Sunday, January 21, 2018

Say 'No' to Rosetta Genomics Take-Under by Genoptix

The first wave of efforts to commercialize microRNAs, the close molecular cousin to RNAi, either for diagnostic or therapeutic purposes is about to fizzle out.  With Regulus Therapeutics getting a last chance to prove its worth with clinical data on its Alport's microRNA therapeutic program pending, today's post symbolizes the end of commercial efforts to establish microRNAs as a broadly applied diagnostic platform.  

Rosetta Genomics Surrenders Despite Promising Products

Last month, the Board of Rosetta Genomics, the main torch-bearer of microRNA diagnostics for close to two decades, announced that it was recommending a take-under by Genoptix.  Genoptix is a larger molecular diagnostics player for which Novartis had paid $470M in 2011 and then was acquired by Ampersand last year.  Under the proposed terms as detailed in this proxy statement, the Board has been recommending shareholders to accept what constituted at the time of the announcement a new all-time low price of between $0.6-0.7 per share, that is  ~1/2000, 1/100, or 1/10 of its value 10, 5, and 1 year ago, respectively. 

Please somebody call the Guiness Books of Records.  

Unsurprisingly, instead of admitting their commercial and financial ineptitude, this surrender is blamed on a financial market that would provide no more support microcap molecular diagnostic companies.

Well, if the company had executed properly, it wouldn’t be a microcap company, would it?  And last time I checked, complex molecular black-box diagnostics was the way the industry was going, although I admit that the Wild West culture of this industry with hardly any market entry barriers has been harmful to the industry and burned many an investor. 

There have been at least two products by Rosetta that I thought had real commercial potential.  The first one was a test to determine the tissue origin of a cancer to better inform treatment (RosettaGX Cancer Origin).  Given the trend towards drug regimen that are increasingly aimed at the molecular changes that have occurred during oncogenesis regardless of tissue origin and immuno-oncology approaches that couldn't care any less, the medical relevance of this test might be waning.  This can happen, but doesn’t subtract from the value of quantifying microRNAs for diagnostic purposes per se.

The other test, RosettaGX Reveal, got me (and apparently Genoptix) excited enough to invest in Rosetta, in my case amounting to a ~3% stake of the company (which curiously I had no problem acquiring in a heart-beat since my bids were hit with volume).  

RosettaGX Reveal is intended to prevent the many unnecessary, and medically harmful thyroid gland surgeries performed today on nodules of uncertain cancer potential based on cytology.  The test appears to be conservatively at least as good as the currently leading test by Veracyte in this ~$350M molecular test market (of which 2/3 remain to be tapped) in terms of making a solid recommendation against performing a surgery without missing the malignant ones.  Importantly, Reveal has the advantage of not requiring fresh tissue and can thus be performed on the same cytology sample that the original indeterminate diagnosis had been made.  This is due to the remarkable stability of microRNAs, in contrast to the longer and thus more fragile mRNAs.

The test has shown solid growth since start of commercialization in early 2016, now running at roughly $1M in quarterly sales with lots more room to grow by increasing reimbursement rates (yes, the test is frequently performed without the company getting paid), tapping the 2/3 untapped market, and converting users of competing tests.

Unacceptable Terms to Holders of Ordinary Shares

The reason why I will not vote my 3% of shares in favor of the merger at the upcoming Meeting of Shareholders (note: the 3% should weigh heavier since related parties in the transaction are apparently barred from voting) is that the proposed $0.6-0.7 per share is at a 25% discount from when merger discussions began, at a time when shares were already tumbling daily to new all-time lows.

While letting shareholders feel the pain, convertible debt holders get $2.5M of the $10M pie, obviously worthless warrants get attributed $1.2M, the two key executives get a combined $0.5M good-bye present (in addition to the windfall from the warrants that they will likely be beneficiaries thereof and insurance benefits), and to add insult to injury the transaction cost of the take-under is estimated at $3.3M, about as much as ordinary shareholders would get!

