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As Shareholder Vote Looms, Genesis Provides New Details on ssRNAi Subsidiary

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By Doug Macron

New Zealand's Genesis Research and Development this month provided additional details about the establishment of a subsidiary to develop and commercialize its single-stranded RNAi technology, revealing that the primary investor in the new company is Japanese biotech firm MediBic Group.

And while MediBic is primarily a pharmacogenomics company, it is not entirely a stranger to RNAi, having invested at least twice in Intradigm through its investment banking arm MediBic Alliance.

In August, Genesis announced that it had finalized an agreement with an unnamed Japanese investment fund to secure up to NZ$1 million ($734,611) to fund the subsidiary, called Solirna BioSciences, which will hold the full rights to its ssRNAi intellectual property and know-how (see RNAi News, 8/6/2009).

In a filing earlier this month with New Zealand's NZX stock exchange, Genesis said that its deal with MediBic was the result of "a lot of negotiation" and includes an agreement through which Solirna will pay Genesis for contract research services that help develop the ssRNAi technology.

In addition, Genesis will retain a seat on Solirna's board, which is to be filled by Genesis CEO Stephen Hall. The subsidiary's other director will be MediBic advisor Ali Zareh, although Genesis said that Solirna's board is expected to expand as the company "makes technical progress" with its various drug-development programs.

Those programs, Genesis noted in the filing, will be entirely owned by Solirna, which is expected to develop the ssRNAi technology and then "license it to any party … interested in using it as the basis for human therapeutics."

Typical licensing formats, Genesis added, include a research license that "allows the licensee to only use the technology for internal research," and a commercial license, under which a licensee is free to "develop and sell commercial products using the patented technology. Commercial licenses might be exclusive for one or more named genes … and/or disease areas, [and] typically involve multi-million dollar milestone payments plus significant royalties over the life of the patents."

Genesis said that Solirna "might" also initiate its own internal drug-development programs based on the ssRNAi technology, but noted that these "would not conflict with any of the commercial licenses" or with the non-exclusive worldwide internal research license to which MediBic holds an option under the terms of the investment deal. That option can be passed along to a third party nominated by MediBic.

Publicly available details about the technology have thus far been limited, but Genesis 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.

And while the handing off of the ssRNAi technology and IP to Solirna essentially takes Genesis out of the RNAi game with regards to human therapeutics, the company said that it remains free to pursue other research projects in the biotechnology field, including agricultural and horticultural RNAi programs.

Finding Funding

Genesis first began working in the RNAi space around 2005 as part of a way to reinvent itself following the failure of a number of antibody-based clinical candidates (see RNAi News, 8/5/2005). After a false start in allergic disease, the company in 2007 shifted its focus onto oncology with the goal of beginning its first clinical trial the next year (see RNAi News, 3/22/2007).

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However, Genesis encountered difficulties with its RNAi cancer programs, as well, and by early this year turned its attention to its nascent ssRNAi program and began asking its existing shareholders to make additional investments in the company as it struggled under a cash crunch (see RNAi News, 2/12/2009).

“The massive downturn in global financial markets is having an impact on us all,” Genesis' Hall wrote in a letter to shareholders at the time. “Now we need to augment our funding by investment of new capital” as the company “actively [explores] opportunities to introduce substantial new shareholders.”

In this month's NZX filing, Genesis said that it had been "actively seeking funding for [its] gene-silencing project during all of 2009 … [and MediBic's] proposal was the best opportunity for the further development" of the ssRNAi technology.

"The Genesis board has reviewed the options for the future development of the [ssRNAi] technology and believes that in absence of any other better funding alternatives … the implementation of the transactions [with MediBic] … provides the best outcome" for the company's shareholders, it added.

Importantly, if Genesis' stockowners do not clear the deal, "the lack of funding will inevitably result in Genesis ceasing operations, terminating remaining staff, and mothballing the [ssRNAi] technology," Genesis said.

According to Genesis, a MediBic investment vehicle, MediBic Alliance Technology Fund-1, will invest up to NZ$1 million in Solirna through a subscription for new Series A Preference Shares and convertible notes.

Once Genesis shareholders have approved the investment deal at a special meeting scheduled for Oct. 23, MATF-1 will make an initial investment in two tranches: the first worth NZ$200,000 by way of a subscription for Series A shares and the second worth NZ$350,000 by way of convertible notes.

"A subsequent investment tranche is likely to be effected in December 2009 or January 2010," Genesis said.

Once the transactions have been completed, Genesis will own 2.2 million ordinary founder shares of Solirna, and MATF-1 will hold between NZ$300,000 and NZ$500,000 worth of the Series A shares, and between NZ$400,000 and NZ$600,000 worth of convertible notes.

Genesis said that the ordinary shares do not have any special rights or obligations, while the Series A shares and convertible notes each convert into two ordinary shares if not redeemed.

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