RNAi For Hepatitis B - A False Hope For A Cure?

by: BZ Equity Research

RNAi is a revolutionary and powerful biotech modality that is being utilized for Chronic Hepatitis B.

Investors should heed caution as RNAi has been plagued by clinical failures and setbacks.

RNAi has not been shown to provide any tangible therapeutic effect in the treatment of Hepatitis B.

Prohibitive and inaccessible costs limit RNAi to a small subset of the Hepatitis B population.

ABUS, ALNY, ARWR, ARCT, DRNA, and BNTC remain a sell.

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Hepatitis B and The Need For Newer Drugs

With an estimated 1 in 3 people infected worldwide, Hepatitis B is one of the most widespread and deadly diseases of our time. The disease is caused by the Hepatitis B Virus (HBV), a double-stranded DNA hepadnavirus, and is spread through blood and bodily fluids. The availability of an effective Hepatitis B vaccine and a push to vaccinate children in many Western Countries have led to a dramatic decrease in the rate of new Hepatitis B infections. However, the CDC estimates that there are anywhere between 850,000 to 2.2 million people in the United States and 240 million people outside the United States suffering from the chronic form of Hepatitis B. Making matters worse, the Lancet Gastroenterology & Hepatology Journal reports that 90% of those affected are unaware they have it and can unknowingly spread it to others.

Hepatitis B can take on two forms - acute and chronic. Once a person becomes infected, the condition is known as Acute Hepatitis B (AHB). In about 90-95% of acute infections, a host's immune system will successfully eradicate the virus from the body. However, in about 5-10% of infections, the host's immune system is unable to eliminate the virus. When the body is unable to clear the virus within 6 months, the condition becomes known as Chronic Hepatitis B (CHB).

Chronic Hepatitis B requires a life-time of medical observation and for those who are deemed to be at risk for the development of liver diseases, a life-time of medication as well. Without medication, the virus can replicate unabated and lead to potentially life-threatening conditions such as Liver Fibrosis, Liver Cirrhosis, and Hepatocellular Carcinoma. The Hepatitis B Foundation estimates that CHB is implicated in approximately one million deaths a year.

Currently, patients afflicted with CHB have two options for treatment - Nucleoside-nucleotide antivirals (NUCs) and Immunomodulation agents. These drugs can be used alone or in combination with one another in order to significantly lower the HBV DNA viral load and prevent the progression of the disease.

Nucleoside-Nucleotide drugs (NUCs) work by inhibiting the activity of the Reverse Transcriptase enzyme, a viral DNA Polymerase, which is required for HBV replication in the hepatocyte. Also known as Reverse-Transcription Inhibitors (RTIs), they are generally well-tolerated and highly effective at lowering HBV DNA levels to undetectable levels. Immune agents, such as Pegylated Interferon, recruit the host's immune system to fight the virus. Although effective, they are not as well-tolerated as NUCs, should not be taken during pregnancy, and are not recommended for patients already diagnosed with liver disease.

Patients taking these agents, however, are rarely cured despite demonstrating a significant reduction in the HBV DNA viral load. It has been found that sustained virological response rates (SVR) following a prolonged course of therapy have been extremely low (<5%). Even if the levels of HBV DNA become undetectable during a course of therapy, the viral load will, in most cases, rebound. Furthermore, long-term use of HBV medications has been associated with toxicities and the emergence of drug-resistant viral mutations, indicating the need for a newer, safer, and more effective class of therapeutics.

Image result for relative efficacy of approved hbv therapies

Figure 1: Sustained Virologic Response Off-Treatment. Credit: University of Washington

Dominated predominately by NUCs and Interferon agents, the Hepatitis B therapeutics field remains largely unexplored as many potential viral and host proteins remain untargeted. RnR Market Research estimates that the global market for Hepatitis B therapeutics will reach approximately $3.5 billion by 2021. New entrants into the field have been attracted not only by the potential market size of CHB therapeutics but also the wide array of potential treatment targets. Many are now seeking to create a new class of drugs to tackle the disease in novel ways with the ultimate goal of finding a cure for Hepatitis B.

