Wednesday, February 19, 2014

Arrowhead Research Gets a License to Succeed

The hard work has paid off and Arrowhead Research can now be considered the third financially strong RNAi Therapeutics platform company after Alnylam and Dicerna.  With ~$200M in cash following a strong $104-120M offering overnight, Arrowhead is in a position to broaden its development pipeline and advance single molecule DPC delivery with urgency.  These two elements in addition to the cash cushion should provide some protection from any setback of its lead candidate ARC520 for chronic HBV. 

Expectations around ARC520 had grown so much that it threatened to take the platform, the ultimate value driver of Arrowhead, hostage. While functional cures in phase IIb in the middle of 2015 could send the company into $10B valuation ranges, a failure due to the underlying mechanistic (immune reactivation) hypothesis not materializing or due to insufficient target knockdown with the 2-molecule DPC technology at 2mg/kg, had the potential to set back the company for years.

But that's the game in biotech and that's how it should be I hear you say.  Yes, but only if you are not a platform company.  If you are, then there is no need to take the same risks.  On the other hand, I do not like when platform companies shy away from going all the way with their pipeline candidates.  ISIS Pharmaceuticals comes here to mind which for example gave away an exciting drug candidate (ISIS-SMNRx) in 2012 for which it has earned around $50M in milestones, but which is valued in the billions for Biogen Idec by analysts.  As such, I would not have looked kindly on ARC520 spin-out ideas that have surfaced at last week’s BIO CEO 2014 conference.  Building a nice cash position was definitely the right answer to the present conundrum.


What the fund raising means more generally for RNAi Therapeutics

When $1B market company (fully diluted) like Arrowhead Research raises $100M at no discount on the back of strong trading and less than 6 months after its last significant and impressive capital raise ($60M), it can only mean one thing: Wall Street's got it and wants more of RNAi Therapeutics.  It is finally recognizing RNAi Therapeutics for its potential and is keen to give players in the space the license to succeed in the form of a healthy cash position.  If RNAi Therapeutics fails to succeed it will not have been for a lack of money.

Of course, other players in the space will be keen to capitalize on the current interest.  In this generally beneficial environment, it is no coincidence that Arrowhead Resesarch and Tekmira are receiving most of the investor attention.   After the amazing pipeline expansion (9 disclosed, 12 undisclosed programs) by bellwether Alnylam on the back of a similar string of capital raises and a 10x share price increase over the last 2 years, from a platform technology point-of-view, there is little reason why these 2 companies should not be able to replicate that come late 2015.  Arrowhead, Tekmira, and Alnylam also benefit from the 2009-2012 funding drought that gave their delivery technologies a big lead over less developed ones when they scraped together their last pennies to prove out their technologies in the clinic.  


There are earlier-stage, promising technologies by other companies that I would like to see funded in this environment.  It is good, however, to see the most developed ones supported first not only because they earned it, but also because their clinical successes and speed of value creation will further support the sector more generally.  I am also concerned that blindly investing in RNAi Therapeutics as it is seen as a ‘hot sector’ these days could trigger a backlash as bad players are lining up to take advantage of the interest.

41 comments:

Anonymous said...

Hi,

Any thoughts on Benitec biopharma from down under? Thanks

Anonymous said...

Dirk, who do you think are some of the bad apples you mention?

Anonymous said...

Arrowhead intends to use the net proceeds from this offering for general corporate purposes, including working capital, capital expenditures, research and development expenditures and clinical trial expenditures. A portion of the net proceeds may also be used for the acquisition of complementary businesses, products and technologies, or for other strategic purposes. Dirk, any thoughts on potential targets?

Dirk Haussecker said...

'Dirk, who do you think are some of the bad apples you mention?'

Anybody reading this and feeling guilty about it. No need to call out examples at this point.

Arrowhead technology acquisitions...I noted that with some trepidation since Arrowhead had been blindly acquiring early-stage nanotechs until they finally recognized the DPC delivery platform for its value. I do not want to see a return back to those days. I'd be surprised, but the comment worried me. But maybe they are after Marina anyway, so I could just about tolerate that.

Anonymous said...

Surely BLT isn't a bad apple? lol

On the topic of ARC being spun out and your comments on it. I think you have overlooked the fact that it would've been a point of leverage when negotiating the secondary. It shows us the momentum is with the company. Not the money men.

Anonymous said...

Boy some posters here really hanging some bait in front of Dirk. Smart of him not taking it. The article and comment almost sound like the Dirk we came to love and appreciate for his insight and expertise over the years. Keep on the straight and narrow path my friend and save the bile for the Alnylams and John Maraganores of the world.

