Investing in miRNA: Beware the Hype, Follow the Money

The momentum in the microRNA (miRNA) field is continuing to build, as evidence that links this group of important genes to multiple diseases, from Alzheimer to diabetes, is constantly mounting. The adoption of miRNAs is further accelerated by the technological advancements in RNA-based therapies.

Because miRNAs are not expressed as proteins but as RNA, the most sensible way to target them is using small RNA technologies from the likes of Isis (ISIS) and Alnylam (ALNY). These technologies have come a long way in recent years, and are now expected to form the basis for a new generation of drugs. Although miRNAs gained wide recognition only recently, the combination of a fresh pool of unexplored genes which are implicated in so many medical conditions together with the maturing technology to manipulate their activity creates a huge untapped market.

So far, 2008 has been particularly fertile, with several exciting events taking place during recent months.

The news flow started last April, when Rosetta Genomics (ROSG) announced it had submitted, jointly with Columbia University Medical Center [CUMC], its first diagnostic test for regulatory approval. The test distinguishes between squamous and non-squamous lung cancer, a classification that has become very important following the introduction of Avastin® and other targeted therapies.

Later that month, GlaxoSmithKline (GSK) and Regulus Therapeutics, a joint venture of Isis and Alnylam, announced a strategic alliance for the development of novel microRNA-targeted drugs for inflammatory diseases. The first of its kind in the miRNA field, the deal includes all the typical ingredients such as an upfront payment, milestone payments based on progress and royalties from future sales. The deal is worth $600 million, excluding future royalties, and denotes the tremendous appetite in the pharmaceutical industry for miRNAs. Given the constant increase in the attention miRNA are garnering, it would not be surprising to see similar deals in the future.

Only one week after the Regulus announcement, Asuragen launched the first-ever miRNA based diagnostic test, beating both Rosetta Genomics and Exiqon. The test is designed to differentiate between pancreatic cancer and pancreatitis (inflammation of the pancreas), which often have similar symptoms. Asuragen quoted a blinded trial in which 60 samples from patients were evaluated by the new assay. The assay demonstrated impressive results in distinguishing between the two conditions, as it identified 95% of the samples accurately.

Similar to other miRNA markers, the miRNAs utilized in this test can be detected in formalin-fixed paraffin embedded [FFPE] tissues, enabling fast and wide-scale retrospect analysis as well as the opportunity to be combined with standard pathological procedures. Earlier this year, Asuragen established its Mirna subsidiary, a company focused on miRNA therapeutics. This step is similar to what Isis and Alnylam did with Regulus, as Asuragen provided initial capital infusion and transferred the intellectual property to Mirna. The long term goal is entering into drug development deals with larger pharmaceutical companies.

Last week, Danish biotech company Santaris (another GSK partner) announced the launch of the first ever clinical trial for the evaluation of a miRNA-targeted drug. The drug is evaluated as a potential treatment for Hepatitis C Virus [HCV], as its target (miRNA-122) has been shown to affect virus replication in liver cells. The trial is already in progress and will include a maximum of 48 healthy volunteers for the evaluation of the drug’s safety and other factors. So far, the company reports, results are encouraging and phase II trials in actual HCV patients are planned.

Another newcomer to the miRNA arena is Colorado based Miragen, which has recently completed $8 million equity placement from several VC firms. Miragen will initially focus on identifying targets related to cardiovascular diseases, primarily heart failure.

miRNAs are making their way from the periphery to the heart of the pharmaceutical industry in two routes: They are being evaluated as therapeutic targets as well as diagnostic targets. In the long run, miRNA-targeted drugs should have greater financial importance, but in the foreseeable future, diagnostic products represent the genuine opportunity to generate meaningful recurring revenues. Candidates from the GSK-Regulus deal, for instance, are expected to enter the clinic in three years time, and from that point, it should take on average 10 years to get a product to the market.

Needless to say, the process of developing any drug is very expensive and characterized by countless delays and an extremely high likelihood of failure. Developing miRNA-targeted drugs should be twice as challenging due to the lack of experience and the nascence of the field.

As is the case with other disruptive technologies, there are still plenty of unresolved issues with respect to the wide-scale commercialization of miRNA-targeted drugs. One of these issues is the safety profile of such drugs, as every miRNA gene has multiple target genes and is involved in tens or hundreds of biological pathways. Another issue has to do with validating the right miRNA to be targeted, as not every miRNA can serve as a drug target.

In addition, there are more general hurdles, which are not specifically related to for miRNA, such as getting the drug to the right organs or tissues and choosing the right technology for modulating miRNA expression. These hurdles will certainly make the road towards miRNA therapeutics a very bumpy one.

