Drugmakers bet big on RNA

Drugmakers, biotechs experiment with RNA to block diseases; risky technology could lead to multi-billion dollar industry.

By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Biotechs and big pharma are betting billions on an experimental technology that could be a quantum leap for healthcare, or just a big bust.

They're working on treatments to harness a naturally occurring process called RNAi (the "i" stands for "interference') to block the creation of diseased cells.

Some analysts believe the technology could blossom into a multi-billion dollar industry. But it's still very experimental, and a marketable product is years away.

"Whether or not they can bring a marketable compound out of this [RNA] mechanism remains to be seen, but you can be sure it would open up the floodgates for other people trying other indications," said Les Funtleyder, analyst for Miller Tabak. "The sky's the limit, but they have to prove themselves, first."

RNA players include OPKO Health, Alnylam Pharmaceuticals, Novartis and Merck & Co. The New Jersey-based pharma giant Merck cast a major vote of confidence for this technology in 2006, when it paid $1.1 billion for Sirna, a company specializing in RNA research.

At the time, Merck was criticized for the Sirna buy, because RNAi research was still in an early phase, and the deal was seen as a huge risk.

"These are very high risk speculative investments," said Douglas Chow, an analyst for Caris & Co. He added that the Sirna deal was one of the few times that a dollar value was attached to RNA technology.

OPKO Health (Charts) and Alnylam Pharmaceuticals (Charts) possess the most advanced pipelines for injectable drugs based on RNA, the pathway used by DNA to produce proteins.

Miami-based OPKO, which has a $650 million market cap, has the world's most advanced RNAi compound in its pipeline, according to company executive vice president Sam Reich and analysts who follow the industry.

The company's bevasiranib compound is an experimental treatment for age-related vision loss, the most common cause of blindness in the developed world. This is the only RNAi drug in phase 3, the final stage of testing before submission to the Food and Drug Administration for review.

If the late-stage trials are successful, OPKO could file the first RNA drug application to the FDA in 2010, said Reich. He considers bevasiranib a potential blockbuster, which would compete with Genentech's non-RNAi drug, Lucentis, which pulled in $420 million in sales during the first half of 2007.

Alnylam, a Cambridge, Mass.-based biotech with a market cap of $1.4 billion, is not too far behind with RNAi compounds. The biotech has built its entire pipeline around this genetic process.

The company has an RNAi inhalable treatment in phase 2 testing, meaning that is has yet to enter late-stage testing and is still years away from potentially entering the market. The compound, called ALN-RSV01, would be used to block the manufacture of the respiratory syncytial virus, the leading cause of pneumonia and bronchiolitis in babies and toddlers.

Pharma giants Merck (Charts, Fortune 500) and Switzerland-based Novartis (Charts) are the biggest players developing RNAi drugs.

During a recent interview at the Novartis Institutes for BioMedical Research (NIBR), in Cambridge, Mass. President Dr. Mark Fishman said that controlling RNA to block diseases "was the next best thing we could do to fixing the gene and the DNA itself," a process that has "proven impossible so far."

"In principal, [RNA technology] could replace the drugs that are out there today, by preventing the synthesis of the protein, not just block its activity," said Fishman.

But it's going to take years to turn this "principal" into a marketable product, according to Trevor Mundel, head of exploratory clinical development for NIBR. "It'll probably take five to 10 years to get a drug on the market, with five years very optimistic," he said.

Merck, through its merger with Sirna and partnership with Allergan (Charts) is experimenting with SIRNA 027, a phase 2 treatment for age-related vision loss. It's Merck's most advanced compound in development.

"Merck is strategically focusing its scientific expertise and resources on fully realizing the potential of Sirna's RNAi technology and programs," said company spokesman Ian McConnell. "This technology is likely to be used across all of Merck's therapeutic areas."

While the experimentation with RNA technology isn't exactly new, the interest in its applications snowballed with recent collaborations, said BWS Financial analyst Hamed Khorsand. He referred to the Merck-Sirna merger, and a deal between Isis Pharmaceuticals (Charts) and Johnson & Johnson's (Charts, Fortune 500) healthcare subsidiary Ortho-McNeil.

"It's something that companies have been working on for many years, but no one's been putting much emphasis on it until recently," said Khorsand. "Right now, everyone is trying to collect as many patents as possible."

Isis develops RNA drugs, but it uses a different process called "antisense." Isis, a Carlsbad, Calif.-based biotech with a market cap of $1.5 billion, is developing an anti-cholesterol drug (known as 301012) that's in phase 2 clinical trials. If successful, the drug would block the creation of harmful cholesterol.

The science of RNA has broad applications, meaning that it could eventually be used to treat a myriad of diseases. But even the most bullish analysts chant the same mantra: proceed with caution.

Ding Ding, an analyst with Maxim Group, said the market for RNAi could eventually reach billions of dollars in annual sales. But she warned that "translating a great science into a commercially successful product" is time-consuming and "very risky."

The analysts quoted in this story do not own stock in the companies mentioned here. Top of page

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.