RNAi Therapeutics Portfolio Update: Sell Targeted Genetics, Buy Benitec

As I intend to manage the RNAi Therapeutics portfolio more aggressively for performance rather than being more of a representation of the state of RNAi Therapeutics investments, I have decided to take advantage of yesterday’s strength of Targeted Genetics on news that it completed its asset sale to Genzyme. Despite exciting results from their ocular Leber’s Congenital Amaurosis program and what this may imply for the use of AAV in ocular RNAi Therapeutics, at this point there is too little evidence that RNAi Therapeutics will play an important role in the foreseeable future of Targeted Genetics to justify its place in the portfolio, especially in light of almost non-existent active research and development and talent outflow.

The proceeds will be re-invested in Benitec as there are signs that this company could emerge as the only proper surviving DNA-directed RNAi Therapeutics player. News from last week that Pfizer will continue to develop a HCV ddRNAi Therapeutics in which Benitec has a significant stake and a recent patent grant for an hairpin with a long loop are very encouraging.

Disclaimer: Investments in RNAi Therapeutics are highly risky and not suited for most people.The purpose of the blog and model portfolio is to convey a sense of the dynamics in the field and is NOT an endorsement for making related investments. I also have financial interests in some of the companies included in the portfolio. I do not, however, have short positions in any of those.

Run-Down of Companies in the RNAi Therapeutics Portfolio

Alnylam: As the bellwether of RNAi Therapeutics due to its IP position, maturing pipeline, strong balance sheet and a generally broad outlook on RNAi Therapeutics, a must for those (institutional) investors with significant funds to invest in the RNA Therapeutics space. Data from Alnylam’s Huntington’s Disease and RSV programs suggest that they have potential on their own, independent of how they contribute to the learning of RNAi for CNS and lung disorders in general. Surely, the hiring pattern of Big Pharma argues that the perception of RNAi as a therapeutic modality has not gone out of fashion there, immediately adding potential licensees to Alnylam’s leading RNAi trigger portfolio.

However, as it is delivery that potential licensees and investors are increasingly paying attention to and even cash-rich Big Pharma/Biotech will question whether it should spend $300M for an RNAi trigger license now that there have been a few decisions that did not go in Alnylam’s favor, I am not sure whether we will see a simple pre-packaged RNAi trigger platform deal. Rather, such IP access may be packaged with access to Alnylam’s know-how on the delivery, chemistry, and safety of RNAi Therapeutics, somewhat reminiscent of the Roche deal and the Kulmbach component. To set up such deals may take longer, but ultimately provide more value not only for the licensee, but also for Alnylam. Certainly, positive SNALP clinical data should prove as a catalyst for these negotiations and the stock.

Tekmira: If you did not know already, my favorite RNAi Therapeutics investment right now. Pioneered the, in my opinion, most advanced systemic RNAi delivery technology, SNALP, which renders the Canadian $50M market cap company fully exposed to the major value drivers in the space near- to mid-term. The well validated ability to deliver oligonucleotides to the liver with SNALP will make Tekmira not only an attractive collaborator and acquisition target in RNAi Therapeutics, but should offer it new business opportunities outside the traditional siRNA structure. This includes various forms of microRNA mimics and inhibitors, immunostimulatory oligonucleotides, and oligos for targets based on emerging non-coding RNA pathways or other knockdown mechanisms. Mir-122 inhibition with SNALP may be an interesting pharmacologic alternative to the naked LNA-anti-miR122 by Santaris now in late phase I studies. Demonstrating the utility of SNALP outside the liver, such as for solid cancers and cells of the immune system (maybe by using targeted delivery) could further increase the perceived value of this conservatively managed company. With about two years’ worth of burn in a relatively good financial position.

I should temper my enthusiasm, however, as there are no sure things in biotech and the first use of SNALP in Man may well yield some unpleasant surprises and could dramatically change the outlook for the company. Similarly, it needs to think ahead about how to access a broader investor audience outside of the Canadian market as its own pipeline is growing in size and capital demand. A good bet nevertheless.

