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Silence Says Cash Runway Ends in Q3, Directors Have 'Uncertainty' About Additional Fundraising


By Doug Macron

Silence Therapeutics this week disclosed that its financial resources will only last through the third quarter, prompting its directors to determine that there is a “material uncertainty” about its ability to maintain its current operations past that time.

And while company officials said that they anticipate signing new partnerships during 2012, these are unlikely to provide the funds needed to extend that cash runway. Instead, Silence said it is eyeing alternative sources of non-dilutive financing as it waits on milestones from one of its technology licensees.

Silence has been facing a cash crunch for some time, in part due to the high costs of maintaining a presence in both Europe and the US. The company was founded in 2005 when UK-based SR Pharma acquired German RNAi drug firm Atugen. Four years later, after it bought US-based Intradigm, the company had operations in London, Berlin, and Redwood City, Calif.

Early last year, Silence announced that it would reorganize into a smaller company, shutting down its US unit while cutting certain non-critical positions in Berlin (GSN 4/28/2011). In conjunction with the restructuring, it also raised nearly $10 million through an offering of roughly 325.4 million newly issued shares (GSN 6/2/2011).

Together, the streamlining and financing gave Silence funds enough to run to the end of the third quarter of this year. But as it heads into the second quarter, the company remains on the lookout for new capital as it works to move its lead cancer drug candidate Atu027 into phase II this year and prep another compound, the lung injury drug Atu111, for phase I testing in 2013.

A key revenue-generating strategy for Silence has been to partner out its delivery approaches in non-core areas, and it has found a number of companies, including Miragen Therapeutics and InteRNA Technolgies, willing to evaluate its technologies in hopes that formal licensing arrangements will follow.

During a conference call held this week to discuss its 2011 financial results, Silence's management said that the company expects to ink more of these agreements during 2012 as it seeks a partner for Atu027, but CFO Max Herrmann cautioned that these deals are unlikely to close in time to generate significant revenues before the end of the third quarter.

As such, Silence is looking to other possible sources of income, such as “grants from the large research charities,” CEO Tony Sedgwick noted in a statement.

Meanwhile, Silence continues to wait to see if it will receive milestones tied to Quark Pharmaceuticals' RNAi drug QPI-1002.

QPI-1002 is a p53 inhibitor in phase II testing for the prevention of ischemia-reperfusion-induced kidney injury in patients removed from a cardiopulmonary bypass pump, and the treatment of delayed graft function in patients whose blood flow is re-established to a transplanted kidney. Both trials are slated to wrap up this year.

Novartis holds options to the drug, and if it chooses to exercise them, Silence stands to receive this year as much as $11 million in milestones — around $7 million on the kidney injury indication and nearly $4 million on the delayed graft function indication, according to Herrmann.

While this money would give Silence a significant measure of breathing room, just how the clinical studies will play out remains unknown. It is also unclear whether Novartis, which notably opted against taking a broad license to Alnylam Pharmaceuticals' RNAi technology in 2010 (GSN 9/30/2010), will exercise its options even if the data are positive.

Similar uncertainties surround another of Quark's drugs that use Silence technology, the ocular disease agent PFE-655.

That drug, which targets a proprietary gene called RTP-801, is being developed for diabetic macular edema and wet age-related macular degeneration, and was licensed to Pfizer in 2006.

A phase II trial of the drug in wet age-related macular degeneration was recently completed, and although results have yet to be released, questions linger because Quark announced last year that a phase II trial in DME was prematurely halted after Pfizer determined that the drug was unlikely to produce a therapeutic effect superior to the current standard of care — Roche's antibody drug Lucentis.

Quark has now taken on the responsibility to conduct a phase IIb study to see if PFE-655 is more effective at higher doses and offers additional benefit when combined with Lucentis. Pfizer has the right to pull out of its deal for the drug depending on the results of that trial, which are due by year end.

According to Silence, it could receive around $4 million in milestones in 2014 if Pfizer chooses to continue the drug's development.

In its financial report, Silence said that it “will require additional funding during the third quarter,” and noted that it “does not currently have any overdraft or loan facilities.”

Still, the company's directors “have a reasonable expectation that further finances will become available during the course of 2012 through a combination of sources, including equity fundraisings, grants, milestone payments from existing agreements, and license fees from entering into new agreements with business partners,” Silence added.

Yet, there is a “material uncertainty” about the amounts that can be raised and the timing of their receipt, the company warned. “Failure to obtain sufficient funding … would cast significant doubt on the group's ability to continue as a going concern.”

The Financials

For the 12-month period ended Dec. 31, Silence posted a net loss of £5.73 million ($9 million), or 1.20 pence per share, down from a year-ago loss of £8.79 million, or 3.60 pence per share.

Revenues dropped to £690,000 from £2.37 million, in part reflecting lower research and development funding from partner Dainippon Sumitomo. Meanwhile R&D costs fell to £3.36 million from £5.82 million in 2010, a result of the company's restructuring program.

At the end of 2011, Silence had cash totaling £3.69 million.

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