CRISPR Stocks in Wake of Verve Therapeutics Acquisition by Eli Lilly

 

Last night, news broke that pharma giant Eli Lilly was in talks to acquire Verve Therapeutics.  After a 3-year lull in major CRISPR dealmaking following the Covid bubble, this brings the space the Big Pharma validation that genome editing is not a crazy fantasy, but a core modality of future drug innovation. To my surprise, even hardcore biotech investors had been waiting for such validation before considering the space investable. 

Needless to say, the news will trigger pin action in other CRISPR stocks.  In this blog post, also based on a similar experience I had in the RNAi space about 10 years ago, I will lay out how I see it play out,  

Verve acquisition is a steal

As you will remember, Verve is developing an exciting one-time PCSK9 base editing treatment, VERVE-102, that could transform LDL-cholesterol-driven atherosclerotic cardiovascular disease (ASCVD).  According to the rumors in the Financial Times the proposed acquisition price is ~$1.3B.  This would be a bargain considering the potential of VERVE-102. 

Even with the current small available safety dataset, it is hard for me not to see VERVE-102 as a highly compelling option for the 1-2 million heterozygous familial hypercholesterolemia (heFH) population in the US and Europe alone.  Slap on that a $100,000 treatment price, this alone has Glp1-type market dimensions.

Under normal market conditions, such a steal would not be possible.  But these have been anything but normal biotech investment times. I believe that more than the nice short-term financial reward of an acquisition, Verve management is doing here what is best for VERVE-102 reaching its maximal potential.  Ultimately, it takes the financial resources, experience, and credibility of a pharma giant to develop and commercialize such a revolutionary treatment to such a big market.  

Who is next?

But luckily for investors, Verve Therapeutics has not been the only severely undervalued CRISPR company.  When Alnylam started to gain tremendous traction in 2012-3 after demonstrating that you can make RNAi gene silencing work in humans, still working as a consultant to companies and investors back then, I noticed how funds started to dig into who could be the next Alnylam to invest in.

So on the back of very strong recent clinical data in the space (VERVE-102, NTLA-2001/2, BEAM-302) and now the Big Pharma validation, I expect the same dynamic to unfold here.

Intellia Therapeutics

The first obvious company to benefit from fund inflow should be Intellia Therapeutics.  Verve Therapeutics will be acquired mostly for a therapeutic candidate that has shown promise in the clinic. Intellia therefore with not just one, but three clinically validated market opportunities (ATTR-CM, ATTR-PN, HAE) and a reasonably large market cap of around $900M and good trading liquidity for funds to take needle-moving positions in, will come first on the radar.

What is more, almost the entire market cap can be accounted for by its cash position and the stock has come down from a high of around $200 4 years ago to $9.  The main reservation by the investor community has been that patients will prefer a daily pill over a futuristic-sounding lifetime treatment, if not cure.  I guess they were wrong.  Not only is Eli Lilly’s proposed acquisition a vote of confidence in CRISPR modality, but the KOLs in the ATTR and HAE field are already fully on board.

Beam Therapeutics

Beam with a market cap about 2x of Intellia’s will also come into investor focus.  While I do have a small position in that company, it is by far not as big as the one I have in Intellia.

This is because I consider uncertainties around its two lead candidates, for sickle cell disease (SCD) and alpha-1-antitrypsin disease (AATD), to be higher than for Intellia’s opportunities.  Their sickle cell disease base editing should be superior to that of already approved Casgevy by Crispr Therapeutics and Vertex Pharmaceuticals. 

But will that be enough for the ex vivo autologous hematopoietic stem cell approach to gain quicker commercial traction than Casgevy?  With regard to BEAM-302 for AATD, I am still waiting for more clarity on the liver safety of their (non-GalNAc) LNP.  It was the new safety standard set by VERVE-102 (GalNAc-targeted and ‘Novartis ionizable lipid’) that makes VERVE-102 a viable therapeutic in the first place.

Prime Medicine

Having just cured p47phox variant chronic granulomatousdisease (CGD) which could entail a valuable priority review voucher, Prime Medicine is now focusing on the relatively large severe genetic liver disease opportunities of Wilson’s Disease and AATD.

