Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

A Deal To Be Done

|Includes: Benitec Biopharma Ltd (BNIKF), NVS

The standard of care for Hepatitis C (HCV) is about to change with a range of new drugs showing remarkable results when compared to the current care regimes. It is in this new market that Benitec (OTCPK:BNIKF) will compete with its TT-034 product, which is about to go into clinical trial. Regardless of the arguments about the pricing of the new drugs and the pros and cons of a one shot treatment versus a once-a-day pill for 8 or 12 weeks, it would be easily understandable if big pharma was slow to pick up on an opportunity to partner on the development of TT-034. After all the trial will only cover fourteen patients and, until market information about the acceptance of the new drugs is available, it will be hard for any new partner to judge what TT-034's market share would be.

Good safety and efficacy results obtained in the TT-034 HCV trial are therefore no guarantee that a deal will be done to fund the rest of the program. So, will good results only have a passing effect on the share price if there is no immediate deal on TT-034? My answer is, no.

The underlying value of good clinical results for TT-034 extends beyond the HCV program. In a quirky way I expect that good results for TT-034 will have more of an immediate impact on Benitec 's non-Small Cell Lung Cancer (NSCLC) drug, Tribetarna, than they will on the HCV program. Why? Because good results for TT-034 will prove that short hairpin RNA (shRNA) can be an effective way of silencing genes in human and, unlike the stiff competition that TT-034 may face, a successful Tribetarna will face little or no competition. This will be attractive to big pharma.

However, even more compelling evidence for this assertion is that Novartis (NYSE:NVS) scientists are already experimenting with their own RNAi and cisplatin treatment for chemo-resistant NSCLC. The Benitec and Novartis teams are targeting different genes but both have the goal of re-sensitising tumor cells to cisplatin.

The Novartis researchers do not seem quite as confident in their findings as the Benitec scientists. In their paper above they say: "However, the results indicate that the resistance was still not completely reversed (tumor growth inhibition was increased from 30 to 60%). This may be due to the involvement of genes other than the ones that we tested. Exploring other gene involvement in drug resistance is thus critical."

In contrast, the Benitec scientists say: "The orthotopic model we used in these experiments consists of human NSCLC cells grown in the lungs of mice, and closely mimics the human situation," Professor Maria Kavallaris of CCIA explained. "These human NSCLC cells are strongly resistant to chemotherapy normally, and we were able to demonstrate that three cycles of intravenous administration of Tribetarna™, in combination with a standard chemotherapy drug, cisplatin, was able to significantly extend the survival of the animals," she added.

The other good thing about the Benitec treatment is that the technology is such that it would be relatively simple to incorporate the survivin gene targeted by Novartis into the ddRNAi construct, thus combining both targets in a single treatment.

Benitec is meeting with the FDA at the end of this month with a view to fine tuning the details of a clinical trial for Tribetarna. The trial will be conducted in Europe at the end of this year.

I suspect that the scientists at Novartis are closely watching the progress of TT-034, looking for the proof that ddRNAi can be made to work in humans and they will be awaiting the new scientific papers that will be released in support of Benitec's submission to the FDA. Good clinical results plus excellent NSCLC pre-clinical data may well be enough for Novartis to pull out the checkbook, or it may prompt one of their competitors to gazump them.

Whatever happens, 2014 will be a watershed year for Benitec.

Disclosure: I am long BNIKF.