So unless Genoptix sweetens its offer to at least $13.3M, meaning a decent premium and doubling of the consideration to shareholders, I would rather go down with this ship and let this Lipdub clip by Rosetta on Youtube be their lasting memory:

Sunday, January 7, 2018

Going into 2018, OligoRx Has Become Mainstream Drug Modality

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

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

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

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

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

This momentum will only pick up speed on 2018.  The year is already starting with an onslaught of drug development VC investments prominently featuring mRNA and gene-modulation startups (e.g. $270M investment in personalized/mRNA oncology Co bioNTech, and ~$100M for gene processing plays ExpansionTherapeutics and Stoke Therapeutics).
Further down the pipeline, we should see approvals and commercializations for at least 3 important oligonucleotide therapeutics drugs: Patisiran (RNAi/Alnylam) and Inotersen (RNaseH antisense/Ionis) for TTR amyloidosis in addition to Volanesorsen (RNaseH antisense/Ionis-Akcea) for lowering triglycerides.  At the same time, Sarepta will continue to walk the tightrope with their first-generation PMO splice skippers for DMD hoping for approvals of additional exons.

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

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

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

RNAi Therapeutics Stock Thoughts for 2018

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

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

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

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

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

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

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

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

Wednesday, December 13, 2017

Dicerna Exploits HBV Biology For Less Frequent RNAi Dosing

Despite recent findings by Arrowhead Pharmaceuticals suggesting that finite treatment with an RNAi medicine might be possible in the search for a (functional) cure of HBV, less frequent dosing is always a plus.  It now seems that fresh HBV entrant Dicerna may have stumbled across a way to reduce dosing frequency and at the same time uncovered an intriguing piece of HBV biology involving the mysterious HBV X protein (HBx).

Search for perfect RNAi target site uncovers important HBV biology

Gene knockdown trigger selection has become critical in a highly competitive field featuring not only Arrowhead and Dicerna, but also Arbutus, Ionis (along with partner GSK), and the Alnylam-Vir alliance in the Western World alone.  This is because ‘by rotten luck’, Arrowhead found that an RNAi trigger that was designed to hit all the HBV transcript did not take into account the absence of the target site on transcripts that derive from host chromosomally integrated HBV.    

The finding that in many patients, e-antigen negative patients in particular, most viral transcripts derive from integrated HBV, has to be considered the most important new discovery in HBV biology and  disease progression since the finding of NTCP as the viral entry receptor.

This has established the selection of a target site upstream of the integration breakpoint as the new industry standard.  Little did we know that the search of the perfect RNAi target site should yield another fundamental insight into HBV biology that could also be therapeutically valuable and provide for some important competitive differentiation for late entrant Dicerna.     

HBx-sparing RNAi trigger has dramatic impact on HBV core protein localization

When scanning the HBV genome for target sites, Dicerna found that an RNAi trigger that hits all HBV transcripts except for HBx was associated with considerably more sustained gene silencing following a single dose (>>8 weeks in a mouse model where GalNAc-RNAi is generally less long-lived compared to humans) compared to an RNAi trigger hitting all HBV transcripts without exception (~3 weeks until knockdown was considerably lessened). 

Further underlining the longevity of the effect, Arbutus’ LNP-based formulation was only able to produce 1 week of good gene silencing in the same (HDI; slide 6) mouse model.

Interestingly, this effect was correlated with striking differences in the cellular localization of the HBV core protein: when all gene products were equally targeted, core protein was predominantly in the nucleus.  By contrast, core protein was almost exclusively cytoplasmic when HBx was spared.  Since phosphorylation of the C-terminal domain is known to be important for HBx nuclear trafficking, it was speculated that HBx may bind in that region and thus mask the nuclear localization signal.  This would be useful during the late stages of a viral infection when core protein would be needed for pregenomic RNA packaging and ultimately viral release.

The reason why gene silencing would be shorter lived when core was in the nucleus is likely due to its stimulating activity on transcription from the HBV cccDNA which would increase transcript dynamics and thus more quickly dilute out the anti-HBV-loaded RNAi machinery in the cytoplasm.