While not as clinically advanced as Beam Therapeutics, Prime Medicine has the benefit of learning from the LNP safety of the Intellia, Beam, and Verve programs.  I therefore expect them to bring forward a lower-risk GalNAc-enabled LNP similar to Verve’s when it enters the clinic next year.

From a platform point of view, prime editing is the future of CRISPR medicine due to its versatility and exquisite on-target specificity.  Prime Medicine with a dominant IP position in prime editing, a market cap of $200M, much of which in cash, is therefore a prime candidate for a Big Biotech/Pharma looking to make use of that technology for its in-house targets.

Metagenomi

Going nowhere in its clinical pipeline, but generating new, especially smaller CRISPR editors that could have delivery and immunologic advantages, is Metagenomi.  Its lead candidate is a CRISPR-enabled gene drop-in approach for hemophilia A (MGX-001) which it hopes to bring into the clinic in 2026.

While I consider Metagenomi’s gene drop-in data to be industry-leading, there are questions around its safety profile since it will involve not only LNP, but also AAV for systemic delivery.  So while MGX-001 could be the first ‘gene therapy’ for hemophilia with sustained transgene expression, Metagenomi’s valuation will unlikely get recognition for it until actual clinical data.

The main reason why Metagenomi is interesting here is that it is not only trading 70% below cash ($55M market cap, $200M cash), but that it has an important partnership with Ionis Pharmaceuticals which could view CRISPR as an increasingly important mechanism to shore up its commercial ambitions in ASO-led franchises such as ATTR, HAE, and cardiovascular disease.

If I were Ionis Pharmaceuticals, I would just buy Metagenomi for $200M, retire preclinical MGX-001 for little cost and thus get rid of my future milestone and royalty obligations.  Of course, Ionis may prefer Prime Medicine for its more versatile technology.

Buying a platform-only company in this biotech tape is certainly not for the faint of heart and large funds will shy away from Metagenomic at least initially due to its small size and illiquidity.  I can see it, however, emerge as an attractive second-wave opportunity should interest in CRISPR stocks be sustained enough.  As a backstop, you still have Ionis Pharmaceuticals having to make a decision on investing further into Metagenomi later this year.

You may ask yourself why I have not mentioned the biggest CRISPR company by market cap, $3.6B CRISPR Therapeutics.  This is because of initially overoptimistic expectation for Casgevy sales and with their recent RNAi deal spreading themselves out too thinly and losing their cutting edge so early in the game.  I would also like to see them disclose the liver safety before attributing value to their first generation Cas9 nuclease-based cardiovascular CRISPR franchise.

 

Disclosure: Verve Therapeutics became my largest portfolio position after they disclosed VERVE-102 data two months ago.  While smaller than my positions in Huntington’s disease gene therapy company uniQure and RNA editing company ProQR, Prime Medicine and Intellia Therapeutics are not far behind and very meaningful positions with close to 10% portfolio weightings.

This is not financial advice.  It is intended for those interested in contemplating the stock market repercussions of the rumored Verve Therapeutics acquisition.  Buying a stock is the simple part, successfully trading it for profit much more difficult. 

ProQR and Partner Eli Lilly Demonstrate Oligonucleotide-induced RNA Editing in the CNS: A Major De-risking Event for the Industry

With every new oligonucleotide therapeutics modality that feeds into an endogenous cellular mechanism comes uncertainty as to whether the mechanism is sufficiently robust to be of therapeutic utility.  

This is especially true for RNA Editing as in its early days targeted AàI editing was only shown with the concomitant DNA-directed overexpression of ADAR along with an targeting RNA or the introduction of recombinant ADAR-antisense conjugates of little direct therapeutic use.  Similarly, simply introducing into a cell a chemically synthesized antisense oligonucleotide hybridizing to the area surrounding the target adenosine in an mRNA will only give you minute editing efficiencies in cell culture without further structural and chemical optimization.

The liver and CNS, due to their gene target richness and the demonstrated clinical feasibility of delivering oligonucleotides to these organs, are of particular importance to the RNA Editing industry.  The demonstration byscientists from Wave Life Sciences of oligonucleotide-directed RNA Editing in non-human primates was therefore an enormous de-risking event in that it showed that RNA Editing is sufficiently robust in living primate livers.

