Dicerna Pharmaceuticals (DRNA) is a biotech that should be on everyone’s radar. That’s because it recently announced a partnership to develop a hepatitis B product with Roche (OTCQX:RHHBY). The hepatitis B indication is a big market opportunity. What makes the deal a good one is that Dicerna is lined up to receive a large upfront payment, with potential to earn a lot more in milestone payments. Dicerna has a lot more going for itself besides its Hepatitis B product which is currently in phase 1. This partnership is just one of many that exist in the pipeline. It seems that many big pharmaceuticals are keen on Dicerna’s GalXC technology platform for RNA interference (RNAi) science. I believe that things can only get better for Dicerna, especially with its ongoing lead program.

Hepatitis B Indication Partnership For DCR-HBVS

Dicerna had announced that it formed a solid partnership with Roche to develop and commercialize a Hepatitis B product known as DCR-HBVS. What makes this deal highly substantial is that it is to receive an upfront payment of $200 million and then up to $1.47 billion in potential milestone payments related to the DCR-HBVS product. Roche gets some good things out of the deal like the ability to obtain worldwide licence to Dicerna’s novel RNAi currently in phase 1.

I think the best part is that Dicerna left itself open to certain options. By that I mean it can choose to co-fund a late-stage study of DCR-HVS for worldwide deployment and a co-promotion option in the U.S. with improved royalties. RNA interference or RNAi is the ability for RNA molecule to inhibit gene expression or translation. It stops the process of a specific protein being created. Hepatitis B is a serious liver disease that is caused by the hepatitis B virus (HBV). If a patient gets the acute version that means it only lasts 6 months or less and can be cleared by your own immune system. For those with chronic HBV, it lasts longer than 6 months and the immune system is not able to clear the infection at all. That’s bad because the disease can eventually cause several severe complications such as liver cirrhosis, liver failure, or liver cancer.

There are vaccines out there that prevent Hepatitis B, but nothing approved to treat a patient once infected. The DCR-HBVS clinical product is currently being explored in a phase 1 study. This is the next most advanced program, which is in phase 1. Yes, this study is very early in nature, but it offers massive potential. That’s because the global Hepatitis B market is expected to reach $3.5 billion by 2021. This is a massive market opportunity if the phase 1 starts to show early evidence of being successful. This seems like a solid program. But why did Roche choose to partner with Dicerna? I think it boils down to how promising the program is, plus the technology involved.

The phase 1 study holds a lot of potential for the simple reason in that it is being designed in a smart way. Instead of just straight up recruiting patients with only one key endpoint in mind, Dicerna has chosen to create 3 separate cohorts which are: Group A, Group B, and Group C. Group A is going to test out 6 single-ascending doses of DCR-HBVS in 30 normal healthy volunteers. It was noted that the first patient had already been dosed for this phase 1 HBV program. This Group A portion will have a 4-week follow-up period afterwards, likely to determine safety of the treatment. The six doses of DCR-HBVS are as follows:

  • 0.1 mg/kg
  • 1 mg/kg
  • 1.5 mg/kg
  • 3 mg/kg
  • 6 mg/kg
  • 12 mg/kg

Then you have Group C, which is a multi-ascending dose portion of the study using 3 doses of DCR-HBVS which are: 1.5 mg/kg, 3 mg/kg and 6 mg/kg. These doses will be tested among a total of 18 patients with HBV who had previously already taken nucleoside analogs up to 24 weeks or more. Group B is going to be a single-dose study of DCR-HBVS of only 3 mg/kg for 8 patients who are naive to nucleoside analog therapy. That means these patients have not yet taken nucleoside analogues for their HBV at all. These patients will be monitored for 12 weeks.

You might be asking, why would the company split up 3 groups for the phase 1 study? That’s because it takes care of multiple issues to determine all at once. For instance, doing a single dose portion and multiple dose portion allows the biotech to see what dose works best and whether or not more than 1 dose is needed to achieve a desired effect.

In addition, as I noted many times, phase 1 studies are built on safety. It has to be made sure that no patient experiences a major adverse event or toxicity while taking a higher dose. This is going to be important if the biotech hopes to advance to phase 2 with the right dose of DCR-HBV. I believe that the basis for the advancement of this study was not just because of the market opportunity alone. That’s one part of it, but I believe it was based on some nice preclinical data. In a standard mouse model, it was shown that DCR-HBVS achieved a greater than 99% reduction in circulating HBsAg. This was achieved in terms of both duration of suppression of this surface cell antigen and in strength of efficacy.

On top of hepatitis B, Dicerna and Roche will have the ability to discover and develop additional therapies that target genes associated with HBV. There even is a catalyst opportunity coming up for investors, in that Dicerna expects to release human proof-of-concept data for HBV in Q4 of 2019. This will be the first look at the ability for Dicerna’s technology to potentially have an impact for this patient population.

Multiple Partnerships

Dicerna is a solid biotech, because of how many big pharma companies have wanted to form a partnership for the use of GalXC technology. Roche just happens to be the most recent partnership announced. One partnership involves Boehringer Ingelheim. It was reported that Dicerna received a $5 million payment this year from Boehringer Ingelheim for taking an option for a license agreement. That’s because Boehringer had agreed to initiate a second disease target indication for the liver to start development.