Indeed, in a non-cccDNA-dependent mouse model (e.g. more reminiscent of e-antigen negative patients), this beneficial effect was not observed.  

In summary, while the mechanistic basis of the differential silencing phenomenon remains to be fully fleshed out by further experimentation, Dicerna has found a way to quite dramatically extend gene silencing and thus decrease drug administration frequency.  This is a useful competitive feature in antivirals in general where drug resistance due to missed doses is always a concern and also simply due to patient convenience.

Disclosure: long DRNA.

Monday, December 11, 2017

Gene Knockdown in Disease Involving Gene Expression Throughout Brain Reported

Today, Ionis issued a press release revelaing that their drug candidate for Huntington’s Disease was able to knock down the huntingtin target gene in a dose-dependent manner.  This is the first clinical demonstration that single-stranded phosphorothioate antisense technology cannot only engage gene targets, as had been shown in the gain-of-function approach for spinal muscular atrophy (SPINRAZA; slide 58), but that it could do so in a sufficiently robust manner so that a knockdown could be measured.

This, of course, has broad implications for the Ionis antisense platform which is similarly being developed for other RNaseH-based knockdown applications ranging from the rare and severe (e.g. ALS, spinal cerebellar ataxias) to the more common neurodegenerative diseases such as Alzheimer’s and Parkinson’s.

The reason why this feat is remarkable and a great de-risking event for the technology is that in some of the indications, the target gene is expressed and needs to be suppressed more or less throughout the brain.  Assuming Ionis didn’t take brain biopsies, but instead looked for protein expression by taking CSF samples which would +/- give you an average of target gene expression in the entire CNS (a safe assumption), the ability to assess a dose-dependent gene knockdown is a testament to the robustness of the gene knockdown.

The actual numbers, however, remain under wraps as Ionis and partner Roche (which has exercised its option to IONS-HTTRx in the wake of the data) plan to present them more formally through a publication and a conference presentation with key thought leaders in the disease present.  My guess is that peak knockdown is in the 50%+ range which Frank Bennett from Ionis has recently referred to be in the desired knockdown range.

Given that dosing in the study only lasted 3 months in this slowly progressive disease, it is unlikely that actual clinical benefits will be reported from this phase I/IIa study.  But given the so called 'huntingtin knockdown holiday phenomenon' and some remarkable comments from investigators in the study and KOLs, one cannot but hope that we’ll be in for a positive surprise.  

Wednesday, December 6, 2017

New Arrowhead Data Shows RNAi Ratting Out HBV

When Arrowhead suffered its DPC fiasco a year ago, it got a chance to re-prioritize its pipeline.  It therefore caught my attention that despite the significant theory risk that still persisted, it chose HBV as one of its lead indications.

To wit, knocking down HBV genes promised to re-awaken the host immune system thought to be exhausted in chronic HBV patients.  The HBV surface antigen (HBsAg) had been regarded to be the main culprit for this exhaustion, although other gene products are now thought to play a role, too.

Previous update suggested long road ahead

When Arrowhead left off, clinical data had shown robust HBV gene suppression (~1-2log range) when the RNAi trigger target sites were present (in treatment-naïve e-antigen positive patients).  Curiously, in e-antigen negative patients where many HBV transcripts lack the ARC-520 target sites, a modest, protracted anti-HBV response could be observed.

Unfortunately, data presented this spring at EASL suggested that long, if not chronic RNAi dosing might be necessary since viral rebounds were seen in all but one subject once ARC-520 dosing had been stopped after half a year of treatment.

Chronic dosing, if indeed it can be shown to lead to a reduction of cirrhosis, liver cancer, and death, is conceivable with a subcutaneously administered RNAi agent.  The road, however, to proving such value and broad adoption in the clinic would be harder and longer compared to demonstrating host control of the virus after a finite treatment period.

New update shows host gaining upper hand

Based on the latest data presented yesterday at HepDART, including ~8 months of additional follow-up in the same patients, this may not be the case anymore.  This is because in 50% of the subjects (in 2 out of 3 e-positive and 2 out of 5 e-negative) given ARC-520 along with polymerase inhibitor entecavir, there have been sustained anti-viral responses after the initial rebound. 

