Summary

  • Trading at less than a quarter of valuation of its closest peer that was acquired by Roche in August 2014, Marina Biotech is extremely undervalued.
  • News in the RNA therapeutics sector continues to attract strong attention; most recently in Regulus Therapeutics’ (RGLS) phase I Hepatitis-C results.
  • Marina overcame immediate cash concerns and regained SEC compliance following a February 2014 $6M financing from Tekmira (TKMR) investor Steven Newby, which piqued our interest leading to this detailed review.
  • Marina still needs more cash to achieve its goals, but has a good chance of funding itself via partnership or more financing at higher levels due to extremely strong IP.
  • After carefully reviewing Marina’s promising technologies and competitive position, we value the company at $4.50 per share.

Earlier this month investors witnessed another RNAi stock achieve incredible gains based on very early clinical trial data. The company, Regulus Therapeutics (RGLS), published its Hepatitis-C phase I data from a pool of only sixteen patients. The data was quite optimistic, however it was based on a very small sample size of patients in addition to the trial still being in a very early stage. The reporting of this, somewhat, premature data resulted in big institutional money stampeding into the stock and causing the share price to rocket from $6.80 to $25 in a matter of a few weeks following the press release. The company’s market cap quadrupled from $300 million to a very impressive $1.2 billion. This parabolic rally to $25 continued despite the company’s news of an $80 million secondary offering, priced at $17 per share, which was announced only a few days after the initial clinical data news.

This type of remarkable price movement has become a common theme for investors in the RNAi sector, as seen in companies such as Arrowhead Research (ARWR), Sarepta Therapeutics (SRPT), Isis Pharmaceuticals (ISIS), Alnylam Pharmaceuticals (ALNY), Regulus Therapeutics and Tekmira Pharmaceuticals (TKMR). Following an announcement of positive clinical data or a cash infusion from a secondary offering, the demand for these stocks has clearly outweighed the supply, resulting in very substantial price appreciation. The RNAi companies of the biotech industry have become one of the hottest sectors in the market.

Today, we believe that Marina Biotech (MRNA) possesses competitively similar IP and in some cases, superior RNAi technologies when compared to the publicly traded names listed above as well as some of the recent privately held companies that were acquired using aggressive valuations by big pharma. Until recently, Marina Biotech had been forgotten, until investor Steve Newby, who recently was Tekmira’s single largest shareholder, funded the company. Newby’s investment allowed Marina to overcome a cash crunch and has given the company another chance to see its technologies more widely accepted by the market.

Marina Biotech has a large and promising intellectual property portfolio that spans several areas of RNAi-based therapeutics – from delivery systems to nucleic acid analogs. In fact, Marina Biotech is the only company in the RNAi sector to possess two distinct delivery technologies in clinical development: Smarticles and TransKingdom RNAi (“TkRNAi”). It is these delivery technologies that we believe are deficient in other companies in the sector. Marina’s superior delivery technologies make the company a hidden gem that we strongly believe will soon partner with a big pharma company and/or deliver positive data from its own phase I clinical trial plus positive data from one of its existing partner’s ongoing clinical trials using Marina’s proprietary delivery technologies. Upon achieving any of these, Marina’s stock could deliver substantial gains to shareholders.

Currently all eyes are focused on President and CEO Michael French as he leads Marina on a path focused on treating rare diseases. Marina’s immediate objectives as shown in their recent investor conference presentation:

A) Advance its phase I program (CEQ508) for FAP in the US.

B) Partner development of CEQ508 outside the US.

C) Achieve human proof of concept in myotonic dystrophy and Duchenne’s muscular dystrophy.

D) Develop additional rare disease programs through biotech and partnering efforts.

We derive our fair valuation of Marina from Roche’s August 2014 acquisition of privately held RNAi company Santaris Pharma for $250 million (as well as another $200 million in potential future royalties). In our view, this is Marina’s closest competitor and we confidently believe Marina deserves a comparable valuation that would place a $4.50 price tag on the shares.

During our due diligence into Marina and the RNAi space we delved into the company on a much deeper basis due to the scientific nature of the technology. In this report, readers will find very comprehensive research on the company as well as the sector. We have also made a significant effort to give a full and fair disclosure to what we believe are the pros and cons of an investment in the company. Marina Biotech currently finds itself in a very similar position to ARWR, TKMR and ALNY prior to those companies’ breakthrough funding. Marina’s possession of novel RNAi technologies, promising clinical trials, and potential for big pharma partnership deals is very compelling and leads us to see great value in the company.

Supply vs. Demand

Highlighted below are three RNAi stocks that utilized early capital raises in their quest to bring new drugs to market for rare diseases. Each of these companies raised in excess of $30 million with some having additional raises that exceeded the $30 million threshold. We believe that companies who continue to produce relevant clinical data and/or form new big pharma partnerships will continue to see large inflows of investor capital into their common stock. The investor appetite for these types of RNAi companies is apparently very strong as demonstrated by the price charts below.

Alnylam Pharmaceuticals, Inc.

  • 01/22/13 Raised $173.8M, 9,200,000 shares @ $20.13

Tekmira Pharmaceuticals Corp

  • 10/22/13 Raised $34.5M, 4,312,500 shares @ $8.00

Arrowhead Research Corp

  • 02/24/14 Raised $120M, 6,325,000 shares @ $18.95
  • 10/14/13 Raised $60M, 3,071,672 shares @ $5.86 (plus warrants)
  • 05/06/13 Raised $36M, 14,300,000 shares @ $1.83 (plus warrants)

As stated earlier, Regulus Therapeutics just raised $103 million at $17 per share, post clinical data, that catapulted the share price by almost 200%. Institutional interest took the supply of the six million new shares into the float and pushed the shares to $25.60 within a few days.

Wall Street is clearly willing to put large amounts of fresh capital behind an RNAi company that has the potential to make an impact in the industry. Marina Biotech is in a great position to benefit from this current trend and investor appetite.

The Science of RNAi-based Therapeutics – Shoot The Messenger

RNA interference (“RNAi”) is a biological process in which RNA molecules inhibit gene expression, typically by causing the destruction of specific messenger RNA (“mRNA”) molecules, which are critical in the pathway to protein formation.

To understand RNAi-based therapeutics, one must first understand the general molecular mechanism of how proteins are formed:

DNA (Deoxyribonucleic acid) is the blueprint for the building blocks of multicellular organisms. Proteins are the building blocks.

DNA is made of 4 different nucleotides; adenine (“A”), thymine (“T”), guanine (“G”) and cytosine (“C”). The nucleotides on one strand of DNA form base pairs with a second strand of DNA to form the double helix. Adenine (“A”) binds to thymine (“T”) and guanine (“G”) binds to cytosine (“C”). If we know the sequence of nucleotides of one strand, we can determine the complimentary strand it will bind to. The two strands are coined sense and anti-sense strands. Genes are sequences of DNA that code for proteins.

When a gene is turned on, its sequence within the DNA is transcribed into an mRNA (called “transcription”). RNA (Ribonucleic acid) is similar to DNA in that it is also composed of a sequence of nucleotides except uracil (“U”) is used instead of thymine (“T”). The sequence of RNA is complimentary to the sequence of DNA it is synthesized from, known as the template strand. The mRNA is transported out of the nucleus and into the cytoplasm. It binds to a protein complex called a ribosome, which reads the sequence and translates the code of the mRNA into a protein (called “translation”). One amino acid is added for every three nucleotides in the RNA. Each triplet of nucleotides is called a codon. A protein is made up of a string of amino acids that subsequently fold into a structural and functional 3D form.

Source: http://www.science-explained.com/theory/dna-rna-and-protein/

Source: http://sitimardianayaakob.blogspot.com/2010/04/nucleic-acids.html

RNA is not just limited to coding for protein synthesis (“mRNA”); these oligonucleotides perform a multitude of roles within the cell involved in protein synthesis, gene expression and regulation.

There are several types of RNA, but for the purposes of this report we will focus on three:

Messenger RNA (“mRNA”) – A single stranded RNA that specifies the amino acid sequence of a protein which is the product of gene expression.

Double-stranded RNA (“dsRNA”) – RNA with two complementary strands, similar to the DNA found in all cells. dsRNA forms the genetic material of some viruses. dsRNA can be introduced in cells in vitro and in vivo, where it is cut into siRNA to produce RNA interference.

Small interfering RNA (“siRNA”), aka short interfering RNA or silencing RNA – A class of dsRNA, 20-25 base pairs in length. It plays a notable role in RNA interference.

MicroRNA (“miRNA”) – A short non-coding RNA molecule about 22 nucleotides long which functions in transcriptional and post-transcriptional regulation of gene expression.

The Discovery of RNAi

In 2006 Andrew Fire and Craig Mello won the Nobel Prize for their 1998 discovery of “RNA interference – gene silencing by double stranded RNA.”1

While investigating gene regulation in nematode worms called C. Elegans, Andrew Fire and Craig Mello discovered that by injecting double-stranded RNA (dsRNA, made up of a sense and an antisense strand) that encodes for a muscle protein, the worms displayed strange muscle movements. Those movements were similar to those of worms completely lacking a functional gene for muscle protein.

Several experiments followed, and each time dsRNA was injected into the cell (in the form of siRNA), the gene it coded for was silenced. The use of dsRNA to silence gene expression is termed RNA interference (“RNAi”), and it is a naturally occurring process in eukaryotes.

This gene-silencing mechanism was later revealed. When dsRNA is introduced into a cell, the cell identifies it as foreign viral DNA and a self-defense mechanism is initiated to target and degrade all sequences that are similar to the foreign DNA, even if it is already in the cell. A protein complex called Dicer binds to the dsRNA and separates the two strands. Another protein complex called RISC subsequently binds to the anti-sense strand and together they hone in on the complementary (“sense”) mRNA in the cytoplasm. When the RISC complex with RNA binds to the mRNA, the mRNA gets cleaved and degraded, ensuing the protein it once coded for does not get synthesized.

Source: www.marinabio.com

RNAi is one of nature’s many ways to regulate gene expression. One can see its significance in defense against viruses: A virus, which is made of a dsRNA enters the cell and starts to proliferate. With the introduction of the dsRNA into the cell, the RNAi mechanism is set into gear, attacking and degrading all oligonucleotides of the template viral DNA.

The discovery of the RNAi pathway with dsRNA led to the rediscovery of microRNA – a hairpin dsRNA structure. Gene expression can be controlled from within the cell as well, and it is microRNA that are the key components in this mechanism. MicroRNAs are regulatory mechanisms expressed in our genes. They are dsRNA that are folded into a hairpin-like structure. They typically bind to the mRNAs and shut them down. Over 100 have been discovered in humans and they are conserved across the phyla. More than 2/3 of human genes are predicted to be repressed by microRNAs.

MicroRNA hairpin structure

Source: http://en.wikipedia.org/wiki/Stem-loop

MicroRNA has diagnostic and therapeutic value. They can be both the druggable target, and the drug.

The discovery of RNAi paved the way for several oligonucleotide diagnostic, drug development and treatment methods.

