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Nastech Amends Previous Flu Tx Timeline, Expects RNAi Unit Spinout by Mid-Year 2008

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Nastech Pharmaceuticals last week provided a peek at its RNAi-based influenza treatment program, presenting preclinical data during a web-based seminar showing that its lead siRNA candidates have anti-viral activity both in vitro and in vivo.
 
However, based on comments made by Nastech officials changing the expected timing of an investigational new drug application filing for the flu program, it appears that the path to commercialization isn’t a smooth one.
 
Also last week, Nastech management provided an update on the company’s plans to spin out its RNAi operations into a subsidiary, to be called MD-RNA, stating that the effort was underway and could be completed within a year.
 
During the seminar, Nastech’s Director of Pharmacology and Toxicology Michael Templin said that in vitro experiments conducted in collaboration with the Centers for Disease Control and Prevention have shown siRNAs targeting conserved regions of the flu virus are active against the avian flu strain H5N1.
 
Additionally, in a mouse model of flu, Nastech has observed up to five-fold inhibition of viral titre with first-generation siRNA formulations, Templin told RNAi News this week. “With our second-generation formulations, we’ve seen up to thousand-fold inhibition of viral replication,” he said.
 
However, during last week’s web seminar and second-quarter conference call, Nastech President and CEO Steven Quay noted that the company is not providing a timeline for when an IND might be filed on a flu drug candidate.
 
In February, Nastech said that it expected to file an IND sometime this year (see RNAi News, 2/15/2007). Before that, Nastech had been anticipating an IND in 2006 (see RNAi News, 3/2/2006).
 
According to Templin, however, Nastech currently is not offering guidance on the timing of an IND for a flu treatment.
 
Nastech’s retreat from its earlier timelines comes around the same time that Alnylam Pharmaceuticals announced that it would miss its goal of filing an IND for its own flu drug this year (see related story, this issue).
 
During a conference call to discuss Alnylam’s second-quarter financials, company officials said in an apparent reference to Nastech that Alnylam’s flu program was experiencing specificity problems that were also plaguing other companies developing RNAi-based flu treatments.
 
Templin declined to comment on Alnylam’s flu efforts, noting that he’s never seen data from the program and therefore “would have no knowledge of exactly what the data is and thus how they could interpret it.”
 
When asked whether Nastech was experiencing specificity issues in its own flu program, he said that “the data that we have generated have been favorable for inhibition of viral replication. Obviously, [with] the candidates we have, specificity is one of the criteria we place on them.”
 
Planning a Spinout
 
Nastech has been considering spinning out its RNAi business for some time (see RNAi News, 6/28/2007), but has been relatively tight-lipped on the details of such a move.
 

The spin-out process “is a high priority that is being addressed expeditiously and should be completed by mid-year 2008.”

During the second-quarter conference call, Quay said that the company is “currently in the process of evaluating our strategic options focused on enhancing the value of our RNAi business for the benefit of our shareholders.
 
“Increasing market valuations for RNAi-based companies and the number and size of the deals in this space demonstrate a growing interest among major pharmaceutical companies and the financial community in RNAi technology,” he added. “Partnering in the RNAi space is a key priority for us and we continue to talk with potential partners about Nastech’s RNAi technology and therapeutic programs, and … we are in the process of establishing a wholly owned subsidiary … called MD-RNA.”
 
In doing so, the company would “transfer the RNAi-related intellectual property and contracts from Nastech into MD-RNA,” something that is likely to happen “in the near future,” he said.
 
Quay declined to provide more specific timing when pressed for information by a financial analyst. However, Nastech CFO Philip Ranker said during the call that the spin-out process “is a high priority that is being addressed expeditiously and should be completed by mid-year 2008.”
 
Losses Rise on Falling Revenues
 
For the second quarter, Nastech posted a sharp jump in losses amid a drop in revenues and a rise in research and development spending.
 
The firm’s net loss was $12.4 million, or $0.50 per share, compared with a year-ago loss of $600,000, or $0.03 per share.
 
Contributing to the loss increase was a decline in revenues to $4.9 million from $11.4 million a year earlier. The drop in revenues partly reflects revenues received last year from partners on non-RNAi drug-development programs.
 
R&D costs in the quarter jumped to $12.8 million from $8.8 million the year before. Selling, general, and administrative costs, meanwhile, climbed $1.4 million in the second quarter to $5.1 million.
 
Nastech had cash, cash equivalents, and investments totaling $70.4 million as of June 30.

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