Expert Financial Analysis and Reporting

Introduction

This is the third of five reports that are intended to give a layman’s overview, first of two technologies that created the biotechnology industry-recombinant DNA and monoclonal antibodies- and three that will importantly shape its future- RNA interference, gene therapy and stem cell therapy. Recombinant DNA and monoclonal antibodies gave rise to some spectacular stock investments-notably Amgen, Biogen and Genentech- and have now become mainstream technologies for the biopharma industry.

My investment hypothesis is that we will have similar opportunities in the just emerging field of RNA interference which is following the introduction of the first commercially significant product arising from recombinant DNA technology by four decades and monoclonal antibodies by three decades. RNA interference holds the promise of being as or potentially more important than monoclonal antibodies to drug development over the next ten, twenty or thirty years. Alnylam and Ionis look to be to RNA interference what Amgen, Biogen and Genentech were to recombinant DNA. In addition, there are several smaller companies that will be factors in this field.

Although I have tried to distill the discussion in this report in a way that someone (like me) who is not that skillful in understanding biological systems can follow, I fear that in some sections of this report, it may be a little hard to follow. If you find this to be the case, I would urge you to skip ahead and come back at a later time to read the section again. I hope that most of the report is comprehensible to the average investor not steeped in cell biology.

Overview of RNA Interference

There are about 200 different types of cells and it estimated that there are 30 trillion cells in total in a human body. They are the building blocks of organs and tissues. Cell functioning is dependent on proteins that  are integral parts of its physical structure and also regulate cellular functions. Almost all human diseases result from a problem in which the quantity of a protein(s) is not properly produced or the protein is mutated resulting in an altering of its biological function.

The genetic code (instructions) for making proteins is contained in genes which are made up of sequences of DNA nucleotides; genes are located on chromosomes in the nucleus of a cell. Humans have about 22,000 genes. In making a protein, this code is transcribed from the gene in a complex series of biochemical steps that results in the creation a genetic molecule called messenger RNA (mRNA). The mRNA carries the instructions for making proteins to ribosomes which are the cell’s factories for manufacturing proteins. Ribosomes read the information contained on the mRNA’s nucleotide sequence and based on this information string together amino acids to form a specific protein. So, the basic instructions for life goes from gene to mRNA to protein production.

For more than 100 years, almost all traditional medicines like small molecule inhibitors or more recently, monoclonal antibody-based therapies have worked to treat disease by targeting  proteins causing the disease after they are produced and doing damage in the body. Over the last two decades two important technologies have emerged that target mRNA and block protein production upstream of conventional drugs and monoclonal antibodies, i.e. before the protein is produced. One builds on a mechanism that occurs in all human cells in which a molecule called short interfering RNA (siRNA) regulates mRNA (effectively it is a feedback mechanism). Synthetic molecules can be developed that are similar to siRNA that then use existing cellular mechanisms to alter or stop the production of a proteins. A second technology can achieve the same result with synthetic oligonucleotides that bind to mRNA; this is called antisense. Both approaches have been shown to be extremely effective.

There are numerous companies involved in siRNA and antisense technology. Alnylam was the pioneer in the development of siRNA and Ionis in antisense. I liken them to Amgen, Biogen and Genentech in recombinant DNA technology. Both have dominant positions with incredibly huge drug pipelines. Both should ride a tsunami wave of drug development resulting from siRNA and antisense technologies that I expect over time will replace many, many of the small molecule and monoclonal antibody approaches used in the current therapeutic armamentarium.

Alnylam offers the analogy that siRNA and antisense approaches are akin to stopping a flood (of proteins) by turning off the faucet as compared with today’s medicines that mop up the floor. These mechanisms offer many potential advantages in the development of disease therapies, including the ability to more effectively target a broad range of genes and proteins with high specificity, and also target disease pathways that have proven difficult to address (not druggable) with traditional small molecule and biologic therapeutics.