“RNAi is a revolution in biology – a breakthrough in understanding how genes are turned on and off in cells – and represents a completely new approach to drug discovery and development. The importance of its discovery was recognized by the award of the 2006 Nobel Peace Prize for Physiology or Medicine, and RNAi has been heralded as ‘a major scientific breakthrough that happens once every decade or so.’ It is widely considered one of the most promising and rapidly advancing frontiers in biology and drug development today.”2

Gene silencing techniques

RNA interference: dsRNA is used in the form of either synthetic siRNA that is taken up into the cell or microRNA which is a natural pathway within the cells controlling gene expression. MicroRNA is a hairpin dsRNA structure that blocks the expression of mRNA, it does not cut mRNA. SiRNA is dsRNA that is made synthetically and delivered (generally) into the cell to cut mRNA. Since microRNAs are regulatory pathways, when they are impaired in some way, it can lead to diseases, most notably cancers.

Anti-sense therapy: A synthetic DNA, RNA or chemical analog is introduced in the cell and binds to the mRNA for the target gene to be silenced. This synthesized nucleic acid is termed an “anti-sense” oligonucleotide because its base sequence is complementary to the gene’s messenger RNA , which is called the “sense” sequence (so that a sense segment of mRNA ” 5′-AAGGUC-3′ ” would be blocked by the anti-sense mRNA segment ” 3′-UUCCAG-5′ “).

MicroRNA mimics: A synthetic microRNA. When introduced into the cell, it mimics endogenous microRNA, binding to its target mRNA, inhibiting translation and thus silencing the target gene.

Antagomirs: A small synthetic single stranded RNA with a sequence that is engineered to be complimentary and bind to a desired site on a microRNA. Antagomirs are used to silence endogenous microRNA. They essentially silence the silencers, thereby un-inhibiting the translation process and thus allowing gene expression.

Where most therapies to date are designed to target and bind to malformed proteins in order to inhibit their activity, RNAi goes one step before and targets the recipe for the protein, the mRNA. There are many disorders/diseases that are deemed “un-druggable” by conventional therapies, which target the protein. RNAi has the potential to target and silence any gene in the genome; particularly interesting is targeting mRNAs of proteins that until now have been deemed untreatable.

Nucleic acid based therapeutics has a vast array of options in developing technologies to help modulate gene expression. The sequence-specific design of RNAi gene silencing facilitates the design of novel inhibitors to be used in rare genetic diseases. Success in the development can truly revolutionize the way we treat disease. Plans are underway to develop silencing RNA as a treatment for virus infections, cardiovascular diseases, cancer, endocrine disorders and several other conditions.

However, nucleic acid based therapeutics is still in early stages of development and still carries significant risk, known and unknown challenges ahead. For example, efficient and cell-specific delivery of oligonucleotide therapeutics remains a barrier to clinical progress.

Comparisons to RNAi therapeutics have been made to the field of monoclonal antibodies (antibodies target proteins), used as diagnostics and in treatments. In 2012 monoclonal antibodies had worldwide sales of over $45 billion.3

Nucleic Acids analogs

Synthetic oligonucleotides can be modified in different ways to give the strands (sense and antisense) particular qualities that can enhance treatment (refer to UNA, CRN and LNA). A nucleic acid (DNA and RNA) is made of nucleotides. A nucleotide is comprised of a five-carbon sugar ring, a base that has nitrogen atoms, and an ion of phosphoric acid known as phosphate. The phosphate group on one nucleotide links to the 3′ carbon atom on the sugar of another one, creating the sugar-phosphate backbone. Complementary base pairs link up (hybridize) in the middle creating the twisted ladder-like structure of the double helix.

RNAi Industry Overview

The Rise (2002-2008)

The discovery of RNA interference and related oligonucleotide therapies set off a race among drug and biotech companies to harness the power of gene silencing.

Between 2002-2005, small, risk-taking biotechnology companies were formed on the basis of RNAi therapeutics such as Ribozyme Pharmaceuticals (a.k.a. Sirna Therapeutics), Atugen (a.k.a. Silence Therapeutics), Protiva (a.k.a. Tekmira), and Alnylam Pharmaceutical.4

By 2008, big pharma (large pharmaceutical companies) took interest, snatching up early stage technology deals. By 2005, Alnylam and Medtronic announced a joint product development program to evaluate the use of Medtronic’s implantable drug delivery devices therapeutic applications of RNAi for the central nervous system (“CNS”). Novartis entered into a research collaboration and license agreement with Alnylam in which Novartis paid $10M in upfront cash, in addition to a $58.5M equity investment in Alnylam’s stock, for the right to exclusively pick 30 therapeutic gene targets protected under Alnylam’s fundamental RNAi trigger IP and for the right of first offer to additional targets. Merck and Roche acquired Sirna Therapeutics for US$1.1B and for a limited platform license from Alnylam worth US$300M . Pfizer, Abbot and Sanofi also hopped on board. Andy Fire and Craig Mello won the Nobel Prize for their discovery of RNAi in 2006, further fueling the excitement.

Excitement around this new field of drug development grew and unrealistic expectations followed. A setback was almost inevitable.

The Fall (2008-2011)

The next phase in RNAi developments was that of unanticipated challenges and unmet expectations. A number of scientific developmental roadblocks, or perhaps stumbling blocks, presented themselves in the development of oligonucleotide therapeutics.

First and foremost is that of delivery. The siRNA mechanism is potent, but getting these large molecules into the target cell is a challenge. Once introduced into the organism, patrolling macrophages and cells of the reticuloendothelial system see the siRNA complex as foreign and attempt to degrade and eliminate it before it reaches its target cells. Once inside the cell, the siRNA must be able to escape the endosome pathway that also attempts to degrade it.5

The second hurdle is that of site specificity. The siRNA must target the proper organ, cell, and mRNA. It must also be potent enough to bind well with its target mRNA. Further, the siRNA may silence the intended target, but may also have some off-targeting effect, unintentionally silencing other genes.

Duration of the treatment is also a problem. The siRNAs are used and degraded rather quickly, usually in a few hours, and then the effects wear off.

The siRNAs needed to be modified for better site-specificity, potency and a longer lasting effect.

With these obstacles, big pharma was stumped. Their strengths lie in late-stage drug development and marketing. They typically do not have the innovative capabilities to develop early stage technologies. Innovation is usually left to the small biotech companies, better equipped to handle innovation and risk.

Roche announced in November 2010 that it was ending all RNAi work after it had already invested more than $500M on the technology; in February 2011, Pfizer followed suit, shuttering its RNAi drug discovery program.

Big pharma started dumping their RNAi divisions as boardrooms became more concerned about the next quarter rather than the next breakthrough; Roche, Pfizer and Abbott all abandoned the RNAi sector. The only large companies left with serious RNAi efforts were Novartis and Sanofi. 6

The financial consequences of the RNAi exits were exacerbated by global economic turmoil. Volatility and uncertainty cause problems for small biotech companies because they are dependent on a steady cash flow to push their products through the R&D pipeline, which can take up to 15 years.

With no sizeable deals in the RNAi space in more than five years (2008-2013), the space had fallen out of favor and a deep chill set in.

The RNAissance? (2013- Q1 2014)

As the five-year chill set in, small biotech companies put serious effort into tackling the obstacles that big pharma had by then abandoned. By 2013, due to advances described below, investors were once again eyeing RNAi.

Several nucleic-acid delivery technologies were starting to take shape and show promising results in the clinic. Tekmira, Alnylam and Dicerna had all developed a liposomal delivery system. Additionally, Arrowhead and PhaseRx had developed a polymer-based system.

Nucleic acid analogs were developed to address a number of problems including site specificity and duration. Making small modifications to the oligonucleotides allowed the siRNA to bind to their complement mRNA with a higher affinity, giving them higher specificity and a longer half-life. Santaris’ Locked Nucleic Acids (“LNA”), Sarepta’s Phosphorodiamidate Morpholino Oligomers (“PMO”), and Isis’ MOE Gapmers are some examples of proprietary technologies designed to permit greater flexibility in siRNA design to address these issues.

As some of RNAi’s major hurdles were being addressed with promising results in the clinic, and the belief spread that the industry was nearing some critical product-development milestones, RNAi based therapeutics experienced a revival and investors flocked back, pumping money into the industry.

The pharmaceutical industry once again became interested in RNAi. But this time their interests were being expressed more cautiously. No longer would they scoop up a novel technology still in early stage development. Big pharma was starting to understand that sometimes when acquiring innovation, they destroy it. They would leave innovation to the smaller companies known for their expertise in developing a technology.

The foundation for valuation growth really started in late 2013 with the pipeline expansion and follow-on financing. These events were critical in building an investor audience that has grown with validating events that occurred in early 2014.7 Come January 2014 RNAi was back on the front page.

March 2013: AstraZeneca (AZN) paid Moderna (private) $240M for rights to Moderna’s technology in cancer and cardiovascular/metabolic disease areas (40 targets).

January 2014: Roche (RHHBY) unveiled a deal with Denmark’s Santaris Pharma to collaborate on RNA-silencing medicines.

January 2014: Sanofi (SNY) – Genzyme bought 12% of Alnylam – a $700M deal that included rights to its lead drug along with a portfolio of current and prospective therapies.

January 2014: Alexion (ALXN) and Moderna (private) signed an exclusive agreement for the discovery and development of mRNA therapeutics to treat rare diseases. Under the agreement, Alexion made an upfront payment to Moderna of $100M to purchase 10 product options to develop and commercialize treatments for rare diseases with Moderna’s mRNA therapeutics platform. In addition, Alexion made a $25M preferred equity investment in Moderna.

January 2014: Merck (MRK) wrote off RNAi and sold Sirna to Alnylam. The deal included $175M in cash and stock, up to $105M in milestones for any new products that emerge from the deal, plus a separate $10M milestone on Alnylam products covered by Sirna’s patent estate. Sirna’s pipeline includes several siRNA drugs including an siRNA-based treatment for age-related macular degeneration.

January 30, 2014: Dicerna Pharmaceuticals (DRNA) scheduled a $60M IPO with a market capitalization of $188M on the NASDAQ, at a price range mid-point of $12 for Thursday, January 30, 2014. On January 27, DRNA increased the price range mid-point to $14 from $12, and increased shares to 6 million from 5 million. They raised $90 million.

February 19, 2014: Arrowhead Research raised ~$104 million in stock offering.8

April 17, 2014: Benitec Biopharma (BLT) completed $29.5M financing deal and aims at reestablishing US operations.

An R&D externalization trend had emerged and so the era of product-specific partnerships began. The industry was paying for partnerships, rights to proven technologies, and milestone payments. The template for this type of relationship is that of Alnylam and Genzyme, where Genzyme invested $700M in Alnylam and Alnylam would develop the RNAi drugs. As investment poured in, RNAi company stock prices soared in 2014 Q1.

Looking Forward

The second quarter of 2014 saw a sharp shift in investor sentiment within the RNAi sector and the biotech industry as a whole. Major players Alnylam, Isis, Tekmira and newcomer Dicerna plummeted ~20%, ~40%, ~50% and ~60% respectively, from their highs in Q1. The pullback may have been inevitable, after massive amounts of investment poured into RNAi in Q1 and expectations were inflated. Sentiments of a biotech bubble also prevailed in the industry.