Benitec: Faces an uphill battle with regards to their core DNA-directed RNAi patent, essentially pitting it against mighty Fire-Mello. However, as time progresses and the ’099 Graham patent not getting any younger, I’m starting to have doubts as to how important this patent will prove to be. Other patents assigned to Benitec, the HIV programs, and potentially the Biomic collaboration may prove to be of more immediate practical value to the company. What is needed, of course, is a re-capitalization of the company.

Targeted Genetics: This cat has 8 lives. I had been quite confused that after almost everything scientific and clinical was going in Targeted Genetics’ favor, the company was rapidly approaching bankruptcy. Society and the investment world are not always fair, which is a warning to those investing just according to scientific principles. Now, Genzyme has come to the rescue, but it remains to be seen how committed the company is to its RNAi pipeline. It would make sense for RNAi to be part of a company focusing on diseases of the eye (and CNS) for which AAV and lentiviral gene therapies currently have most promise (the eye as the liver of DNA-directed RNAi).

RXi Pharmaceuticals: Experienced management and scientific team, access to Tuschl I and preferential treatment by the state of Massachusetts, yet for some reason very little drive towards the clinic and financially challenged. Instead of a clinical pipeline, a pipeline of ‘interesting’ RNAi trigger and delivery approaches. I’m still not sure about what their rights to Tuschl I are that have recently been characterized as ‘limited’ in scope. This, however, and the Massachusetts/Mello connection are probably the biggest draws for the stock. Still, without being able to offer complementary practical know-how I would think Big Pharma is not too anxious to access RXi as a partner.

Silence Therapeutics: Similar to RXi Pharmaceuticals, stands to greatly benefit depending on the messiness of the Tuschl patent outcomes where Silence’s ability to operate in the 21-23nucleotide space is at stake. Also reasonably successful in battling the patent that most likely imposes most constraints on the company, namely Kreutzer-Limmer. While nobody would doubt Alnylam’s freedom-to-operate (however questions have been raised as to the degree of being able to exclude), my fundamental question about Silence Therapeutics is whether what may be a patent work-around also makes for the best scientific approach. Their underlying patent application is based on quite limited data, so I have yet to be convinced of any real generally applicable scientific advantage of the Atu-RNAi design (nevermind, at least in terms of IP, my opinion does not matter much since the European and US patent offices appear to concur with Silence). Things have been looking up recently for the company and its Atu-027 program for advanced solid cancers has started phase I dosing. This program aims at silencing the PKN3 kinase in the endothelia of solid tumors which apparently inhibits metastatic spread through reduced lymphangiogenesis. An interesting approach towards RNAi cancer therapy and has been described in a detailed company publication late last year that provided reasonable support for bona fide in vivo gene knockdown using lipoplex delivery (Aleku et al., 2008). One interesting point I found in that publication was that in cynomolgous monkeys, the circulation time of the particles was greatly extended to what they found in rodents. This can only be a good thing for the prospect of lipid-based nanoparticles.

mdRNA: Together with Targeted Genetics, another unlikely survivor from the financial crisis coming from Seattle. Two deals with Big Pharma, one on delivery (Novartis), and one on siRNA structure (Roche), early this year contained enough upfront to give the company another couple of months to get itself on sounder footing. Similar to Silence Therapeutics, their main delivery approach consists of essentially the same chemistries as contained in SNALP and apparently lends itself to targeted delivery (which, however, is not a unique property of their technology). Also, I would be cautious about claims that putting UNA-modified nucleotides in the 3’ overhang of siRNAs would liberate them from claims in Tuschl II. UNA modifications appear to be a viable option for the siRNA modification toolbox, but I would be cautious in how far they are uniquely advantageous over other chemistries at last according to an excellent, comprehensive siRNA modification screen as published by Bramsen et al. this year. In any case, the fresh, and apparently well-connected management team can be congratulated for rescuing the company, and the scientific team for their skills in being able to rapidly adopt oligonucleotide modification and liposomal delivery skills at least to the degree that Big Pharma is curious enough to look under their hood. I would like to speculate that if RXi e.g. had built such practical skills in-house, we may have seen some deals that would not have been as dilutive as recent efforts to raise capital.

