What do you think of my bacon gene silencing gag, pretty cool eh? I do love the sizzle of bacon…
Firstly, I would like to start this blog post by apologising to Benitec, and particularly Peter French (CEO). In my last entry, I broke one of my own purported rules and that was not to simply rubbish a company. I genuinely aspire to do better than that, and it was wrong of me to do so. However what really irritated me was Benitec’s interim clinical update, something I have never seen before in terms of a crass and blatant publicity strategy. This announcement was not about measured and meaningful scientific disclosure, nor was it about sensitive clinical communication with patients and physicians. It was just a publicity stunt targeted at fickle retail public investors hanging out for some good news after a decade of waiting.
When a biotech company does this, they deserve nothing but ridicule.
I have learned over the past 24 hours that Benitec enthusiasts are a passionate lot. I don’t actually get that many comments left on my blog (mainly because it is not especially interesting to the vast majority of people) but I do tend to get a lot of emails (I suppose it reflects the more conservative culture of the predominantly Australian readership of this site). Most of the abusive emails simply amuse me but I did get a lot of punters attempt to give me a science lesson because I clearly “didn’t understand” what they had invested in.
I will admit, the background IP landscape is complex and it’s hard to read the tea leaves when watching the players in the RNAi space is like watching a game of musical chairs, from Novartis and Merck pulling back, to Sanofi getting red hot. But let me tell you what I do understand, and why I think BLT isn’t a game-changer company. Other than the delectable picture of rashers and the pun of the headline, I will keep this serious and brief, so that my position can be clearly and factually understood. I will also re-iterate, to sooth the concerns of several individuals, that I am not trading or acting on this opinion in any way.
1) Not withstanding that there is some similar disease area interest, Alnylam and Benitec are not peers. In any way – scientifically or commercially – and I am frankly tired of hearing this comparison. In my opinion, their technology is conceptually similar at best – much like a motorcycle and a car are both “automobiles”. I am well aware that about a decade ago when the last cycle of gene therapy enthusiasm was at a frenzied peak (and Alnylam was a fresh IPO), a commercial agreement was signed between the two companies. It was not really a cross-licensing agreement as many people have suggested – it was in fact an option provision, should either company wish to access the other’s technology. To the best of my knowledge, this option has never been exercised in either direction. I think the description of “alliance” is correct – but a decade on, this alliance is almost certainly irrelevant.
2) Benitec has missed the opportunity to become a product company. There is no doubt that in 2004/5, the Benitec (actually CSIRO) IP around gene silencing was considered to be very groundbreaking. It is wonderful science and there is also no doubt that the Waterhouse and Graham patent estates had the potential, at the time, to be commercially exciting – in 2005. It’s just a pity that Benitec’s early strategy seems to have been more around patent portfolio ownership rather than seriously developing a product. If the company had actually demonstrated product development chops, it would probably be one of Australia’s most valuable biotech companies today. By the way, we shouldn’t be too harsh on Benitec, a lot of companies have failed by sitting back and expecting someone else to come knocking on the door for technology rights. It’s also a pity that CSIRO, on the whole, has such a crappy track record at commercialisation (though it may change with its new leadership) – let’s hope that some value can still be captured from agricultural applications of this technology, which have progressed considerably further than clinical applications (and to which Benitec has, as far as I am aware, no rights).
3) It’s now 2015. The cornerstone of Benitec’s IP expires in the next 3-4 years and any recently filed IP around specific constructs is probably too product-specific to be strategically threatening. There is no product candidate dependent on Benitec IP that I am aware of that has any real probability of attaining marketing clearance in the next while. Contrary to the assertions of a lot of emails I received, there is no infringement of intellectual property in developing a product, only commercialising it (research safe harbours exist in most commercially significant jurisdictions, for example the § 271(e)(1) exemption in the US). It is quite possible that reagent companies or providers of sophisticated animal models are infringing Benitec IP but those revenue opportunities are not enormous and probably not worth much more than a “shot across the bow”, let alone a lawsuit. For others developing clinical products that might infringe (remembering, for example, that there is a huge technological nexus between gene therapy and autologous cell therapies, so I am thinking about Gradalis’ Vigil program that is currently in Phase III) there is absolutely no compunction to do a deal with Benitec because the IP will have expired by the time a product is launched. You snooze, you lose.
