Tekmira Pharmaceuticals: Is The Clinical Hold Sell-Off A Buying Opportunity?

| About: Arbutus Biopharma (ABUS)


Tekmira is a biopharmaceutical company focused on developing RNAi therapeutics. Tekmira leverages their extensive drug development and delivery expertise by advancing drugs based on their lipid nanoparticle (SNALP) delivery technology.

Tekmira share price has decreased over 30% from $13.80 (July 3) to $9.57 (July 21) following U.S. Department of Defense funded TKM-Ebola being put on clinical hold.

TKM-Ebola being put on clinical hold has led to unreasonable uncertainty surrounding TKM-HBV. Available data for TKM-Ebola suggests arguably a positive read through to TKM-HBV.

Tekmira is trading ~$4/share above cash value. Estimating future royalties from Patisiran at $4/share, this means you can buy Tekmira and get TKM-Ebola, TKM-HBV, pipeline, and platform for free.

Tekmira has a strong balance sheet (~$124.5 million cash) and is trading at low market cap of $211 million and enterprise value of $87 million. There are numerous upcoming catalysts.

On July 3, 2014, Tekmira (NASDAQ:TKMR), "announced that the company has received verbal notice from the US FDA that the TKM-Ebola phase I healthy volunteer clinical study has been placed on clinical hold."

Tekmira was in the process of conducting a phase I trial studying the safety, tolerability, and pharmacokinetics of TKM-Ebola in healthy volunteers. TKM-Ebola is a "3rd generation" SNALP (proprietary lipid nanoparticle technology) formulation designed to facilitate the clearance of Ebola virus from an infected individual. The phase I trial consists of two portions: single ascending dose (SAD) and multiple ascending dose (MAD). Tekmira has completed the SAD portion of the trial and released data from this portion on May 21, 2014. An interim review of the data prior to initiation of the MAD portion was planned which led to the clinical hold of the trial. The SAD consisted of a single dose of TKM-Ebola at various doses up to 0.50 [mg/kg]. Treatment Emergent Adverse Events (TEAEs) for the SAD portion of the trial are shown below:

(Company Presentation)

Adverse Events result of transient elevation of cytokines:

Most of the reported treatment related Adverse Events were consistent with a transient inflammatory response that begins within 6 hours after infusion and dissipates in most cases by 24 hours post-dosing. This conclusion is supported by the transient elevation of some cytokines at 2 & 6 hours post-dosing and returning to or near baseline levels by 24 hours (shown below):

(Company Presentation)

This may come as a surprise to those familiar with Tekmira's SNALP RNAi delivery platform which has demonstrated a robust safety profile in the clinic thus far. This is shown (below) by Tekmira's SNALP platform being the most widely adopted RNAi delivery vehicle in the clinic (slightly out of date):

(Company Presentation)

Tekmira's 2nd generation, liver-targeted SNALP formulation is currently being utilized by Alnylam's (NASDAQ:ALNY) lead clinical candidate Patisiran (ALN-TTR02) for the treatment of Familial Amyloid Polyneuropathy (FAP). A phase III study of Patisiran in FAP patients is currently enrolling and is also in a phase II Open Label Extension (OLE) study. In these studies, SNALP-enabled Patisiran is administered with a steroid pre-treatment regimen. This pre-treatment is administered to suppress the immune system in order to decrease the frequency of adverse events. Prior to TKM-Ebola, this steroid pre-treatment regimen has previously been used in all other SNALP-enabled therapeutics tested in the clinic.

TKM-Ebola Does Not Use Steroid Pre-Treatment: Transient Elevations of Cytokines Not Surprising

TKM-Ebola does not utilize a pre-treatment regimen and therefore does not suppress the immune system prior to the administration of TKM-Ebola to an individual. The choice to administer TKM-Ebola with no steroid pre-treatment regimen was most likely a joint decision between Tekmira and the US Department of Defense (funding TKM-Ebola project). Due to the aggressive nature of the Ebola virus, it would be advantageous to have a fully functioning immune system during treatment in order to facilitate the full clearance of Ebola virus from an infected individual. The aggressiveness of Ebola virus is why in pre-clinical studies and the MAD portion of the phase I study, TKM-Ebola is administered once daily for seven consecutive days. This aggressive dosing frequency is in stark contrast to previous SNALP-enabled therapeutics in the clinic, such as Patisiran, which is administered once every 3 weeks.

