Biotech Buzz Post No. 3 - RGLS

The world is getting better, but it’s not getting better fast enough, and it’s not getting better for everyone - Bill Gates, Microsoft founder and philanthropist (1955 -    )

Regulus Therapeutics (Nasdaq: RGLS) - The little king of RNA

I learned yesterday that Bell Potter had managed to hire my replacement as senior healthcare analyst. John Hester used to be with John Bowie-Wilson’s Linwar Securities and more recently had been with a boutique called Select Equities after the ANZ bank shut Linwar down last year. For various reasons I had been hoping that my old employer wouldn’t find anyone up to the job. I now bring to mind the famous quote from Charles De Gaulle “The graveyards are full of indispensable men”.

Let’s talk about a field of the Life Sciences that is very much alive and likely to prove indispensable to modern medicine sometime down the track – RNA therapeutics. RNA, as just about everyone knows, is the material used to translate the DNA from the nucleus of our cells into the proteins that make up just about everything in our bodies. Modulate the RNA that creates too much or too little of a particular protein, or the wrong kind of protein, and you theoretically have a way to treat hitherto incurable diseases. The devil, of course, is in the detail. Exactly what gene or genes do you need to interfere with? What kind of nucleic acid, peptide, or small molecule do you do it with? And how do you get your therapeutic into the cells where it can do its work? So far none of these questions appear to have been answered to anyone’s satisfaction. However the fact that a lot of progress has been made can be attested to the San Diego-based Regulus Therapeutics (Nasdaq: RGLS), which was able to go public last year in an US$81m raise.

The first thing to like about Regulus is its name. As star gazers will know, Regulus is the brightest star in the constellation Leo, and its name means 'the little king'. Regulus’s beat is microRNA, the short strands of RNA which regulate what messenger RNA takes to the ribosomes to turn into proteins. MicroRNA, when it associates with a set of proteins called ‘RISC’ (short for RNA-induced silencing complex), is able to target specific messenger RNA and stop it from converting to protein. Regulus was created in 2007 when two other pioneers of the RNA therapeutics space - Alnylam and Isis – pooled the intellectual property they didn’t need in order to go after microRNA while they focused on their core technologies (siRNA in the case of Alnylam, antisense in the case of Isis). MicroRNA could be a whole lot bigger a field than siRNA or antisense because with MicroRNA whole networks of disease-causing genes can be targeted. Indeed, there’s evidence that microRNA works through RNAi to regulate perhaps a third of the whole genome.

Regulus, after it has identified a microRNA target of interest, designs anti-microRNA oligonucleotides, called ‘anti-miRs’, whose chemistry has been modified for better stability, among other things. The company has some powerful friends. With Sanofi it is going after liver cancer and kidney fibrosis. With GSK it’s targeting Hepatitis C, where it could develop a much more differentiated offering than those currently in the works from Gilead et. al. And with AstraZeneca it is exploring anti-miRs that could be useful in atherosclerosis. For its own account it has a glioblastoma candidate in the works. Add it all up and these deals are worth US$1.7bn in milestones, of which ~US$100m gets paid even before a patient gets dosed and US$350m kicks in during clinical development. Regulus has only just gotten around to picking candidates this year and doesn’t expect to file INDs until next year.

How much would you expect to get in on the ground floor of microRNA drug development? Regulus is currently capitalised at a generous US$343m, the stock having performed well since last year’s arrival on Nasdaq. Part of the attraction is the Hepatitis C programme, where the race is definitely on to find therapies that deliver above and beyond what the current generation of small molecule antivirals has to offer. It’s worth noting in this regard that Regulus’s CEO Kleanthis Xanthopoulos was a founder of Anadys, which Roche bought in 2011 in order to go after Hep C. Also attractive for investors is the Regulus board, whose all-star cast includes, most notably, Caltech’s David Baltimore, the guy who discovered retroviruses in the 1960s and who won the Nobel Prize for Medicine for this in 1975 (and in whose lab Doug Hilton, the current WEHI director, worked for a while).

So Regulus basically has rock star appeal. But as we've done several times this week and will continue to do  in this blog, it's worth stopping and thinking about whom the market is missing in all this excitement. Come down to Sydney and Benitec (ASX: BLT) can show you how double-stranded RNAi (ddRNAi) is a unique RNA therapeutic approach with promise in a range of disease indications including Hepatitis C. Benitec is currently in the process of filing an IND for its TT‐034 gene silencing therapeutic ahead of a Phase II trial in Hep C, and that product, which can shut down  three separate highly conserved regions on the virus genome simultaneously, has been designed as a 'one shot cure' for HCV infection. The Benitech folks are not rock stars - yet - but Kevin Buchi, the man who built Cephalon before it went to Teva, is a director, which tells you it's something worth looking into, particularly since it's only capped at A$24m.

Stuart Roberts, Australian Life Sciences consultant, with global focus
Nisi Dominus Frustra

+61 (0)447 247 909

sroberts2164@gmail.com

Twitter @Biotech_buzz

About Stuart Roberts. I started as an analyst at the Sydney-based stockbroking firm Southern Cross Equities in April 2001, focused on the Life Sciences sector from February 2002. Southern Cross Equities was acquired by Bell Financial Group in 2008 and I continued at Bell Potter Securities until June 2013. Over the twelve years to 2013 I built a reputation as one of Australia's leading biotech analysts. I am currently consulting to the Australian biotech industry. Before joining Southern Cross Equities I wrote for The Intelligent Investor, probably the most readable investment publication in Australia. I have a Masters Degree in Finance from Finsia. My hobbies are jazz, cinema, US politics and reading patent applications filed by biotechnology and medical device companies.

Previous Australian Biotechnology Buzz posts:
Immunomedics (Nasdaq: IMMU), 21 August 2013
Oncolytics Biotech (Nasdaq: ONCY),  22 August 2013
Regulus Therapeutics (Nasdaq: RGLS), 23 August 2013

Disclaimer. This is commentary, not investment research. If you buy the stock of any biotech company in Australia, the US or wherever you need to do your own homework, and I mean, do your own homework. I'm not responsible if you lose money.