Rosetta Genomics: After having apparently staked their future on a blood-based test for colorectal cancer screening, it has reported that these plans have been slightly delayed due to technical issues. The poster on the colorectal cancer-related microRNAs in blood that had been presented previously certainly showed initial proof-of-concept for blood-based microRNA diagnostics, but more robust detection methods are needed in order to make such tests a commercial reality. It is debatable whether the one-shot strategy was a wise one, instead of churning out a series of tissue-based Dx albeit with a much smaller target market. If blockbuster products like a screening test for colorectal cancer were a primary business goal, then an alternative route may be to collaborate on Rx-Dx combinations which however are much onerous to develop than home-brew Dx and may require a partner like Roche. There may be a number of regulatory and health care reform issues that could affect the future prospects of being able to sell and get reimbursements for home-brew Dx. On a positive note, according to my literature, I have stumbled across enough references by Big Pharma on the potentially unique utilities of microRNA Dx that I believe the concept has well arrived in the minds of important constituencies for Rosetta. A pick-up in sales of their first products would also be welcome by investors. Due to a number of synergies, companies like Regulus may also be a good home for Rosetta Genomics.

ISIS Pharmaceuticals: There is certainly a flood of ISIS-related antisense in various stages of clinical development, some with interesting results indicating efficacy. Mipomersen meanwhile blazes the trail for ApoB as a target for hypercholesterolemia, and assuming it will confirm phase II results, I am curious about how much of the patient audience Genzyme is able to capture. This should also have implications for the financial potential of follow-on ApoB therapeutics. ISIS also was successful in monetizing their IP for ssRNAi with almost $21M (! a high number considering the stage of ssRNAi and other deals that Alnylam has done in the past) in upfront and near-term payments from Alnylam, while still being able to develop ssRNAi Therapeutics itself. OK, you know that I have some problems with how ISIS likes to interpret RNAi as an antisense technology, so please allow me this comment: if RNAi already was a single-stranded antisense technology, how is it then possible to claim ssRNAi as a separate technology without running afoul double-patenting rules? Anyway, I acknowledge that ISIS is on a good way of becoming a sustainable, profitable oligotherapeutics company and probably should be part of a diversified RNA Therapeutics portfolio.

Oxford Biomedica: Despite disappointing cancer vaccine results causing partner Sanofi-Aventis to give up on Trovax, Oxford Biomedica must have been able to impress Sanofi-Aventis with their core leniviral delivery technology (note: Trovax is not a lentiviral technology). Sanofi-Aventis thus seems to agree that lentiviral delivery has significant potential for applications of the CNS, including the eye. However, as I hear little about Oxford Biomedica using its IP and know-how in RNAi, I will consider replacing it with companies like Genesis R&D in my next portfolio update. There is certainly a lot of DNA-directed RNAi Therapeutics technology and IP looking for a well-funded home.

[Please note that the following is a run-down of my own impressions of companies in the portfolio and links are not necessarily provided for all major assertions. Please use the comments section if you believe that there are factual inaccuracies]

HBV Collaboration between Benitec and Biomics Indicates Shift in DNA-directed RNAi Therapeutics towards Asia

My four years as a post-doc here in Stanford, during which my advisor Mark Kay served a term as the President of the American Society for Gene Therapy, taught me that drug development is as much about politics and perceptions as it is about the science.