On April 15, 2014, Novartis announced they were nixing a large part of their RNAi division. This announcement sent shivers down the backs of investors, resulting in several of the major players in RNAi taking a beating on their stock prices.

“We have decided to significantly reduce our internal drug discovery efforts in RNA therapeutics,” Novartis told FierceBiotech “This decision was driven by ongoing challenges with formulation and delivery and the reality that the current range of medically relevant targets where siRNA may be used is quite narrow. In the future we will have a small group working in this field and look for partnering opportunities.”9

Investor memory is short-term. There was so much hype around the RNAi industry in Q1 that they forgot about the challenges big pharma had years ago when they picked it up. The ‘Fall’ era marked the time when big pharma dumped their RNAi divisions as they struggled with issues like delivery and specificity. The ‘RNAissance’ came after the small biotechs had tackled some of the obstacles, and big pharma were dipping their toes back in with product-specific partnerships. One might argue that Novartis may just be late in the game, in the ‘fall’ stage.

Parallels have been made to the monoclonal antibody industry, which was launched three decades ago and is now a multi-billion dollar industry. Big pharma also took on monoclonal antibody divisions in early stage development and stumbled on innovation, particularly when it came to delivery systems. The sentiment in the industry is that innovation is best left to small companies.10

“I think the best way to think about the news around RNAi versus the scientific progress is that big pharma – as evidence by the story of recombinant DNA and monoclonal antibodies – has been a miserable barometer of high impact technologies,” said Alnylam COO Barry Green, in response to the Novartis news of its RNAi pullout.

August 4, 2014 – Roche displayed renewed interest in gene silencing drugs, paying $250 million plus a potential $200 million more in milestone payments to Copenhagen, Denmark – based biotech Santaris in a deal that adds three RNA-targeted therapies to its pipeline as well as the proprietary microRNA Locked Nucleic Acid (LNA) drug technology.

And so goes the roller coaster RNAi ride.

Overview of Marina Biotech

Marina Biotech is a leading nucleic acid-based drug discovery and development company focused on rare diseases. Marina has a drug discovery platform that allows them to develop compounds which best counter the underlying pathophysiology associated with a specific rare disease. Using this platform, they are developing proprietary single and double-stranded nucleic acid therapeutics including siRNAs, microRNA mimics, antagomirs, and antisense compounds intended to trigger various RNA-based mechanisms of action including RNA interference, microRNA replacement therapy, microRNA inhibition and mRNA translational inhibition, respectively.11

These technologies were based on the RNA interference pathway in order to discover and develop different types of nucleic acid-based therapeutics in order to modulate (up or down) a specific protein(s) which is either being produced too much or too little thereby causing a particular disease. Marina Biotech has built up its holdings by licensing peptides with potential RNAi therapy applications from numerous pharmaceutical companies and universities.

The Company is currently advancing CEQ508, for which they have received FDA orphan drug designation, in a Phase 1 clinical program for patients with Familial Adenomatous Polyposis (FAP). In addition, they are expanding their rare disease focus to include myotonic dystrophy and Duchenne’s muscular mystrophy.

The Company was listed on the NASDAQ in 2011 but struggled to keep their share price over the $1 per share barrier. In 2012 the Company was forced to halt operations amid a cash shortfall. On February 2, 2012 the Company lost SEC compliance status. It was then removed from the NASDAQ and moved to the OTC markets. The Company ceased its internal development efforts and placed most of its workforce on leave as it struggled to fund operations.

In February 2014 the Company announced that long-time biotechnology investor Steven Newby purchased $6 million in convertible preferred stock, which gave them funds to operate into May 2015 and the ability to restart research and development efforts, albeit through contract research and academic collaborations.

Marina Biotech has a patent portfolio based on internal innovation, in-licensing and acquisition which as of July 2014, includes 104 issued or allowed patents and 91 pending U.S. and foreign patent applications, including provisional patent applications.

Biochemistry IP

  • Unlocked Nucleobase Monomers (“UNM”)
  • Conformationally Restricted Nucleotides (“CRN”)
  • Nucleic acid-based molecular diagnostics using CRN chemistries

Delivery IP

  • Library of DILA2 compounds
  • Liposome delivery formulations
  • Methods for making liposome delivery formulations
  • Bacterial-mediated shRNA delivery system
  • Phage display library for the identification of novel delivery peptides
  • Tissue and cell-specific targeting peptides
  • Nucleic acid condensing and delivery peptides
  • RNA-peptide conjugates
  • Lipopeptides

Review of Marina’s Technologies

Marina Biotech’s business strategy is to develop the company into a one-stop shop for nucleic acid based therapeutics. Their chemistry and delivery technologies provide a drug discovery platform for the development of nucleic acid-based therapeutics for rare and orphan diseases.

Such nucleic acid-based therapeutics and their respective mechanism of action include:

  • siRNAs directed at RNA interference
  • MicroRNA mimics directed at microRNA replacement
  • Antagomirs directed at microRNA inhibition
  • Antisense compounds directed at mRNA translational inhibition, steric blocking or exon skipping

“In 2010, we began executing an aggressive strategy to consolidate key intellectual property and technologies necessary to create a broad nucleic acid-based drug discovery platform. I believe that strategy continues to be successful and has resulted in a platform and capability unparalleled within the industry,” stated J. Michael French, president & CEO of Marina Biotech on August 20, 2014.

Chemistry Technologies

Nucleic Acid Analogs are used to minimize the potential for off-target effects, evade the mechanism of cytokine induction (which are important in immune response), and protect from nuclease degradation. They are essentially “tunable” instruments for oligonucleotide activity and affinity. Marina Biotech presents two unique analogs, UNAs and CRNs.

Source: www.marinabio.com

Conformationally Restricted Nucleotides (“CRN”)

CRNs are nucleotide-like structures in which the ribose portion is locked into a rigid conformation by a small chemical linker. The “bridge” locks the ribose ring into a stable conformation and increases the hybridization affinity. This means that the nucleotides stack more restrictedly into place, making the ladder-like structure more stable.

CRN technology is currently used in antisense therapeutics.

Unlocked Nucleobase Monomers (“UNA”)

UNAs are acyclic monomers that are distinguishable from RNA nucleotides because they do not contain a ribose sugar ring. This important difference in structure provides the freedom to develop double-stranded oligomers that can replace siRNAs and other constructs.

UNAs do not have a bond between two adjacent carbon atoms that form the ribose portion of RNA -The ring is open. This has the opposite effect of a CRN and makes hybridization binding with less affinity. The reason for that is instead of the bases stacking, they flop around, and therefore it is harder for the bases to attach to their compliment. Within the RNAi mechanism, the RICS complex can load either strand of the siRNA (sense or antisense). Applying a 5′ UNA modification to the unintended sense strand of the siRNAs can dramatically improve on-target silencing by the intended antisense strand. Intended strand selection (of the antisense strand) will increase the potency and reduce off-target effects from the unintended (“sense”) strand. 12

UNA added to 5′-end of oligonucleotide:

Source: J. Michael French Presentation March 2014

Why is this valuable?

UNA and CRN monomers enable Marina to tailor the constructs for greater target specificity and activity:

  • UNAs prevent passenger strand participation in RNAi, thus lowering the potential for off-target effects
  • UNAs increase the specificity of the guide strand for its intended target mRNA by eliminating microRNA-like off-target effects
  • UNA and CRN provide resistance to nuclease degradation
  • UNA and CRN decrease the potential for a cytokine response
  • CRNs impart the highly stable A-form of RNA to the duplex, resulting in increased thermal stability
  • UNA and CRN-substituted oligonucleotides are highly active and well tolerated
  • UNA/CRN chemistry can be used to develop highly potent and specific nucleic acid-based therapeutics to target mRNA or microRNA
  • UNA increases target specificity and provides advantages in the development of RNAi-based therapeutics
  • UNA blocks activity against unintended microRNA targets
  • CRN-substituted oligonucleotides can be administered via systemic and subcutaneous routes in multiple formulations including normal saline
  • CRN increases affinity (ie. potency/efficacy) for catalytic and non-catalytic mechanisms when targeting either coding or non-coding RNA

In a practical sense, CRN increases affinity, and UNA decreases affinity. If you add both into the same string, you can dial up or down the affinity as necessary.

Delivery Technologies

Marina Biotech has an array of delivery technologies that allow for the possibility of intravenous, subcutaneous, local, topical and orally administrated therapeutics directed at various tissue systems. The oligonucleotide delivery platform IP estate includes the SMARTICLES® liposomal delivery platform, DiLA2 delivery platform, tkRNAi (bacterial delivery platform), and the Trp Cage phage display library – a peptide nanoparticle delivery platform.

SMARTICLES: Amphoteric liposomes composed of unique combinations of anionic and cationic lipids which enable cell uptake and pH-triggered endosomal escape.

DiLA2 – Liposomes composed of unique combinations of head groups, linkers and alkyl chains where the head group is an amino acid (naturally occurring or man-made).

tkRNAi – Non-pathogenic bacteria engineered to produce, deliver and release interfering RNA mediators (shRNA) to targeted tissue.

Trp Cage Phage Display Library – Library Trp Cage possesses 207 unique peptides in a high copy number phage library; trp cage motif is the smallest known peptide that folds into a stable 3-D structure.

(above taken from www.marinabio.com)

Background information about Liposomes:

Liposomes are spherical vesicles composed of a lipid bilayer and can be used as a vehicle to transport drugs into the cell. The drugs are encapsulated in tiny particles made of lipids (fats or oils). Marina Biotech liposomal delivery technology includes DiLA2 liposomes and SMARTICLES.

SiRNAs are highly negatively charged, hydrophilic and large, which makes it difficult for them to cross cell membranes. However, if they are surrounded by the uncharged lipid bilayer provided by a liposome, they may penetrate the cell membrane more easily. DiLA2 have more charge, while SMARTICLES have less charge.

Liposomes have three components

  • Inner component – siRNAs, microRNA mimics, or antagomirs, any of the small RNAs can go in there.
  • Lipid bilayer membrane
  • Trans-membrane proteins

Source: http://upload.wikimedia.org/wikipedia/en/2/28/Liposome.jpg

SMARTICLES ®

SMARTICLES are a liposomal technology with a fully reversible surface charge. This technology allows the delivery of active substances inside the cell either for topical or systemic applications. What makes them different from standard liposomal delivery technologies is that they have a fully reversible surface charge. This unique characteristic is ideally suited to the delivery of encapsulated nucleic acids from injection, through stable and aggregate-free travel within the bloodstream, across cell boundaries to release the oligonucleotide inside the cell.

SMARTICLES delivery technology is currently in Phase 1 and Phase 2 human trials delivering both a single-stranded and a double-stranded oligonucleotide through licensees ProNAi Therapeutics, Inc. and Mirna Therapeutics, Inc., respectively. It is the only technology delivering both single and double stranded nucleic acid payload. To date, SMARTICLES has been administered to ~50 people. (See appendix for details)

In July 2010 Marina Biotech acquired the intellectual property for the SMARTICLES liposomal-based delivery system from Novosom AG. (United States Patent No. 8,580,297). The US ’297 patent encompasses the SMARTICLES delivery platform which provides a broad range of amphoteric liposomes having structural features for improved serum stability and cargo loading for active substances including siRNA, miRNA, and antisense molecules.