According to the Hepatitis B Foundation's drug watch, there were 36 drugs in development at various stages of clinical research for the treatment of CHB as of February 2018. Amongst these candidates is a new class of therapeutics known as RNA Interference (RNAi). Discovered in 2002, the Nobel Prizing-winning biotechnology was believed by many researchers to potentially disrupt the entire industry with the promise of better safety and efficacy over traditional small-molecule drugs. Now, companies like Alnylam Pharmaceuticals (ALNY), Arbutus Biopharma Corporation (ABUS), Arrowhead Pharmaceuticals (ARWR), Arcturus Therapeutics (ARCT) in partnership with Johnson & Johnson (JNJ), Dicerna Pharmaceuticals (DRNA), and Benitec Biopharma (BNTC) have devoted most of their resources to the development of RNAi medicines. They believe that RNAi can potentially tackle the Hepatitis B Virus in ways that the current standard of care cannot and pave the way to an effective and sustainable cure.

RNAi Compound


Clinical Trial Identifiers

Current Status


Arbutus Biopharma


Phase 2a


Arrowhead Pharmaceuticals


Phase 1/2a


Alnylam Pharmaceuticals



Hepbarna (BB-HB-331)

Benitec Biopharma




Arcturus Therapeutics with Johnson & Johnson




Dicerna Pharmaceuticals




Alnylam Pharmaceuticals




Arbutus Biopharma




Arrowhead Pharmaceuticals

NCT02738008, NCT02349126, NCT02604199, NCT02604212, NCT02577029, NCT02065336, NCT02452528



Arrowhead Pharmaceuticals



Table 1: Current and Former RNAi Drug Candidates For Hepatitis B

RNAi Therapy In A Nutshell

The key to understanding RNA medicine is to first comprehend the central dogma of biology, the chain of command in the cellular environment. Made up of amino acids, proteins are considered the workhorse of the cell and are responsible for its structure and function. In order to create these proteins, the Deoxynucleic Acid (DNA) transcribes information by way of Ribonucleic Acid (RNA). The RNA then carries this information from the nucleus to the ribosomes in the cytoplasm, where it is then translated in the ribosomes in order to manufacture specific proteins. Related image

Figure 2: Central Dogma of Molecular Biology. Credit: Georgia State University

Traditional small-molecule drugs such as NUCs target the viral proteins and enzymes or inhibit their actions in order to prevent the virus from carrying out its activity in the cellular environment. RNA therapy, however, attacks the source of these proteins by interfering with and destroying the viral RNA. With the viral RNA compromised, the virus is unable to carry out the orders from the viral DNA and form viral proteins, which are essential to the life cycle of the virus. RNAi therapy works by using compounds such as microRNA (miRNA) or small interfering RNA (siRNA) to interfere with and ultimately destroy the pregenomic viral RNA (pgRNA) responsible for the formation of viral proteins.

Image result for rnai hbv

Figure 3: A comparison of HBV Pathway Inhibitor by NUC Therapy and RNAi Therapy. Credit: Gish, Robert G. "Synthetic RNAi triggers and their use in chronic hepatitis B therapies with curative intent"

With the exception of Arbutus Biopharma's ARB-1467 and Arrowhead's ARO-HBV, most RNAi candidates for Hepatitis B are in preclinical stages. Despite their early clinical stage, many of these small-cap companies have demonstrated what they believe are excellent preclinical and early-stage results and contend that their compounds will play a pivotal role in the search for a Hepatitis B cure. Understandably, such positive results can attract plenty of investor dollars and partnership offerings. However, investors who are bullish on the prospects of RNAi therapeutics are unlikely to see a return on their investments. A closer examination of this data as well as the recent history of RNAi drug failures and setbacks will reveal that these agents are unlikely to effectively demonstrate a tangible therapeutic advantage over the current standard of care.

