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As Investors Again Look to RNAi, Drug Developers Pull in More than $230M

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Following the close of Dicerna Pharmaceuticals Series C round of financing last week, the RNAi therapeutics space has seen a dramatic increase in investor interest, with privately held companies in the field pulling in more than $100 million thus far in 2013.

Publicly traded RNAi drug firms have also been faring well, raising more than $230 million in the first part of the year through stock offerings, with the majority going to industry leader Alnylam Pharmaceuticals.

Though the RNAi therapeutics industry started off strongly amid hype over the technology’s potential to knockdown virtually any disease-causing gene, it began to face increasing scrutiny from Wall Street as investors recognized that the road from the lab to the market is a long one.

The field was particularly hard hit in late 2010/early 2011 when Roche and Pfizer — two of the highest profile big pharmas that had embraced RNAi — announced the end of their in-house work with the gene-silencing approach (GSN 11/18/2010 & 2/3/2011). But now the technology has once again caught the interest of the investment community.

To Simos Simeonidis, a senior biotech analyst at Cowen and Company, the RNAi renaissance is in part being driven by an improvement in the economy and stock market, where biotech companies have been outperforming.

But at the same time, positive developments have helped de-risk those companies working in the broader RNA therapeutics field, he told Gene Silencing News.

He pointed to the increasing number of antisense, RNAi, and microRNA drugs entering human trials, and cited the positive phase I data on Alnylam’s TTR-mediated amyloidosis treatment ALN-TTR02 (GSN 8/2/2012), as key developments in the minds of investors.

Perhaps most reassuring to Wall Street was Isis securing US Food and Drug Administration approval for its antisense-based hypercholesterolemia treatment Kynamro, or mipomersen, early this year (GSN 1/31/2013). This milestone, Simeonidis said, played on the “behavioral aspect of finance,” offering “emotional relief” that an RNA therapeutic can get onto the market.

“The science has come of age,” he said, “and investors are finally accepting the fact that RNA will be a therapeutic modality,” which has given a financial boost to those working on RNAi.

Most recently, Dicerna announced that it raised $60 million through an oversubscribed Series C round, which the company said would give it the resources needed to fund its operations through 2016 as it works to get two drugs into the clinic by next year (GSN 8/1/2013).

The next biggest payday for a private RNAi drug shop came in January, when Gradalis closed a $24 million Series B round (GSN 1/3/2013).

That company is developing proprietary bifunctional shRNAs, which are capable of triggering both cleavage-dependent and cleavage-independent RISC-mediated inhibition of target mRNA. It is using the technology as part of a cancer vaccine that includes the immunostimulator recombinant human granulocyte-macrophage colony-stimulating factor and is currently in phase II testing.

Gradalis also has another phase I cancer drug based solely its bifunctional shRNAs.

Also in January, privately held Solstice Biologics announced that it raised $18 million in a Series A, which is expected to give the startup two to three years of cash as it ramps up operations (GSN 1/10/2013).

The founders of Traversa Therapeutics, which shut down in 2012 amid funding difficulties, established Solstice to develop an RNAi delivery vehicle called ribonucleic neutrals. Solstice has not yet publicly discloses details about the technology as it shores up its intellectual property position.

Lastly, RNAi newcomer Arcturus Therapeutics revealed in June that it raised $1.3 million in seed financing to refine its own siRNA delivery and formulation technologies (GSN 6/6/2013).

The private company was founded by two former Nitto Denko researchers who helped advance that company’s first RNAi drug into the clinic. Arcturus’ core technology, currently being tested in vivo, is a biodegradable lipid-based nanoparticle that can be targeted to specific tissues.

Among public companies, Alnylam has been the biggest winner, netting $173.6 million through the public offering of common stock in January. In that transaction, the company sold 9.2 million shares at $20.13 apiece. It said it would use the proceeds partly to advance its pipeline candidates including ALN-TTR-02, as well as a subcutaneous version of the drug that is currently in phase I.

A few months later, Arrowhead Research closed a $36 million private offering, selling 14.3 million shares at $1.83 each and 9,900 shares of preferred stock, convertible into 546 shares, at $1,000 per share.

Following the influx of capital, Arrowhead moved its lead candidate, the hepatitis B treatment ARC-520, into phase I testing (GSN 7/25/2013). That drug, along with its delivery technology, was acquired from Roche, which sold off its RNA assets to Arrowhead as part of its departure from the RNA therapeutics arena.

Finally, RXi Pharmaceuticals in April earned $16 million through the sale of roughly 113 million shares of its stock in a private placement, giving the company about two years of cash as it aims to advance its sole clinical candidate, the anti-scarring drug RXI-109, into phase II and works to get its stock off the over-the-counter bulletin boards and back onto the Nasdaq (GSN 4/4/2013 & 7/25/2013).

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