and the precarious balance sheet of the company. The thin trading volume of the stock causes volatilities in share price, usually to the downside, and there is a real chance that the stock will be de-listed from the Nasdaq exchange which will make this little company even more opaque to investors. On the other hand, conditions will improve at some point and in an environment where venture capital exits have become increasingly difficult and considering the attractive relative valuation and maturity of the company and technology, Targeted Genetics may represent an interesting, somewhat more liquid piece of RNAi Therapeutics real estate for investors otherwise specializing in private start-up companies.

RNAi Therapeutics Portfolio Review: Time for Bottom-Fishing?

A quick look at the table on the right shows that 6 out of the 10 RNAi-related stocks in the RNAi Therapeutics portfolio suffered serious declines of over -15% since January '08. Clearly, the tight credit markets and an overall risk-averse investment climate had an adverse affect on the biotech market in general, and the valuation of early-stage companies in particular.

While the share price decline in companies such as Nastech is to a large degree to be blamed on company-specific issues, the difficulty of raising capital at reasonable terms has only accentuated the downfall of companies in need of near-term funding and has taken on dynamics that make me think twice about whether the time to do some bottom-fishing has come.

When it comes to bottom-fishing in RNAi Therapeutics, the issue is whether the markets have only accelerated the inevitable process of separating the good from the bad, or whether some the of the affected companies could be turned around with good management if they were afforded the necessary funding.

Separation based on scientific and financial track records probably accounts for the difference between Alnylam’s +1.6% increase versus -46.4%, -48.9%, and -67.9% declines, respectively, for Alnylam’s main synthetic RNAi competitors Silence Therapeutics, RXi Pharmaceuticals, and Nastech. Among those three, RXi with its motley patent portfolio (access to Hannon and Tuschl I) and preferential treatment by the State of Massachusetts may be the most interesting, but is hurt by development programs that do not appear to have sufficient maturity.

Nastech may be better off not to compete on the RNAi trigger side (“mdRNAs”) and instead concentrate on peptide-mediated RNAi delivery. As by far the best performer in the portfolio, Tekmira, demonstrates, innovative and clinically credible RNAi delivery capabilities are more likely to be rewarded by the market than companies built on yet another, not-so-innovative RNAi trigger designs.

Next to siRNA delivery companies that have gone down with the overall markets, but of which the science is promising, it is DNA-directed RNAi companies that may offer some of the most attractive investment opportunities right now. Admittedly, gene therapy investments historically have been a huge disappointment with an even much greater failure rate than for normal drug development already and a handful of overly publicized safety incidents. This means that even a phase II rheumatoid arthritis program by Targeted Genetics is valued essentially at zero. However, an increasing number of exciting gene therapy proof-of-concept studies, such as the two recent publications on the vision improvement by AAV gene therapy for Leber’s Congenital Amaurosis, indicates that gene therapy is finally starting to realize its therapeutic potential after years of trial and error.

While (synthetic) siRNA Therapeutics may be preferable for the majority of RNAi Therapeutics applications, DNA-directed RNAi, especially in conjunction with AAV and lentivirus, due to its often more advanced delivery efficiencies, potencies, and long-term expression may have a number of applications for serious and difficult-to-treat conditions such as neurological disorders or together with stem cell therapy (e.g. HIV trials by COH/Benitec). With the right IP, therapeutic portfolio selection and resource allocation strategy, an investment in DNA-directed RNAi at this point may both give the companies' R&D efforts the much needed financial boost as well as reward the investor once the biotech market has returned to more normal valuations. Of course, if the overall market conditions don’t change, there is nothing to stop investors to remain on the sidelines and just wait for even cheaper prices while, unless of course Big Pharma's thirst for innovation causes it to pull the trigger first.

Breaking News: Pfizer Licenses DNA-directed RNAi Program for HCV from Tacere Therapeutics

Representing the first major DNA-directed RNAi licensing deal to date by Big Pharma, Tacere Therapeutics announced today licensing of its late preclinical-stage AAV-RNAi HCV program, TT-033, to Pfizer. Detailed terms were not disclosed, but Tacere will be eligible for up to $145 in development milestones, plus royalties on sales of drugs. Pfizer will assume all development work and cost.

TT-033 consists of an adeno-associated viral vector (AAV) expressing small hairpin RNAs (shRNAs) that are expressed from the viral vector. The shRNAs are processed by the RNAi machinery to yield small interfering RNAs that target the HCV RNA. This vector is devoid of any viral protein-encoding gene and has proven extremely efficient in transducing liver cells in mice and in many cases effecting almost complete gene knockdown. Tacere acquired the rights to TT-033 from Benitec when Benitec, due to funding problem, downsized and left the US in 2006. Benitec retains a stake in both Tacere and TT-033.

With today’s announcement, Pfizer is continuing is strategy of small, but deliberate RNAi technology deals. Tacere is a Bay Area company and close to Pfizer’s new Bioinnovation Center in South San Francisco. Last year, Pfizer made clear that it wants to become a major player in RNAi Therapeutics as part of its biotechnology initiative. It will now be interesting to watch whether Pfizer will take a broad technology license from Alnylam to protect all of its ongoing RNAi projects (Alnylam announced today that it is confident to close at least 2 major Roche-type technology licensing deals in the not-to-distant future).

The deal is a validation of AAV technology for gene therapy. AAV has shown great promise in addressing the RNAi delivery challenge for a number of organs, including the liver, brain, and eye. Benitec, Tacere, and Targeted Genetics currently have significant interests in AAV-mediated RNAi.