This is particularly true when it comes to gene therapy and it is no surprise that despite pre-clinical data that, taken together, often surpassed that obtained with synthetic siRNAs, DNA-directed RNAi (ddRNAi) Therapeutics is struggling for funding in the corporate world. Targeted Genetics is a prominent example of a gene therapy company that despite much scientific (AAV-delivered RNAi data for Huntington’s Disease) and clinical progress (saving patients from blindness) is now facing bankruptcy. The reason? The regrettable death of a patient in a Targeted Genetics-sponsored clinical trial that has now been linked by experts to a immuno-suppressive monoclonal antibody the trial participant had been taking. The case was taken to the level of an NIH RAC (recombinant advisory committee) hearing, and synthetic oligonucleotide therapeutics companies are quite right in being scared that they, too, may be subject to RAC review in the future. I wonder what the outcome was from a recent meeting to discuss just this matter.

I am aware that gene therapy carries risks. Western society, however, needlessly deprives itself of potentially life-saving treatments when it chooses to suppress the entire field following isolated, albeit very unfortunate cases of adverse events linked to gene therapy. Then there are the so called ethical concerns of changing the human genome by introducing DNA into our cells as if sick patients had the luxury of worrying about this. By contrast, news of drug-related deaths in clinical trials of small molecules, many of which unlike the commonly used viral vectors have never been introduced into the human body, hardly ever reaches the wider public.

This week’s memorandum of understanding between Australia’s Benitec and China’s Biomics to collaborate on a DNA-directed RNAi therapeutic for chronic hepatitis B virus (HBV) infection may be a sign that the near to mid-term future for ddRNAi may instead lie in the economically vibrant parts of Asia. Here, practicality and an eagerness to adopt innovation means that gene therapies fall on much more fertile ground, including funding. Just last year, Benitec spin-off Tacere signed a similar deal with Japan’s Oncolys for the development of an ddRNAi Therapeutics for another viral disease of the liver, hepatitis C virus (HCV) infection.

Funding and access to R&D may have been financially struggling Benitec’s main motivation to reach out to Biomics. Also, Biomics provides Benitec with a foothold in a country that faces end-stage liver failures and hepatocellular carcinoma caused by chronic HBV that are of epidemic proportions. On the other hand, while Biomics, a biotech company with locations also in the US and that, with the help from some former Nastech employees, strives to transform itself from a mainly RNAi research-reagent company into an RNAi Therapeutics developer, certainly appears to enjoy better economic health and brings with it RNAi know-how, ideally it would have complemented Benitec ddRNAi patent estate and insights into shRNA design by providing an advanced delivery technology, maybe AAV. Although it is possible that they have such a technology, this is not apparent from the company's website which describes a range of delivery modalities that they are apparently working on.

For RNAi Therapeutics in general, Asia not only provides a growing market, but also an enormous R&D opportunity with many highly trained, detail-oriented chemists and increasingly also biologists to draw from. I am often surprised for example how many chemistry- and gene therapy-based publications on RNAi delivery come out of a country like Korea which is relatively minor in terms of biomedical research budgets, yet is little capitalized on due to lack of risk capital there. As for the IP situation in a country like China, I believe that once it becomes relevant, that is in maybe 7-15 years, China should be more aligned in this regard with the rest of the world and it would be a mistake not to make an effort of protecting your RNAi Therapeutics IP there, too.

HBV played a prominent role in the history of RNAi Therapeutics. Both synthetic (SNALP RNAi) and DNA-directed approaches proved successful in repressing HBV replication in mouse models. Since suppression of viral replication is a well-accepted measure for predicting HBV treatment success, RNAi Therapeutics should very well be able to complement current interferon-alpha and nucleoside analogue-based standard of care that result in unsatisfactory treatment success rates of only 20-30%. Due to the nature of the disease, however, it is unclear to me whether synthetic siRNAi or ddRNAi would be preferable. However, since treatment success by nucleoside replication inhibitors requires long-term treatment, probably due to the persistence of viral DNA in hepatocytes, a gene therapy approach has certainly theoretical justifications.

