Dicerna Announces Series A, Nastech Announces Spin-Out of MDRNA

As we wrote about two weeks ago here, the new RNAi play Dicerna has closed its Series A, which was led by Oxford Bioscience Partners with participation from Skyline Ventures (which coincidentally concluded its own fundraising recently, which it announced today and VentureBeat reports on here). As anticipated, Dicerna brought in $13 million to advance its dicer-substrate RNAi projects. The full description of the Dicerna deal and its IP and technology is available in this month's Start-Up.

And, as we also pointed out back on Hallowe'en, Dicerna's IP, licensed exclusively from City of Hope, is nevertheless not quite 'exclusive.' Nastech Pharmaceutical coincidentally said yesterday--and elaborated on in a conference call today--that it would be spinning out its own RNA interference assets, also built around a license to that same Rossi/Behlke IP, into a newco called MDRNA Inc.

Nastech chairman/pres/CEO Steven Quay, MD, PhD, said on today's conference call that the current plan was to seek a private investment in MDRNA from institutional investors or VCs, followed by a Nasdaq listing for the firm.

Beyond the company's core IP and ongoing RNAi programs at Nastech that will be transferred to the newco, relatively little is known about MDRNA. Quay offered no details on who will manage the company, who will advise it and who will comprise the board--though "the boards are being built as we speak," he said.

Nastech's hard luck, (most recently) dominated by the decision of partner Procter and Gamble to give up on the companies' nasal-delivery osteoporosis project and documented here by the WSJ's Health Blog, has led to predictable restructuring. That restructuring--also announced last night and discussed today on Nastech's call--either forced the company's hand in disclosure of the spin-out or perhaps more likely led to the decision to offload the assets in the first place, which will save the company $20 million in 2008 and shift approx 40 of its employees (70 positions are targeted in the restructuring).

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Dicerna Crashes RNAi Party

Life often imitates art, as the saying goes.

In “This Is Spinal Tap,” the classic rock and roll mockumentary chronicling the eponymous band, guitarist Nigel Tufnel famously brags that his amplifiers, unlike conventional ones that max out at a volume of ten, were specially designed to go “one louder.”

“These go to eleven,” he deadpans.

IN VIVO Blog has learned that in the world of RNA interference (RNAi), a new company aims to make some noise of its own not by going louder, but longer, while at the same time circumventing the IP barriers to entry in the exciting field.

Dicerna Pharmaceuticals Inc. is based on technology called Dicer substrate small interfering RNAs developed by co-founders John Rossi, PhD, from the City of Hope National Medical Center’s Beckman Research Institute and Mark Behlke, MD, PhD, from Integrated DNA Technologies Inc. (IDT). Dicer substrate siRNAs differ from traditional siRNA employed by companies like Alnylam Pharmaceuticals and Merck & Co.’s Sirna Therapeutics in that they are slightly longer oligonucleotides—between 26 and 30 base pairs (bp) versus 21bp for standard siRNA—which then get trimmed down to size once inside the cell.

Dicerna is expected to announce its $13 million Series A, which will be led by Oxford Bioscience Partners, at some point in November.

Dicerna hopes that its longer molecules not only confer an IP workaround strategy in the hot area of RNA interference therapeutics, but also a pipeline of highly potent drug candidates that will pique the interest of quite a few Big Pharma that have been so far left out of the increasingly expensive but important RNAi arms race.

The seminal patent licensed by both Alnylam and Sirna named after RNAi pioneer Thomas Tuschl, PhD, only covers isolated double-stranded oligonucleotides from 19 bps up to 25 bps, Dicerna co-founder and chief executive James Jenson tells IN VIVO Blog. Tuschl’s landmark work in RNA interference was conducted in Drosophila, says Jenson. “Beyond 21mers the activity of siRNAs drops off in Drosophila, which is reflected in the Tuschl patent applications, and the literature at the time teaches that limitation. It’s where the streetlight was shining and where the research was focused,” he says.

