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Benitec s Move to US Proceeds Apace as Execs Eye M&A Possibilities, Development Programs


Last spring, Benitec initiated a reorganization plan — designed to turn it into a US-based and publicly traded RNAi drug developer — by exclusively licensing to Promega its DNA-directed RNAi technology for areas outside of human therapeutics. (See GenomeWeb News, 4/17/2003). With that deal poised to bear fruit for Benitec in the form of royalties from Promega on ddRNAi-related sublicenses and research product sales, the Australian company’s two top executives are now in the US scouting out investment banks that could help it move closer to its goal.

Benitec has long been dedicated to the idea that it would remain a public company once it has moved to the US, and last summer the company’s chairman and CEO, John McKinley, had told RNAi News that Benitec was planning to float its shares in an initial public offering. While Benitec still plans to trade in the US, McKinley told RNAi News this week that the company now hopes to do so through consolidation.

“Our preference is to grow as a much larger company,” something that would more easily be done through a merger or acquisition rather than through organic growth, he said. To do so, McKinley and Ken Reed, Benitec’s director of research and technology are meeting with various investment banks in the US this week, looking for the right one to facilitate such a transaction.

McKinley said that Benitec has a fairly good idea of the kind of company with which it wants to deal, adding that he is “looking across [a] range” of biotech firms with a focus on NASDAQ-traded ones. He said it doesn’t matter where the company is located, although he expressed a preference for the West Coast and stressed that Benitec would not consider merging with a shell company simply for its public status.

McKinley declined to talk further about Benitec’s prerequisites for an M&A target, or specify any particular companies that might be a good fit. Reed noted, however, that Benitec is primarily interested in companies operating in the “molecular medicine” field.

McKinley also told RNAi News that Benitec is on the prowl for development partnerships to help drive its preclinical programs. Having “spoken with every RNAi company in the field and many gene therapy companies,” McKinley said that Benitec is very interested in securing a partner (or partners) with strong delivery technology, a process Reed doesn’t expect to be too difficult given the multitude of effective methods for delivering of DNA cassettes, such as viral vectors, that are available.

“We’re not underestimating the importance or necessity of getting [delivery] right,” McKinley said. “But there are so many safe and effective vectors available — the same issues [that exist] for siRNA [delivery] aren’t there for ddRNAi.”

Reed also dismissed concerns that linger over the use of viral vectors ever since two patients in a French clinical trial developed leukemia after receiving a retroviral vector-delivered gene therapy. He said that the study involved a unique set of circumstances and noted that US regulators have since lifted a ban on gene therapy studies. McKinley added that there are more than 250 FDA-sanctioned trials using viral vectors ongoing.

Benitec plans to begin selecting preclinical drug targets soon, Mc- Kinley said. Though nothing is 100 percent, Benitec believes “HIV is the first [indication] we should tackle,” Reed noted. As such, Benitec is planning to establish a preclinical HIV collaboration in the next three months, and while neither McKinley nor Reed would name possible partners, Beckman Research Institute researcher John Rossi — who has worked extensively with RNA and is currently studying the ability of RNAi to fight HIV — appears a likely candidate, especially in light of his role as chairman of Benitec’s scientific advisory board and a long-standing relationship with Reed.

Fresh off its settlement of a dispute with Australia’s Commonwealth Scientific and Industrial Research Organization over the ownership of its core patent, Benitec is also making preparations to defend its intellectual property position, which includes the only granted US patent relating to RNAi in mammalian cells. (See RNAi News, 12/12/2003).

McKinley said that several infringers of Benitec’s patents have been identified and that action against them will begin over the next 12 months if outlicensing deals cannot be struck. He declined to name the infringers, although at one point he noted that Nucleonics, which employs an RNAi technology (called expressed interfering RNAi) very similar to Benitec’s, “needs a license.”

McKinley added that Benitec bought IP insurance in anticipation of potential legal battles. This puts the company in a position to defend its patents without significantly impacting its current financial position of roughly $5 million to $7 million in cash and zero debt.

Finally, to make its transition to the US a smooth one, McKinley said that Benitec is set to begin next week looking for people in the US to fill for two management positions in the areas of business development and project coordination, respectively. He noted that as part of their visit to the US, he and Reed are meeting with recruitment firms to facilitate the search.

We’re “looking to build a senior management team,” McKinley said, as Benitec expands from its current eight employees to an anticipated 30 to 50 over 2004.