Anonymous said...

As a keen follower of RNAi, Benitec and The Hausse's blog for the last few years, I find this whole Benitec supporter / Dirk acrimony pretty disappointing, and unnecessary.

Dirk, your main beef with Benitec management is their not having a lab, therefore missing the opportunity to champion ddRNAi.

Such an effort to set up a lab in Silicon Valley when Sarah Cunningham was at the helm some years back, during many patent challenges from large and small US RNAi Cos, nearly finished the Co.

I'd expect Mick Graham would love to get a lab going inhouse as soon as funding permits. Australia isn't awash with cashed up investors in the biotech sector. It's all been in resources for last 20 years.

Anonymous said...

Remember people... this blog is clearly defined as for Entertainment Purposes Only, so nothing should be taken seriously... not these comments, not the editorial content or the published papers and guides!

Anonymous said...

While I agree with the value of keeping some drugs wholly owned all the way, I think your example of the ISIS SMA drug is a poor one. ISIS had no experience with CNS administration and had noted the fact their AS not crossing the BBB was a benefit in avoiding side effects. They also had no experience with neuro diseases in general and BIIB thus was an ideal partner, and while the SMA partnership terms are not ideal, it did lead to the broader BIIB deal with the $100M upfront payment and the probably of numerous more drugs to come at better terms now that intrathecal administration has been validated.

Dirk Haussecker said...

ISIS...c'mon. ISIS-SMNRx was ready to go into the clinic, plus if they needed advice on CNS drug dev, how does spending $5M+- for advisors compare to the multi-bilion dollar in value now attributed to Biogen, not ISIS?

That's no excuse. ISIS is afraid to develop into a mature pharmaceutical company (which would likely entail mgmt and board changes) and is leaving a lot of value on the table as a result.

Anonymous said...

Understand your reluctance to mention BLT. You can see the pumping on HotCopper. Other sites are being sanitized of anything negative about them. Hard to believe but true.
BAd apples coming to market?

Anonymous said...

More like sour grapes.

Benitec and ddRNAi barely rate a mention for years now suddenly they are a bad apple just because a company called Voyager bounce out of nowhere wanting to own ddRNAi.

Nucleonics - that was a bad apple. And it nearly ruined, with help from other BIG bad RNAi apples, a good one in Benitec.

Do your own research if you want to get on the right end of the last big lever left in RNAi.
eg: the Benitec patents derive from CSIRO. Go google CSIRO and WiFi for an interesting read about big companies ego's getting belted by people knowing their stuff.

Benitec don't have a lab, yet, as Dirk points out - just occasionally.

So how come Benitec's pipeline is looking so damn fine?! They've surrounded themselves with hell smart people, possibly smarter than Alnylam and ISIS management teams.

Check out Uniqure (first gene therapy commercial approval), Calimmune ($20M CIRM grant for their ddRNAi shRNA HIV programme now in clinical trial), Maria Kavallaris' work in lung cancer ddRNAi programme (recently received national award for medical research, joining 7 Nobel prize winners), if Pfizer and Tacere's big effort on getting TT-034 to the clinic doesn't impress. There's more, but you're probably nodding off..

So despite being given 'facts', not having the whole story could leave many RNAi investors short of a very good opportunity.

karmaswimswami, MD, PhD said...

All well and good thus far with Arrowhead. Rosy, in fact. Of the three RNAi public names with which Dirk is ostensibly enamored, however, Tekmira has the weakest dullest pipeline. Alnylam is massively overpriced. Arrowhead has the shakiest foundational science for its HBV work.

The whole HBV clinical programme is moving forward on the basis of one pre-clinical study in one HBV infected chimp. That chimp did have an impressive 3-log order drop in HBV DNA, surface antigen and E antigen. How relevant is that? Impossible to say!

Most human HBV'ers are chronic because their immune system is in a profoundly tolerant state vis a vis the virus. They are that way mostly because of vertical transmission of virus. This is considerably different from the immune phenomenology in, for example, HCV.

In these people without an immune system fighting the virus, I am genuinely concerned that one can suppress virus with RNAi til kingdom come but never kick it out. Our experience with adefovir, telaprevir, entecavir and telbivudine all tell this same story.

Be careful.

Terry Chrisomalis said...

Everyone seems to hate the 2 most underappreciated RNAi biotechs in the RNAi space. I can understand somewhat, because people are afraid of new technology. Seems people want to stick only with what they are use too.