4) Still articulates a lack of focus. I mentioned this in my last post but I did it in far too much of a throw-away fashion and as such, the point lost impact. Not to harp on too much about Alnylam, but they have received close to $1.5Bn in non-dilutive financing through partnerships and collaborations over the last decade. Clearly, the scattergun partnership strategy has worked for a lot of platform from companies from Alnylam to Seattle Genetics (sorry… couldn’t think of an example of a platform technology beginning with “Z”) but the fundamental requirement to build escalating value in your technology is to also develop products and demonstrate clinical utility. Benitec waited far too long to do this and now it is trying to position itself as a comprehensive player, just as it’s $10Bn market cap “peer” does, mainly because it appeals to retail punters as an arbitrage opportunity. To the management team’s credit, the last annual report talks about paring back focus to HCV, but in my view the company is still – at least from an outside perspective – confused about whether it is a biotech or a patent troll (and one wonders what would have happened if they hadn’t been able to do a deal with Asklepios?).
5) Hepatitis C is not what it once was. Benitec is unlucky because the HCV world has undergone such a massive transformation in the last few years. Not just Gilead, but Merck, BMS, Abbvie and others. There is no doubt that a single-shot injection would be a big deal for patient compliance but it’s really important to understand that we are very rapidly moving away from the miserable life of PEG-interferon / ribaviron therapy. Ignoring the economic issues that are currently a topical point of discussion, we now have 8-12 week courses of once-a-day, oral, extremely well tolerated combination anti-virals that have about a 95% cure rate across all HCV genotypes. So can Benitec really justify the full clinical cost of development of a novel biologic at this point, especially given that the market is going to turn into a competitive bloodbath? Even for emerging markets (which Benitec has talked about as a unique opportunity), the big boys like Gilead have committed to allowing generic competition and dramatically reduced pricing structure.
6) This leads to the economics of Benitec’s technology. The reason why it will struggle to displace a lot of the HCV therapeutics already out there (or not far behind) is the COGS. We are talking about a really sophisticated ddRNAi construct consisting of an engineered adenovirus vector and the gene(s) itself. Compared to even a finicky (and kind of ancient) lipid-siRNA particle, this is comparatively expensive to manufacture. Moreover, there are very few contract manufacturers that can actually scale up production of this kind of product and many of those players have their eye on very different market opportunities. It’s not enough to just make some material for a clinical trial, you need to have a cost-effective production scale-up plan. This is where Benitec comes up very far behind its notional competition – especially with very elegant new carbohydrate delivery mechanisms like GalNAc, which are extremely stable (think shelf-life, storage conditions) and incredibly cheap to synthesize. The competitive difference is chemistry vs biotechnology. Think about it. By the way, Benitec has zero chance of making money if the price benchmark for Sovaldi in India is $300.
7) Lastly, the fundamental technology has plenty of challenges associated with it. There is absolutely nothing wrong with the Benitec ddRNAi concept, it’s just that making this kind of technology really fly is not only about the question of whether “gene silencing” works or not. It does work, at least we think so. But in tackling something like HCV with a Benitec construct, there are plenty of other issues to consider such as CAR expression outside of the liver / innate adenovirus immunity, construct/delivery heterogeneity, side-effect profile and even basic pharmacologic issues like dosing vs hepatic clearance. Also, although viral replication mostly happens in hepatocytes, there is a growing body of evidence that HCV also replicates in peripheral blood mononuclear cells, explaining the prevalence of immunological disorders in chronic patients. This actually doesn’t bode well for any gene silencing strategies for hepatitis based on a high-molecular weight delivery vehicle like a lipid or viral particle, and it would basically be a disaster if therapeutic efficacy of a drug like TT-034 required a combination gene therapy / anti-viral. The commercial and clinical risk wouldn’t be worth it and the economics would completely suck.
But if none of these reasons are good enough to be wary of BLT, then watching how a company behaves with clinical information should at least factor in your thinking. When a company drip-feeds clinical information to the market, rather than assembling a complete and robust data package and subjecting it to peer review (even for an interim data point), then there is something wrong with the ethos of the management team.
Frankly, I am surprised that a top-tier site like Duke allowed it. It’s highly irregular and clinicians would have hated it.
And now all this talk of bacon has made me hungry. Time for breakfast.