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Benitec Shuts Down US Operations, Cuts Entire US Staff; Says Manufacture of HIV/AIDS Drug Resumed

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Benitec announced last week that it has shut down its US operations and placed its in-house hepatitis C clinical program on hold, raising serious questions about the future of the beleaguered RNAi drugs developer.

According to the company, it has terminated its US staff, including CEO Sara Cunningham and CFO Mike Catelani, and moved its operations back to Australia. In order to conserve cash, the company said its hepatitis C program has been placed on hold indefinitely, although its HIV/AIDS drug program will move forward since it is being funded by strategic partner City of Hope.

"The directors have implemented these changes to reduce the company's cash burn in the current environment," Benitec Chairman Peter Francis said in a statement. "Our focus now is the preservation of the company's intellectual property."

Benitec said that it expects the restructuring to cut its monthly burn by $250,000. In a filing with the Australian Stock Exchange, the company said it had about $3.2 million in cash as of Dec. 31, 2005, with monthly expenses of almost $1 million during the prior six-month period.

A restructuring in April, which included the elimination of half of Benitec's US staff, was expected to trim $4 million a year from the company's costs (see RNAi News, 4/20/2006).


"The directors have implemented these changes to reduce the company's cash burn in the current environment. Our focus now is the preservation of the company's intellectual property."

With Cunningham and Catelani gone, Benitec said day-to-day operations will be handled by director Mike Dalling.

"A priority in this will be the maintenance of the company's relationships with its key strategic partners including the City of Hope and Sigma-Aldrich," which acquired the rights to Benitec's expressed RNAi technology for research applications in October (see RNAi News, 10/28/2005), "as well … as continuing to prosecute and maintain the company's extensive [intellectual property] estate," Benitec said.

Benitec officials were not available for comment by press time.

Benitec's retreat from California back to Australia comes as little surprise to those keeping an eye on the small biotech, which had ambitions to be a major player in the US biopharmaceutical market but has been battered by questions surrounding the validity of its IP and a spate of costly lawsuits.

In 2003, Benitec's former Chairman and CEO John McKinley — a former IP lawyer — told RNAi News that as part of his company's plan to become a publicly traded, US-based firm, it would be striking numerous licensing deals for its expressed RNAi technology. Companies that didn't take a license, he noted, would be the subject of patent-infringement litigation.

True to McKinley's word, Benitec launched three patent infringement suits against Nucleonics, Ambion, and GenScript in 2004 (see RNAi News, 4/2/2004). While Ambion and GenScript took licenses to Benitec's technology in order to settle the matter, Nucleonics chose to fight, arguing that it does not require a license to Benitec's technology (see RNAi News, 8/5/2005 and 3/16/2006).

Only a few months later, Benitec sued partner Promega, which had the exclusive rights to use and sublicense Benitec's RNAi technology in areas outside human therapeutics, for allegedly failing to meet payment requirements pursuant to the companies' alliance (see RNAi News, 7/30/2004).

The dispute with Promega was eventually resolved (see RNAi News, 8/26/2005), but the Nucleonics suit proved to be Benitec's undoing: As part of their battle, Nucleonics has turned the fight around and sought a court ruling to invalidate Benitec's IP. It has also opposed or requested reexaminations of certain Benitec patents in several nations, including the US (see RNAi News, 9/9/2005).

With its US patent in jeopardy after an initial US Patent and Trademark Office review deemed the IP invalid, and its cash reserved dwindling, Benitec successfully fought to extract itself from that costly litigation and had the lawsuit dismissed (see RNAi News, 10/7/2005). Nucleonics, however, has vowed to pursue the case in order to force a decision on the validity of Benitec's IP (see RNAi News, 3/16/2006).


"A priority in this will be the maintenance of the company's relationships with its key strategic partners including the City of Hope and Sigma-Aldrich."

Although McKinley was ousted from the company in January 2005 and replaced with Cunningham (see RNAi News, 1/21/2005), Cunningham's efforts, it seems, were too little, too late.

When it announced its April restructuring, Benitec also said it had begun exploring possible merger, acquisition, or divestiture options for its US operations. With no takers, it seems, Benitec has opted to shut its doors in the US.

Some Good News

In February, Benitec said that it had delayed the filing of an investigational new drug application for its RNAi-based HIV/AIDS therapy after discovering "one aberrant result in the release tests of the clinical materials" (see RNAi News, 2/2/2006).

The issue has now been resolved and manufacture of the drug resumed by the City of Hope, Benitec said last week.

The therapy — the most advanced in the company's pipeline and being developed with the City of Hope — involves using granulocyte colony stimulating factor to mobilize stem cells in AIDS lymphoma patients.

Once the stem cells begin circulating peripherally, they can be collected, isolated, and genetically modified with a lentiviral vector containing three therapeutic genes: DNA that encodes for shRNAs targeting the tat-rev exon, a ribozyme that cleaves the mRNA for CCR5, and a nucleolar-localizing TAR decoy.

The patients undergo full chemoablation, which kills both the regenerative cells of the bone marrow and lymphoma cells, and then the stem cells are infused back into their bloodstreams so that they can migrate to, and engraft in, the marrow.

It was originally set to enter phase I testing in the first half of this year, but the issue with the clinical materials through this timeline into doubt. However, last week the company said that manufacture of the HIV/AIDS drug has resumed.

The company did not provide an estimate for when an IND may be filed.

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