Sosei's Latest U.K. Fishing Trip Hooks An RNA Player

| About: Sosei Co., (SOLTF)

Among Japanese biopharma groups looking westwards, Sosei (OTCPK:SOLTF) has found fertile ground for deal-making in the UK, and Mina Therapeutics, a little-known private biotech, could soon become the latest string it adds to its bow.

The target company is unusual in focusing on short RNA fragments - technology that has so far largely failed to live up to expectations. But Sosei's Chief Executive, Peter Bains, is eager to stress that Mina's approach targets gene activation, not silencing; and any focus his company might seem to have on UK deal-making, he puts down to coincidence.

"Affordability has to be taken into account, and price in an absolute sense is clearly a limitation," he tells EP Vantage. "But in a relative sense it didn't mean we excluded ... the US or other parts of the world. We have a vision to build a global biotechnology company, and we have certain criteria that we're looking for."

The criteria Mina met were "an early-stage but very exciting technology platform with an asset that's in the clinic." That asset is MTL-CEBPA, a small activating RNA (saRNA) project targeting liver cancer.

Boom and bust

Mention of RNA technologies makes it impossible to ignore the RNA interference (RNAi) boom that hit its peak when Merck & Co. (NYSE:MRK) bought Sirna Therapeutics for $1.1bn in 2006, and saw Roche (OTCQX:RHHBY) invest vast sums trying to keep up. Both efforts came to nothing, and what was left was sold cheaply to Alnylam (NASDAQ:ALNY) and Arrowhead (NASDAQ:ARWR) respectively.

RNAi and the saRNA approach both involve the delivery of short, double-stranded RNA molecules to bind to specific mRNA sequences. But while the former attempts to silence gene expression, the latter seeks to activate gene transcription, possibly even allowing undruggable targets to be hit.

Mr. Bains accepts the risk, but says the RNAi field has stabilised. "The RNA activation mechanism is different ... Mina is the first company to enter human clinical trials. We feel that a lot of the risks in the technology have been discharged."

One of the biggest problems has been how to deliver RNA fragments into cells, and here Mina relies on Argonaute proteins, onto which the saRNA is loaded in the cytosol before being translocated into the nucleus.

Risk mitigation

Much of the remaining risk is mitigated by the deal structure: Sosei is for now paying £35m ($45m) for a 25.6% equity stake, and retains an exclusive option to buy out the remainder for another £140m in a scenario Mr. Bains reckons could crystallize in 12-18 months.

The likely trigger is MTL-CEBPA's phase I/II hepatocellular carcinoma study, which should yield safety and tolerability data, as well as efficacy hints via biomarkers, in the same timeframe. This project aims to activate the CEBPA gene regulator of liver function whose levels are decreased in patients with liver diseases, and the trial could validate Mina's approach more broadly.

However, very little is known about Mina's current owners' return. The private company has raised unspecified funds from high net-worth individuals rather than from traditional venture capitalists, and only an undisclosed part of the £35m is for new equity. However, the resulting valuation - £137m now, or £188m in a full buyout - looks decent enough for an early-stage biotech.

It is interesting that the deal is fundamentally based around M&A rather than project licensing. If the takeout materialises, Sosei could well run Mina at arm's length, as it has done with its most recent UK acquisition, that of Heptares in 2015.

Sosei's other notable UK takeout involved Arakis, a respiratory player developing what turned into Utibron Neohaler, which was licensed to and launched by Novartis (NYSE:NVS).

The increasingly commoditized respiratory field and a novel RNA technology have little in common, but as far as Mina goes, Mr. Bains says he has tried to "manage the risk well and optimize the opportunity also."

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