Benitec has a unique mechanism of action by allowing a precursor shRNA molecule to enter the cell with a DNA vector and create a natural siRNA molecule to down regulate the genes of the hepatitis c Virus. One would think natural siRNA molecule would probably be better than synthetic. I don't understand the hate for Benitec.

The other RNAi biotech people don't seem to like and understand is RXII. I am still inclined to like Rxi pharmaceuticals the most, because instead of taking the easy way out like every other RNAi company and encapsulate the siRNA molecule in a lipid nanoparticle, or polymer shield they went a different route. They were able to rearrange the guide strands and passenger strands and turn the siRNA molecule into a drug compound that can be delivered to the cell, and penetrate the cell with " Zero " Delivery vehicles.

All in all I think Benitec and RXII will be better longer term because of the advancement of the RNAi technologies. Not using rehashed uses of lipid nanoparticles/shields to delivery the siRNA molecules.

Anonymous said...

The other RNAi biotech people don't seem to like and understand is RXII. I am still inclined to like Rxi pharmaceuticals the most, because instead of taking the easy way out like every other RNAi company and encapsulate the siRNA molecule in a lipid nanoparticle, or polymer shield they went a different route. They were able to rearrange the guide strands and passenger strands and turn the siRNA molecule into a drug compound that can be delivered to the cell, and penetrate the cell with " Zero " Delivery vehicles.

That sounds like Solirna. Are they still alive?

karmaswimswami, MD, PhD said...

Terry:

I agree that RXII has a good method for delivery of RNAi, though I wish they would indulge us and tell us more about the chemistry of the lipid nanoparticle. Why "nano"? Are they trafficking to LDL receptor?

The biggest problem with RXII is that they don't have a duke of an idea about a clinical agenda. They are aiming to use RNAi to shurt down scar tissue formation, such as in keloids, or such as lead to fibrous adhesions of the gut after open abdomen surgery. This is crazy. There are a million real diseases needing RNAi and they are seeking to deploy RNAi in a way that will likely lead to post-operative hernias. Shame on RXII. No one should buy shares of this company until it gets a clue.

Terry Chrisomalis said...

Karma The reason for targeting scarring is validation which reduces investor risk. This is because Pfizer's Excaliard already proved in phase 2 mechanism of action that targeting CTGF with oligonucleotides leads to positive results against scarring. That's the first reason why they chose that indication.

Second there are "0" FDA approved drugs for scarring. That's right nothing approved yet by the FDA for scarring. Big unmet medical need , huge market that could net $1 to $4 billion dollars or more.

Third reason is the products CTGF leads to. Once the anti-scarring pans out they can use CTGF to target liver fibrosis/liver disease, macular degeneration, PVR (retinal detachment) etc. Because not only would they use CTFG to target the skin portion of the eye/liver to heal the scar itself but apply another genome like VEGF to knockdown the genes of the disease as well. So it will be a double standard type drug that can do 2 things at once.

4th reason they chose scarring is it can be delivered locally right away. Access to the eye and skin requires an injection, and doesn't need to be delivered systemically to reach its target.

finally they are not worried about safety. I have all the confidence in the RXI-109 compound. WHat reason would that be? Simple the EMA under the "special" provision allows access to drugs with unmet medical needs before they are approved considering they have met safety and efficacy. RXII couldn't just go to the EMA and say " here sell our drug because it's awesome"! pretty sure they had to get EMA approval and authority to allow the EMA to start to sell the RXI-109 drug to doctors in Europe. That's confidence from RXII being so confident with the current dosage of the compound to start to give the compound to people in Europe with scars.

I know probably many will still have a hate relationship with RXII and that's okay everyone is entitled to their own opinion. But I still believe RXII is revolutionary in the RNAi space and I'm a long term investors of RXII.

Anonymous said...

Dirk, Benitec cannot be ignored much longer. I know you believe in ddRNAi and the science behind it, and if you do then you also know all the hard work put in by Benitec folks. For everything time has to come and I know this year will be the year. Hopefully you blog something good about BLT soon.

Anonymous said...

Unless BLT have an ace up their sleeve Dirk is quite justified to diss them. The science does not work
Evidenced by the CoH trial patients who had their HIV return.

Anonymous said...

You can keep ignoring them at your own peril

Anonymous said...

In peril to my what exactly? My investment portfolio health. My HIV risk profile. Or HCV. Middle aged baldness which they once claimed to have a cure for.
What exactly is imperiled by ignoring failed science? Unless they have a proprietary claim to the mRNA space BLT will prove itself to be one of the bad apples Dirk speaks of.