In all cases, HBsAg continued trending down until the last time-point reported, and in 3 of these 4 subjects HBsAg was approaching the limit of detection.   Intriguingly, this was accompanied by a modest spike in liver enzymes, consistent with the host immune system regaining the ability to spot and remove infected hepatocytes. 

Of note, the HBsAg declines are more robust (5.0, 3.1, 2.0, and 0.6) and faster than would be expected based on entecavir treatment alone (~0.5log per year).

Since the enzyme elevations generally followed on the heels of the viral rebound, it is possible that treatment cessation and getting HBV to come out of hiding is actually beneficial.  Nevertheless, in the one subject (patient 01-7985) where there was no viral rebound, ALT values still rose.  

Experimenting with treatment schedules will therefore be an important component of future HBV trials.

In the meantime, we can look forward to an update on the same subjects after another few months. Could it possibly be that we are witnessing  the first HBsAg clearances and host control of HBV brought about by RNAi?

Wednesday, November 29, 2017

Non-RNAi Oligonucleotide Therapeutics Stocks

In the final instalment of the stock market-focused mini-series, I will turn my attention to the non-RNAi Oligonucleotide Therapeutics sector.  With last year’s approval of EXONDYS51 (Sarepta) and SPINRAZA (Ionis/Biogen), two highly impactful exon-skipping drugs, Oligonucleotide Therapeutics has finally gained widespread acceptance as a mainstream drug modality and arguably de-risked biotech investment vehicle.

Ionis Pharmaceuticals
This is a stock where tremendous value is waiting to be unlocked.  All it takes is a change in corporate strategy.  At present, Ionis needs ~4 groundbreaking medicines for every one developed by more traditional biotech companies such as Alnylam for it to reap similar market cap appreciation.  This is because it has readily given away ownership over its drugs regardless of needs, be they financial or related to a lack of disease expertise.

A striking recent example of this is the creation of Akcea as a subsidiary tasked with the commercialization of cardiometabolic drugs discovered by Ionis.  In addition to instantly giving up 1/3 of its ownership through an IPO of Akcea at very low prices, Akcea also partnered much of its assets with Novartis, thus further diluting Ionis’ ownership.

So what should have easily been a value of $3-4B to Ionis on the eve of the approval of the first important cardiometabolic antisense drug (triglyceride lowering Volanesorsen for FCS), Ionis’ stake in Akcea now probably accounts for barely $1B of Ionis’ ~$6.5B market cap.

To add insult to injury, Ionis this summer purchased close to $100M worth of real estate related to their R&D and manufacturing operations. $100M of valuable drug development monies!  This apparently they consider a better prospective return on investment than keeping full ownership of the cardiometabolic franchise or spending a few millions to just buy the marketing muscle they keep whining about lacking.

Not all may be lost though.  There are signs that Ionis, and perhaps even the CEO (Stan Crooke) himself who had been propagating the marketing-is-evil myth to justify Ionis’ business strategy, has started to realize that they need to change their ways to keep up with the market capitalizations of peers, including organizations driven by strong platform technologies (etc Alnylam, Regeneron).  With Brett Monia assuming the role of COO and Crooke’s right hand Lynne Parshall stepping aside, we are in the midst of a change of guards in this company.  But don’t hold your breath given that Dr. Monia, as a founding member (in his mid-20s!) of Ionis, still ought to be considered a part of status quo until proven otherwise.

Inotersen as an inadvertent opportunity

Just as Ionis was looking to be locked into its royalty play model with Volanesorsen (à Akcea) and GSK-partnered Inotersen for TTR amyloidosis as the next approvals on the 2018 horizon, GSK handed back full rights to Inotersen to Ionis.  Suddenly, Ionis is in full control of a drug competing for a market currently supporting ~$10B in market capitalizations between Ionis and Alnylam.  With peak sales expectations (even without the wild-type TTR cardiomyopathy opportunity) topping $5B, this number should only grow as the commercialization phase begins.   