Of similar importance was the revelation by ProQR and their partners from Eli Lilly last week that this also holds true for the primate nervous system following the intrathecal administration of an editing oligonucleotide.  10-30% editing were seen in the brain depending on the anatomical location investigated.  In both the mice (intracerebroventricular delivery) and cynomolgous monkeys, editing was highest in the cortex.  Even higher editing levels, up to 50%, were observed in the spinal cord of non-human primates.

The spinal cord (motor neurons) also happens to be the location of the most successful oligonucleotide therapeutic currently on the market: SPINRAZA (nusinersen) for spinal muscular atrophy.  Since RNA Editing is quite new and many do not fully appreciate what 10-50% editing efficiencies mean, SPINRAZA can serve as a good example for how impactful such target engagements can be particular for gain-of-function approaches.

SPINRAZA is a splice modulator and works through gain-of-function by obscuring an intronic splice silencer element in the SMN2 pre-mRNA.  Typically, only 10-20% of SMN2 mRNA is ‘correctly’ spliced to yield a functional full-length protein.  With 12mg of SPINRAZA in infants (same dose used for the RNA editing studies in cynomolgous monkeys), this increases 2-3x.  This means that an approximately 10-40% successful target engagement can save babies from certain death and, if given early enough, may allow children with the type I SMA mutations to grow up almost normally.

In the case of the (undisclosed) target gene that Eli Lilly is looking at, these types of target engagements with RNA editing resulted in 5-25x increases in protein function.  Because of the above and because gain-of-function is a particular competitive strength of RNA editing, this application should be prioritized in target selection of industry pipelines.

Eli Lilly Comes Back for More ADAR Editing

Barely two weeks after GSK took an exclusive license to the ADAR Editing industry’s leading pipeline asset (alpha-1-antitrypsin) and other ADAR targets from Wave Life Sciences, Eli Lilly and ADAR pure-play ProQR announced a major expansion of their RNA Editing partnership from a year ago.

Here, I will lay out what the deal says about the position of RNA Editing within the pharmaceutical industry, the dynamics within the RNA Editing space before going into some specifics of the deal itself.

 

ADAR Editing to exploit exploding genetic insight into disease

The deals were driven by the desire of large pharmaceutical companies to exploit their investments into understanding the genetic basis of disease by matching them with complementary therapeutic modalities. Not only is ADAR Editing as a genetic technology itself an obvious consideration for this challenge, unlike most other modalities which work by inhibiting pathways, ADAR Editing is amenable to gain-of-function and gene upregulation.

Similarly, RNA and genome editing (‘CRISPR’) are unique in their ability to generate protective variants, that is variants thought to protect a person from developing a disease such as cardiovascular disease or Alzheimer’s.

Target modulation versus all-or-nothing forever

Genome editing may have captured our imagination and overshadowed ADAR Editing for most of its existence, but for many applications its mechanism is imperfect or for technical reasons not applicable (yet).

The delivery challenge for large nucleic acids as in genome editing is, however, bigger than for ~30nt oligonucleotides which have emerged as the preferred strategy to mediate ADAR Editing.  It is therefore unsurprising that currently the greatest value of genome editing is in combination with cell therapeutics such as in immune oncology or for hematopoietic stem cell-based strategies where delivery happens ex vivo. For in vivo delivery strategies, liver hepatocytes will be its main target tissue and it is here where most of the competition between ADAR and genome Editing will play out.  

But also where there is such direct competition, there are often good reasons to not pursue a permanent change in the patient's DNA.  For example, permanently burning liver fat in an uncontrolled manner by turning thyroxin hormone receptor-beta into constitutively active versions could be dangerous.  This is where a daily (small molecule) pill or a quarterly administered oligonucleotide therapeutic like RNA Editing would be preferable.

 

In Eli Lilly’s words: ‘“We have been impressed with the progress to date with our partners at ProQR and have conviction that RNA editing can be an important alternative to other more permanent therapies.”

 

For other targets, a biallelic modification may not be tolerated by the cell.  It is for example hotly debated whether huntingtin in Huntington’s Disease should be fully ablated or whether residual huntingtin activity is important for safety reasons.

