“Pain makes man think. Thought makes man wise. Wisdom makes life endurable.”
-John Patrick, Tea House of the August Moon
There are few things in life more satisfying than the exhilarating thrill of discovery. Investing in ribonucleic acid (RNA) biotechnology does have its moments, despite a few notable, recent shareholder disappointments. RNA therapeutics in the last year have created a lot of excitement now evident in the investment world. With a solid research foundation established for understanding and elucidating various endogenous regulatory mechanisms, RNA mimetic drugs designed to correct biological dysfunction are moving forward in 'enlightening' fashion. A host of startups, acquisitions, mergers and collaborations have made their debut, intent on developing applications ranging from treating infectious disease to developing autoimmune and cancer therapies. Important RNA biology in agronomy is also in play, where alternatives are being sought for small molecule herbicides, pesticides and antibiotics that were intended to promote healthy growth and halt infection. And we all (even Luddites) know where that road paved with good intentions has led in the past....to the devil we know.
Exploiting efficient nucleic acid sequencing methods and bio-informatics for discovery, design and optimization of RNA biologic mimetics have finally yielded results in the form of newly approved products, with a slew of promising candidates in clinical pipelines subject to the FDA gatekeeper. The cost efficiency and pace of these advances outstrip less predictable and quite expensive shotgun approaches for teasing desired molecular interactions away from deleterious side effects, the traditional modus operandi for developing classes of drugs like small molecule organics or even monoclonal antibodies. And yet it must be appreciated that so many complexities of RNA biology still remain to be understood or even discovered. This article discusses interesting companies working in this field that have come to the author's attention.
Let's start with one of the most notable shareholder disappointments in 2018: Geron (GERN). Originally founded as a stem cell company in the 'Jurassic' era of RNA drug development and bleeding red ink, it devolved into a questionable salvage operation by current management. Dreams of the company discovering the fountain of youth with stem cells were jettisoned. GERN essentially became a holding company for commercial development rights to patents associated with its anti-sense RNA telomerase inhibitor (delivered via infusion): Imetelstat. Telomerase is upregulated in a great majority of cancers. The mechanism of action (MOA) of Imetelstat was initially conjectured to be confined to halting immortalization of differentiated cancer stem cells. This would then force the cells to subsequently undergo normal intrinsic apoptosis (eventually) once the cell's hayflick number was reached. A slew of clinical trials evaluating Imetelstat's efficacy in solid tumors did not meet the bar of expectations. Failing forward, the drug caught the attention of Johnson and Johnson (JNJ) after pilot trials at the Mayo clinic and elsewhere reported promising results treating related heme malignancies (MF, MDS and ET) in a 'frontline' setting.
GERN subsequently entered into an initial, modest collaboration with JNJ to fund and advance two clinical trials (IMbark and IMerge) evaluating Imetelstat efficacy for treating MF and MDS. All Imetelstat commercial rights were signed over to JNJ, dependent on a positive continuation decision by JNJ to commercialize the drug. It is interesting to note Dr. John Scarlett, GERN's current CEO, was previously associated with carfilzomib (while CEO of Proteolix), a blockbuster drug treating Multiple Myeloma (MM), which was acquired by Onyx Pharmaceuticals (itself acquired by Amgen) at a bargain price. Giving the benefit of the doubt, Geron investors made the tacit assumption this was a lesson learned prior to the deal negotiated with JNJ.
All further in-house chemistry to reduce Imetelstat's toxicity profile (or improve its therapeutic index) was halted after the collaboration--this at a time when there was an FDA concern of liver toxicity for RNA drugs. It appeared as though GERN was being set-up for acquisition. Meanwhile back in the lab, concurrent fascinating research by Nobel laureates Blackburn and Cech shed more light on Imetelstat's MOA. While the MF and MDS trials were being conducted, basic research helped to explain why intrinsic apoptosis was observed in some types of cells upon treatment with Imetelstat, before the cells reached their hayflick number. An important new class of RNA known as lncRNA (long non-coding RNA) was also being recognized in this time frame. Imetelstat's MOA, still not clearly understood, is intertwined with the anti-sense RNA inhibition of hTR, the lncRNA component of telomerase. By an act of serendipity, Geron had survived the Jurassic era of RNA therapeutics development and fortuitously had the first drug in clinical trials known to directly interact with the functions of an important regulatory lncRNA.