SMARTICLES Clinical Status

ProNAi Therapeutics: Drug candidate PNT2258 to treat advanced solid tumors and lymphomas

  • Phase 1 completed in November 2012: 30 patients (dose range 1-150mg/m2); (J Clin Oncol 30, 2012 (suppl; abstr TPS3110))
  • Phase 2 data interim data reported at American Society of Hematology in December 2013: 82% of patients had tumor shrinkage when receiving single-agent therapy with PNT2258. Overall response rate in patients with follicular lymphoma is 40% and in patients with diffuse large B-cell lymphoma is 50%.

Mirna Therapeutics: Drug candidate MRX34 to treat liver-based cancers

  • Phase 1 clinical testing initiated in April 2013. On November 20, 2014 Mirna reported favorable interim safety and preliminary efficacy data. A maximum tolerated dose (“MTD”) was established at 110 mg/m2 for MRX34.

Marina Biotech licenses their SMARTICLES technology to ProNAi Therapeutics regarding the development and commercialization of DNAi-based therapeutics. They are in Phase 1 cancer clinical studies of PNT2258. PNT2258 targets Bcl-2-driven tumors such as diffuse large B-cell lymphoma, follicular lymphoma and chronic lymphocytic leukemia.

This delivery technology offers protection for the DNAi oligonucleotide during systemic administration with good circulation times and extrahepatic tumor exposure. DNAi are short single-strand unmodified oligonucleotides designed to silence genes by interfering with DNA. The DNAi silencing approach is differentiated from that of RNAi, antisense or miRNA in that it targets genomic sequences within the noncoding region of DNA disrupting transcription.

ProNAi will have full responsibility for the development and commercialization of any products arising under the Agreement. Under terms of the Agreement, Marina Biotech could receive up to $14M for each gene target in total upfront, clinical and commercialization milestone payments, as well as royalties on sales, with ProNAi having the option to select any number of additional gene targets. For example, if ProNAi licenses five products over time under this Agreement, Marina Biotech could receive up to $70M in total milestones, plus royalties. Further terms of the Agreement were not disclosed.

Source: J. Michael French presentation September 10, 2014

DiLA2

The DiLA2 technology is a proprietary means for creating novel liposome formulations from dialkylated amino acids. This technology allows for modifying key aspects of the delivery system such as charge, linker and acyl chains such that the properties of the liposome can be optimized for delivery to a target tissue of interest. In addition, the technology is designed to permit inclusion of peptides to improve a variety of delivery characteristics including encapsulation of nanoparticles, cellular uptake, endosomal release and cell/tissue targeting.

TransKingdom RNA Interference (tkRNAi)

Marina Biotech merged with Cequent Pharmaceuticals in July 2010 and acquired the tkRNAi platform for RNAi delivery using bacteria.

Cequent Pharmaceuticals engineered a genetically modified live, non-pathogenic Escherichia coli (E. coli) that produces two proteins, invasion and listeriolysin, along with short hairpin RNA (shRNA) targeting a mammalian gene.13 The invasion on the outer surface of the bacteria interacts with the beta-integrin receptors on the outer membrane of the epithelial cells, which form into polyps. The bacteria then get dragged into the polyp cells via the endosomal process. With the help of listeriolysin, pores are formed in the endosome which makes it rupture and lyse the cell, releasing the shRNA into the cytoplasm of the targeted cells and subsequently knocking-down the genes that are important for polyp formation (target is the beta-catenin mRNA, the beta-catenin protein is involved in polyp growth). Each individual bacterium can deliver several copies of the shRNA into the cell. The treatment is delivered orally in a capsule. This platform was patent protected in 2012. Marina is so far the only company that uses bacteria for RNAi.

Marina Biotech is currently using its tkRNAi platform to deliver their drug product, CEQ508, to treat Familial Adenomatous Polyposis (“FAP”), in Phase 1 clinical trials.

Familial Adenomatous Polyposis (“FAP”)

A mutation in the Adenomatous Polyposis Coli (“APC”) gene causes dysregulation and accumulation of β-catenin. This results in overproduction of polyps in the colon and leads to a pre-cancerous condition called Familial Adenomatous Polyposis (“FAP”). FAP patients form many polyps at an early age and eventually require their colons to be surgically removed. There is currently no viable treatment option and surgical intervention is the primary treatment approach. FAP is a rare hereditary disease affecting 1 in 10,000 individuals worldwide.

Source: www.marinabio.com

TransKingdom RNA interference (tkRNAi) delivery has not yet been well validated in the lab. Marina Biotech is the only company using it as a delivery system for oligonucleotides.

The Prospects of Applying tkRNAi Delivery to Treat FAP

The concept here is that the E.coli expresses shRNA against the FAP target gene. This is an interesting packaging idea, since otherwise the RNA degrades. There is a formal possibility that ingested bacteria can take up residency in the gut, in which case this could be a one or two dose treatment. However, the type of bacteria that Marina Biotech uses does not colonize the treated area.

This may also be a regulatory nightmare, since bacteria are often the contaminant and here they are the treatment. The nice thing with this is that once the FDA stops scratching its head over how to evaluate and deal with bacterial delivery of interfering RNA, it should be adaptable for several targets. The Company has a patent for this technology, so they may not face much competition in this area.

A big advantage in this technology is that bacteria grow easily and cheaply. That means that while other companies are putting significant effort into production, Marina Biotech can easily grow batches of E.coli. This could be much cheaper than liposomal production.

Trp Cage Phage Display Library

Trp Cage motif is the smallest known peptide that folds into a stable 3-D structure. Marina’s Trp Cage library possesses 207 unique peptides. The library identifies peptides for targeted delivery, cellular uptake and endosomal release of siRNA. They are peptides with preferential homing-like properties that allow the peptides to target specific tissues, including tumors.

Such peptides are to be used in conjunction with Marina Biotech’s delivery systems, including DiLA2-based liposomes, to further enhance uptake into the target cells.

The Trp Cage phage display library (J Biol Chem. 2007 282(13):9813) is itself the subject of U.S. patent 7,329,725.

Key Takeaways

  • Marina Biotech is the only company in the sector with two distinct delivery technologies in clinical development (SMARTICLES and TransKingdom RNAi)
  • SMARTICLES is the only delivery system able to deliver both a single-stranded and double-stranded nucleic acid.
  • Marina Biotech is the only company using bacteria as a delivery system for oligonucleotides.

Matching the Nucleic Acid Construct to the Most Effective Mechanism of Action:

Source: J. Michael French presentation, BIO-Europe Spring, March 2014

Marina’s Drug Development Pipeline:

Source: www.marinabio.com

Familial Adenomatous Polyposis (FAP)

Familial Adenomatous Polyposis (“FAP”) is a rare hereditary disease affecting approximately 1 in 10,000 persons worldwide. In FAP, a mutation in the Adenomatous Polyposis Coli (“APC”) gene causes dysregulation and accumulation of β-catenin. This results in the appearance of numerous colon polyps during early adolescence with potential for rapid disease progression and a near 100% risk of colon cancer if untreated. Surgical intervention is currently the only available treatment.

Marina Biotech’s clinical drug product, CEQ508, targets the β-catenin oncogene via RNAi and has the potential to be a first-in-class therapeutic for the treatment of FAP. It employs the tkRNAi delivery platform.14 CEQ508 is a live attenuated E.coli expressing and delivering shRNA to silence β-catenin expression.

CEQ508 clinical testing is set to resume during the first quarter of 2015. More details on CEQ508 and the clinical trial can be found here.

Myotonic Dystrophy – Type 1 (“DM1″)

Neuromuscular disorders affect the nerves that control voluntary muscles, such as those that control the arms and legs. Nerve cells, also called neurons, send messages that control these muscles. When the neurons become unhealthy or die, communication between the nervous system and muscles breaks down. As a result, muscles weaken and waste away. Likewise, dystrophies are progressive degenerative disorders affecting skeletal muscles. In both cases, the diseases can often affect other organ systems such as the heart and central nervous system. Many neuromuscular diseases and almost all dystrophies are genetic, which means there is a mutation in genes which in many cases is passed from family member to family member. Although a cure for these disorders may present itself in the future, currently the goal of drug development efforts is to improve symptoms, increase mobility and increase the individual’s lifespan.15

Myotonic dystrophy type 1 (“DM1″) is an autosomal dominant, multi-system disorder that affects both smooth and skeletal muscles and may affect the central nervous system, heart, eyes, and/or endocrine systems. DM1 is caused by an abnormality in the DMPK gene. Affected individuals have an increased number of copies of a portion of this gene called CTG. The greater the number of repeated copies of CTG, the more severe the disorder. DM1 affects at least 1 in 8,000 people worldwide.

In vivo proof-of-concept studies are expected to be completed by the end of 2014, with a lead candidate selected in early 2015.

Duchenne Muscular Dystrophy (“DMD”)

Duchenne muscular dystrophy (“DMD”) is a rapidly progressive form of muscular dystrophy that occurs primarily in boys. It is caused by a mutation in the DMD gene that can be inherited in families, but it often occurs in people from families without a known family history of the condition.

Individuals who have DMD have progressive loss of muscle function and weakness, which begins in the lower limbs. The DMD gene is the second largest gene to date, which encodes the muscle protein, dystrophin. Boys with Duchenne muscular dystrophy do not make the dystrophin protein in their muscles.

Duchenne muscular dystrophy affects approximately 1 in 3,500 male births worldwide. Because this is an inherited disorder, risks include a family history of Duchenne muscular dystrophy.

Proof-of-concept data timing is currently unknown. The Company is closely following the research developments of Prosensa, which has a DMD drug is Phase 3 testing, and Sarepta Therapeutics, which has a drug in Phase 2 testing.

Marina’s Partnership programs

ProNAi Therapeutics – Drug candidate PNT2258

Pipeline status: Phase 2 clinical development

PNT2258 treats follicular lymphoma and large B-cell lymphoma. PNT2258 is designed to treat cancers that overexpress BCL2. BCL2 is a protein that regulates apoptosis (cell death). When a BCL2 protein is non-functional, the cells are blocked from apoptosis, thus leading to cancer.

PNT2258 has demonstrated in vivo efficacy in human tumor xenograft models.

Mirna Therapeutics – Drug candidate MRX34

Pipeline status: Phase 1 clinical development

MRX34 treats liver cancer or solid cancers with liver involvement. MRX34 is designed to mimic the activity of a human microRNA (miRNA). MRX34 is a liposome-formulated mimic of the tumor suppressor miRNA, miR-34, which is lost or expressed at reduced levels in most solid and hematologic malignancies (cancers that affect blood, bone marrow and lymph nodes).