And finally, following Nucleonic’s fall and the situation around Targeted Genetics and Benitec, it is time for the entire RNAi Therapeutics field to think about creating a strong ddRNAi Therapeutic company before much of the IP is squandered. Consolidation of these efforts into a re-capitalized Benitec (disclosure: no current investments) may be one, although not the only option.

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.

Update on AAV-based RNAi for Huntington’s Disease: Time to Move on from U6-shRNAs?

Huntington’s disease (HD) is a dominant genetic disease caused by a triplett expansion in one of the two copies of the huntingtin (htt) gene. So far there is no treatment that appropriately addresses this disease. As with other dominant diseases, suppressing the insulting gene copy by RNAi should bring a therapeutic benefit, hopefully even delay its progression. A recent paper from Beverly Davidson’s group in Iowa reports on their latest experience in developing an DNA-directed RNAi Therapeutic for the treatment of Huntington’s disease [HD; Mc Bride et al (2008): PNAS 105:5868).

Previous studies from the Davidson lab showed that AAV-delivered shRNAs were able to knockdown target genes in mouse brains and subsequently improve the behavioral deficits and pathology of polyglutamine-repeat diseases such as Huntington’s. These promising results led to a collaboration with the AAV gene therapy company Targeted Genetics and Sirna Therapeutics (pre-Merck acquisition) with the goal of advancing an AAV-based RNAi Therapeutic for HD into the clinic.

Their prior work on Huntington’s was based on a transgenic mouse model which expressed a human fragment of the huntingtin gene containing a triplet expansion. However, as the shRNAs in those studies were directed specifically against the human htt gene, but left the mice’s own huntingtin gene copies untargeted, the present studies were designed to evaluate the safety of knocking down all the huntingtin gene copies in a mouse. This is important for the development of an RNAi Therapeutic for HD in man since targeting a small RNA towards the highly structured triplet expansion is unlikely to be effective, and since the mutant htt allele is not associated with a common polymorphism in the htt mRNA which would facilitate a discrimination between mutant and wildtype huntingtin. This issue is also of particular concern since the huntingtin gene is considered to be essential during early mammalian development and little is known about its requirement in the adult brain.

For that reason, McBride and coworkers chose a different mouse model where a triplet expansion had been inserted into one of the existing mouse htt alleles which has the added advantage that it also preserves the natural expression pattern of htt.

Encouragingly, a 50-60% knockdown of mouse htt was observed over a period of 4 months without any obvious target-specific side-effects. Transduction of this particular AAV administered to the striatum, a region in the brain particularly affected in HD, was fairly broad and specific for neurons, the cell type critically affected during HD. Given that not every neuron was transduced and that non-neuronal cells may also express some htt, this 50-60% knockdown implies that very efficient knockdown of htt can be achieved in a subset of neurons and (based on previous studies) should be therapeutic and safe. Longer term studies are ongoing.

The unpleasant surprise, however, was that as previously reported by a number of other groups, some of the tested U6-driven shRNAs were toxic. This is likely caused by the very high levels of small hairpin RNAs from the strong U6 promoter which may jam up the endogenous microRNA gene regulation which is harnessed by RNAi. Whether it is just the level of the hairpins or also the specific biogenesis of the shRNAs, which only resemble microRNA precursors, but actually undergo a slightly different biogenesis involving an unusual set of enzymes and RNA structures, is an open question. In any case, to make a long story short, it is probably advisable that future DNA-directed RNAi Therapeutics programs avoid U6-driven shRNAs altogether and instead use other Pol III-driven systems or Pol II promoters. The latter have the added safety advantage as they can be chosen to be tissue specific so as to minimize side-effects in non-target cells. Since efficient RNAi does not require high small RNA levels, vector transduction and long-term expression should in many applications be more important considerations than mere promoter strength.