A second, though less attractive way to make money from miRNA is by technology and patent licensing. Although the potential market for miRNA seems infinite, the number of potential miRNAs is very finite. It is estimated that there are 1000 miRNA genes in the human genome, over 700 of which have been discovered to date. These genes are not easily discovered and upon initial discovery, their sequences as well as potential applications are heavily patented.

This dynamic creates a market in which most assets will be in the hands of a limited number of stakeholders. These stakeholders (companies and research institutes) will eventually license their technologies and patents to the pharmaceutical giants, similar to the Regulus-GSK partnership. The deal entails $600 million in milestone and licensing payments for four different miRNA targets, excluding royalties from actual sales. This reflects a price tag of $150 million per target for lucrative indications such as inflammatory diseases, diabetes and cancer.

Developing drugs that target miRNA genes includes two components: the miRNA target and the technology to target it. As a joint venture between Isis and Alnylam, Regulus has access to practically every available technology that could be potentially used to develop miRNA-targeted drug, on top of having the actual miRNA genes. Other companies or institutes who do not have the technology to target miRNAs will probably sign more modest deals, as many pharmaceutical companies, including Merck (MRK), Takeda and Roche (RHHBY) have already obtained access to such technologies.

Evidently, not every miRNA gene can serve as a potential target, let alone a target for a lucrative indication, as it is still early to estimate what portion of the 1000 genes is clinically relevant. For the sake of discussion, if 50 (a wild, uneducated guess) miRNAs are licensed, the opportunity for patent holders, based on the above deal, is $7.5 billion in aggregate payments over several decades. However, most of this amount will be paid only in more advanced clinical stages, following a long process of clinical development.

There can be numerous drugs that target the same miRNA, so picking the right one becomes even more complicated, as many of these drugs will drop out on the way to the clinic.

Rosetta Genomics seems like the best way to play the miRNA game with countless opportunities in the diagnostics field as well as in licensing deals. The company started exploring miRNAs years ahead of anyone else in the industry, using a unique approach that starts with computational modeling and ends with biological validation. As a result, Rosetta currently has the most prolific discovery platform in the industry that will enable it to maintain a constant flow of diagnostic products into the market.

In addition, it possesses the most extensive patent portfolio that covers more than half of all known miRNAs, their roles and potential applications. Finally, Rosetta is the only miRNA pure-play, with the vast majority of its resources dedicated to diagnostics.

The rest of the companies are either not sufficiently focused on miRNAs or suffer from too much exposure to the therapeutic side. Investing in Alnylam or Isis just for the sake of miRNA seems premature, as Regulus is active only in the therapeutics market. Nevertheless, investing in these companies for their core businesses is not a bad idea at all.

Exiqon could have been an interesting opportunity but its miRNA activity is thus far dwarfed by its activity in other areas, mostly products for research labs. Asuragen, which currently has the only marketed miRNA-based diagnostic test, seems very active in the field, but it is also involved in a wide range of other areas, not to mention the fact it is not publicly-traded. Santaris’ achievement in having the first miRNA-targeted drug in the clinic is very impressive, but it will take years to commercialize this product, not to mention the unfavorable risk/reward ratio any single clinical program represents.

With so much going on in just several months, miRNAs are certainly living up to their promise thus far, turning into a strategic asset the pharmaceutical industry cannot ignore. Nevertheless, investors should make a clear distinction between the general excitement around miRNAs and the near-term financial values they represent. At the moment, miRNA-based diagnostics present the most compelling opportunity in the field, due to their short time to market, low development costs and increased likelihood of commercialization. Taking all the above under consideration, the best positioned company to capitalize on the miRNA revolution is Rosetta Genomics.

For more about Rosetta Genomics and its promising pipeline, click here and here.

Disclosure: Author is long ROSG & ISIS.

Comments

[NJgolfer]

I like ISIS here better than ROSG just based on technical performance of the chart. ISIS is much closer to ROSG and shown better accummulation. Long ISIS...

[Roxieanne]

ROSG will take time to mature as a stock and company. ROSG is a "speculation"... with possible long term potential at best. Many of the medical area stocks are just that due to the research and trials that takes months and years. Interesting to follow.

Your information is interesting.

[Ohad Hammer]

ROSG is not like other pharmaceutical companies simply because they are focused on diagnostics, with a huge near term potential. By this time next year, they should have 3 products in the market, in addition to several other submitted tests.

[PrudentInvesting101]

What about MRNA? Aren't there other RNA type of companies out there? Wasn't there some company founded by Nobel Laureates who really found this stuff? Could be one of the above mentioned...New as all heck to Biotech but I've been told that RNA is the next 5-10 year play in Biotech. Smart folks I know say this is the investment theme and to find the winners now....

I am a tech guy myself. ABAT has made and will continue to make me some nice returns this year. In there BIG at an avg. cost of $4.50. ROSG is about the size company I like to find......