Short oligo-mediated RNA Editing is the way

It is no coincidence that GSK and Eli Lilly have partnered with the leading ADAR Editing companies that employ short oligonucleotides to both recognize target RNA and recruit endogenous ADARs.  In the earlier days of RNA Editing, a longer editing oligonucleotide expressed from DNA along with ADAR co-expression was predominantly practiced.  However, this approach not only suffers from the challenge of having to deliver larger cargos to target cells, ADAR overexpression is associated with widespread, likely intolerably high off-targeting. 

Clearly, Roche should have known about these fundamental challenges in 2021 when it sealed its collaboration with DNA-directed ADAR player Shape Therapeutics.  Roche must feel the intended approaches it is intending the technology for justify such delivery and would expect the collaboration to focus on reducing the level of off-targeting.

Eli Lilly and ProQR partnership

In September this year, when I got finally convinced to look more into the potential of ADAR RNA Editing, I could not believe how well positioned and cheap ProQR was:

ProQR had stumbled across an oligo-mediated method to achieve targeted RNA Editing about 10 years ago.  At the time I was extremely critical of the company because they pursued a form of mRNA repair (for cystic fibrosis) that in my book as an RNA molecular biologist did not exist.

Predictably, that project failed and I can imagine that failure and resulting skepticism of the technology led the company to explore other methods of repairing mRNA.  They obviously stumbled across ADAR Editing when virtually nobody, except for a few DNA-directed project teams was paying attention.  This means that their IP may be close to having gatekeeper potential for oligo-directed ADAR Editing.  

Another thing that I liked about ProQR during my research was that, unlike its closest competitor, Wave Life Sciences, ProQR is now fully exclusively focusing its cash towards the platform instead of having its budget being overwhelmed by expensive clinical trials on less exciting drug development prospects.

As such I was confident that regardless of the neglect by the public markets, the pharmaceutical industry which has gotten used to the concept of Oligonucleotide Therapeutics would be attracted by the notion of piggybacking on existing oligonucleotide delivery and chemistry progress to open up unique new genetic drug target space with RNA Editing.

So after initially buying access to 5 liver and CNS-related targets for $20M in upfront cash and an equity investment of $30M for a little over $7.5 per share, Eli is paying now $60M in upfront and making a $15M equity investment at $1.6 per share for 5 more targets.  The focus this time has shifted from the liver to central and peripheral nervous system applications, and the protective variant concept was highlighted in the press release.  Lilly now owns approx. 17% of ProQR. 

Each target comes with $250M in potential development and commercialization milestones and given the early stage of the collaboration, royalties from commercial sales are capped at single digit percentages.

Another perk for ProQR is that it may access Eli Lilly oligonucleotide know-how and technology under the collaboration.  Eli Lilly has a rather long history of developing antisense and RNAi molecules.  ProQR values such external input a lot and as such partnership deals had been limited to those companies with a substantial investment in oligonucleotide therapeutics. And that Eli Lilly happens to be the partner again speaks to the apparent success of the ongoing collaboration.

ProQR stated in the conference call that Eli Lilly has an option to gain access to a final 5 targets for $50M and that the companies would be incentivized for this to happen in 2023.

But since the enterprise value (market cap minus cash on hand) of ProQR is barely $50M, why not just attempt to acquire this gem after the 6-month standstill expires this summer?  But before that will be the JP Morgan Conference in January, a biotech dating lovefest where new relationships are formed and deals are born.  Oligonucleotide powerhouses Alnylam and Ionis, or Big Pharma, this time perhaps of the European flavor would be my candidates playing interference with Eli Lilly.

GSK Partners with Wave Life Sciences for Access to RNA Editing

This week, we have seen further confirmation of the increasingly recognized value within the pharmaceutical industry of Oligonucleotide Therapeutics in general, and RNA Editing in particular.

In a landmark deal, GSK obtained an exclusive license from Wave Life Sciences to the RNA Editing industry’s lead, albeit still preclinical WVE-006 development candidate for the treatment of alpha-1-antitrypsin disease.  In addition, GSK has the right to evaluate Wave’s oligonucleotide platform (editing, splice modulation, and RNAi/ASO silencing modalities) to then advance up to 8 programs into development.

In return, Wave will receive $120M in upfront cash, another $50M in an equity investment, and the potential to earn up to $3.3B in development and commercial milestones in addition to royalties on drug sales.  Because of its more advanced stage in development, WVE-006 stands to earn relatively more in milestones ($525M) and royalties (tiered double-digit, up to the high teens).

