The RNA industry could receive a significant boost this year after the National Institute of Health ("NIH") announced a data-sharing collaboration with Life Technologies Corp. (NASDAQ: LIFE) in December. Under the deal, large-scale information covering the biochemical makeup of small interfering RNA ("siRNA") molecules will be made publicly available to help scientists better understand how genes affect disease.
The partnership will release data on 65,000 siRNA sequences targeting more than 20,000 human genes through the NIH's public database PubChem. Experts from the NIH RNAi initiative will also conduct follow-up screens and add new data to PubChem on an ongoing basis, making the database a growing resource for gene function studies in both private and public efforts.
NCATS Director Christopher P. Austin, M.D. sums up the project's potential best by saying, "The Human Genome Project showed that public data release is critical to scientific progress. Similarly, I believe that making RNAi data publicly available will revolutionize the study of biology and medicine."
Regaining Confidence in RNAi
The NIH's move to bolster RNAi research comes as the industry has been seeing renewed strength after a period of uncertainty.
Dicerna Pharmaceuticals Inc. recently filed papers with the SEC to raise up to $69 million from public investors through an IPO, marking only the second RNA therapeutics company to go public. The company is focused on RNAi-based treatments for rare inherited diseases involving the liver and for cancers that are genetically defined. Renewed investor appetite for RNA-focused biotech companies is a positive sign moving forward.
Recent clinical data has also been very positive across the board in RNA research and development. For example, RXi Pharmaceuticals Corp.'s (OTCBB: RXII) RXI-109 treatment for dermal scarring following planned surgery showed a strong safety profile and a 50% reduction in CTGF mRNA expression compared to placebo in data from its second Phase I study. Inhibition of CTGF is associated with a marked reduction in scarring.
Alnylam Pharmaceuticals Inc. (NASDAQ: ALNY) also reported favorable results from its RNAi-based program focused on amyloidosis - a disease where proteins build up in the body due to changes in their structure. In a recent Phase I clinical trial, the company's ALN-TTRsc showed a statistically significant knockdown of TTR concentration in the serum of over 80% of patients, signaling that the RNAi mechanism works.
The favorable clinical data from companies like Alnylam Pharmaceuticals and RXi Pharmaceuticals has renewed investor appetite in the RNA industry to the point where companies like Dicerna Pharmaceuticals are comfortable with an IPO. The NIH's recent data collaboration could encourage more participation and innovation in the space over the long-term which should help bolster investor interest and returns moving forward.
Opportunities for Investment
RNA-focused companies like Alnylam Pharmaceuticals and ISIS Pharmaceuticals Inc. (NASDAQ: ISIS) are trading up more than 200% over the past 52-weeks as investors begin to re-embrace RNA's potential. Investors are also closely eyeing Dicerna Pharmaceuticals' upcoming IPO and other potential private companies entering the public markets in 2014 and beyond.
Given these lofty valuations, investors may want to consider smaller companies in the space. RXi Pharmaceuticals has a market capitalization of just $40 million despite targeting the multi-billion dollar dermal scarring market. With Phase I clinical trials already showing strong signs of efficacy, the odds of favorable Phase II results are higher. Potential partnership opportunities could further catalyze the stock, too.
Conclusions
The RNA industry is experiencing a renewal that shouldn't be ignored by investors. Like the Human Genome Project, the NIH's collaboration with Life Technologies could make RNA research much easier and open the door to greater industry participation. In the meantime, favorable clinical results from RXi Pharmaceuticals, Alnylam Pharmaceuticals, and others has solidified RNA's therapeutic potential, while Dicerna Pharmaceuticals' upcoming IPO illustrates investor demand.
With Alnylam Pharmaceuticals, ISIS Pharmaceuticals, and many other larger RNA players already trading at record highs, investors may want to consider smaller companies in the space like RXi Pharmaceuticals instead. These smaller companies may offer more reasonable valuations and greater upside potential over the long-run as the industry matures.
For more information, see RXi Pharmaceuticals' website at http://www.rxipharma.com/
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