Mechanism of Action of siRNA to Silence Genes

Let me start this section be describing in layman’s terms how siRNA technology works. It is based on the understanding of a naturally occurring biological pathway in humans that regulates protein production in a cell. This is essentially a feedback mechanism to prevent over production of a protein. The gene transcription process is initiated by the RNA polymerase 2 molecule. This is followed by some complex biochemical steps that lead to the formation of messenger RNA (mRNA). The mRNA is transported into the cytoplasm of the cell where ribosomes (a structure comprised of RNA and proteins) uses the genetic information encoded on mRNA to string together chains of amino acids (the building blocks of proteins) that are then folded into proteins.

Two other types of RNA molecules are produced in a cell that can bind to mRNA and degrade it, thus reducing or stopping protein production. These are short interfering RNA (siRNA) and micro interfering RNA (miRNA). For reasons that are too complex for me to try to tackle here, drug development is heavily concentrated on siRNA and I will focus this discussion on that molecule. Here are the steps in the biological pathway that result in siRNA molecules silencing gene production (this is probably  the most technologically complicated section):

1. Certain genes code for the production of a double stranded RNA molecule that is a precursor of siRNAs. These bind to a protein called DICER which cuts these RNA molecules into short, double stranded segments approximately 20 to 21 nucleotides long.
2. The resulting short, double stranded RNA then binds to the Argonaut protein in the cytoplasm. Argonaut selects one strand of the RNA that complexes with Argonaut; this is called the guide strand. The other strand is discarded and degraded in the cytoplasm,
3. The combination of this single RNA guide strand, Argonaut and other proteins then form the RNA induced silencing complex or RISC.
4. The guide strand from the siRNA has perfect complementarity to nucleotide sequences on an mRNA that binds RISC to the targeted mRNA. The targeting is precise because it is determined by base pairing between the guide strand RNA of the RISC complex and the messenger RNA. Once bound, RISC catalyzes cleavage of the mRNA and degrades it.
5. The RISC complex is catalytic meaning that after it degrades one mRNA, it can then go on and degrade many more of the same mRNA molecules.
6. Because almost all drug development focuses on siRNAs, I am not going to go into any detail on miRNA. miRNAs are created through a different pathway, but then go through the same process as siRNAs to create RISC and then target it to mRNA. However, only part of the guide strand of miRNA is complimentary to the target segment on the mRNA. This imprecise matching allows miRNA to target hundreds of mRNAs as contrasted to the specificity of siRNA.

Mechanism of Action of Antisense

Like siRNA, antisense technology interrupts the cell’s protein production process by degrading mRNA and preventing its genetic instruction from reaching the ribosome protein production factories, thus inhibiting the production of the protein. Antisense technology synthetically creates single strands of nucleotides that through the base pairing mechanism are designed to target a specific mRNA.

The mRNA sequence of nucleotides that carries the information for protein production is called the sense strand. Antisense technology produces a complimentary, synthetically designed nucleotide chain which binds specifically to the sense strand; this is called the antisense strand. Researchers use information contained in mRNA to design molecules called antisense oligonucleotides (ASOs). to bind to a complimentary nucleotide sequence on the mRNA, Once bound to the target, RNaseH1 RNA-protein complexes in the cytoplasm are recruited and degrade the mRNA. As in the case of siRNA, this process is catalytic. One ASO can degrade numerous mRNAs.

The Enormous Promise of siRNA and Antisense Drugs

It is possible to design siRNAs and antisense oligonucleotides to target the mRNA of any gene that is involved in a disease. This capability means that these technologies can create drugs for virtually all diseases that are now treated by small molecules and monoclonal antibodies, but with greater specificity. They can also address numerous diseases that do not fit into the current druggable target classes and can’t be addressed with the older technologies. Also, certain diseases may be caused by the mutation in one copy of the genetic material (a single allele), in which case a specific siRNA or ASO can target the disease-causing mutation and leave the normal allele intact.

Identification of appropriate drug candidates is straightforward. Once the protein involved in a disease is known or hypothesized, the mRNA corresponding to that target can be determined and bioinformatic tools can be used to design siRNA or antisense drugs that have nucleotide sequences that match those found on the targeted mRNA. Current technology makes this a fairly straightforward process. The process of choosing an siRNA or ASO for development starts with the synthesis and testing of numerous candidates that can bind to that mRNA. Once a candidate is selected, intricate chemical modifications are necessary to confer drug like properties on these candidates.