While I view Wave doing this deal largely to feed its voracious appetite for cash to feed what I consider to be less exciting clinical work in Huntington’s (ASO knockdown) and Duchenne muscular dystrophy (exon skipping), GSK will bring its genetics-based target insights to the collaboration table so that Wave could advance up to 3 related programs that it would wholly own.

Seeing the AATD program go to GSK was a disappointment to me at first.  Ultimately, I thought that this program would end up shouldering the weight of Wave’s market cap as the company’s lead program once the current clinical pipeline will meet its expected fate.  However, during the discussion of the deal the company’s CEO Paul Bolno made it clear that not only is GSK much better suited to advance ‘006 especially with regards to its lung-related endpoints, it is RNA Editing and gene upregulation that Wave considers the most valuable elements of its PRISM oligonucleotide platform and that it wants to maintain control over.

Gene upregulation can be achieved by either masking destabilizing sequences in an (m)RNA by antisense oligonucleotide, or by using RNA Editing to disrupt those or slightly change the protein to make it more stable.

After the 2021 deals between Shape Therapeutics andRoche (neuroscience, DNA-directed RNA Editing) and ProQR and Eli Lilly, this marks the third such Big Pharma deal in the ADAR sector.  It is reminiscent of the 2004-5 phase when Big Pharma started to take note of RNAi through a few measured investments.  

Expect the noise and excitement to grow over 2023 as RNA Editing approaches the clinic.  But unlike RNAi, a lot of delivery work has already been undertaken so that the trajectory of RNA Editing should be smoother from a technology point of view.  Only yesterday, Avidity Biosciences reported on the  expansion of the targetable tissue universe to the muscle and Arrowhead Pharmaceuticals is about to report important data on targeting RNAi to the lung.

Big Pharma Investments in RNA Editing

When it comes to new platform technologies, investors generally like to see their belief validated by large pharmaceutical companies.  In addition to confirming the soundness of the scientific approach, in times when access to capital is constrained, such partnerships also provide an important financing source.

In RNA Editing, Venture Capital certainly has taken the charge (and risk) by investing close to $600M in Series As and Bs spread between Korro Bio, Shape Therapeutics, EdiGene and ADARx (the last two are not pure-plays) largely in 2020-1.  There have, however, been two notable Big Pharma deals that materialized in the second half of 2021.

 

Shape Therapeutics-Roche

In August 2021, Shape Therapeutics announced its first Big Pharma partnership.  Shape apparently has been working on the DNA-directed expression of editing RNAs harnessing endogenous ADARs, especially in the CNS.  Their favourite delivery vehicle is AAV viral delivery.

It is an interesting approach, since despite of going through the trouble of gene therapy-type delivery, they choose not to bring exogenous ADARs along for the ride.  This makes sense since overexpression of ADARs is linked to widespread off-targeting and the molecular size of ADAR may be a vector capacity issue, too.  As it would have involved essentially naturally occurring ADARs (plus/minus a few optimizing mutations), the cost in terms of immunogenicity though may have been tolerable.  This is in stark contrast to genome editing technologies like CRISPR where, because of delivery in the CNS, you would likely have to deal with the extended expression of entirely foreign proteins.

Shape and Roche will tackle a number of neuronal diseases together, likely Alzheimer’s, Parkinson’s and more rare indications like Rett Syndrome.  Of note, Roche has suffered a major setback in oligonucleotide-based neurodegenerative drug development when efficacy and tox issues derailed a late-stage Huntington’s disease drug candidate based on the intrathecal administration of phosphorothioate antisense molecules.  So for them opting for AAV-based expression of targeting RNAs is worth taking note of.

Rett Syndrome is a truly intriguing indication highlighting a few of the unique advantages of RNA Editing.  Rett Syndrome affects ~1 in 10-15k female births.  It is a severe, early onset neurodevelopmental disorder caused by too little MeCP2 expression due to mostly spontaneous (as opposed to inherited) mutations.  Nevertheless, persons suffering from this X-linked gene condition can still live into their 40s and 50s- with severe disabilities. There are no drugs approved specifically addressing Rett Syndrome. 