Anonymous said...

"Unless BLT have an ace up their sleeve Dirk is quite justified to diss them. The science does not work
Evidenced by the CoH trial patients who had their HIV return."

It was a PI study, not an efficacy study so I don't know how you conclude the science does not work. Calimmune's study should give a better indication of ddRNAi's efficacy against HIV as it is a PI/II, as is TT-034. I personally would wait for the results of these trials before writing Benitec off, but hey, you're obviously the expert here.

Terry Chrisomalis said...

I'm writing an article for Benitec and how their technology works against the hepatitis C. I agree with the poster above you should wait to see the results before writing off Benitec. A lot of the other biotechs fail to target hepatitis C virus because they are only able to target one genome allowing the HCV to obtain a resistance during treatment. Benitec has established its technology to target all 3 genomes at the same time, not allowing the HCV to be able to gain resistance to the treatment. This knockdown in resistance of treatment along with DNA directed RNAi gene knockdown should merit enough efficacy to achieve proper status. But like the other poster said if you wanna write off Benitec that's fine its the other people who may reap the rewards.

Anonymous said...

The triangulated approach to "exhausting" the virus was tried several years ago. It failed because the delivery vector couldn't reach the spaces the virus inhabited. So even if it worked in those areas it could reach it is still a failure.
Delivery is still a problem for them according to what we have been told. Thus the spotlight should be put on ARWRs endosomal escape hatch technology.
Details aside, Dirk will be proven correct due to the purity of science.
A rough rule of thumb when on the internet is the more that is said about a stock the less value there is to be had in the stock being discussed.
Which means, when you see a worldwide marketing campaign being undertaken through chat rooms to pump a stock, then you know you are dealing with a boiler room operation
In this case, its BLT.
Tony Soprano would be proud of the operation.
Shame on CSIRO for still being associated with the company as a shareholder still.

Anonymous said...

Keep dreaming that Benitec would not succeed. All the information is there for you to read and learn more. No point in arguing and lets revisit in 2015.

Anonymous said...

The stock room chat for Benitec has actually been no different in sentiment than Alnylam or ISIS, or any other, for years.

The only difference is your awareness, which is about as good as the guy who thought the CoH Benitec HIV pilot study cured HIV for a while.

Anonymous said...

Reading the ASX:BLT press release on their private placement, I thought I would share a thought. SEC records show sells of ARWR by Sabby. Looks like they sold out of 2.2 millions shares ARWR in the 3rd quarter of 2013. A filing the week of January 16th shows Sabby back in ARWR for 650,000 shares. A lot of difference in prices between those 100 days. Sabby is mentioned in the Benitec announcement. Note: unclear whether all trades in both stocks are the same Sabby fund.

karmaswimswami, MD, PhD said...

Terry: There are certainly more than 3 HCV genotypes, and much more nuance to HCV than that, as the subgenotypes vary enormously. The shRNA of TT-034 targets elements in the genome that transcend genotype and structure. That said, however, the current trial is in gt 1 treatment failures and those may mostly be 1b's. 1b's have more SVR's than 1a's with IFN/RBV/PI regimens, but there are plenty of IFN intolerant people out there.

I would love to see Benitec use its new capital to pursue Gradalis given the clear infringement going on at that company.

Anonymous said...

Benitec will do nothing of the sort. They are currently up for grabs and will soon be gone from everywhere except memory. Am expecting something to be revealed on that front any day.
That aside, it's not up to BLT to pursue prosecution of patent rights. These have been abrogated by CSIRO. Any value expected from patents accrues to shareholders at the whim of CSIRO.
Clearly, CSIRO have no desire to prosecute patents. Witness Gradalis behavior and the advent of Voyager.
Conclusion:BLT sold.

Anonymous said...

Clearly, CSIRO have no desire to prosecute patents.

$430m and counting from their settlement reached over their wifi patent infringement, with two cases still outstanding. I'd say they have a very strong desire to prosecute patents actually.

Benitec will not prosecute until their is something to prosecute. Until Gradalis commercialise or do a deal, they are not in breach.

Anonymous said...

Benitec will not prosecute until their is something to prosecute

Their[sic] never will be anything to prosecute for BLT. The decision belongs to CSIRO

Anonymous said...

Pretty sure it'd be a joint decision, just as it were when Benitec and CSIRO fronted the meetings with the USPTO Examiners during the Graham re-exam. They are both on the same side of the coin, so to speak.