Late September 2018 turned out to be the high water mark for GERN. The science was being clinically validated along with increasing evidence combinations with Imetelstat would be the basis for a platform therapy. An acceptable safety profile for Imetelstat was demonstrated to the FDA's satisfaction as the trials progressed and there was evidence of benefit for very sick MF patients relapsed/refractory to approved front line therapy often characterized as palliative. IMerge, the MDS clinical trial, had better results than competitor Acceleron/Celgene's luspatercept for a majority of MDS patients. Then there were the tea leaves investors were reading from new JNJ positions advertised to lay the foundation for Imetelstat's commercial launch, shortly before the continuation decision was due. Along with rumblings of JNJ interest in RNA, Imetelstat in early September was still on JNJ's list of planned filings ....until the negative continuation decision was issued later that month. Welcome to the big pharma biosphere.
Until the implosion of GERN's stock price with the calamitous JNJ decision, investors were willing to overlook management deficiencies in primary responsibilities, with respect to guarding shareholder value. The exorbitant executive compensation, the lack of proper communication or transparency in shareholder meetings, and hind-sight criticisms over lost time and money (due to the manner in which the trials were designed with assumed competent oversight by Geron personnel) have all left a residue of toxic sentiment on Wall Street, including resentment from longtime-shareholders as to how events transpired.
Prognosis: GERONimo is now on the run with a long history of dysfunction. With the exception of traders, longtime investors may have reached the point of no return; prospects are dim without an ally. To be profitable on its own will take a miracle...they do happen. My not so thrilling discovery: never underestimate the importance of competent, shareholder focused management.
Now on to something more pleasant: investor discovery of Arrowhead Pharmaceuticals (ARWR). Shortly after parting ways with GERN, a press release in early October 2018 announced a $3.7 billion collaboration between JNJ and ARWR with a substantial upfront payment in cash and a $75 million ARWR stock purchase by JNJ (@ $23/share), enough to fund ARWR's independent pipeline for years without diluting its share price. Milestone payments were built into the collaboration for regulatory deliverables. Strangely enough, many investors initially soured on the deal and hammered the stock—fears of another Geron hangover? On an ARWR conference call, CEO Christopher Anzalone declared it as one of the largest non-acquisitive collaborations ever, in the pharmaceutical industry.
This is big news and what a contrast to the negotiating skills of Geron management. Perhaps what is most important, ARWR retains control of its drug candidate development while JNJ's market dominance enables and is responsible for a swift commercial ramp-up after anticipated FDA approval of the furthest advanced drug candidate in the collaboration: ARO-HBV. Besides JNJ, ARWR also has a collaboration with Amgen (AMGN) investigating dyslipidemia.
So what makes ARWR the real deal? More than anything it's the stunning achievements demonstrated in a hyper-competitive environment and the development pace of the company's subcutaneous TRiM (Targeted RNAi Molecule) platform. RNAi drugs are double stranded and stem from Nobel laureate work published in 1998 by Craig Mello and Andrew Fire discovering RNA interference (RNAi). The road has not been easy; there were earlier setbacks with the death of a non-human primate associated with its previous pegylated DPC (Dynamic Poly-Conjugate) infused delivery system. The company turned things around in just a year pushing TriM to the forefront, vastly improving the therapeutic index for its RNAi drugs in the process. The science necessary to develop a therapeutic to treat Hepatitis B virus (HBV) was advanced in conjunction with work by Professor Stephen Locarnini (and others).