If Ionis is smart, they will retain most marketing rights to Inotersen as any misstep by Alnylam around its first-generation TTR drug Patisiran could provide Ionis with an unanticipated upside (as an investor, I always look for the upside compared to market expectations).  Also, learning the TTR marketing ropes now will prepare them for the battle of the respective next-gen drugs between Alnylam and Ionis as this is where the TTR game will be won in the mid-term.

Chances are that Ionis will find commercialization less daunting and even rewarding, including to the R&D staff getting closer to the patient experience.  They should also then realize that through the exposure to the patients and medical community, they will gain a better understanding of the demands on follow-on products.  Drug discovery and commercialization in the orphan era is certainly a virtuous circle and Ionis may be the last one to find out.   

Better late than never.

In the interim, look to clinical results, especially from partnered CNS franchise drugs (Huntington’s, ALS) as tradable catalysts.  With a position in IONS that is approaching the size of my largest holding (ARWR) following the recent mini-sell-off in biotech, I also speculate that as the commercialization of Inotersen approaches and the market understands the impact of the SPINRAZA loading dose issue on sales numbers, IONS should be a solid outperformer in the biotech market. 

Strong buy.

Wave Life Sciences
I consider the CNS where currently the most value is bottled up in antisense therapeutics whereas in the liver, RNAi in general holds the edge in terms of safety and convenience (long-term I believe the battle will be won based on off-targeting, one gene at a time).

Since Ionis has given up substantial rights to its CNS drugs through its broad partnership with Biogen and the next hot CNS candidate is partnered with Roche (for Huntington’s), consider Wave Life Sciences not primarily as a stereopure ASO investment, but an ASO CNS play with the company likely retaining significant commercialization rights.

Of most interest to investors should be its two early clinical-stage drug candidates specifically targeting the mutant alleles in Huntington’s disease.  Initially, I had been skeptical about the actual need for targeting mutant huntingtin specifically given that we are unlikely to see the 90%+ type knockdowns that *could* spark safety concerns if the degree of knockdown also applied to wild-type huntingtin. The observation by Ionis, however, that ASO knockdown in the various areas of the brain is uneven and that the deep brain structures thought to be most involved in Huntington’s pathology may be some of the least sensitive to ASO knockdown made me realize the potential value of the allele-specific approach.  This is because in order to drive substantial knockdowns in the deep nuclei, the corresponding drug doses might lower wild-type huntingtin to very low levels say in the cortical neurons.

Still, since the huntingtin knockdown concern remains theoretical and is largely based on animal models where huntingtin has been knocked out since around birth (please correct me if wrong), I still consider the allele-specific approach as a needlessly complicating measure.

With a healthy market cap of $1B, I feel that WVE is a very interesting ASO investment for the long-term, but that price-wise better buying opportunities could be ahead for this clinically nascent company.  Also, I am skeptical about Wave’s unforced fast-follower strategy and would like to see first-in-class candidates entering clinical development.

And yes, if stereopure chemistry can get around some of the safety issues of phosphorothioate oligos that will likely remain relevant (due to dose levels) for systemic applications outside the liver, additional competitive value is to be realized there.

Disclosure: no position as of November 29, 2017.

Sarepta Therapeutics
One of the fast-follower indications pursued by Wave is exon skipping for DMD- the domain of Sarepta Therapeutics.  Soon, Wave may not find themselves chasing a modestly potent EXONDYS51 and related PMO-chemistries for other exons, but what could emerge as a much more exciting exon skipping chemistry for the muscle: peptide-conjugated PMOs (PPMOs) which has recently cleared the preclinical safety hurdle to enter clinical development.

PPMOs easily outperform simple PMO chemistry in terms of potency, but arginine-rich precursors have suffered from unacceptable preclinical toxicity.  Sarepta now claims that it has found PPMOs with increased potency (see slide 16 of this presentation), but a much better safety margin.