Marina’s Competitive Position

Note: information taken November 23, 2014

Clinical Status:

Note: As of November, 2014

Technologies Comparison of RNAi-based Therapeutics Companies:

Source: J. Michael French’s presentation, March 2014

Isis Pharmaceuticals

Isis develops antisense oligonucleotide therapeutics using single stranded DNA. The strategy is to discover more potential drug compounds that it can develop on its own and then license them off to larger drug firms, thus producing a potential stream of revenue (in the form of milestone payments and royalties) for itself. Its lead candidate is the cholesterol-lowering drug mipomersen, which Isis has licensed to Genzyme.

Isis has a lot of experience in oligonucleotide therapeutic development; they have good chemists and many patents. They are also not shy in enforcing their patents (they sued Santaris).

Sarepta Therapeutics

Sarepta is focused on the discovery and development of RNAi-based therapeutics for the treatment of rare and infectious diseases. They are developing multiple drug candidates for Duchenne muscular dystrophy (“DMD”) based on their proprietary RNA-based technology and expertise with phosphorodiamidate morpholino oligomer-or PMO-chemistries. Sarepta’s lead drug candidate is Eteplirsen, which is in phase 2 clinical trials.

Dicerna Pharmaceuticals

Dicerna is focused on the discovery and development of RNAi-based treatments for rare inherited diseases involving the liver and for cancers that are genetically defined. Dicerna’s discovery approach is based on proprietary double-stranded RNA molecules, called Dicer Substrate siRNA (DsiRNA™), which the Company believes maximizes RNAi potency. Dicerna has three drugs the pipeline in early stage development. Its lead candidate is DCR-MYC targeting a variety of tumor types with the initial focus on hepatocellular carcinoma (liver cancer) in phase 1 clinical studies.

Tekmira Pharmaceuticals

Tekmira is focused on advancing RNAi therapeutics and providing its lipid nanoparticle (LNP) delivery technology to pharmaceutical partners. Tekmira has a diverse pipeline of product candidates in development to treat serious human diseases such as cancer and viral infections like Hepatitis B and Ebola.

Santaris Pharma

Santaris develops antisense therapeutics leveraging their Locked Nucleic Acid (LNA) chemistry platform and tissue targeting expertise. They have a pipeline of drug candidates that act selectively on disease-related RNAs to provide patients with novel treatments for both rare and common diseases. They have attracted multiple large-scale partnerships and yielded exciting and unique LNA-based drugs. On August 4, 2014 Roche announced plans to acquire Santaris Pharma for $250 million.

Comparison of Technologies

Nucleotide IP Compared

Modified nucleic acids may aid in addressing key problems in RNAi therapeutics such as site specificity, binding affinity, stability and drug potency. For the single stranded approach (antisense), the antisense has low affinity for its target. In the double stranded approach (siRNA), the molecules are relatively large which leads to poor cellular uptake and the need for complex delivery vehicles that can sometimes be associated with toxicity.

Several companies use nucleic acid analogs to enhance their oligonucleotides. Below is a summary of those who we may compare to Marina’s technology.

Marina Biotech: CRN and UNA (explained above). The Company currently uses CRN and UNA to inhibit microRNA.

Isis: 2′MOE Gapmer: A second generation antisense phosphorothioate oligonucleotide of 15-30 nucleotides wherein all of the backbone linkages are modified by adding a sulfur at the non-bridging oxygen (phosphorothioate) and a stretch of at least 10 consecutive nucleotides remain unmodified (deoxy sugars) and the remaining nucleotides contain an O´-methyl O´-ethyl substitution at the 2´ position (“MOE”).16 This chemistry is used in antisense technology.

Isis claims that the 2′MOE modification chemistry slows degradation of the drugs by protecting them from nucleases. Slower clearance allows for less frequent dosing.

Sarepta: Phosphorodiamidate Morpholino Oligomer (“PMO”): While PMOs have the same nucleic acid bases found in RNA, they are bound to six-sided morpholine rings instead of five-sided ribose rings. In addition, these rings are connected with phosphorodiamidate instead of other linkages. PMOs are charge-neutral, which reduces off-target interactions, they stack and bind with high affinity, and are highly resistant to degradation by enzymes, which makes them more stable, prolonging drug activity.

Santaris: Locked Nucleic Acid (LNA): A chemical analog in which there is an extra ring connected to the ribose ring – an Oxygen connects the sugar ring that connects to the phosphate backbone. This extra ring “locks” the nucleic acid into a more stable configuration. This chemistry is used in anti-sense technology.

Source: http://www.santaris.com/science/mechanism-action

What is LNA and why is it important?

In an LNA, the ribose ring is “locked” by a methylene bridge connecting the 2′-O atom and the 4′-C atom. By “locking” the molecule with the methylene bridge the LNA is constrained in the ideal conformation for Watson-Crick binding. The locked ribose conformation enhances base stacking and backbone pre-organization. The net result is that it makes one strand of RNA bind with very high affinity to its compliment strand. Basically, LNAs give stiffness to the ladder and makes the bases stay in place.

The increase in affinity that the LNA chemistry brings to oligonucleotides means that LNA-based drugs can be made much shorter than previous antisense drugs based on other chemistries, while displaying unprecedented affinity for their RNA targets. Because the strands are shorter, they require less complex delivery systems. Because the strands bind with higher affinity, they are more potent and thus require a lower dose to have a significant effect.

Exiqon A/S secured the exclusive rights to the LNA technology in 1997. Exiqon spun off a separate company, Santaris Pharma, to develop LNA for therapeutic applications. Exiqon uses it for diagnostic and reagent purposes, while Santaris uses the LNA for therapeutic applications. Santaris owns the sole rights to therapeutic uses of LNA technology.17 Their drug Miravirsen, the first microRNA targeted drug to enter human clinical trials, targets miR-122, a liver specific microRNA that the Hepatitis C virus requires for replication. They are currently in phase 2 clinical trials.18

http://www.santaris.com/sites/default/files/SantarisPharmaAASLDPhase2dataFINALpressrelease11.5.11.pdf

According to Santaris’ results, the LNAs are very well tolerated, non-toxic, and effective.

On August 4, 2014 Roche announced plans to acquire Santaris Pharma to expand discovery and development of RNA-targeting medicines using its proprietary Locked Nucleic Acid (“LNA”) platform to address difficult to treat diseases in a range of therapeutic areas. Roche plans to maintain Santaris Pharma’s operations in Denmark, where the existing site will be renamed Roche Innovation Center Copenhagen. Under the terms of the agreement, Roche will make an upfront cash payment of USD $250 million to Santaris Pharma shareholders and make additional contingent payments of up to USD $200 million based on the achievement of certain predetermined milestones.

LNA technology is considered to be the gold standard for the higher affinity technologies. LNAs are very well tolerated, non-toxic, and effective. They are stable and thus display a very long period of activity (months) (Regular dsRNA melting temperature is about 42°C, while for LNA-RNA it is 75-90°C). LNAs have a very high affinity and give a lot of flexibility in terms of designing oligonucleotides for site specificity, including substantial flexibility to design oligonucleotides in therapeutic and diagnostic spaces.

LNAs are potent inhibitors of both mRNA and microRNA. In fact, it is the only antagomir that inhibits microRNAs in-situ. The reason those antagomirs work so well is because of the extra ring from the ribose ring that locks it into place. The net result of locking that ring is that the string of bases of the nucleotides does not twist into the double helix. Instead, the bases stack up on top of each other. The net result is that when one nucleotide binds to its complement, it makes the next one much more likely and much more strong, which in turn makes the next following one much stronger. It is strong because the bases are presented all on one face of the strand.

Our impression is that Santaris’ LNA-based antisense compounds are more potent than ISIS’ generation 2.0 2′-MOE phosphorothioate gapmers, and this is why Santaris is likely to be the more attractive company to partner or acquire from a technical point-of-view.

LNA vs. Marina’s CRN

Source: J. Michael French Presentation, March 2014

CRNs may have a similar profile to LNAs. Given the data collected thus far, they may even work better. However, the systematic studies have not been done and no conclusions can be stated. Marina Biotech’s hope is that the CRN technology will prove to be safer than the LNA, indicating that higher affinity nucleotides are the right strategy.

When using the LNAs, after a certain number of bases they start not registering perfectly. The CRNs stack nicely – there is a larger space between them – which appears to better match the normal binding to RNA; therefore, you should be able to add more CRN substitutions into an RNA strand. This should theoretically increase the affinity and thus decrease the dose and treat for a longer time.

Marina Biotech discusses UNAs and CRNs in inhibiting microRNAs, but they are not stopping there. The Company is preparing to target rare diseases such as myotonic dystrophy. Sarepta uses morpholinos in treating Duchene’s muscular dystrophy (“DMD”). Morpholinos are like LNAs, as they bind with high affinity thus perfecting the targeting and increasing the stability. CRN technology may work just as well, if not better.

CRN technology is relatively simple and probably does not require an in-house R&D staff to develop it. Marina Biotech can do a lot of the testing and characterizations on CRN via outsourcing.

“They have only tested a few CRNs, but with the few that they have tested, head to head with the comparably substituted LNA, it performed better.” – Carl Novina, Marina Scientific Advisory Board.19

“If Marina has nothing else, it has the CRN which could be its own business in the reagent space, in the diagnostic space, and in the therapeutic space, if they so chose to have it. They can easily compete with Exiqon, Santaris, Isis, just because of that.” – Carl Novina.20

The following chart shows dose-response of a CRN- vs LNA-subsituted Oligo:

Comparison of Delivery Systems

Each RNA strand that you get into the cell is good, but you need to get thousands of them into the cell to get it working. One liposome can pack thousands of RNAs – It’s like dropping a little RNA bomb on the cell. If done right, then conceivably you need very few delivery events to have a very effective therapeutic modality.

Tekmira’s Lipid Nanoparticle (LNP)

Tekmira’s LNP represents the most widely adopted RNAi delivery technology to date. LNP technology is a liposomal delivery system that uses PEGylation. They can be positively charged at a low ph. It is administered intravenously. Through a process called endocytosis, cells take up the LNPs which allows them to migrate into the cell. The LNPs then undergo an interaction within the cell and the siRNA drug is released, mediating RNAi.

In addition to RNAi, other important nucleic acid payloads, including messenger RNA, can be efficiently and effectively delivered using LNPs. Tekmira scientists have designed LNP for hepatic delivery, oncology applications, inhalation and delivery to immune cells.

The LNP platform is being utilized in multiple clinical trials by both Tekmira and its partners.

TKM-Ebola for treatment of the Ebola infection is in clinical phase 1 studies. TKM-PLK1 for oncology treatment is in clinical phase 2.

Tekmira’s LNP technology (formerly referred to as stable nucleic acid-lipid particles or SNALP) encapsulates siRNAs with high efficiency in uniform lipid nanoparticles that are effective in delivering RNAi therapeutics to disease sites in numerous preclinical models. Tekmira’s LNP formulations are manufactured by a proprietary method which is robust, scalable and highly reproducible, and LNP-based products have been reviewed by multiple FDA divisions for use in clinical trials. LNP formulations comprise several lipid components that can be adjusted to suit the specific application.21

Tekmira has in-house R&D and has been able to significantly improve the potency and safety of their LNP technology for cancer delivery over the last two years. This would be a moving target for Marina Biotech where as they are just standing still with SMARTICLES.