However I'm sure for now Benitec have other more important things to tend right now than bogging down resources in patent litigation.

Anonymous said...

Benitec do not need permission from the CSIRO to challenge the novelty of Gradalis' bi-shRNA patent. Even an anonymous third party can ask for a re-exam. However, they will not go down this path unless it is worth it. At present, it isn't worth wasting time and energy on.

Benitec is not 'up for grabs' and has not been sold. What a load of nonsense.

Anonymous said...

I must be old fashioned. In my day when you gave away about 50% of your company while someone was building a position on market, we used to call that a takeover, in play or a sale.

Anonymous said...

Details of BLT capital raise are out. It makes a good case study of what happens to those who swim outside of the flags and beyond their depth. It really is a dance of the desperate to sell so much of the company under such onerous terms for holders and such sweet terms for the VCs.
And still no lab.
Quite different from ARWRs the other day. It shows the power imbalances between the parties and quality of science.
But if anyone knows how to pump a price these guys do.

Anonymous said...

Dirk, you're blog is more littered with Benitec dumps than pumps, let's face it.

Best we call a truce to this battle of bs and made up stories, and let the results do the talking.

One last attempt to correct the dump crew's latest round of shots fired from the hip:

The capital raise institutionals paid a PREMIUM to what Benitec's sp was only 2 weeks ago. $1.07 Vs 90c. It's now $2.01. Well done management, hard luck BLT Dumpers.

CoH never claimed to cure HIV from patients. But they got great reason to get excited, and that trial then fed into Calimmune's trial now underway.Hear it from Rossi here: 1:40 into the vid.
Then extrapolate to where you think Calimmune are at, noting Rossi is on their SAB.

https://www.youtube.com/watch?v=9XqJyYrYgwU








Anonymous said...

Dirk, you're blog is more littered with Benitec dumps than pumps, let's face it.

Best we call a truce to this battle of bs and made up stories, and let the results do the talking.

One last attempt to correct the dump crew's latest round of shots fired from the hip:

The capital raise institutionals paid a PREMIUM to what Benitec's sp was only 2 weeks ago. $1.07 Vs 90c. It's now $2.01. Well done management, hard luck BLT Dumpers.

CoH never claimed to cure HIV from patients. But they got great reason to get excited, and that trial then fed into Calimmune's trial now underway.Hear it from Rossi here: 1:40 into the vid.
Then extrapolate to where you think Calimmune are at, noting Rossi is on their SAB.

https://www.youtube.com/watch?v=9XqJyYrYgwU








Anonymous said...

Dirk, you're blog is more littered with Benitec dumps than pumps, let's face it.

Best we call a truce to this battle of bs and made up stories, and let the results do the talking.

One last attempt to correct the dump crew's latest round of shots fired from the hip:

The capital raise institutionals paid a PREMIUM to what Benitec's sp was only 2 weeks ago. $1.07 Vs 90c. It's now $2.01. Well done management, hard luck BLT Dumpers.

CoH never claimed to cure HIV from patients. But they got great reason to get excited, and that trial then fed into Calimmune's trial now underway.Hear it from Rossi here: 1:40 into the vid.
Then extrapolate to where you think Calimmune are at, noting Rossi is on their SAB.

https://www.youtube.com/watch?v=9XqJyYrYgwU

Anonymous said...

Relax, All the dumps are made by the same person. He posts as Plastic on another forum but he has so much egg on his face their he has now moved is attention to Dirk's blog.

Anonymous said...

Interesting discourse here. As someone suggested, there does seem to be some kind of marketing campaign underway. My view is, it is the integrity of the science that justifies value. Pretty naive I know.
So when people equate price to value then extrapolate that to mean scientific success while ignoring existing data to the contrary. Then one does have to wonder.
Where is the third party validation? How come PFE walked away? Replaced instead by some Wall St. VCs on winner terms.
That said, an opportunity does exist to ride the pump as they sell to the unwashed.

Anonymous said...

Probably the wrong place to ask, but I have just come across the following product which is being touted as a vaccine for HB by a company called Bioton which has a subsidiary called SciGen. I have never heard of it or the company before and wonder if anyone has an opinion about it. Either by itself or as a benchmark against the likes of ARWR, ISIS, TKMR or anyone else.
Thank you for any response made.

...a hepatitis B vaccine under the trade name Sci-B-Vac.

http://www.bioton.pl/en/about/article/show/109

By Dirk Haussecker. All rights reserved.

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