By considering that no steroid pre-treatment regimen (designed to suppress the immune system) was utilized in the SAD portion of the phase I trial of TKM-Ebola, it is not too surprising that transient elevation of cytokines (temporary "elevation" of immune function) led to the phase I trial being put on clinical hold prior to the initiation of the MAD portion of the trial. Mark Murray also stated in the July 3 press release that "The FDA has requested additional data related to the mechanism of cytokine release...and a protocol modification designed to ensure the safety of healthy volunteer subjects, before we proceed with the multiple ascending dose portion of our TKM-Ebola phase I trial."

I believe this protocol modification to the MAD portion of the trial may consist of cohorts utilizing a steroid pre-treatment regimen prior to non pre-treatment MAD cohorts being initiated. This will allow the FDA to ensure the safety of human volunteers and would also be beneficial for Tekmira because it would allow them to compare data between the two types of cohorts. By utilizing cohorts with steroid pre-treatment regimen, Tekmira and the DoD can diversify their clinical development plans in order to ensure a safe dosing regimen (with or without pre-treatment) is available for the continued development of TKM-Ebola. It could also be interpreted that utilizing a steroid pre-treatment regimen was Tekmira's safer 'backup plan' in case a trial utilizing no pre-treatment regimen failed.

TKM-Ebola Clinical Hold Has Created Unreasonable Uncertainty Surrounding TKM-HBV:

One of the reasons for the drastic share price decrease following TKM-Ebola being put on clinical hold is that it has created uncertainty surrounding TKM-HBV. TKM-HBV is being developed for the treatment of chronic hepatitis B virus (HBV) infection. The chronic HBV indication could be the next massive blockbuster indication following Hepatitis C virus infection (HCV). When developing treatments for these types of indications, the rewards can be immense as shown by the success of Gilead's (NASDAQ:GILD) Solvaldi for HCV and Merck (NYSE:MRK) buying Idenix (NASDAQ:IDIX) for $3.85 billion to acquire their HCV programs.

Tekmira has stated that both TKM-Ebola and TKM-HBV utilize '3rd generation' SNALP formulation. TKM-Ebola being put on clinic hold has led to the interpretation that TKM-HBV may not be as safe in humans as expected. However, it is an unreasonable assumption for a number of reasons when considering the side effects are a result of the SNALP formulation or the siRNA triggers (cargo) utilized in TKM-Ebola:

TKM-HBV "3rd generation" SNALP formulation is different from TKM-Ebola "3rd generation" SNALP formulation. Generations of SNALP do not refer to the actual formulation of the SNALP, but refers to an approximate 10 times increase in potency of the SNALP formulation in each generation (2nd gen 10x more potent than 1st gen):

  • TKM-Ebola "3rd gen." SNALP targets many types of cells (hepatocytes and immune cells). TKM-Ebola being designed to be taken up into immune cells could be contributing to the cytokine elevation.
  • TKM-HBV utilizes an extremely potent hepatocyte-targeted "3rd gen" SNALP formulation.

TKM-Ebola and TKM-HBV utilize different types of RNAi triggers. TKM-Ebola utilizes 2'-O-Methyl modified siRNAs. TKM-HBV utilizes UNA siRNA chemistry termed UsiRNA. UsiRNA triggers have been shown to be more potent and safer than 2'-O-Me modified siRNA triggers:

Considering that TKM-Ebola uses a different "3rd generation" SNALP formulation and a different RNAi trigger chemistry, I believe it is unreasonable to associate negativity with the TKM-HBV program because of the TKM-Ebola clinical hold. I believe it is more reasonable to interpret the current SAD phase I TKM-Ebola data as a positive for the TKM-HBV program and "3rd generation" liver-targeted SNALP. This is because an arguably more toxic "3rd generation" formulation in TKM-Ebola can be used a single time at therapeutically relevant doses. In addition, if TKM-Ebola did not have to be administered 1x daily for 7 consecutive days, it may not have been put on clinical hold. This is because if the Ebola virus allowed for a less aggressive dosing regimen used in Patisiran and potentially TKM-HBV (1x every 3 weeks), this less rigorous dosing regimen would allow for cytokines to completely return to baseline prior to the next dose being administered.

TKM-Ebola SAD Results Reflects Positively on TKM-HBV: No Steroid Pre-treatment Needed

TKM-Ebola utilizes an arguably more toxic "3rd generation" SNALP formulation and RNAi trigger cocktail compared to TKM-HBV. If TKM-Ebola was administered at a lower frequency like TKM-HBV will be, TKM-Ebola's safety profile could have been acceptable and a clinical hold not needed. The SAD dose trial shows that '3rd generation' TKM-Ebola can be safely administered one time at therapeutic relevant doses (0.3 [mg/kg]).