If first clinical biomarker data support substantial exon skipping, then I believe Sarepta’s control over the DMD market will be cemented. Currently it somewhat hinges on confirmatory clinical evidence of therapeutic benefit for their mildly active PMO exon skippers entailing considerable clinical and competitive risk.  Add to this a number of other modalities in the quiver to treat DMD which Sarepta has acquired rights to more recently, Sarepta looks like a Vertex-/Alexion-type single orphan disease-focus play in the making.  Think $30-40B market cap (now: $3.6B).

Disclosures: long SRPT.

Regulus Therapeutics
After the miR-122 desaster in HCV and new management in place, it looks like a fresh start for Regulus Therapeutics.  The new mantra is quality over quantity as Regulus and partners alike have axed a number of microRNA Therapeutics programs.

As a result, it is clinical data from two development candidates that will most likely determine the shareholders’ fate in the years to come (note: I still think there could be tremendous opportunity in microRNA Therapeutics from addressing complex neurological diseases like Alzheimer's, but his seems of less interest to Regulus currently).  

One is RG-012 targeting miR-21 for the treatment of Alport Syndrome, an orphan disease impacting kidney health.  The advancement of this program into patients was recently slightly delayed by a few months after insights from a natural history study of the disease made the company re-focus on only X-linked cases of the disease for purposes of better stratification.

Instead of considering the change in study design as increasing the quality and therefore odds of success for the study, the market penalized this 3-6 month delay by selling off the stock from $1.4 to sub $1.  I call this a buying opportunity.

Regulus Therapeutics stands out from the oligonucleotide therapeutics crowd in that also its second candidate, RGLS4326 for autosomal dominant polycystic kidney disease (ADPKD) now in the clinic, is also targeting cells in the kidney.  I don’t think that this was by design, but the result of the liver programs falling by the wayside for various reasons.

While the kidney is certainly an interesting organ for oligonucleotides due to its high exposure to this class of molecules, it is a complex organ and not all that much is known about cell type-specific pharmacodynamics outside the proximal tubule epithelial cells.  Add to this the uncertainty about the relevant therapeutic cell types that need to be targeted for a disease like Alport’s, and you end up with considerable target risk around these programs so that in the end we largely have to rely on the mouse models here being relevant to human disease.  

I am long RGLS given (1) that Alport Syndrome makes for a nice orphan market opportunity with some important groundwork laid by Regulus itself,  and (2) the fact that sentiment around Regulus can only get better and if targeting miR-21 does not have a measurable on fibrosis in the kidney, maybe it’s time to give up on microRNAs for therapeutics altogether.

Wednesday, November 22, 2017

RNAi Therapeutics Stocks (Part 2)

Having covered the most developed RNAi companies (Alnylam, Arrowhead, Dicerna) yesterday, this blog entry will discuss RNAi plays that are somewhat less established, but nevertheless could represent interesting investment opportunities.

Silence Therapeutics (SLN.L)
This London-listed company is roughly 2 years behind Arrowhead Pharmaceuticals and Dicerna.  Similar to those, Silence has set its sights on exploiting targets in liver hepatocytes using GalNAc conjugate technology.  Its first program targeting TMPRSS6 for iron overload disorders should enter the clinic in the first half of 2019.

The strength of Silence is partly its RNAi trigger IP position which, if the claims stand, should read on Alnylam’s 3-4 drug candidates that could come on the market over the next 2-3 years.  In my opinion, it would take a generous interpretation of what constitutes a ‘pattern’ for LNP-enabled Patisiran to fall under Silence IP, but it is much less of a stretch for the more stabilized GalNAc-enabled Givosiran, Fitusiran, and Inclisiran molecules in late-stage development.
Part of the potential upside could  therefore come from a settlement of the IP litigation that Silence has filed against Alnylam as it could hamper the commercialization of Alnylam's RNAi drug, especially as it ramps up for the launch of Patisiran. 

The reason why such revenues would be meaningful to the company is that Silence is run extremely well in financial terms such that these funds would neatly feed into Silence's operations as it is about to expand clinically all the while minimizing shareholder dilution. 
This, however, could also be viewed as a necessity since it is much more difficult for a London-based company to raise the kind of biotech ‘risk capital’ that allows companies like Alnylam in the US to really press down the gas pedal to pursue a grand vision without killing shareholders.   