Targeted Delivery to a Target Cell is the Key to Product Development

During the early days of development, researchers found that siRNA and antisense oligonucleotides worked extremely well in a laboratory setting, but moving from culture dishes in the lab to creating drugs that were effective in humans presented formidable, seemingly unsurmountable hurdles. The early drug candidates had poor pharmaceutical characteristics. When injected into the bloodstream, they were unstable and were often recognized as foreign and attacked by the immune system. The resultant destruction of significant quantities of the drug required high doses to be given intravenously. It was also difficult to target them with precision to tissues in which they would be effective. And when a target cell was reached, there was the further challenge of getting the drug to leave the blood stream and traverse through cell membranes into the interior of cells in order to do their function of degrading mRNA.

These daunting challenges led many biopharma companies and investors to conclude that siRNA technology would never be a meaningful technology for drug development. This is well illustrated by the action of Roche which licensed Alnylam’s technology in 2007, but became discouraged and returned the technology to Alnylam in 2010. Similarly, Merck acquired Sirna Therapeutics, an early competitor to Alnylam, for $1.2 billion in 2006 and wound up selling the Sirna assets to Alnylam in 2014 for $175 million. Clinical trials of antisense therapeutics by Ionis (then known as Isis) and others in the early 2000s were also plagued by lack of efficacy and immune reactions to drug candidates. As with siRNA technology, there was widespread skepticism around the 2010 to 2015 period.

Against a torrent of skepticism and naysayers, Alnylam and Ionis showed incredible tenacity in continuing to work on improving the characteristics of their drugs. Both persevered to find ways to develop better formulations and deliver their drugs more effectively. Early drug delivery efforts focused on the use of lipid-based (LNP) formulations. For reasons I won’t go into. These were effective in delivering drugs to the liver, but were relatively ineffective for other tissues. As a consequence, most of the early efforts in drug development focused on silencing genes that were expressed in liver tissue.

I won’t even attempt to describe the breakthroughs in biochemistry that have now allowed Alnylam, Ionis and smaller competitors to overcome the obstacles they faced. The chemistry involved is so complex that I don’t really understand it so I won’t even try to explain in any detail what they have done. Instead, the proof is in the pudding. Both have developed elegant new drugs and have enormous pipelines. There is also impressive validation of their technology as can be seen by the collaborations they have made with the crème de la crème of major biopharma companies.

Alnylam and Ionis have developed technology that allows them to silence genes in tissues beyond the liver using a conjugate technology in which the drug can be targeted to non-liver tissues. (Recall that the first solutions on drug delivery were based on lipid particles that were really only effective for delivering drugs to the liver). This is an enormous advance and obviously very meaningful from both a medical and commercial standpoint. There are many genes linked to disease that are expressed in liver tissue so that it provides a vast array of initial targets for drug development and indeed there remains enormous potential for siRNAs and antisense oligonucleotides targeted at genes expressed in liver tissue.

It is very exciting that Alnylam, Ionis and competitors are now able to begin clinical development in other tissues. Ionis is farthest along as they have actually developed a drug that targets a disease caused by genes expressed in the central nervous system. This was Spinraza which has been medical breakthrough in the treatment of spinal muscular atrophy and is a commercial blockbuster. Ionis also has two other drugs in phase 3 development that target genes in the CNS. These are tominersen (partnered with Roche) for Huntington’s disease and tofersen (partnered with Biogen) for a genetic mutation of the SOD-1 gene that is believed to cause around 15% of ALS cases linked to a meaningful percentage of ALS patients. These two phase 3 drugs are also noteworthy because they are aimed at diseases for which there is no drug therapy.

Alnylam is now in a position to use its conjugate-based drug delivery technology for extra-hepatic delivery. They are moving forward on drugs that are delivered to the brain, spinal cord and the eye. In 2019 Alnylam signed a collaboration with Regeneron for the advancement of siRNA for a broad range of diseases in the eye and CNS, in addition to a select number of targets in the liver. These programs are in early stage development with clinical development programs progressing in 2020. Alnylam and Regeneron plan to advance programs directed at up to 30 targets.