The HBsAg Fallacy

The history of drug development for Hepatitis B has been relatively slow and quiet. To date, the market for CHB therapeutics has been dominated by various NUCs and Interferon agents. Both types of drugs have been utilized to keep the virus at bay by inhibiting viral replication and disease progression. The extent of the Hepatitis B Virus is monitored by the levels of viral DNA in the blood serum, with high levels representing an uncontrolled and progressing disease and low viral levels indicating a less active or controlled disease. It was found that even if medication could bring the levels of viral DNA to the point where it was undetectable in most cases, the patient was still not cured in the vast majority of cases. Despite undetectable levels of viral DNA, the Hepatitis B virus could not be completely eradicated from the body. HBV DNA levels are an excellent marker of the extent and activity of the disease but were found to be unreliable as a marker for disease status.

Researchers began to use a biomarker known as the Hepatitis B Surface Antigen (HBsAg) in order to diagnose patients and to gauge whether or not the infection was resolved during a course of therapy. HBsAg is a viral surface protein found on both true HBV particles (Dane particles) and so-called 'dummy' particles which are devoid of viral DNA. The virus creates both types of particles in order to trick and overwhelm the immune system. If the immune system is able to fight off the virus or establish immunity, HBsAg levels will be cleared from the blood serum and signify that the infection has been 'resolved'.

Although highly effective at clearing the level of HBV-DNA in the blood serum and ceasing the progression of the disease, the current standard of care (NUCs and Interferon) is unable to clear significant levels of HBsAg from the blood serum. RNAi drugs seek to overcome this disadvantage by work synergistically with NUCs and Interferon agents in order to reduce both HBV DNA and HBsAg. By attacking the virus prior to pregenomic RNA (pgRNA) translation, RNAi agents claim to not only inhibit the reverse transcription process targeted by NUCs but also the synthesis of other key targets outside the reach of current antiviral medicines such as HBcAg (core antigen), HBx (X-protein), and more importantly, HBsAg. With HBsAg reduction as their primary clinical goal, both Arbutus Biopharma and Arrowhead Pharmaceuticals have designed their ARB-1467 and ARO-HBV clinical trials, respectively, to monitor this key antigen in order to gauge the 'effectiveness' of their drugs.

Figure 4: Relative Efficacy of Approved HBV Therapies. Credit: Sofia, Michael J., International Liver Congress

The theory behind HBsAg knockdown is also based on in-vitro studies which have demonstrated that prolonged exposure to high amounts of viral antigens such as HBsAg led to immune suppression and thus ineffective clearance of the virus from the body. However, in a previously published article on Arrowhead Pharmaceuticals' defunct ARC-520 candidate, the Chimera Research Group has called this theory into question and suggested that there was no supporting evidence in human clinical trials to indicate that there is a link between a reduction in viral antigen levels and increased viral clearance.

Although RNAi agents such as ARB-1467 and the defunct ARC-520 have been able to successfully demonstrate a significant knockdown of HBsAg to undetectable levels mid-stage clinical trials, the antigen levels were shown to have rebounded once the patients ceased RNAi therapy. This rebound indicates that no RNAi candidates have been able to demonstrate a successful and sustained viral clearance in humans. Furthermore, RNAi as a monotherapy has not been shown to demonstrate a dramatic reduction in HBV-DNA, HBcAg, or HBV-RNA clearance. Rather it only provides a slight synergistic effect on HBV-DNA levels when combined with NUCs or Interferon agents.

Figure 5: ARB-1467 and Entecavir Serum HBV DNA and Serum HBsAg Reductions. Credit: Sofia, Michael J., International Liver Congress

This information has allowed us to conclude that, akin to HBV-DNA levels in the blood, undetectable levels of HBsAg are not always an accurate indicator of a sustained virological response. Furthermore, the data presented from the ARB-1467 studies have called the theory linking a reduction in antigen levels to viral clearance levels into question as the data fails to demonstrate that RNAi's HBsAg reductions had produced a significant effect on HBV-DNA levels.