Marina’s SMARTICLES Potential

Similar to LNPs, SMARTICLES (described earlier in this report) can be positively or negatively charged, or neutral – depending on the physiological environment. Unlike LNPs these liposomes also contain anionic lipids, in addition to cationic and neutral lipids, and do not employ PEGylation.

SMARTICLES have potential, but at this point Tekmira’s delivery technology has been much better characterized and tested.

DiLA2 is a little more charged. It is useful for delivery in more localized areas. DiLA2 has been tested and worked very well in transducing bladder cancer cells.

Marina does not have any in-house R&D, and so without partners it is difficult to advance their products.

ProNAi, and Mirna Therapeutics are currently using SMARTICLES successfully in clinical trials.

Sarepta, Santaris and Isis do not have delivery modules.

SWOT Analysis

Strengths

  • CRN, UNA: The main competition here is the LNA. Head to head thus far, the CRNs and UNAs have performed better – they are more potent and last longer.
  • Diverse portfolio and platform flexibility: Marina is building itself up to be a one-stop shop – it has a number of technologies that cater to several aspects of oligonucleotide therapeutics.
  • Malleability and flexibility to form new partnerships: According to President and CEO J. Michael French, the Company is willing to move in a direction to suit the needs of a big pharma partner. “With the acquisition of Santaris (by Roche), there really isn’t any other player with a bridged nucleic acid that can partner with companies beginning to focus on non-coding RNAs and other mechanisms of action outside of RNAi,” French said in a statement to Gene Silencing News.

Weaknesses

  • No in-house R&D: Marina does not have in-house R&D and is therefore currently dependent on partnerships to further the progress of their technologies.
  • Cash flow: R&D costs are high and Marina suffered the consequences of this in 2012 when they had to put operations on halt due to a lack of cash on hand.

Opportunities

  • TransKingdom RNA interference platform: Marina is the only company using bacteria for delivery of siRNA and the only company with an orally administered nucleic acid therapeutic. There are not only opportunities in the therapeutic space, but also in the diagnostic space within the gastrointestinal tract. Production costs for bacteria could be minuscule compared to the liposomal production costs.
  • SEC compliance: In August 2014, Maria announced that the Company had regained compliance with the SEC reporting obligations. They are now eligible for listing on an international exchange. This can help bring in more investor interest.
  • New partnerships: Some potential partners who can’t partner with Isis may think about Marina as a good alternative. There is a new approach in partnerships where the RNAi company is essentially responsible for developing the RNA drug through the clinic and early clinical development, while the other makes large investments and/or milestone payments. The template for that type of relationship is with Alnylam and Genzyme.
  • FAP clinical trials: If the results in the clinic are good, Marina Biotech can continue the program, or they can possibly sell it to another company with more capabilities. Either case will have a good effect on Marina’s share price.

Threats

  • Legal threats: Patent infringement lawsuits are not unusual, and should Marina get caught up in a lawsuit, it could do heavy damage to their cash reserves. In such situations it is always good to be well financed.

Strategic Alliances

Marina Biotech has built up its holdings by licensing technologies with potential RNAi therapy applications from a variety of institutions.

Rosetta Genomics, Ltd.

On April 2, 2014 Marina Biotech and Rosetta Genomics (ROSG), a leading developer and provider of microRNA-based molecular diagnostics and therapeutics established a strategic alliance where the companies will collaborate to identify and develop microRNA-based products designed to diagnose and treat various neuromuscular diseases and dystrophies. The companies’ initial efforts are expected to be focused on myotonic dystrophy and Duchenne muscular dystrophy. Rosetta will apply its industry leading microRNA discovery expertise for the identification of microRNAs involved in the various dystrophy diseases. If the microRNA is determined to be correlative to the disease, Rosetta may further develop the microRNA into a diagnostic for patient identification and stratification. If the microRNA is determined to be involved in the disease pathology and represents a potential therapeutic target, Marina Biotech may develop the resulting microRNA-based therapeutic for clinical development.

Nitto Denko Avecia, Inc.

Marina Biotech and Nitto Avecia (formerly Girindus), a drug development and manufacturing services company and part of Nitto Denko, Inc., Japan’s leading diversified materials manufacturer, established a strategic alliance where Nitto Avecia will have exclusive rights to develop, supply and commercialize certain oligonucleotide constructs using Marina Biotech’s Conformationally Restricted Nucleotide (“CRN”) chemistry and in return, Marina Biotech will receive royalties from the sale of CRN-based oligonucleotide reagents as well as a robust supply of cGMP material for Marina Biotech and its partners’ pre-clinical, clinical, and commercialization needs.

ProNAi Therapeutics, Inc.

Marina Biotech and ProNAi, a privately-held biotechnology company pioneering DNA interference (“DNAi”) therapies for cancer, established an exclusive license agreement regarding the development and commercialization of DNAi-based therapeutics utilizing Marina Biotech’s novel SMARTICLES® liposomal delivery technology. ProNAi will have full responsibility for the development and commercialization of any products arising under the Agreement. Under terms of the Agreement, Marina Biotech could receive up to $14 million for each gene target in total upfront, clinical, and commercialization milestone payments, as well as royalties on sales, with ProNAi having the option to select any number of additional gene targets.

Mirna Therapeutics, Inc.

Marina Biotech and Mirna, a privately-held biotechnology company pioneering microRNA (miRNA) replacement therapy for cancer, established a license agreement regarding the development and commercialization of microRNA-based therapeutics utilizing Mirna’s proprietary microRNAs and Marina Biotech’s novel SMARTICLES liposomal delivery technology. Mirna will have full responsibility for the development and commercialization of any products arising under the Agreement, and Marina Biotech will support pre-clinical and process development efforts. Under terms of the Agreement, Marina Biotech could receive up to $63 million in total upfront, clinical, and commercialization milestone payments, as well as royalties on sales, based on the successful outcome of the collaboration.

Mirna paid certain pre-payments to Marina Biotech and now has additional rights to its lead program, MRX34, currently in Phase 1 clinical development for patients with unresectable primary liver cancer or metastatic cancer with liver involvement. In addition, under the terms of the license agreement, Mirna has optioned exclusivity on several additional miRNA targets.

Marina Biotech outlines its partnering goals below:

A Closer Looks at Marina’s Plan of Action

The Company’s general direction is to use their RNAi, antisense and microRNA therapeutics platform to develop drugs for rare diseases, with a focus on the muscular dystrophies. There is currently no cure for any form of muscular dystrophy.

The immediate plan of action is to:

  • Restart clinical trial for FAP drug CEQ508 – Set to resume as soon as the first quarter of 2015. The (Company’s cash on hand is expected to last until May 2015, enough time to restart, and potentially complete the CEQ508 Phase I trial.)
  • Conduct in vivo animal proof of concept in mytonic (muscular) dystrophy
  • Establish a pharma R&D collaboration

Muscular Dystrophy

An estimated 500 newborns are diagnosed with muscular dystrophy in the US each year. The yearly average cost in 2004 for medical care for privately insured individuals with any type of muscular dystrophy was $18,930, ranging from $13,464 at 5 through 9 years of age to $32,541 at 15 through 19 years of age.22

Competition in the dystrophies

Isis and Biogen have partnered for myotonic dystrophy studies using anti-sense technology. They recently entered Phase I studies. This partnership clearly illustrates the interest in using anti-sense for this indication. Marina is closely watching efforts by the RNA therapeutics companies Prosensa, which has a DMD drug in Phase 3, and Sarepta Therapeutics, which has a drug for the disease in Phase 2.

Familial adenomatous polyposis (“FAP”)

Familial adenomatous polyposis (“FAP”) is an inherited disorder characterized by cancer of the large intestine (colon) and rectum. Mutations in the APC gene cause both classic and attenuated familial adenomatous polyposis. The reported incidence of FAP varies from 1 in 10,000 worldwide. FAP usually leads to colon cancer and patients resort to surgically having part of their colon removed, as this is the only treatment currently available.

Marina’s Financials

Marina’s Current financial position and outlook

On February 24, 2014 Marina announced a $6 million convertible preferred stock financing and conversion to common stock of the company’s promissory note – A group of investors led by Steven T. Newby, a long-time biotechnology investor have entered into a binding term sheet for the issuance of convertible preferred stock at a conversion price equivalent to $0.75 per share of common stock resulting in gross proceeds of $6 million. In addition, the company will issue to the investors warrants to purchase 6 million shares on common stock. The warrants will have an exercise price of $0.75 per share and are exercisable for a period of five years after the Company regains compliance with its reporting obligations under the Securities Exchange Act.

Proceeds from the financing are being used to restart certain day-to-day operations, repay the Company’s outstanding obligations, regain compliance with the Company’s Exchange Act reporting obligations and advance the Company’s preclinical and clinical rare disease programs through contract research and academic collaborations. The funding will allow the Company to continue to operate into May 2015.

J. Michael French, President and CEO stated,

“We are going to remain virtual to the extent possible in order to continue to conserve our resources and utilize out-sourced consulting and contract services in order to be responsive and flexible in the pursuit of these goals.”

Current sources of cash

  • Partnerships / licensing agreements
  • Equity financing

Projected sources of cash

  • New partnerships and licensing deals
  • Equity financing (if the stock price rises to a desirable price)

Current financial position and outlook

As of September 30, 2014, Marina had cash on hand totaling $ $3.2 million. For the first nine months of 2014 Marina recorded zero revenues and spent about $375k per month in cash on operating expenses.

Marina will require additional financing or licensing fee income or the company will run out of cash by around May 2015. If the share price goes up and investors start to see the value in Marina Biotech as a competitor to Isis and Santaris, then it would be wise for Marina to conduct a larger financing similar to its peers. Much of it depends on market sentiment, and whether investors gain confidence in Marina Biotech and its CEO.

Marina’s Management and Scientific Advisory Board

Management Team

J. Michael French – President, CEO and Chairman of the Board

Mr. French joined Marina Biotech in June 2008 as Chief Executive Officer. He became a Director in September 2008, President in October 2008 and Chairman in August 2012. Mr. French was Senior Vice President of Corporate Development at Sirna Therapeutics from 2005 until 2007 when the company was acquired by Merck. Sirna was well-known as one of the leading RNAi companies. Earlier, Mr. French was Chief Business Officer at Entelos, Inc., a pre-IPO biotechnology company, as well as a variety of other positions at healthcare companies, including Health IQ and Bayer Pharmaceuticals. He also served for 13 years in the United States Army and Army Reserve. Mr. French holds a M.S. degree in physiology and biophysics from Georgetown University and a B.S. degree in aerospace engineering from the United States Military Academy.

Daniel E. Geffken, M.B.A. – Interim Chief Financial Officer

Daniel Geffken, M.B.A. is a founder and Managing Director at Danforth Advisors. He has worked in both the life science and renewable energy industries for the past 20 years. His work has ranged from early start-ups to publicly traded companies with $1 billion market capitalizations. Previously, he served as COO or CFO of four publicly traded and four privately held companies. In addition, he has been involved with multiple rare disease-focused companies in areas such as Huntington’s disease, amyotrophic lateral sclerosis, fragile X, hemophilia A and Gaucher’s disease including the approval of enzyme replacement therapies for the treatment of Fabry disease and Hunter syndrome. Mr. Geffken has raised more than $700 million in equity and debt securities. Mr. Geffken started his career as a C.P.A. at KPMG and, later, as a principal in a private equity firm. Mr. Geffken received his M.B.A from the Harvard Business School and his B.S. from the Wharton School, University of Pennsylvania.