Alnylam and Ionis have also made major advancement in conferring drug like properties to their drugs that give them more stability and extended half-lives. Most of the drugs in development can be dosed on bi-weekly, monthly or an annual basis. Many can also be given by subcutaneous injection rather than by IV. There is early work going on in oral formulations.

Advantages of siRNA and Antisense Versus Conventional Therapy

The greater specificity of siRNAs and ASOs may (should) make them more effective in targeting diseases now treated with small molecule and monoclonal antibody drugs. Also, many proteins produced within a cell can’t be targeted with these older technologies. Developing effective drugs for currently undruggable targets has the potential to address large underserved or unserved markets for the treatment of many diseases. Some key advantages are:

• Broad applications to multiple disease targets: there are virtually no “undruggable” targets for these technologies so they can potentially treat a wide range of diseases in therapeutic areas ranging from rare diseases to diseases that affect large patient populations.
• Good drug properties in which the drug is distributed well throughout the body without the need for special formulations or vehicles.
• Have a relatively long half-life in the range of weeks to months.
• Rapid lead identification,
• The approach for these technologies to address mRNA is consistent across all therapies. Essentially, only the cellular address to which the therapy is targeted changes with a new medicine
• High specificity minimizes or eliminates the possibility that they will bind to unintended targets and cause side effects.
• Opportunity to use multiple siRNAs or ASOs in one drug product when multiple genes are involved in disease
• Ability to combine with other medicines: because antisense medicines do not interact with the enzymes that metabolize or break down other medicines, they can usually be combined with other medicines.

Marketed Drugs and Pipelines of Alnylam and Ionis

Alnylam currently has two FDA approved drugs. Onpattro (partisan) was approved for use hereditary transthyretin-mediated amyloidosis (hATTR) in adult patients in August of 2018. This was the first ever approved product based on siRNA. It is administered intravenously with doses given at three week intervals and targets a gene in liver tissue. This drug uses first generation technology and Alnylam is already developing vutrisan as an improved version based on more advanced technology. The company received FDA approval for its second drug Givlaari (givosan) in November 2019 for the treatment of acute hepatic porphyria; it also targets a gene in liver tissue. It is given once monthly by subcutaneous injection. Alnylam developed and licensed inclisiran to the Medicines Company which was subsequently acquired by Novartis to gain control of this drug. It is targeted the mRNA of the PCSK9 for the treatment of high cholesterol. It is given as a subcutaneous injection once every six months. Novartis believe that inclisiran has blockbuster potential. FDA approval is anticipated in 2020 and the regulatory filing in the EC is expected in 2020.

Ionis has three approved drugs. Spinraza was approved by the FDA in December of 2016 for the treatment of the rare disease spinal muscular atrophy in pediatric and adult patients. It is the first siRNA or antisense drug to be approved that targets genes outside the liver. It is given through an intrathecal injection (in the spine) in order to target neurons in the CNS. During the first month of treatment a loading dose regimen is followed and thereafter infusions are given at the four month intervals.

Tegsedi (inotersen) was approved by the FDA in October 2018 for polyneuropathy caused by hereditary transthyretin-mediated amyloidosis (hATTR) for adults (like Onpattro). It is given as an infusion once per week. Waylivra (volanesorsen) is an ApoC-III inhibitor for the treatment of familial chylomicronemia syndrome, a serious disease that prevents the body from breaking down fats. It is approved in the EC, but not by the FDA. Both Tegsedi and Waylivra target genetic diseases caused by abnormalities of genes in liver tissue.

On its website, Ionis lists products in its pipeline. The number and diversity of products in various stages of clinical development is staggering. Click on this link.   Alnylam on its website only lists drugs in late stage development. Click on this link.  They currently don’t show their total pipeline, but it is probably comparable to Ionis. Recall that in 2019, Alnylam and Regeneron entered into a collaboration that will investigate 30 drug targets. Alnylam is also developing additional drugs on its own or in partnership with other biopharma companies.