Whether it is advisable to go ahead with the particular U6-shRNA that was found to be non-toxic and efficient in knockdown, or instead go back and re-design all of the vectors and repeat 2-3 years of pre-clinical studies, must be a tough decision to make, a situation similar to that faced by other RNAi Therapeutics programs currently in development given the steep learning curve the field is still undergoing.

It is maybe for these reasons that Merck’s subsidiary Sirna Therapeutics decided not to continue with this program and fully hand over the commercial rights to Targeted Genetics. In some way, the AAV-RNAi program always stood out as being an awkward fit for Sirna Therapeutics as it seemed at odds with their siRNA modification focus. Maybe at the time there were not that many advanced RNAi Therapeutics programs to chose from so that Dr. Davidson’s studies seemed like an opportunity to fill the early pipeline. Given the unpredictability of early studies and the number of RNAi Therapeutics programs under evaluation, it is best to let pipeline decisions be driven not by history, but by where the science is progressing swiftest. AAV RNAi for HD still has much promise and the path forward fairly obvious, but as many things in drug development it will be a long and arduous one.

Alnylam Granted Expanded Kreutzer-Limmer Patent Series in Germany, Signals Its Intention to Enforce Dominant IP Position

Yesterday, Alnylam announced issuance of the new Kreutzer-Limmer patent series in Germany, covering double-stranded RNAs of 15 to 49 base-pairs for gene silencing in mammals. This is quite significant and Alnylam’s accompanying press release made it clear that this should be understood as a watershed event, sending a stern signal to companies like Silence Therapeutics, RXi, Nastech, Dicerna and others that thought to have identified Kreutzer-Limmer as a potential loop-hole in Alnylam’s IP strategy by employing double-stranded RNAs (dsRNAs) longer than Tuschl’s 19-23 base-pair siRNAs and/or making them blunt-ended to emphasize an apparent difference to the classical Tuschl siRNA that features 3’ overhangs. These patent workaround efforts seemed to bear first fruits last year when the original Kreutzer-Limmer I patent series was restricted by the European Patent Office to covering siRNAs between 15 and 21 base-pairs in length (opposing parties: Sirna [now Merck], AstraZeneca PLC, Atugen [now Silence Therapeutics], Janssen Pharmaceutica N.V., and Sanofi-Aventis).

From a partnering perspective, this seemingly small development could have important implications for striking the next major deal, since which company would feel comfortable paying hundreds of millions of dollars for a technology license that appears to be circumventable.

Kreutzer-Limmer was Alnylam’s first line of defense against such blunt-end siRNAs and siRNA precursors longer than 23 base-pairs (aka Dicer substrates) given that, depending on the explicitly granted range of double-stranded RNA lengths, Kreutzer-Limmer would directly cover such structures. Its short-coming, however, is that in 1999, Kreutzer and Limmer did not understand well how these dsRNAs exactly caused gene silencing, which is what Tuschl II is famous for. While I consider Tuschl II, in addition to the ubiquitous Fire-Mello patent, as the fundamental patent series for therapeutic RNAi, due to its excruciatingly detailed explanation of what it takes to effect efficient RNAi in mammalian cells, it is the early priority date of Kreutzer-Limmer’s invention that makes this patent so potentially valuable and dangerous, and explains why Alnylam saw it necessary to remove any uncertainty and obtain exclusive access to it by acquiring Ribopharma AG in 2003.

I found it curious that a number of companies have chosen to take licenses to Kreutzer-Limmer, but not Tuschl II. While that may be interpreted as reflecting the fundamental importance of Kreutzer-Limmer, it was as if by pursuing this strategy, it is almost made implicit that as soon as the scientifically less detailed Kreutzer-Limmer series were curtailed in scope due to heavy opposition, the field for newly patentable RNAi inducers would be wide open. In this case, Alnylam would probably have argued in a second line of defense that, although not spelt out letter by letter, Tuschl II would also cover Dicer-substrate and other RNAi inducers that obviously function either as siRNA precursors (= pro-drugs) or are derived from it, for example 3-stranded siRNAs (meroduplexes). This argument becomes particularly relevant in the case of a weakened Kreutzer-Limmer as this ironically would directly strengthen Tuschl II. In this way, Alnylam holds all the cards and may play them as they wish.