"2nd generation" liver-targeted SNALP-enabled ALN-HBV showed potent HBsAg knockdown (mean 0.7log10) at 0.25 [mg/kg]. Since
"3rd generation" liver-targeted SNALP TKM-HBV utilizes a more potent formulation and RNAi trigger cocktail, it can be reasonably assumed TKM-HBV can achieve therapeutically relevant knockdown of HBsAg at a much lower dose than 0.25 [mg/kg].

Considering that an arguably more toxic SNALP formulation and RNAi trigger cocktail was used in TKM-Ebola safely at ~0.25 [mg/kg], the prediction can be made that TKM-HBV can be administered safely at a therapeutically relevant dose without the need of a steroid pre-treatment regimen. This is beneficial because when treating HBV it is thought that there are two critical components to facilitating a "functional cure" of HBV: HBsAg knockdown and immune activity. A strong immune system is needed to fully facilitate the clearance of HBV. This is why it is hypothesized to be beneficial that TKM-HBV be administered without steroid pre-treatment.

Hidden Value in U.S. Department of Defense Funded TKM-Ebola Program

In 2010, Tekmira signed a $140 million contract with the U.S. DoD to advance an RNAi therapeutic (TKM-Ebola) utilizing Tekmira's SNALP to treat Ebola virus infection. This has allowed for TKM-Ebola to be fully funded by the DoD for clinical development. It has also allowed Tekmira to improve their SNALP platform through non-dilutive funding as shown by newer SNALP formulations and the ability for SNALP to be lyophilized. Lyophilization is desired for many reasons including enabling storage at room temperatures (desired in stockpiling situations). TKM-Ebola is being developed as a medical countermeasure against Ebola as a bioterrorism threat. For this reason, the United States' DoD Defense Advanced Research Program Agency (DARPA) will stockpile TKM-Ebola if Tekmira is successful in advancing this asset through the clinic via the FDA's "Animal Rule."

On the year-end 2013 conference call, management stated that TKM-Ebola stockpiling discussion has been ongoing with the DoD to a certain extent. According to a slide from a company presentation (shown below), potential annual cash flow from TKM-Ebola stockpiling could reach $75 million (conservative 30% discount from company estimates) per year if TKM-Ebola is successful in the clinic and secures a stockpiling contract with DARPA.

(Company Presentation)

Medical Countermeasures Market Niche

Tekmira currently has two medical countermeasure programs in development: TKM-Ebola and TKM-Marburg for the treatment of Ebola and Marburg infection respectively. As stated above, TKM-Ebola is being fully funded by the DoD. In 2010, Tekmira in collaboration with University of Texas Medical Branch (UTMB), received a $2.4 million NIH grant to support the development of TKM-Ebola and TKM-Marburg. Tekmira and UTMB received an additional NIH grant worth up to $26 million in March 2014 to support the development of treatments for Ebola and Marburg. Although early in development, Tekmira has demonstrated the ability to secure non-dilutive funding to continue the development of TKM-Ebola and TKM-Marburg in the market of medical countermeasures. If Tekmira is successful in advancing TKM-Ebola through the clinic and continuing their relationship with the DoD, this would pave the way for them to become a leader in the niche market of medical countermeasures.

The importance of DARPA stockpiling treatments and DoD funded medical countermeasures against bioterrorism threats is exemplified by the current Ebola outbreak which has infected over 1000 people. Considering most people have assigned little value to TKM-Ebola in valuation models, and that TKM-Ebola is fully funded by the DoD with potential for annual stockpiling revenue, I believe a 33% share price drop since TKM-Ebola being put on clinical hold is an overreaction.

Overreaction Has Created a Great Buying Opportunity:

I believe this is an overreaction and creates a great buying opportunity in Tekmira Pharmaceuticals ahead of many catalysts.

