Rosetta Genomics: Mining Genes From Junk (Part I)

| About: Rosetta Genomics (ROSG)

Rosetta Genomics (NASDAQ:ROSG) represents one of the most exciting revolutions in biology in recent decades. The company is a pioneer in the field of microRNAs (miRNAs), a group of recently discovered genes that may serve as a novel class of diagnostic markers and drug targets. Unlike “traditional” genes we were familiar with, miRNA genes are not expressed as proteins, but as small RNA fragments that regulate the expression of many proteins. Rosetta Genomics’ impressive pipeline, unparalleled discovery capabilities and intellectual property make it one of the most exciting biotech companies out there.

The field of miRNA has captured the scientific community’s attention only in recent years, and is expected to become an important field in the drug development industry. The ultimate proof for how hot miRNAs are is the increase in the number of published scientific articles that focus on this new gene family. Using the Pubmed database, I looked for articles that contain the term “miRNA” in their title or abstract. There were only 38 such articles in 2003 but the number increased more than fourteen-fold in 2007. Even more striking is the diverse list of medical areas in which miRNAs are investigated, from oncology to cardiovascular diseases, from tissue engineering to women’s health.

The existence of miRNAs sheds new light on two basic foundations of molecular biology. The first has to do with how we view the human genome, and the number of genes it contains. After the completion of the human genome project, it was evaluated that there are anywhere between 30,000-50,000 genes that comprise only 2% of the genome, with the remaining 98% arrogantly termed “junk” DNA. In what looked like a bizarre initiative, Rosetta Genomics started to investigate the “junk” portion of the genome, searching for previously undiscovered genes. What made this search even more unusual is the fact that the company looked for very short genes that are not expressed as proteins but as small RNA fragments, at a time when there was limited evidence supporting the existence of this kind of genes. After several years of intense digging in the genomic junk, Rosetta collected large amounts of the biological equivalent of gold – new genes.

This leads us to the next misconception miRNAs shattered, which is the identity of the players that regulate protein expression in our cells. It is common knowledge that every cell in our body contains exactly the same genetic information, however, each type of cell is totally different from others. This difference is a direct result of different profiles of gene expression. A kidney cell expresses a different repertoire of genes than that of a brain cell or a muscle cell. Thus, regulation of gene expression is the basis for the proper function of our body as well as, unfortunately, most diseases. Until recently, it was held that proteins are the exclusive regulators of gene expression. The discovery of miRNAs revealed a whole new level of gene regulation and called for adjustments to this theory, as it is now believed that miRNAs regulate more than 30% of all human genes. Moreover, many miRNAs are positioned very early in gene regulatory networks and seem to act as “master switches” of the human genome, regulating some of the most important genes, including such with proven linkage to serious illnesses.

The first miRNA gene, lin-4, was discovered in a nematode in 1993 at Victor Ambros’ lab, although back then this gene wasn’t referred to as miRNA. The Harvard University group found that a mutation in the gene caused some severe developmental defects but they were also very surprised to discover that this gene did not encode a protein but a short fragment of RNA. It has been more than 8 years until the official birth of miRNAs occurred in late 2001, after Science published three papers showing that miRNAs are a large family of genes, that can be observed in many creatures and have important functions in many biological processes.

Rosetta Genomics, which started operating in 2000, was the first company to identify the importance of miRNAs as therapeutic and diagnostic targets. In addition to being the first company focused on miRNAs, Rosetta Genomics managed to position itself as the dominant player in the miRNA arena, utilizing what turned out to be a brilliant strategy.

Most groups that investigate miRNAs usually start from the biology side, hence, working with living cells or creatures and trying to find evidence for the existence and function of miRNAs. The collected data is then analyzed by computational tools. In contrast, Rosetta Genomics started from the computer side and then moved to the biology side. The company generated a sophisticated computational engine that scanned the entire human genome, looking for potential miRNAs, based on sequence and various structural elements. The first cycle of scans generated 10,000 potential miRNAs candidates. Before turning to biology, the company filed patents, covering many of the 10,000 sequences. Only then did it start biological evaluations that proved that in the minority of cases the identified sequences are real miRNAs that play important roles in biology. The company estimates that it has access to the vast majority of miRNAs, either as a result of its patent portfolio or as a result of partnerships with other leading research groups.

Rosetta Genomics activity can be separated into two distinct business models. The first one is developing drugs and diagnostics based on miRNAs independently or in partnership with other companies. The second business model is holding the intellectual property for the lion’s share of miRNAs, so that anyone who wants to develop products based on miRNAs originally discovered by Rosetta Genomics, would have to license them from the company. That way, Rosetta Genomics can benefit from the strong momentum miRNAs gain among leading pharmaceutical companies without direct involvement.

This is the place to emphasize that, to date, Rosetta Genomics has received only 2 patents, with the rest pending in several regulatory stages. In addition, patenting naturally occurring genes is a very problematic issue, and the current policy is not to grant patents for plain gene sequences. This issue resulted in concerns with regard to the strength of the company’s patent portfolio. However, company’s management has been constantly reassuring investors that its patents are valid since they include two additional layers on top of the gene sequences. One layer shows the utility of the sequences by associating them with specific medical conditions or biological pathways. By doing so, the company can claim to have proven “composition of matter” for the sequences. On top of the second layer, in some cases the company filed the sequences in the context of “uses and methods”, covering the uses of miRNAs as diagnostic biomarkers and therapeutic targets. In addition, the company filed several patents covering certain technologies for identifying and extracting miRNAs from body fluids and tissue samples, which may prove extremely important for the diagnostics market.

In July 2007, Rosetta Genomics’ patent strategy was finally validated, as The United States Patent and Trademark Office [USPTO] issued the company the first ever patent for a human miRNA gene (miR-492). This patent is an important precedent for the company’s strategy, although there is no guarantee regarding the rest of the pending patents. According to management, additional patents are in advanced stages of reviewing and are expected to be awarded this year.

The next article will go over Rosetta Genomics’ pipeline.

Disclosure: Author is long ROSG