West Coast Editor

As RNA interference firms continue to jostle for position, Australia-based Benitec Ltd. is cutting the work force by half at its U.S. facility while taking other measures with an aim of saving about $4 million per year so the company can move ahead with preclinical programs in hepatitis C virus and HIV.

The staff reduction means almost $100,000 in monthly savings, and other moves will save another $250,000 per month, with spending levels reduced by 50 percent overall, though the company did not say how many workers would be laid off at the site in Mountain View, Calif. Benitec could not be reached Tuesday.

Jonathan Aschoff, analyst with Brean Murray, Carret & Co. in New York, classed Benitec with such RNAi firms as Philadelphia-based Acuity Pharmaceuticals Inc. and Arrowhead Research Corp., of Pasadena, Calif.

"All of them, I believe, do not have anything [that will last]," said Aschoff, who covers Sirna Therapeutics Inc., of San Francisco.

Acuity, though, is beyond the preclinical stage. Earlier this year, the firm finished the patient-dosing component of its Phase II program for Cand5, a small interfering RNA therapy, in wet age-related macular degeneration, and began dosing patients in a pilot Phase II trial with the product in patients with diabetic macular edema.

Of the RNAi companies operating, "only two companies arguably have staying power," he added, citing Sirna and Alnylam Pharmaceuticals Inc., of Cambridge, Mass.

In late January, Benitec said the filing of the investigational new drug application for the HIV drug would be delayed because of "one aberrant result in the release tests of the clinical materials," and said the problem was not related to the safety or efficacy of the compound.

"I would never use the trials and tribulations of Benitec as a barometer" of the research, Aschoff said.

Andrew McDonald, who covers Alnylam for ThinkEquity Partners in San Francisco, agreed, saying Benitec "was on the radar but was never really significant."

Benitec's cost-cutting moves come less than a month after Alnylam - already having signed a potential $700 million deal with Novartis AG last fall - entered a research agreement to access INEX Pharmaceuticals Corp.'s drug delivery technology. (See BioWorld Today, Sept. 8, 2005, and March 28, 2006.)

Not to be outdone in the collaboration department is Sirna, which earlier this month entered a deal, also worth up to $700 million, for RNAi therapeutics against respiratory diseases with London-based GlaxoSmithKline plc. (See BioWorld Today, April 4, 2006.)

Alnylam, which also has partnered an age-related macular degeneration program with Merck & Co. Inc., of Whitehouse Station, N.J., was the subject of a research note late last month by New York-based Needham & Co. analyst Mark Monane, after Alnylam published preclinical data on systemic delivery of siRNAs in monkeys in the journal Nature.

"We assign substantial weight to the Nature data," Monane wrote, "given that they have been vetted through peer-review for a top-tier scientific journal," while noting that Alnylam is not alone in having shown systemic delivery - Sirna has done the same in monkeys.

ThinkEquity's McDonald said there is "a big controversy right now as to who has the dominant intellectual property in the space, and that's not going to get resolved for quite a while." Alnylam has broad patents, whereas Sirna is focused on genes and oligonucleotides, he said.

"Who has the dominant IP at this point is almost moot, since the technology really hasn't achieved proof of concept in humans," he added.

Aschoff said both firms "have freedom to operate in non-modified RNAi technology, but when it comes to highly modified RNAi, that's where Sirna has dominant patents - there and on drug targets," though Aschoff agreed the IP won't mean much until further clinical trials are done.

"Even if Phase III drugs ultimately fail, I believe [Sirna's] stock is going to respond strongly to pharma deals," said Aschoff, who has set an $11 price target. The firm's shares (NASDAQ:RNAI) closed Tuesday at $7.77, up 32 cents.

Alnylam's shares (NASDAQ:ALNY) ended the day at $14.60, up 36 cents.

In their respective pharma deals, Alnylam and Sirna came away with the same amount of milestone potential, "but Alnylam had to sign up many, many disease areas with Novartis," Aschoff noted, whereas Sirna gave up just one disease area, "and it's only going to take [Sirna] about four deals to not only match the up-front payment" of about $56.8 million from Novartis, but also Sirna could get "four times the milestones, since $700 million seems to be the going rate."

He predicted another pharma deal for Sirna in the late third quarter or early fourth quarter forecasting a "big-splash type of large pharmaceutical deal for one disease area, or a portion of one disease area. Sirna's not going to give all of oncology to one company."

Naming Sirna as the RNAi leader, Aschoff pointed to Phase I data in age-related macular degeneration, with a drug partnered with Allergan Inc., of Irvine, Calif. Phase II trials are expected to start in the middle of the year, and a drug could be on the market in 2010, he said.

Also this month, Arrowhead agreed to contribute up to $10 million in additional capital to its majority-owned subsidiary, Duarte, Calif.-based Calando Pharmaceuticals Inc. to boost preclinical testing of its RNAi therapeutics and shop for collaborators. Calando focuses on delivering small interfering RNAs by way of linear cyclodextrin polymers.

Others to make news in the space recently include Los Angeles-based CytRx Corp., which in January spun its RNAi assets into a subsidiary. In February, Nastech Pharmaceutical Co. Inc., of Bothell, Wash., bought the RNAi intellectual property estate of Cambridge, Mass.-based Galenea Corp. (See BioWorld Today, Jan. 31, 2006, and Feb. 24, 2006.)