If we follow the data, we can see that as a monotherapy, RNAi can significantly lower the levels of HBsAg and HBV-DNA. However, compared to NUCs, RNAi's effect on viral clearance (HBV-DNA) is not as dramatic. Although it appears to provide a synergistic benefit in lowering the HBV-DNA levels when combined with NUCs, the benefit does not appear to be significant. If the data shows that undetectable levels of HBsAg are not indicative of a cure and do not lead to significant viral clearance, the addition of RNAi to a treatment regimen of NUCs or Interferon does not appear to provide any tangible therapeutic effect. In fact, all RNAi does is place a blindfold over the disease that continues to linger in the body.

A History of Failures and Setbacks

Perhaps one of the most memorable and significant RNAi letdowns took place in November 2016 when Arrowhead's lead Hepatitis B candidate ARC-520 was slapped with a clinical hold during Phase 2 trials. The FDA initiated the clinical hold on several Arrowhead RNAi programs, including ARC-520, ARC-521, and ARC-AAT due to potential safety issues with their delivery platform known as EX1. ARC-520 was perhaps billed as one of the most promising drugs not only in Arrowhead's pipeline but the entire Hepatitis B field. Combination studies with NUCs had shown great promise in knocking down the viral load and HBsAg. Investors were excited, the Hepatitis B community was hopeful, and the entire RNAi field was watching.

However, on November 9, 2016, the FDA had announced that it would place a clinical hold on the drug candidates due to the multiple deaths of nonhuman primates treated with high doses of ARC-520 in preclinical studies. Arrowhead CEO Dr. Christopher Anzalone hypothesized that the deaths were caused by dose-related drug-induced toxicology. To everyone's dismay, Arrowhead decided to gut research on the three drug candidates and axed 30% of its workforce in order to conserve cash. Arrowhead's shares plunged from a high of $6.18 on November 8, 2016, to an astounding low of $1.20 on December 21, 2016, and the company found itself back to square one.

The old stock market adage "past performance does not predict future returns" is applicable to RNAi and the biotech industry as a whole. It would not be wise to try to predict the success or failure of current or future RNAi drug candidates based on the setbacks or failures of previous drug candidates. Although it is not a predictor, it is, however, prudent to keep in mind that three of the five RNAi companies currently working on RNAi CHB medicines have previously failed to deliver on not only Hepatitis B drug candidates but RNAi drugs for other disease areas as well. It is also important to remember that despite 16 years of clinical trials, no RNAi drugs have made it past the FDA's New Drug Application (NDA) stage. Therefore, it is critical to recognize that the threat of future RNAi drug failures remains a real possibility. Investors that were once hopeful on Arbutus Biopharma's Ebola drug (TKM-EBOLA) or the second generation RNAi HBV drug ARB-1740, Alnylam's hereditary ATTR amyloidosis drug Revusiran or HBV candidate ALN-HBV, or Dicerna Pharmaceutical's first generation primary Hyperoxaluria drug DCR-PHXC or multi-cancer drug candidate DCR-MYC, or Arrowhead's first generation Alpha-1 Antitrypsin drug candidate ARC-AAT or HBV candidates ARC-520 and ARC-521 were left licking their wounds as these candidates were shelved due to drug efficacy issues or safety concerns.

Prohibitive Costs and Inaccessibility to a Large Population of Hepatitis B Patients

In the event that an RNAi drug candidate for CHB succeeds in clinical trials and makes it to the consumer market, it is likely to come with an unjustifiably high price tag. Unfortunately, with a lack of approved RNAi drugs and studies conducted analyzing potential RNAi drug costs for Hepatitis B, we only make assumptions based on analyst cost predictions for Alnylam's Patisiran and the current costs of Antisense RNA medicines.

Analysts expect that Patisiran, an RNAi candidate currently being reviewed for FDA approval for the treatment of Hereditary ATTR Amyloidosis, could fetch for anywhere between $200,000 and $400,000 per patient per year. Such a high cost is expected due to the rarity of the disease (20,000 to 30,000 people afflicted worldwide) and the complexity of the therapeutic platform. Antisense Oligonucleotide drugs such as Sarepta's (NASDAQ:SRPT) Duchenne Muscular Dystrophy drug Exondys 51 and Ionis' (NASDAQ:IONS) homozygous familial hypercholesterolemia drug Kynamro cost approximately $300,000 and $176,000, respectively. Biogen's (NASDAQ:BIIB) antisense drug Spinraza is priced at $750,000 in the first year and $350,000 per year thereafter for the treatment of Spinal Muscular Atrophy.