The Rossi and Behlke IP, owned by City of Hope and IDT, allows an adjacent doorway into RNAi from an IP perspective, Jenson claims. What’s more, Rossi and colleagues somewhat surprisingly discovered, in mammalian cells longer double-stranded RNAs worked better than the 21mers thought to be optimal under Tuschl; 26-30mer oligos are “typically five to ten fold more potent,” says Jenson, perhaps resulting in a longer duration of action that has been demonstrated in vitro by Rossi, et al. “In a technology where adequate delivery has been a challenge, the increased potency could be important,” says Jenson. The researchers have been publishing their results with Dicer substrate siRNA since 2005 in journals such as Nature Biotechnology and Nucleic Acid Research.

The process of RNA interference begins when the Dicer enzyme cleaves double-stranded RNA into 21bp oligonucleotides, which are then incorporated into the so-called RNA-induced silencing complex (RISC); RISC then targets messenger RNA sequences determined by the siRNA sequence. Because one end of Dicerna’s 30bp Dicer-substrate siRNAs will be clipped by Dicer and removed to form the active 21mer, various targeting agents can be attached to the non-coding end of the molecule, says Jenson.

Jenson has been busy reaching out certain investors and potential partners since completing an agreement with City of Hope in late September on a license to the IP. He’s been joined by Dicerna chairman and co-founder Douglas Fambrough, PhD, a general partner at Oxford and a former director of, and early investor in, Sirna.

Dicerna's IP hasn’t gone completely unnoticed; in fact, Dicerna isn’t even the first company to license it. Nastech Pharmaceutical Co. gained a more limited license to the technology in late 2006; it holds exclusive rights to the Dicer-substrate technology for five undisclosed targets and broad, nonexclusive rights to siRNAs directed against all mammalian targets (subject to undisclosed limitations).

Fambrough says that Sirna held discussions to gain access to the technology as well, but “for whatever reason those talks never went anywhere. When we sold the company to Merck I was aware of the IP and Jim Jenson and I had been talking about doing something in RNAi for oncology, but we thought, why just go after oncology?”

Dicerna now has an exclusive license for all remaining rights on the Dicer-substrate IP, says Fambrough, and previous licensees won’t affect Dicerna’s plans or the value of the IP to potential acquirers, partners or investors, he maintains.

Nevertheless, it’s still early days. “Only recently have people woken up to this additional doorway into the RNAi space,” says Jenson. In part, he suggests, that’s because Alnylam and Sirna, the companies with access to the Tuschl IP, have done such a good job convincing the world that theirs is the only pathway. Those two firms have certainly been at the forefront of the field, consolidating IP early and almost exclusively garnering the attention of Big Pharma. And some observers feel the patent battles—which may heat up as product candidates inch toward the market—have barely begun.

Alnylam’s early deals gave a small handful of companies, led by Novartis, an early entry into the field. Merck broke new ground in RNAi dealmaking when it acquired Sirna in late 2006 for $1.1 billion. Most recently, Alnylam has upped the ante with a broad strategic alliance with Roche, whereby Roche has paid $331 million for a non-exclusive license to Alnylam’s platform and IP over several therapeutic areas.

Dicerna hasn't specified a therapeutic focus, reflecting perhaps the reality that the firm’s initial targets will likely be dictated by its future pharmaceutical partners as much as by any internal strategy. Those pharma alliances will almost certainly be struck with one eye on an M&A exit.

"Ultimately the technology belongs in a large pharmaceutical company, and we would like to partner early on in ways that do not jeopardize an eventual acquisition and in ways that aren’t overly dilutive,” says Jenson. “There are other approaches out there but few if any that will allow you to compete with Tuschl this way.”

The full text of this article will appear in the November issue of START-UP.

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Alnylam/Roche: IP, IP, Hooray!

Alnylam and Roche's major alliance in RNA interference could be worth more than $1 billion plus royaties to the biotech company. Unusually for an RNAi deal, those biobucks terms aren't completely back-end-loaded, and Alnylam will walk away on close with $331 million in upfront payments.

Two minutes in the penalty box up-front, with up to
twenty-three hours in total potential penalty minutes

So what does $331 million buy these days? Roche is taking a roughly 5% stake in the RNAi company, buying 1.975 million shares at $21.50 apiece, a more than 40% premium to the company's Friday close (though below the company's 52-week high). (Those shares--already turning a profit--are subject to a two-year lockup, and the companies agreed to a three-year standstill agreement.) Roche is also snapping up Alnylam's European research site in Kulmbach, Germany, complete with 40 employees, which Alnylam values at $15 million.