Silence Therapeutics, in particular, will not be very happy with the outcome in Germany, not only because it and others, myself included (to be explained in my next posting), sees itself as a major force in RNAi in Europe, but also since their blunt-end, modified dsRNA is not only the size of the classical Tuschl siRNA, but with Kreutzer-Limmer any gene silencing dsRNA, modified or unmodified, is covered. Silence Therapeutics’ approach could be likened to first taking an invention (here: Tuschl’s siRNAs), then impair its function (here: by flushing the ends blunt), and finally rescue some of the original function by adding further changes (here: by introducing a pattern of RNA modifications). Certainly original, in its own complicated way.

I should disclose here that I largely agree with Alnylam’s view of their IP position and have invested in this company, but at this time I particularly felt like speaking out on all these confusing claims about proprietary RNAi compositions that threatened to hurt investments in RNAi Therapeutics. The acquisition of Sirna Therapeutics by Merck was certainly triggered in part by Sirna’s IP claims which now appear to be weaker than originally hoped for by the buyer and has escalated into a costly and time-consuming mess for a number of companies. In the same vein, I should also emphasize that I am likewise invested in companies that I have strongly criticized in this and other contexts and that I am therefore not wed to any company’s view of the space. It is in this spirit that I hope that Alnylam does not use their IP position to block the evaluation of RNAi inducers that differ from the classical siRNA design in more than just a modification here or an overhang there. Financial incentives should therefore be created for investments in such start-ups without requiring a $1 billion upfront license fee.

PS: In my next posting, barring further developments, I would like to provide the promised company-by-company overview.


Two additional recent developments that I would like to briefly comment on:

1) The FDA removed the clinical hold on Targeted Genetics’ rheumatoid arthritis AAV gene therapy that had been suspected to have played a role in the unfortunate death of a clinical trial participant. I am relieved by this judgment since there was just no good scientific evidence that the gene therapy caused or was associated with the fatality. AAV vectors are currently probably the most potent method to deliver RNAi in vivo and there are a number of indications where AAV-RNAi may be years ahead of synthetic siRNA strategies, and where the benefits outweigh the real risks of gene therapies. One such indication would be AAV-RNAi for treating Huntington’s Disease, where published and orally presented data so far suggests superiority of the AAV approach compared to siRNAs and that Targeted Genetics should now be in a better position to pursue in collaboration with Sirna Therapeutics/Merck and Bev Davidson’s group in Iowa.

2) At a recent symposium on RNAi and its targeting in Sonoma, California, Ian MacLachlan from Protiva presented more data on the efficacy of SNALP-siRNA delivery in non-human primates. According to the abstract, more than 90% gene silencing of ApoB, with silencing lasting for several weeks, could be achieved by single-dose intravenous administration. These are impressive numbers and the task is now to minimize the toxicities associated with cationic liposomes. I am quite impressed by Protiva’s past work not only on RNAi delivery (in collaboration with Sirna Therapeutics and Alnylam), but also on dissecting the causes for the toxicity, and would expect them to be the first to find a solution for this problem. Unfortunately, the ownership and know-how of SNALP delivery technology is highly contested and I can only urge the involved parties to consider working together on this promising technology. During a recent conference call by Tekmira it was apparent that a lack of suitable scientists caused delays in the development of SNALP technology. I would even venture as far and propose that Alnylam’s delays on their systemic delivery programs have probably cost the company more in terms of reagent, labor, time and market cap than the combined market cap of Tekmira and Protiva.