ARWR also revealed it has candidates for extra-hepatic delivery to the kidney, lung and muscle; something that has been ignored or a major stumbling block for more established RNA companies like Alnylam (ALNY) and Ionis (IONS). ALNY did recently announce an intrathecal drug candidate (physically delivered into spinal fluid); it doesn't compare to the versatility of ARWR's TRiM extrahepatic delivery platform. That being stated, there are many therapeutic RNA targets in the liver that both ALNY and IONS have in their pipelines.
OK, but are there any FDA approved RNA therapeutics on the market? Yes! The honor of the first RNAi approved drug goes to ALNY in August of 2018 with Onpattro, while anti-sense RNA drugs developed by IONS were first on the market with Kynamro (2013), followed by Spinraza (2016) and Tegsedi (2018). Key events on the horizon for ARWR in the next few months concern its drug candidates ARO-HBV, ARO-AAT, AMG890 and ARO-ANG3.
Prognosis: the new beginning of a 'beautiful friendship' of RNAi with Wall Street.
One company that reports 'self-delivery' hybrid RNAi/anti-sense RNA is tiny Phio Pharmaceuticals (RXII), a survivor spinoff of a company(Argonaut Pharmaceuticals) originally founded in part by Craig Mello. RXII is currently trading in pink sheet territory. However its recently published technology approach claims efficacy by treating effector cells ex-vivo to improve immuno-oncology checkpoint antibody therapeutics. RXII reminds me of Nantkwest (NK): Caveat Emptor.
While RNAi and anti-sense RNA therapeutics are often designed to halt production of harmful or mutated proteins, ProQR (PRQR) has exploited endogenous deaminase activity by designing RNA templates to effect Adenosine (A) to Inosine (I) editing in RNA sequence transcripts. Inosine is read as Guanine (G) in mRNA templates for proteins. There are over 20,000 G to A mutations known to cause disease that could be potentially treated with this technique. Advantages of this RNA transcript editing approach is: (1) its comparative simplicity, compared to DNA gene editing methods; and (2) it isn't permanent, in case off-target effects arise. Prognosis: Fascinating, if not yet profitable!
Now let's try to get some intelligence on super-secret squirrel company Moderna (MRNA), which made its debut early this year with a monstrous IPO. MRNA states it is focused on producing products endogenously from RNA therapeutics; the concept of biologic drug manufacturing in concert with the patient's cells. Other than that, very little substantive science has been disclosed. With not a single product in advanced clinical trials and management that has a long way to go to prove itself, the company's market cap is more than a bit concerning.
There are many more interesting RNA therapeutics companies to discuss, however this article is getting long and due diligence would be best served for a discussion at another time, in particular the Monsanto (MON)/Bayer (OTCPK:BAYRY) merger, as well as companies focused on another less advanced class of RNA therapeutics known as microRNAs (miRNA). What all RNA therapeutics companies have in common is that their innovation did not originate in big pharma corporate atmospheres.
What we also know is RNA therapeutics development costs are going lower, delivering more and faster because of efficient systematic approaches to understanding the MOA of disease. At the recent bipartisan US senate finance committee hearing excoriating big pharma for abuses and outrageous drug prices, Senator Widen reported that 50% of pharmaceutical profits are accrued globally by only ten dominant companies, nine of them pharmaceutical giants. Innovative, FDA approved products advancing healthcare from smaller companies (e.g. DVAX, MNKD, and VSTM) have another hurdle to face besides bearing the technology risk: lengthy times to market access. Being assimilated is usually the end result for the innovators as long as it suits leviathan. Is it only a matter of time before more fundamental advancements come under threat as they have for antibiotics research? Just ask Nabriva (NBRV) or better yet take a look at its stock performance. Is suffering strong-arm tactics via regulatory and market capture a proper reward for innovation? The caveat here for this investor is to remember that while the science delivers, business decisions and the manner in which they are executed carry the clout even in healthcare, at the moment. Sic Transit Gloria
Disclosure: I am/we are long ARWR. 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.