  • Tekmira is also down over 66% since raising net proceeds of $56.5 million dollars (2m shares at $28.50/share) giving them approximately $124.4 million cash as of July 21, 2014 (134.4m as of March 31 minus $10m quarterly burn).
  • At $9.57/share (July 21) and ~22.1 million shares outstanding, this gives Tekmira a market cap of ~$211 million and an approximate Enterprise Value of $87 million. Trading at $9.57/share means Tekmira is only trading ~$4/share above cash value.
  • Estimating the value of possible future royalties from Alnylam's SNALP-enabled Patisiran program at $4/share, this means at this valuation you can buy Tekmira and essentially get the Ebola program (TKM-Ebola), Hepatitis B program (TKM-HBV), pipeline, and platform for free.
  • Over the last year, Tekmira's share price has been run up and down from ~$6 to $31.48 to $9.57. During this period, no insiders sold a single share. Prior to TKM-Ebola being put on clinical hold, a couple insiders purchased shares. Tekmira also has many upcoming catalyst (see below Update July 21 section):

Update July 21: Tekmira Provides Update on TKM-Ebola Phase I Clinical Hold

In a press release on July 21, 2014, Tekmira stated:

The Company has received the clinical hold letter form the U.S. Food and Drug Administration (FDA) and is preparing a Complete Response to the Agency. The Company anticipates this matter will be resolved by Q4, 2014.

Tekmira's other clinical development programs are unaffected by the TKM-Ebola clinical hold and remain on track.

"It is important to highlight that the study protocol for the TKM-Ebola Phase I trial called for an interim review of data for the single ascending dose portion of the trial before proceeding to the multiple ascending dose portion of the study. I wish to emphasize this trial is unique. It represents the first RNAi study involving the daily treatment of healthy volunteers, without steroid pre-medication or any other type of pre-medication, and with multiple ascending doses," said Dr. Mark Murray, President and CEO of Tekmira Pharmaceuticals. "Furthermore, the multiple ascending dose portion of the study, as originally, proposed, reflects the intense dosing regimen that would be used in patients lethally infected with Ebola virus."

On May 21, 2014 the Company disclosed the results of the single ascending dose portion of the study which demonstrated the administration of TKM-Ebola in the absence of steroid-containing pre-medication was well tolerated at a dose level; of 0.3 mg/kg, determined to be the maximum tolerated dose in the absence of steroid cover. At that time, Dr Murray said, "These (TKM-Ebola Phase I) results are significant as they establish the safety of 'third generation' LNP formulations and confirm that dosing at efficacious levels may be accomplished without the need for pre-medication."

Dr Murray added, "The mechanism for cytokine release is understood and we will be modifying our study protocol to further ensure subject safety. Our team is working expediently to respond to the FDA."

Sections of the above press release italicized support or corroborate many of the key points made throughout this article.



  • TKM-Ebola clinical hold "resolution": by 4th quarter 2014
  • Potential protocol modification and initiation of MAD portion of phase I trial: late 2014/early 2015
  • TKM-Ebola phase I MAD results: 1st half 2015


  • Pre-clinical TKM-HBV data in non-human primates (possibly at R&D day in October and/or AASLD in November): 2nd half 2014
  • TKM-HBV IND by the end of 2014
  • TKM-HBV phase I trial initiation in chronic HBV patients: 1st half 2015
  • Arrowhead's (NASDAQ:ARWR) ARC-520 Phase IIa data in chronic HBV patients validating TKM-HBV's approach to treating chronic HBV: July/August 2014


  • TKM-PLK1 Phase I/II data in GI-NET/ACC: by end of 2014 (possibly October for GI-NET and ACC)
  • TKM-PLK1 Phase I/II data in HCC: mid-2015


  • TKM-ALDH2 pre-clinical data (possibly at R&D day in October) by end of 2014
  • TKM-ALDH2 IND by end of 2014
  • TKM-ALDH2 comprehensive phase I data in healthy volunteers: 2nd half 2015


  • Earnings Release Aug. 13, 2014
  • Pre-clinical data and nomination of a new pipeline development candidate by the end of 2014 (possibly at R&D day in October)
  • Patisiran phase II OLE study clinical endpoint data Oct. 12-14 at ANA meeting
  • New formulations of SNALP such as subcutaneous formulations and SNALP designed for respiratory applications
  • Additional mRNA delivery data
  • Additional clarification on pending $5m ALN-VSP milestone
  • Additional information/updates on seven Alnylam targets to be selected

Key Risks (in decreasing order of severity):

  1. Issues with TKM-HBV and/or '3rd generation' liver-targeted SNALP
  2. Safety/Efficacy problems with Patisiran
  3. More problems with TKM-Ebola and/or termination of DoD contract and/or failure to secure TKM-Ebola stockpiling contract
  4. TKM-PLK1 failures (near term)

Disclosure: The author is long TKMR, ARWR. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.