That leaves roughly $275 million, which covers Roche's non-exclusive license to all of Alnylam's existing IP in four therapeutic areas: oncology, respiratory diseases, metabolic diseases, and a subset of liver disease (Alnylam will collaborate with Roche on one or more targets within those areas). Roche can tack on additional therapeutic areas, for a price.

That's a lot of dough considering Alnylam can turn around and license its IP in those same areas tomorrow to another pharmaceutical company. According to CEO John Maraganore: "The license to Roche is non-exclusive, so the targets they can work on , as long as they haven't been exclusively licensed to other partners, Roche can pursue. But we are free to license those same fields to other third parties and we are free ourselves to work on any targets in those fields."

Talk about monetizing IP. This alliance changes the game in RNAi, which until the 2006 headline grabbing acquisition of Sirna Therapeutics by Merck had been a field dominated by deals boasting big-biobucks figures but small upfront payments.

Earlier this year we talked about the proliferation of RNAi technology beyond the confines of Alnylam and Merck, thanks to a surge of investment and drug development advances. It is this phenomenon that has enabled companies like Silence Therapeutics (nee SR Pharma) to strike its RNAi deal with AstraZeneca, certainly a validating moment for that biotech. But it remains a relatively select club compared to the various protein therapeutics-enabling technologies available as antibodies began ot hit their stride. Can purveyors of other technology platforms emulate Alnylam's success?

As we asked then: is there enoughRNAi IP to go around? Apparently there is, but it's pricey. We'll have more on these deals in the next IN VIVO.

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While You Were Dominating the Competition

If you were too busy playing in the Wimbledon semis and finals this weekend (or maybe just watching) to keep up with the news, IN VIVO Blog is here to help.

• Inhibition! Some news out of the International Society on Thrombosis and Haemostasis in Geneva this weekend. First up, Bayer's rivaroxaban was significantly more effective than Sanofi-aventis' Lovenox in preventing blood clots after knee surgery, Reuters reports. Rivaroxaban, a Factor Xa inhibitor, is being developed with Johnson & Johnson. Another Factor Xa inibhitor, Pfizer and BMS' apixiban (which is approximately a year behind rivaroxaban in development), also posted solid results, in a mid-stage trial. Reuters has the story.
  
• Indecision! UK's National Institute for Clinical Excellence (NICE) has changed its mind, and now considers Eli Lilly's Alimta cost-effective in treating mesothelioma in certain patients.


• Interference!! Roche and Alnylam announced this morning a broad alliance in RNAi therapeutics, worth up to $1 billion. Alnylam gets $331 million up-front in cash and equity payments. We hope you're not all RNAi'd out cause there'll be more on this later ...

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AZ, Silence team up in RNAi

AstraZeneca is joining the RNA interference crowd via a deal announced earlier today with Silence Therapeutics (formerly SR Pharma/Atugen). AZ will pay the biotech an upfront fee of ₤7.5 million, two thirds of which is an equity investment in Silence at 146p/share, a 10% premium to the company's recent share price. The companies will focus on respiratory diseases, discovering and developing proprietary siRNA molecules against up to five targets over three years.

The alliance is certainly small potatoes in comparison with the Big Pharma's embrace of other large molecule technologies (see MedImmune etc.), but not wholly out of synch with the vast majority of deals in the RNAi space. Until the conspicuously high-value takeout of Sirna Therapeutics by Merck & Co. last year, just about every siRNA agreement was back-end loaded. With up to $400 million in fees and milestones this one is no different. A more apt comparison would be GSK's April 2006 deal with Sirna in the respiratory area, which netted the biotech only $12 million up-front (half in exchange for equity).

For Silence the AZ backing provides not a small degree of validation in a space that's quickly becoming crowded with variations on a technological theme and a multitude of IP skirmishes. Moreover respiratory disease is not Silence's singular focus--IN VIVO Blog is anticipating a bigger deal in the oncology area. Our most recent coverage of the RNA interference space is here.

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