By Doug Macron
Genesis Research and Development's top official this week asked existing shareholders to make additional investments in the company so that it will have enough funds to support the creation of a planned subsidiary.
In a letter to shareholders, Genesis CEO Stephen Hall said that the money will allow the New Zealand-based company to move ahead with the creation of a subsidiary to develop a single-stranded RNAi technology, which recently received a funding commitment from an undisclosed group of investors.
"The need to raise funds … is now urgent" because Genesis currently has cash reserves of NZ$300,000 ($189,000), he said in the letter. In an e-mail to RNAi News, Hall indicated that this would only be sufficient to support the company's operations for about two months.
As a result, Genesis is planning to initiate a share-purchase plan, authorized under New Zealand legislation and the rules of both the New Zealand and Australian Stock Exchanges, which will allow shareholders to buy up to NZ$5,000 in discounted Genesis shares in multiples of NZ$1,000.
Genesis added that all its directors expect to participate in the plan, which is expected to be open during the "last few weeks of July," and that full details about the transaction will be provided once approval is received from New Zealand regulators.
Looking to assuage potential doubts, Hall noted in the letter that once the external funding for the new subsidiary has been secured, "we believe that shareholders can have the confidence that Genesis has commercial value and that it should be supported until some of the current assets can be realized."
But there are still hurdles to be cleared before that investment is in hand.
Hall wrote in the letter to shareholders that while the unnamed investment group, which is "allied to a large international pharmaceutical company," has said it would make an undisclosed investment in the subsidiary after determining the so-called ssRNAi technology to be novel and commercially promising, the terms of the investment have yet to be agreed upon.
In addition, the deal remains subject to standard closing conditions, including shareholder approval. In his e-mail, Hall added that Genesis expects to hold a "substantial stake" in the subsidiary, but that this could change "with future financing rounds."
On the Ropes
Genesis' decision to create the subsidiary marks the firm's latest step to move beyond what has been a rather turbulent entry into the RNAi therapeutics field.
The company began working with the gene-silencing technology in earnest in 2005 in an effort to move past the failure of a number of earlier non-RNAi drug candidates (see RNAi News, 8/5/2005).
Initially, Genesis had aimed to develop RNAi-based treatments for allergic diseases, such as asthma and atopic dermatitis, by targeting immunoglobulin E and IgE receptor pathways, and had plans to move a candidate into phase I testing by early 2007.
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But instead of starting a clinical trial, that year the company disclosed that it was finding little success and had turned its attention to cancer (see RNAi News, 3/22/2007). Specifically, Genesis was taking aim at the M1 subunit of ribonucleotide reductase, an enzyme that catalyzes the formation of the deoxyribonucleotide precursors required for DNA synthesis.
In this week's letter to shareholders, Hall noted that although Genesis researchers have "developed several potent siRNA molecules that inhibit key genes for the treatment of various types of cancer," the company has been unable to overcome the delivery hurdle that has long been the RNAi field's biggest challenge.
"Genesis has tested some of its own delivery vehicles and a number of lipids, nanoparticles, and polymers from external groups, but none have achieved effective and consistent in vivo delivery," he wrote.
Theorizing that delivery of a single RNA strand would be easier than an siRNA duplex, Genesis began developing the ssRNAi technology, he added.
Few details about the technology have been made publicly available, but the company has said that it involves chemically modified, nucleobase-masked single-stranded oligos designed to form active double-stranded molecules inside a cell once the masking groups are removed by chemical hydrolysis or enzymatic cleavage.
In the shareholder letter, Hall wrote that three patent applications have been filed on the technology with the US Patent and Trademark Office, "and a review of the intellectual property that was commission by Genesis concluded that the single-stranded masking technology was patentable for its novelty and had freedom to operate without requiring licenses from other parties."
Despite Genesis' enthusiasm for the ssRNAi technology, financial woes have kept the company up against the ropes. Among these is its inability to obtain the more than NZ$2 million ($1.3 million) it is owed for selling its majority stake in a biofuels company after the buyer ran into money troubles of its own (see RNAi News, 2/12/2009).
Additionally, Genesis had sought investments from its stockowners in February, with Hall writing to the company's investor base at the time that the "massive global downturn" had created the "need to augment our funding by investment of new capital.
“The last time we sought funds from shareholders was in September 2000,” when Genesis had its initial public offering, Hall wrote at the time. “I hope shareholders will continue to support Genesis so that they can share the future benefits from the position we have achieved.”
About two months later, the company said in its annual report that there was "little buying interest" in the company's shares, with Genesis Chairman Joachim von Roy noting in the report that "a recent review of prospects for raising capital to fund Genesis for the next year has concluded that this is not likely to be successful" (see RNAi News, 4/2/2009).
But with interest in the ssRNAi technology, Genesis is hoping that its stockowners will now be willing to expand their stakes in the company.
"If consummated, this investment [in the new subsidiary] will provide vital funding support and will also provide access to international expertise," Hall wrote in this week's letter.
In his e-mail to RNAi News, he added that company stockholders "were very supportive" at the firm's annual meeting on June 30.