Silence Therapeutics is an investment for those that value the pursuit shareholder return instead of mere market cap growth (=management bragging rights).  While I support this strategy, I am still largely on the sidelines as the company needs to address the anemic trading volume which makes it very costly to trade in and out.

RXi Pharmaceuticals (RXII)
Who doesn’t dream of striking it rich overnight?  If so, RXII is the type of stock that in the right biotech environment could be your daily biotech double in the not-so-distant future.

After all, which other biotech with a market cap of ~$15M can boast about 3 clinical data read-outs before year-end and one additional in early 2018?

1) Q4 2017: phase II results dermal scarring (RXI-109)

2) Q4 2017: phase II results warts (samcyprone, non-RNAi)

3) Q4 2017: UV-induced hyperpigmentation results, consumer testing (RXI-231)

4) Q1 2018: phase I/II results retinal scarring (RXI-109)  

It is possible that the first 3 data read-outs could show that the agents are active and well tolerated, but where there will be a discussion about the commercial adoption of these agents in the real world.  Therefore, the real fireworks may occur following the results from the retinal scarring phase I/II trial in early 2018.  Here, the self-delivering RNAi trigger technology is tested for the first time in the eye where for reasons of technical feasibility (more equal biodistribution throughout eye than in the skin) and clinical application I see the most potential for this technology.
Downside risk comes from management that is pitifully ignorant about the workings of the financial markets and shareholder value creation.  If RXi fails to ignite investor interest in the wake of any of these 4 shots on goal, we could well see a continuation of the financial death spiral that has seen RXII lose 98-99% of its value in the last 3-4 years!!!

I own approximately 3% of the outstanding shares of RXII and will try to add on any weakness ahead of data release.

Arcturus Therapeutics (ARCT)
In sharp contrast to RXi, I view management of Arcturus as far more savvy when it comes to the financial markets and building a biotech company of decent size.

Arcturus, which has recently gone public via a reverse merger, has its roots in RNAi technology, largely by copying liposomal delivery technology from Tekmira (now Arbutus) and then licensing related RNAi IP from Marina Biotech.  In light of the Patisiran APOLLO results, you could view the platform as fundamentally de-risked.
In fact, its lead program was an RNAi program to address TTR amyloidosis.   Since then, however, Arcturus has largely re-tooled itself as an mRNA Therapeutics company using LNP delivery technology.  Although its pipeline is not as prolific as that of much-better known Moderna, it appears impressive for a company with a market cap of still less than $100M just as its partnering activities.

Therefore, Arcturus is a bet on a management that can take average science to build a significant biotech as it talks the language of Wall Street and Pharma deal makers.  It was one of my early biotech investment mistakes to undervalue big-mouthed management relative to science. The best science can always be acquired once you have lowered your cost of capital by growing market cap.
I have a starter long position in ARCT as I wait for it to be discovered by larger hedge fund manager.

The final instalment of this series will cover oligonucleotide therapeutics companies Ionis Pharmaceuticals, Wave Life Sciences, Regulus Therapeutics, and Sarepta.
By Dirk Haussecker. All rights reserved.

Disclaimer: This blog is not intended for distribution to or use by any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the author or any of his collaborators and contributors to any registration or licensing requirement within such jurisdiction. This blog expresses only my opinions, they may be flawed and are for entertainment purposes only. Opinions expressed are a direct result of information which may or may not be accurate, and I do not assume any responsibility for material errors or to provide updates should circumstances change. Opinions expressed in this blog may have been disseminated before to others. This blog should not be taken as investment, legal or tax advice. The investments referred to herein may not be suitable for you. Investments particularly in the field of RNAi Therapeutics and biotechnology carry a high risk of total loss. You, the reader must make your own investment decisions in consultation with your professional advisors in light of your specific circumstances. I reserve the right to buy, sell, or short any security including those that may or may not be discussed on my blog.