Both Ionis and Alnylam have collaborations with a large number of other prominent biopharma companies that validate the importance of their technology. Ionis has collaborations with among others: AstraZeneca, Bayer, Biogen, GSK, Janssen, Novartis, Pfizer and Roche. Alnylam has collaborations with Regeneron, Sanofi Genzyme, Novartis, Vir Biotechnology and others. In April 2020, Alnylam formed a financial collaboration with Blackstone that will bring in $2 billion for further drug development. Interestingly, Ionis and Alnylam have collaborated on drug delivery and chemistry issues.

History of siRNA

Caenorhabditis elegans is a small, free-living, nematode worm, which has become established as a standard model organism for a broad variety of genetic investigations studying developmental biology, cell biology and neurobiology. The first instance of RNA silencing in animals was documented in 1996 when an experiment showed that introducing certain RNA molecules in C. elegans resulted in reduced amounts of a certain protein. In 1998, Fire and Mello discovered that this ability to silence the par-1 gene expression was actually triggered by double-stranded RNA (dsRNA) molecules.They received the Nobel Prize in Physiology or Medicine for this discovery in 2006.

Alnylam was founded by scientists in 2002 and John Maraganore was the first CEO; he continues as CEO today. The first trial in was performed in humans in 2010 using a nanoparticle delivery system. In February 2013, Alnylam formed a partnership with The Medicines Company to develop a drug to treat a genetic form of high cholesterol; this led to the development of inclisiran. In July 2013, Alnylam demonstrated a statistically significant reduction in transthyretin (TTR) with patirsan. In 2018, this became the first siRNA therapeutic approved by the FDA.

History of Antisense

Research efforts to understand the mechanism of mRNA translation led to the first research into antisense in the late 1970s. Ionis was founded to commercialize antisense technology in 1989 by Stanley Crooke, previously head of research at GlaxoSmithKline. Dr. Crooke guided Ionis for many years and is currently Executive Chairman of the Board of Ionis. The company went public in 1997; at the time it was known as Isis Pharmaceuticals.

In 1992, Ionis received its first IND approval for an antisense therapy to treat genital warts; that drug ultimately failed. As with siRNA, there was a lot of frustration and skepticism in the early days. Around 1995, one of Ionis early competitors in antisense was Gilead. It sold its intellectual property rights to Ionis and exited the field.

Ionis’ first marketed drug was fomivirsen (Vitravene) for the treatment of cytomegalovirus retinitis (CMV) in immunocompromised patients, including those with AIDS. This drug was discovered at the NIH and was licensed to Ionis for development. It was approved by the FDA for CMV in 1998- the first antisense drug approval. The drug was licensed to Novartis, but Novartis withdrew the marketing authorization for fomivirsen in the EU in 2002 and in the US in 2006, because of a sharp decrease in the incidence of CMV owing to effective drug therapy. Ionis cut its workforce by 40% in 2005 due to weak sales of fomivirsen and lack of confidence by investors in antisense technology.

Its second drug was mipomersen for the treatment of homozygous familial hypercholesterolemia. This drug was partnered with Genzyme. it was approved by the FDA in 2013, but the European Medicines Agency rejected it in in 2012 and again in 2013. The drug never reached meaningful levels of sales.

Ionis finally developed a medically meaningful and commercial blockbuster product with Spinraza (nusinersen). This was discovered in a collaboration Cold Spring Harbor Laboratory and the initial clinical development work was done by Ionis. The company then partnered with Biogen in 2012 on further clinical development and in 2015, Biogen acquired an exclusive commercial license to the drug for a $75 million license fee, milestone payments up to $150M, and tiered royalties between 10 and 15%.

Tegsedi (inotersen) was approved by the FDA in October 2018 for polyneuropathy caused by hereditary transthyretin-mediated amyloidosis (hATTR) for adults and Waylivra (volanesorsen) was approved by the EMA in 2019; it is an ApoC-III inhibitor for the treatment of familial chylomicronemia syndrome. It is not approved by the FDA. Tegsedi and Waylivra are marketed by Akcea which came public in 2017 and is 76% owned by Ionis.

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