The potential cost structure of RNAi medicines for Hepatitis B remains unclear, however, predominately due to the sheer difference in the vast population size of CHB patients in contrast to the significantly smaller population of patients afflicted with conditions such as Hereditary ATTR Amyloidosis, Duchenne Muscular Dystrophy, homozygous familial, and Spinal Muscular Atrophy. However, due to the high costs of development and the complexity of RNAi medicines, we can expect the costs will be significantly higher than the cost of simpler small-molecule drugs.

According to GoodRx.com, Gilead Sciences' (NASDAQ:GILD) most advanced Reverse Transcriptase Inhibitor drug Vemlidy (a small-molecule drug) is estimated to cost patients $12,756 per year and Interferon Alfa-2a agent Pegasys as much as $42,708 per year in the United States. The prospective cost of newer and more advanced RNAi medicines is certain to eclipse the costs of Hepatitis B drugs such as Vemlidy and Pegasys. Furthermore, RNAi drugs such as Arrowhead's ARO-HBV and Arbutus's ARB-1467 are designed to be given as weekly, bi-weekly, or monthly injections. The administration of these agents is most likely to be performed in a medical outpatient setting under the care and watchful eye of trained medical professionals. This will undoubtedly add to the total costs of RNAi therapy.

Unless RNAi agents can be shown to be as effective as NUCs or Interferon agents in reducing the viral load, their 'synergistic' effect will require that they'd be utilized as part of a 2 or 3-drug combination therapy regimen which will include a NUC and/or Interferon agent. This will undoubtedly add even more cost to patients.

The World Health Organization estimates that between 5% and 10% of the adult population in Sub-Saharan Africa, East Asia, Amazon, and Eastern Europe are chronically infected with Hepatitis B. Furthermore, the CDC indicates that Saudi Arabia, North Canada, Greenland, and several Central Asian countries also have a high prevalence of Chronic Hepatitis B (8% or more of the population). With vast majority of the world's Chronic Hepatitis B cases concentrated in less developed and poorer Sub-Saharan Africa and East Asia countries, costly CHB medication is generally inaccessible for a large percentage of patients, according to Lancet Global Health. The Lancet report found that due to unaffordable pricing and the lack of generic Tenofovir-based NUC agents, accessibility to Hepatitis B medication has been limited. A price of $48 per patient per year for generic CHB medicine is believed to be reasonable for accessibility to this population. Image result for hbv prevalence by country

Figure 6: Global Chronic Hepatitis B Prevalence. Source: Center For Disease Control

Due to the high development costs and complexity of RNAi, it is unlikely that RNAi drug prices can to such a degree in order to reach the majority of the Hepatitis B population. That in effect limits RNAi drug access to a much smaller but wealthier western Hepatitis B population. However, it is unlikely that patients, insurance companies, or government agencies can afford to pay will be willing to fork over potentially six figures a year for a drug with questionable therapeutic effects.


RNA interference is an incredible biotech modality that has tremendous potential in the treatment of many clinical diseases and conditions. However, investors who are bullish on the prospects of RNAi therapeutics should heed caution as these agents have been historically plagued by clinical failures and setbacks, and in the realm of Hepatitis B, have been unable to effectively demonstrate a tangible therapeutic advantage over the current standard of care. With potentially prohibitive costs, RNAi is unlikely to reach the vast majority of Hepatitis B patients. For these reasons, RNAi should not be considered a viable class of therapeutics for Chronic Hepatitis B. Alnylam Pharmaceuticals, Arbutus Biopharma Corporation, Arrowhead Pharmaceuticals, Arcturus Therapeutics, Dicerna Pharmaceuticals, and Benitec Biopharma remain a sell.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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