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Dicerna Stock Soars Following IPO Despite Potential Competition with Core Technology

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Despite a lack of exclusivity for its core RNAi technology, Dicerna Pharmaceuticals continues to fly high following its Jan. 30 initial public offering, with its shares trading this week around $36 — more than twice their $15 debut price.

To one industry watcher, the success of Dicerna's IPO reflects a confluence of a strong biotech market and a resurgence in interest in RNAi as a therapeutic modality.

"The company happens to be at the right place at the right time," Cowen analyst Simos Simeonidis said, citing Wall Streets growing interest in biotechnology as of late. Indeed, last year alone there were more than 30 biotech companies that made the transition from private to public entities, including Dutch RNA drug firm Prosensa.

And within that sector, "the RNAi space has been very hot," largely due to the successes Alnylam Pharmaceuticals has had with its two transthyretin-mediated amyloidosis (ATTR) drug candidates, one of which is already in phase III testing, Simeonidis noted.

Investors are always interested in novel technologies, but can be turned off by the uncertainties that accompany their newness, he added. And, through the work of Alnylam and others in the field, RNAi "has become a de-risked new technology."

But even though RNAi has garnered acceptance as a viable drug modality, questions remained about Dicerna due to an unusual intellectual property situation. Specifically, in 2007 the company picked up an exclusive license to its core Dicer-substrate RNAi molecules — essentially asymmetric duplexes with 27-mer guide strands and 25-mer passenger strands that are cleaved by Dicer into siRNAs — from City of Hope, where the technology was invented.

However, this arrangement was precluded by a non-exclusive license that had previously been granted to Nastech Pharmaceuticals. Nastech later became Marina Biotech, which sublicensed its Dicer-substrate position to Roche. In 2011, Roche sold off its RNA drug assets, including the Dicer-substrate sublicense, to Arrowhead Research.

When it first filed to go public, Dicerna warned in a US Securities and Exchange Commission document that it "cannot rely on [its] patent rights to prevent Arrowhead or third parties working with Arrowhead from developing, marketing, and selling products that compete directly with our product candidates."

And while the company views this IP situation as important, Dicerna CEO Douglas Fambrough told Gene Silencing News that it hasn't proven to be a "front-burner issue" — an observation borne out by Wall Street's response to the IPO.

Noting that there were very few questions about Dicerna's IP position from investors in the lead-up to the offering, Fambrough said that most of the attention was around the company's drug-development programs. Of particular interest was one focused on primary hyperoxaluria 1 (PH1), in part because it is expected to indicate a likelihood of success early on.

PH1 is characterized by disruptions to the enzymes responsible for the breakdown of a precursor of the metabolic end-product oxalate. The primary enzyme in this process, alanine-glyoxylate aminotransferase 1 (AGT1), is mutated in PH1 patients.

In mouse models of the disease, it has been shown that deleting the gene responsible for an enzyme that is upstream of AGT1, called glycolate oxidase, prevents the buildup of oxalate.

Because of the disease's straightforward nature, "there is no reason to think [outcome is] going to be different in a mouse model than in humans," Fambrough said. If Dicerna can show in phase I testing that its drug can silence glycolate oxidase, it is highly likely that it will offer a therapeutic benefit.

"You've got to finish development," he said, "but you've already shown that you can do what you set out to do" — an effect that contributed to the rise in Alnylam's stock following its release of phase I ATTR data. Given the tight association between levels of mutated protein and that disease, Alnylam's demonstration that its drug could silence its target by up to 94 percent in humans was viewed as a major success, even though the trial was in healthy volunteers.

Overall, investors have appeared "very focused on the product opportunities … and less focused on the specific IP," Fambrough said. "The number of opportunities people can pursue is greater than the number of people who try to pursue them. Right now, there isn't a sense… that there isn't enough room" for everyone, even those pursuing drugs based on the same technology.

Ultimately, the lion's share of the RNAi space's fundamental IP is set to expire in the next 10 to 15 years, at which point products and not patents will be the key metric by which an RNAi company's success will be determined, he added. In the interim, a US statute known as 35 U.S.C. 271 (e)(1) permits the use of patented technologies for uses related to the submission of a drug for regulatory approval.

The core Dicer-substrate patent licensed by City of Hope will expire in mid-2027. As a point of reference, the Alnylam-controlled Tuschl-II IP, which broadly covers siRNAs with 3' overhangs, is set to expire in late 2021.

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