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SR Pharma Plans Name Change, US Presence As Atugen Unit's RNAi Drugs Near the Clinic

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Less than two years after acquiring Germany’s Atugen as part of a corporate reorganization, SR Pharma announced last week that it has essentially become a pure-play RNAi drugs shop and that it intends to change its name to Silence Therapeutics in order to reflect its new focus.
 
Additionally, the British firm is looking to set up US operations with an eye to someday listing its stock, which currently trades on the London Stock Exchange, on the Nasdaq.
Ultimately, Silence Therapeutics may relocate its headquarters to the US, SR Pharma Chairman Iain Ross told RNAi News this week.
 
In the near term, however, SR Pharma expects that any presence it establishes in the US will be limited to business development and a small amount of research, since the company’s primary focus is on two RNAi-based cancer therapeutics set to enter phase I trials before the end of the year, he said.
 
Also last week, SR Pharma released its financial results for 2006, posting increased losses despite higher revenues, which the company said reflects the consolidation of Atugen’s results into its own.
 
Is Silence Golden?
 
In July 2005, SR Pharma bought Atugen for £6.2 million ($7.5 million) in a bid to enter the RNAi drugs arena after its lead product candidate, the mycobacterium M. vaccae, proved ineffective in a phase III trial as a treatment for allergic asthma and atopic dermatitis (see RNAi News, 7/29/2005).
 
Although SR Pharma had continued to work on developing M. vaccae, the company said last week in its annual report that it passed off the candidate to an animal health partner for development as a canine dermatitis treatment. Ross also noted that the company is looking to out-license the technology for other applications and has essentially ceased spending money on the M. vaccae program.
 
“Our view is that because the RNAi sector has really heated up and because we’re getting a lot of interest, we should focus entirely on that,” he said. “As a small company, you can only do so much.”
With its attention now entirely on RNAi, SR Pharma has proposed to its shareholders that the company change its name to Silence Therapeutics plc. A vote on the change is scheduled for April 26.
 
According to Ross, after the renaming, Atugen will become Silence Therapeutics AG. He noted that although the two companies will be tied together under a single name, Atugen will continue to operate as a stand-alone subsidiary of its parent firm.
 
As Silence Therapeutics, SR Pharma also plans to set up operations in the US sometime this year, although the details have not been finalized.
 
“In terms of business development, there’s no doubt that our competitors do very well by having people located in the United States [and] there is certainly a good appreciation of the technology in the United States,” Ross said.
 
As such, SR Pharma is aiming to expand its research and business development operations into the US, most likely under the guidance of Atugen CSO Klaus Giese, during 2007.
 
“I’ve always said that I see this business as passing from Berlin through London on its way to [the US and] the Nasdaq,” he said. “I think that’s eventually what will happen to the business.”
 
For the time being, however, “Berlin is obviously the center of our operations,” and would likely continue to be so for the foreseeable future as the company moves toward the clinic.
 
As reported earlier this year by RNAi News, Atugen recently completed preclinical toxicology studies for its lead drug candidate, Atu-027, a systemically delivered gastrointestinal cancer therapy slated to begin phase I trials in Germany in the second half of this year.
 
Atugen is currently conducting the full toxicology studies “required to support systemic administration” of the drug, and which are expected to wrap up this summer. Ross noted that the development timeline for Atu-027 is contingent on getting clearance from German ethical committees to begin human testing.
 
At the same time, Atugen is making progress in formulating an RNAi-based drug for non-small cell lung cancer, which is expected to enter phase I before the end of 2007.
 
Ross said that Atugen is exploring a number of different delivery approaches for this drug, including systemic and inhalable, and that the company is in discussions with possible partners that could bring delivery expertise to the program.
 
Aside from any possible collaboration on delivery, SR Pharma has its sights set on inking research and development alliances with a big pharma or biotech for its RNAi technology this year, Ross said.
 
“We have enough cash and enough [revenues] coming in from our existing collaborations to see our programs into the clinic to the end of phase I studies,” he said. “But obviously if we could sign a couple of big pharma … or biotech collaborations to bring in more money, we would broaden the portfolio of programs and ramp up from there.”
 

“Our view is that because the RNAi sector has really heated up and because we’re getting a lot of interest, we should focus entirely on that. As a small company, you can only do so much.”

Ross added that SR Pharma plans to keep its two oncology programs in-house, at least for the time being, and that any collaborations signed this year would likely be in other therapeutic areas where Atugen has less expertise.
 
“RNAi can be applied in any therapeutic sector, so we’re having discussions with people about different [indications as we] … continue to forge ahead with the oncology side ourselves,” he said. “That’s not to say we haven’t had discussions with people on the oncology side, but at the moment I think people will wait until we get into the clinic.”
 
Pound for Pound
 
In 2006, SR Pharma reported a net loss of £3.9 million ($7.7 million), or 4.02p per share, versus a loss of £3.6 million, or 5.89p per share, in 2005.
 
Revenues in the year jumped to £1.9 million from £508,721 in 2005, primarily due to payments from Quark Biotech, which licensed two RNAi drug candidates from Atugen including RTP-801i, which Quark recently partnered on with Pfizer (see RNAi News, 9/28/2006).
 
Although financial terms of that arrangement were not disclosed, Atugen received a $2 million milestone from Quark when it signed the Pfizer deal. 
 
Atugen also stands to receive up to $95 million in milestones and royalties under the deal, including a $1.5 million payment upon the initiation of phase I testing, which is expected to begin this year.
 
R&D spending nearly doubled in 2006 compared with 2005, to £3.2 million from £1.7 million, while administrative costs climbed to £3 million from £2.75 million. According to SR Pharma, the increases are a result of the inclusion of a full year of Atugen’s financial results into its own.
 
Melvyn Davies, SR Pharma’s finance director, said in a statement that the company’s burn rate is expected to continue to grow during 2007 “as we take our lead product into human trials … and broaden our development targets.”
 
Ross declined to provide specific projections on the cost increases.
 
As of Dec. 31, 2006, SR Pharma had £8.8 million in cash and cash equivalents, which Ross said is sufficient to fund the company’s operations for the next two years.

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