Alan Dunton, M.D. – Chief Medical Officer

Dr. Dunton is the founder of Danerius, LLC. He has held significant senior positions in major pharmaceutical companies and has been directly responsible for, or has overseen the successful development/original/line extension approvals of Levaquin®, Regranex®, Aleve®, Procrit/EPREX®, Sporanox®, Reminyl® and Risperdal®. Most recently, he served as President and Chief Executive Officer of Panacos Pharmaceuticals, Inc. a company focused on treatment resistant HIV therapeutics. Previously, he was the President and CEO of Metaphore Pharmaceuticals, which focused on anti-inflammatory and analgesic products. Dr. Dunton was a senior executive in various capacities in the Pharmaceuticals Group of Johnson & Johnson including President and Managing Director of The Janssen Research Foundation. He also served as group vice president of global clinical research and development of Janssen as well as the R.W. Johnson Pharmaceutical Research Institute, also a Johnson & Johnson company. Dr. Dunton has also held positions in clinical research and development at Syntex Corporation, CIBA-GEIGY Corporation and Hoffmann La Roche Inc. Dr. Dunton holds a M.D. degree from New York University School of Medicine, where he completed his residency in internal medicine. He also was a Fellow in Clinical Pharmacology at the New York Hospital/Cornell University Medical Center.

Michael V. Templin, Ph.D., DABT – Chief Technology Officer

Dr. Templin joined Marina Biotech in December 2004. While at Marina Biotech (and its predecessors) he has served in a variety of management positions leading teams in the areas of discovery research and preclinical development. Before joining Marina Biotech he held research and development positions at Isis Pharmaceuticals, Amgen, and Zymogenetics. Dr. Templin’s pharmaceutical development experience includes regulatory toxicology from bench research through IND and NDA filings for small- and large-molecule platforms (oligonucleotides, peptides, proteins, and antibodies). Dr. Templin received a Ph.D. in Pharmacology/Toxicology from Washington State University and completed a Postdoctoral Fellowship at the Chemical Industry Institute of Toxicology (RTP, NC Dr. Templin has held certification as a Diplomate of the American Board of Toxicology since 1998.

June Ameen, R.N., M.B.A. – Senior Vice President, Strategic Alliances

Ms. Ameen has held progressively responsible positions in both public and private life sciences companies for the past 20 years. Ms. Ameen has served as Vice President, Alliance Management and then Vice President, Business Development and Alliances of Entelos, Inc., a privately held systems biology company based in Foster City, California. While there, she was responsible for expanding the business from early-adopter technology-based research partnerships to therapeutic focused co-development collaborations with major pharmaceutical and biotechnology companies. As Vice President, Business Development and Alliances, annual revenues increased from less than $3 million to over $21 million in two years. Prior to Entelos, Ms. Ameen was with PAREXEL International Corporation in several positions focused on client relations and alliance management. In her capacity as Vice President and General Manager, Ms. Ameen had operational and P&L responsibility for generating $35 million in annual revenues with Fortune 200 pharmaceutical companies. Ms. Ameen has an M.B.A. from Babson College and a B.S.N., magna cum laude, from Boston College.

Scientific Advisory Board

Richard Ho, M.D., Ph.D. – Chairman

Dr. Ho joined Marina Biotech as Executive Vice President, Research and Development in September 2011 and became Chair, Scientific Advisory Board in January 2014. Prior to joining Marina Biotech, Dr. Ho served as Senior Medical Director at Entelos, Inc. from 2008 to 2011 where he oversaw academic and governmental collaborations including a Cooperative Research and Development Agreement with the FDA. From 2007 to 2008, he was a Principal at Rosa and Co. where he worked with pharmaceutical and biotechnology companies on physiological modeling efforts in several disease areas including metabolic disorders, respiratory disease, and bioterrorism agents. Dr. Ho began his industry career at Johnson & Johnson Pharmaceutical Research & Development starting as a fellow in Medical Informatics and advancing to the position of Director of Disease Modeling. Over a ten year period at J&J, he built and led a team which championed systems biology and personalized medicine approaches to understanding and treating human disease. In this position, he coordinated model-based analysis and research with global clinical and preclinical teams developing both small and large molecule compounds. Before joining J&J, Dr. Ho completed a residency in Internal Medicine and a fellowship in Rheumatology at Yale School of Medicine. Dr. Ho received his M.D.-Ph.D. from the University at Buffalo School of Medicine with his thesis work at the Grace Cancer Drug Center of Roswell Park Cancer Institute and received his A.B. in physics from Harvard College.

Barry Polisky, Ph.D.

Dr. Polisky joined Marina Biotech as Chief Scientific Officer in January 2009 and became a member of the Scientific Advisory Board in September 2011. Previously, he served as Research Vice President at Merck & Co., from 2007 to 2008. Before joining Merck, Dr. Polisky was Chief Scientific Officer at Sirna Therapeutics, a leading RNAi company that was acquired by Merck in 2006. Earlier, Dr. Polisky served as Vice President of Research at ThermoBiostar, Inc., where he initiated and launched a SNP diagnostic platform. From 1992 to 1998, Dr. Polisky was Vice President of Research and Drug Discovery at NeXstar, Inc. where he developed several aptamer therapeutics (nucleic acid-based therapeutics including the VEGF aptamer currently marketed by Pfizer [as Macugen® (pegaptanib sodium injection)]). Prior to joining NeXstar, Dr. Polisky was Professor and Chairman of the Molecular Biology program at Indiana University. Dr. Polisky received his Ph.D. in molecular biology from the University of Colorado and conducted his post-doctoral work in the Department of Biochemistry and Biophysics, University of California, San Francisco.

Beverly L. Davidson, Ph.D.

Dr. Davidson is currently the Arthur V. Meigs Chair in Pediatrics at Children’s Hospital of Philadelphia and will join the hospital’s Department of Pathology and Laboratory Medicine. Dr. Davidson, was previously o investigates gene therapy for neurodegenerative diseases, arrives from the. She served as associate director at the Center for Gene Therapy at the University of Iowa, as well as director of the Gene Therapy Vector Core, and held the Roy J. Carver Biomedical Research Chair in Internal Medicine at the University. She also was Vice Chair of the Department of Internal Medicine and was a Professor in Internal Medicine, Neurology, and Physiology & Biophysics. Dr. Davidson’s research is focused on inherited genetic diseases that cause central nervous system dysfunction, with a focus on (1) recessive, childhood onset neurodegenerative disease, in particular the lysosomal storage diseases such as the mucopolysaccharidoses and Battens disease; and (2) dominant genetic diseases for example the CAG repeat disorders, Huntington’s disease and spinal cerebellar ataxia type I; and (3), understanding how noncoding RNAs participate in neural development and neurodegenerative diseases processes. Dr. Davidson is a member of the American Association for the Advancement of Science, American Federation for Clinical Research (Midwest Section), American Society for Neuroscience, American Society for Gene Therapy, and the American Society for Microbiology. Dr. Davidson serves on the Board of Directors for the American Society for Gene Therapy, and is Associate Director of the Center for Gene Therapy for Cystic Fibrosis and other Genetic Diseases, and is past Co-Director of the Iowa Biosciences Advantage Program. Dr. Davidson received her Ph.D. from the University of Michigan in 1987 and was a Fellow of the University of Michigan from 1990 to 1992.

Carl Novina, M.D., Ph.D.

Dr. Novina is an Assistant Professor in the Department of Pathology at Harvard Medical School, an Assistant Professor of Cancer Immunology/AIDS at Dana-Farber Cancer Institute and an Associate Member at the Broad Institute. His research focuses on investigating the mechanisms and applications of mammalian RNAi. To discover the biological roles of microRNAs and their interacting proteins, his group has developed cell-free, microRNA-dependent translational gene silencing reactions and cell-based reporter systems for translational repression and mRNA cleavage by microRNAs. His laboratory is engaged in collaborative projects to profile microRNA expression as well as microRNA and RNAi factor gene loci, in an effort to understand the roles of microRNAs in cancer, including hematopoietic and solid tumors. Dr. Novina received his M.D. from Columbia University, College of Physicians and Surgeons in 2000 and his Ph.D. from Tufts University, Sackler School of Graduate Biomedical Sciences in 1998. He did his graduate studies on transcriptional regulation of TATA-less promoters by TFII-I in Dr. Ananda Roy’s laboratory. Dr. Novina completed his postdoctoral training with Dr. Phillip Sharp, Nobel Laureate, at Massachusetts Institute of Technology investigating small RNA-directed gene silencing.

Valuing Marina

When valuing a biotech company, a discounted cash flow model calculating a risk-adjusted net present value may be used. However, potential risks and payoffs are highly uncertain for early-stage technologies/IP with a broad scope of potential applications.

A more useful approach in this case is to focus on examining the various drivers that play a critical role in company valuation and then make company comparisons.

Biotechnology Company Value Drivers Analysis

  1. Cash: Cash is king, as it funds costly R&D efforts and pushes products through the pipeline. In this area Marina falls short in comparison its competitors. Marina expects its cash to last to May 2015.
  2. Catalysts
    • Regaining SEC compliance: Because the Company is now SEC compliant, they are eligible to be listed on an international exchange. Being on an international exchange will bring more attention to Marina, and also make it eligible for larger-scale institutional investment. This, in turn, will drive up Marina’s share price.
    • FAP Clinical Trial: Marina has already dosed the second cohort of the FAP trial. Collecting and analyzing the data will not be costly. Clinical testing is set to resume as soon as the first quarter of 2015. (The Company’s cash on hand is expected to last until May 2015, enough time to restart, and potentially complete the CEQ508 Phase I trial.)
  3. Pipeline Potential: Marina Biotech has three products in the pipeline. This is a relatively small number compared to its competitors. Marina’s pipeline potential, however, is vast – they have several chemistry and delivery technologies. These technologies have many potential applications, however they are still early in development, much of which is standing still (because of lack of funding) and we have yet to see how they fare against the competitors’ technologies as R&D proceeds.
  4. Patents: Herein lies one of Marina’s strengths. Marina has enough intellectual property to form a ‘one stop shop’ for nucleic acid-based therapeutics. However, they do not currently have the capabilities to develop all of their technologies, and thus run the risk of spreading themselves thin should they try.
  5. Partnerships: Marina Biotech has 4 partnerships. A relatively average amount compared to other small-cap RNAi therapeutic companies.
  6. Management Team: Given the leadership team, board of directors and scientific advisory board, the Company has a strong team with proven experience in biotech, healthcare, and business.