Rett Syndrome would seem like an ideal candidate for the development of gene therapy.  What makes, however, gene therapy particularly challenging in this setting is that while too little of the master epigenetic regulator that MeCP2 is gives you Rett Syndrome, too much of it is neurotoxic.  Add X chromosome inactivation mosaicism into the mix and the therapeutic window of MeCP2 expression narrows dramatically:

for each (neuronal) cell just enough to give you MeCP2 function, but not more, certainly not >2x normal MeCP2 expression.

As a technology that does not change the rate of gene transcription, RNA Editing is ideally suited for Rett Syndrome and it is estimated that 40-50% of cases can be addressed by the technology.  The downside is that in order to address all of those mutations, similar to Duchenne’s and exon skipping, a number of RNA editing molecules would have to be developed.

 

ProQR-Eli Lilly

A month following the Shape deal, ProQR announced a partnership with Eli Lilly for up to 5 targets in the liver and CNS. This was accompanied by a $20M upfront consideration and a $30M equity investment.

Unlike Shape, ProQR (pronounced ‘Procure’) is pursuing a more traditional approach to drug development in the form of synthetic oligonucleotides for A-to-I editing.  Eli Lilly has shown great commitment to RNA Therapeutics for a while now with for example two RNAi compounds licensed from Dicerna (now part of Novo Nordisk) in clinical development for two cardiometabolic indications and a recent whopping $700M investment into a Genetic Medicine research site for RNA- and DNA-based drug development.  In the CNS, Eli Lilly will be interested in applying the new platform to the usual suspects including Alzheimer’s and pain.

 

As RNA Editing is moving into the clinic (Wave Life Sciences, alpha-1-antitrypsin) and more people hear about the platform and come up with great ideas of where to apply it, but also as oligonucleotide therapeutics more and more becomes part of the mainstream pharma mindset, I expect additional Big Pharma deals to materialize soon.

RNAi is the Future of Cardiovascular Disease

At least, this is what Big Pharma and Biotech is saying right now following deals between pure-play RNAi companies Arrowhead Pharmaceuticals and Dicerna with Amgen and Eli Lilly, respectively, and the sale of The Medicines Company with its lead PCSK9 RNAi asset really being only a matter of timing.  Besides its new relationship with Eli Lilly announced yesterday, Dicerna has an ongoin CVD-related NASH/NAFLD collaboration with Boehringer-Ingelheim.  In addition, Wave Life Sciences and Akcea, the commercial Ionis spin-out, have been pursuing cardiovascular targets along with Pfizer and Novartis, respectively, using the competitive RNaseH antisense gene knockdown technology.

Drugging the undruggable

Part of the attraction of RNAi for CVD for the pharmaceutical industry is because the targets that come from large genetic studies (e.g. ApoCIII, Apo(a), ANGPTL3) based on chance alone are not readily druggable.  To make matters worse, amorphous lipid macromolecular aggregates are particularly difficult to target with either small molecules or antibodies.

Infrequent dosing

What a difference 10 years can make.  When Protiva (now Arbutus) was one of the first to enter a systemically administered RNAi therapeutic against LDLc-related ApoB into the clinic a decade ago, it often found itself ridiculed for using RNAi in such an indication.  Systemic RNAi back then required relatively frequent (1-3 weeks) intravenous administration which would make it an unlikely modality for widespread diseases that ideally require decade-long preventive treatment strategies.

Fast-forward to the present and now we have subcutaneously delivered RNAi with potential dosing frequencies of up to once-a-year as evidenced by the lead candidate of this crop, phase III asset Inclisiran by The Medicines Company.  If the remarkable safety profile holds up following about 2000 patient years of clinical experience, such a drug should be very widely prescribed, not least because it should enjoy great adherence, one of the major impediments of treatment success in cardiovascular disease.   

Undoubtedly, it has been the Inclisiran performance so far that has attracted the attention of players like Eli Lilly and Amgen, the latter of which, of course, should know particularly well about the competitive threat from RNAi having an antibody-based PCSK9 agent on the market (Repatha).  Beyond the upcoming slew of phase III read-outs with Inclisiran, it will equally be interesting to see the types of new targets being pursued and the clinical validation of targets like Apo(a) by the antisense competition.