RNA interference (RNAi) is a very new life science technology that is largely attributed to Andrew Fire and Craig Mello, the recipients of the 2006 Noble Prize in Physiology or Medicine. Using RNAi, scientists can manipulate the expression of DNA by selectively disabling certain messenger RNA (mRNA) molecules. If DNA can be considered a "book" of information, RNAi is the technology that allows scientists to edit the text before publication.
RNAi molecules are unstable, which is why delivery mechanisms for these agents matter – a lot. And since it's a cutting edge field, only a handful of companies and institutions have decent RNAi delivery platforms. Due to the huge commercial potential of RNAi, most biotech investors are (or should be) watching the development quite closely.
There are four early-mid stage RNAi companies we are actively following, and we feel that these companies can be considered first "generation" of RNA-focused biotech companies. It's easy to understand why all of these companies have done well in the last 6 months, but it gets more complicated when you try to evaluate the valuations of these companies and their pipelines.
We will now provide updated reviews on each of these companies.
Alnylam (ALNY)
Now trading at a $5.2 B valuation after a 2-year 550% rally, Alnylam is one of the most successful RNAi stories out there. Big pharma has also shown direct interest in Alnylam, evidenced by the $700 M investment made into the company by Sanofi (SNY).
The company's pipeline has grown, and there is a lot going on, but we are giving a lot of attention to ALN-TTR02 – an upcoming treatment for TTR-Mediated Amyloidosis. Note that the drug is now called Patisiran.
Amyloidosis is a disease where changes in protein structure cause massive buildups of these proteins in the body. These growths are known as amyloids, and can be very dangerous when they interfere with normal body function. It is incurable, and we see huge potential for Patisiran and the subcutaneous version of this drug after potential FDA approval.
The company provided a "Key 2014" goals update in January that explains what investors should expect this year, and when.
Since our last note on Alnylam, the stock has roughly doubled. The company seems to have decent momentum going into 2014 with a string of catalysts from the 5x15 program, but we see it as an expensive buy at $80+/share. ALNY might be a better bet after a double-digit correction, because we currently see a "neutral" risk/reward profile.
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Tekmira (TKMR)
Tekmira is a modestly-valued RNA company that is most famous for its lipid nanoparticle (LNP) RNAi delivery technology. Investors may remember that this LNP delivery technology was the subject of a heated legal debate between Tekmira and Alnylam, which was settled with a payment of $65 M. Tekmira is also well known for its Marqibo partnership with Spectrum, and its early-stage partnership with Bristol-Myers Squibb (BMY).
But that's old news. Tekmira is now putting a lot of effort into developing its wholly-owned novel drug candidates. Of the seven programs listed on the site, TKM-PLK1 is the only one currently in clinical development.
TKM-PLK1 targets a protein known as PLK1, which has been implicated many times in certain types of cancers. The protein triggers certain cancer-propagating mechanisms that allow tumors to grow. According to the company's trial data, PLK1 inhibition demonstrated objective clinical efficacy in patients with Gastrointestinal Neuroendocrine Tumors (GI-NET) or Adrenocortical Carcinoma (ACC). I don't really care for Phase I efficacy data, but a good sign is a good sign.
One of the really cool things about Tekmira is the fact that the company still generates a lot of revenue from the LNP platform. In Q3 2013, the Marqibo deal paid out $1 M due to an accelerated approval received by Spectrum. More recently, Tekmira confirmed the first $14.5 M of a $16.5 M IP licensing deal with Monsanto (MON).
As the company morphs into a drug developer, this revenue will be needed to offset higher cashburn. However, this strategy makes it possible for this company to become another Alnylam. To raise additional capital, Tekmira announced the registration of up to $150 M of TKMR common. While this is potentially dilutive, it is a smart move by Tekmira to introduce a flexible financing option that can take advantage of its 140% rally since the
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