Other important factors that drive up Marina Biotech’s value

  • Marina Biotech is the only company in the sector with two distinct delivery technologies in clinical development (SMARTICLES and TransKingdom RNAi). In the Mirna agreement, Marina Biotech could receive up to $60 million in total upfront, clinical and commercialization milestone payments, as well as royalties on sales, based on the successful outcome of the collaboration.
  • SMARTICLES: The only technology delivering both single and double stranded nucleic acid payload in ongoing human clinical trials.
  • TransKingdom RNAi for CEQ508: The only orally administered nucleic acid therapeutic, CEQ508 for the treatment of Familial Adenomatous Polyposis, in clinical development. (FAP potential peak year US sales of $195 million)
  • Marina Biotech has the freedom-to-operate to develop any number of nucleic acid-based compounds, such as: small interfering RNA, microRNA mimics, microRNA antagonists, and antisense oligonucleotides that target broad RNA-based mechanisms of action, including: RNA interference, mRNA translational inhibition, exon skipping, microRNA replacement, microRNA inhibition, and steric blocking.23
  • Roche recently acquired Marina Biotech’s competitor, Santaris Pharma for $250 million plus $200 million in potential future royalties.

Does Marina Deserve a similar valuation to Santaris?

Santaris Pharma – Provides LNA-based drugs in antisense technology for treatment for a range of diseases. Santaris has intellectual property rights of more than 60 patent families which cover the LNA chemistry, manufacturing, therapeutic uses in patients and animals and optimal drug designs and drug formats.

Marina Biotech – Provides two chemistry and four delivery nucleic acid based technologies for the treatment of rare diseases. Their intellectual property portfolio includes 104 issued or allowed patents and 91 pending U.S. and foreign patent applications, including provisional patent applications.

Comparison of pipelines

Marina Biotech has a broad range of IP in both nucleic acid chemistry and delivery. Santaris Pharma’s IP estate is centered on the LNA chemistry. Santaris products are more widely tested than Marina’s products. Given Marina’s broad IP estate coupled with its lack of testing, this would make Marina a riskier investment with potential large pay-offs compared to a more conservative investment in Santaris. One can draw many comparisons between the CRN and the LNA. The CRN has not been tested as widely as the LNA, but from preliminary experiments the CRN looks slightly stronger. LNA has so far proven safe whereas the toxicity tests for the CRN have not been completed.

Other factors

Marina Biotech has significantly more technologies than its competitors, however, they are not as widely tested. The large IP portfolio gives the Company a lot of potential, but the lack of experimental data gives their value a big question mark.

Compared to other RNAi companies whose market capitalizations range from approximately $300M to $6B, Marina seems grossly undervalued at an approximately $55M (Fully Diluted) market capitalization (November 2014). However, one can argue that the Company’s current value is stripped down to its IP estate, its CEO, and three products in the early stages of the pipeline.

Bull vs. Bear Valuations

Bear Thesis – MRNA still undervalued

MRNA fails to generate enough cash in the short term from new partnerships to fund its operations and is forced to raise more cash from investors or sell the company. Given the extensive IP portfolio, we would hope that the sale of the company could value it in the $1.50 range.

Bull thesis – MRNA extremely undervalued

Investors see the value in Marina’s IP and investment flows into the company. Marina gets relisted on an international exchange. Partnerships hold strong and new ones develop. Marina uses the new funds to start up operations. Experimental results show promise and products are pushed farther into the pipeline.

Given the comparisons we can make between Marina Biotech and Santaris Pharma. We estimate the value of the Company to be $250 million. That puts Marina’s valuation at approximately $4.50 per share, including exercise of all warrants.

Risks for Marina

  • They may run out of cash again: The Company ran out of cash in 2012 and operations were halted. Current cash may last to May 2015. They will have to raise more capital, either from financing deals and/or from new partnerships. Shareholder dilution may also be a concern if they acquire new financing.
  • FDA and regulatory risks: As with most drug development companies, Marina’s products are dependent on the approval of the FDA and the regulatory agencies in other countries they would like to penetrate. Approval timelines are unpredictable.
  • Partnership dependency: Marina is dependent on its partners for further product development and marketing. Their partners are also a source of revenue for Marina. If their partners fail to perform, this could hurt Marina’s developments and cash flow.
  • Unknown long-term effects of the therapy: The long-term effects of the RNAi-based therapeutics and delivery technologies are unknown. There could be unknown side effects that may only present themselves in the long run. Each sequence must be tested separately in the lab, as each sequence will have a different off-targeting profile (it not only hits your intended target, but also hits other targets). The industry is still in the early stages of development, and there haven’t been clinical treatments that lasted more than a year or two. There can always be toxicities related to the duration of the treatment and this we will only know in time.
  • Clinical trials: Clinical risk in drug development is always prevalent. There is no way to be certain that any clinical trial will not fall flat. This could lead to outright failure or extreme time overruns.
  • They spread themselves thin: Marina has several early stage technologies in development and they all have great potential. However each technology requires significant attention and heavy R&D costs. If they don’t focus their efforts, it may be difficult to succeed in any one area. You can’t be everything to everyone!
  • Patent litigation, IP risk: In an industry where success lies largely on a company’s valuable intellectual property, litigation risk is always a factor. In 2011 Isis filed an aggressive lawsuit against Santaris that alleged the Danish company was selling technology that is covered by at least two of ISIS’ literally thousands of patents. And though Marina’s technology is protected and nicely differentiated, litigation risk always lingers. The last thing Marina needs at this point, when cash is tight, is a lawsuit.
  • Overall market risk, industry risk, and volatility: Small biotech companies are somewhat at the mercy of the overall economy. In a healthy growing economy with low interest rates, expect money to continue to flow into the higher risk end of the market – biotech, early stage companies. A volatile or recessive market poses challenges for small biotech companies that are financially unstable. There is also industry risk: When something significant happens in another RNAi therapeutics company, it can affect Marina’s share price and potential to raise capital.

GLOSSARY OF TERMS

  • Amino Acids: Amino acids are biologically important organic compounds composed of amine and carboxylic acid functional groups, along with a side-chain specific to each amino acid.
  • Big Pharma: A term that encompasses the largest players in the pharmaceutical industry.
  • DNA: Deoxyribonucleic acid (DNA) is a molecule that encodes the genetic instructions used in the development and functioning of all known living organisms and many viruses.
  • Exon Skipping: A method used to cause cells to “skip” over faulty or misaligned sections of genetic code, leading to a truncated but still functional protein despite the genetic mutation.
  • Hybridization: Hybridization is the process of combining two complementary single-stranded DNA or RNA molecules and allowing them to form a single double-stranded molecule through base pairing.
  • Nucleic Acids: Nucleic acids are polymeric macromolecules, or large biological molecules, essential for all known forms of life. Nucleic acids, which include DNA and RNA, are made from monomers known as nucleotides.
  • Nucleotides: Nucleotides are organic molecules that serve as the monomers, or subunits, of nucleic acids like DNA and RNA.
  • Oligonucleotide: A polynucleotide whose molecules contain a relatively small number of nucleotides
  • PEGylation: The process of attaching a polyethylene glycol (“PEG”) polymer chains to another molecule. PEGylated Lipids can be applied to liposomal drug formulations to prolong the plasma half-life of the drugs.

  • Protein: Proteins are large biological molecules, or macromolecules, consisting of one or more chains of amino acid residues.
  • RNA: Ribonucleic acid (“RNA”) is a ubiquitous family of large biological molecules that perform multiple vital roles in the coding, decoding, regulation, and expression of genes.
  • Steric Blocking: Binding to a target sequence within an RNA and simply getting in the way of molecules that might otherwise interact with the RNA

Important references

RNA interference industry:

  • http://rnaitherapeutics.blogspot.com/
  • The Business of RNAi Therapeutics in 2012, Dirk Haussecker, Molecular Therapy Nucleic Acids (2012) 1, e8; doi:10.1038/mtna.2011.9 Published online 7 February 2012

Delivery technology:

  • An Amino Acid-based Amphoteric Liposomal Delivery System for Systemic Administration of siRNA, Molecular Therapy (2011) 19 6, 1141-1151. doi:10.1038/mt.2011.56
  • RNAi-based Therapeutics Targeting Survivin and PLK1 for Treatment of Bladder Cancer, Molecular Therapy (2011) 19 5, 928-935. doi:10.1038/mt.2011.21
  • Application of liposomes in drug development – focus on gastroenterological targets, Int J Nanomedicine. 2013; 8: 1325-1334. Published online Apr 8, 2013. doi: 10.2147/IJN.S42153

Nucleic acid analog technology:

  • 5′ Unlocked Nucleic Acid Modification Improves siRNA Targeting, Molecular Therapy-Nucleic Acids (2013) 2, e103; doi:10.1038/mtna.2013.36
  • Locked Nucleic Acid Technology: A brief overview, Jesper Wengel, Exiqon

Footnotes

1 Fire A., Xu S.Q., Montgomery M.K., Kostas S.A., Driver S.E., Mello C.C. Potent and specific genetic interference by double-stranded RNA in Caenorhabditis elegans. Nature 1998; 391:806-811

2 http://www.alnylam.com/

3 http://www.prnewswire.com/news-releases/global-and-china-monoclonal-antibody-industry-report-2013-2017-252689041.html

4 The Business of RNAi Therapeutics in 2012, Dirk Haussecker

5 Genetic Engineering & Biotechnology News, April 15, 2011 (Vol. 31)

6 Nature Biotechnology, Editorial: Is this really the RNAissance? Volume 32 Number 3 March 2014

7 http://www.cantechletter.com/2014/03/tekmira-became-canadas-hottest-biotech-stock/

8 http://www.arrowheadresearch.com/press-releases/arrowhead-announces-pricing-underwritten-offering-common-stock

9 http://www.fiercebiotech.com/story/breaking-novartis-slams-brakes-rnai-development-efforts/2014-04-14

10 http://rnaitherapeutics.blogspot.com/

11 www.marinabio.com

12 5′ Unlocked Nucleic Acid Modification Improves siRNA Targeting. Molecular Therapy – Nucleic Acids (2013)2, e103

13 Short hairpin RNA-expressing bacteria elicit RNA interference in mammals, Nature biotechnology volume 24 no. 6 June 2006

14 www.marinabio.com

15 http://www.marinabio.com/files/3414/0856/2067/14-04-02_-_Rosetta_Genomics_and_marina_Biotech_Establish_Strategic_Alliance_to_Jointly_Develop_microRNA-Based_Diagnostics_and_Therapeutics_for_Rare_Diseases.pdf

16 ISIS 10-Q filed Nov 10, 2008

17 “Developing LNA technology for new-generation cancer drugs” (PDF). SP2 Magazine. March 2006.

18 Franciscus, Alan (2010). “Hepatitis C Treatments in Current Development”. HCV Advocate.

19 Novina, C. (2014, March 3). Telephone interview.

20 Novina, C. (2014, March 3). Telephone interview.

21 http://www.sec.gov/Archives/edgar/data/1447028/000117184312004316/newsrelease.htm

22 J Child Neurol August 2008 23: 883-888, first published on April 10, 2008

23 http://www.marketwired.com/press-release/marina-biotech-regains-compliance-with-exchange-act-reporting-obligations-pinksheets-mrna-1939890.htm