This collaboration agreement between both companies was first established back in 2017, with the potential for Dicerna to earn up to $201 million in milestone payments along with royalties on net sales. The biggest reason is because Boehringer wanted to use the GalXC technology platform which uses RNA interference (RNAi).

The initial agreement was to work on nonalcoholic steatohepatitis (NASH) and other liver diseases. The NASH indication is still ongoing, but Boehringer decided to go after a second liver disease target indication. That’s what triggered the $5 million payment. The NASH target indication is expected to be large opportunity for any biotech that successfully develops a drug for it. It is estimated that the global NASH market could possibly become a $35 billion market opportunity. Of course, there is a lot of competition in this space. Therefore, it is not going to be easy for Dicerna to navigate through this. Having said that, the lead program for PH1 and PH2 is treating a rare disease that has limited competition. It also has a diversified pipeline that is slowly building and I believe that should reduce investor risk.

In terms of Eli Lilly (NYSE:LLY), Dicerna partnered with it for a few key areas including: pain, neurodegeneration and cardiometabolic. It is expected that the deal could bring in 10+ targets into the pipeline depending up preliminary data. Dicerna received an initial $100 million upfront payment and another $100 million as an equity investment. It is also eligible to earn $350 million per target in development and commercialization milestones. As you can see, if multiple clinical products advance forward, this could be meaningful cash to avoid dilution. On top of that, each animal model that establishes proof of concept will also trigger a $5 million payment. The latest update is that as of the quarter ending March 31, 2019, Dicerna received $0.5 million recognized as revenue for the partnership.

The Alexion (NASDAQ:ALXN) collaboration agreement also remains on track. This partnership was established to use the GalXC technology for complement-mediated diseases. The main thing about this partnership is that Dicerna is just responsible for the preclinical development of these products. From there, Alexion will handle the rest of the trials from phase 1 all the way through marketing the drugs. If initial preclinical testing goes smoothly, then there is an option in place to allow Alexion to advance 2 additional pre-clinical products on top of the other ones. This also includes Dicerna receiving up to a potential $600 million in milestone payments and option exercises. The final item is that any product that is derived from this partnership, that would bring in mid-single to low-double-digit royalties. The update for this partnership is that Dicerna had recognized revenue of $0.4 million in consideration for this deal in the quarter ending March 31, 2019.

Main Program Diversifies Pipeline

The most important product in Dicerna’s pipeline is DCR-PHXC, which has reported data from its study known as PHYOX1. Even better than that, the biotech is recruiting for its other phase 2 study PHYOX2. This program has massive potential in the next few years. Despite PHYOX2 being a phase 2 study, the FDA has agreed to make it a pivotal one. What that means is if the primary endpoint is met, then the company can file for accelerated approval after this study. It may still need to run a confirmatory study, but it will be able to obtain FDA approval earlier than expected. I like these kind of biotechs that treat unmet medical needs for that reason. They are able to gain FDA approval after only completing a phase 2 study.

The DCR-PHXC product being used to treat patients with a rare disease known as Primary Hyperoxaluria (PH). This disease, PH, is a rare genetic metabolic disorder. The basic premise is that these patients see a build up of oxalate in the kidneys. With the kidneys becoming damaged, the oxalate then tends to branch out to other organs. As you can see, this can lead to many complications of the kidney like end-stage renal disease (ESRD) and kidney stones/urinary stones. This disease is broken down into Primary Hyperoxaluria Type 1 (PH1) and Primary Hyperoxaluria Type 2 (PH2). PH1 is caused by the AGXT gene, while PH2 is caused by the GRHPR gene. PH1 is far worse than PH2. That’s because in PH1 oxidate levels build up faster and patients suffer often with urinary/kidney stones. It still happens with PH2 patients but less frequently.

There was a major update on recently released data from the PHYOX 1 study. This newly updated data reinforced the prior data, in which a single injection of DCR-PHXC was able to substantially reduce 24-hour urinary oxate levels. As I alluded to above, patients with PH suffer from increased oxate levels which build up in the kidney and and other organs. The more the oxate levels can be reduced, the better it is for the patient in the long run.

As of a cut off time of May 1, 2019, it was noted that PH1 patients treated with the 3 mg/kg dose of DCR-PXHC achieved a mean (average) maximal reduction of 24-hour urinary oxalate of 71%. Patients achieved a reduction in urinary oxalate anywhere between 62% and up to 80%. It is important to note that about 4 out of 6 patients were brought to the normal range of levels in the body, while 1 patient was near normal range. It appears as though this 3 mg/kg dose is strong as what has been achieved with these results. The 6 mg/kg dose of DCR-PXHC was just about equivalent in average reduction of urinary oxalate with 66%. That’s a slightly lower average reduction achieved than the 3 mg/kg dose. The lowest dose of 1.5 mg/kg only made a mean maximal reduction of 48% in PH1 patients. The PH2 patients were also evaluated as well. It was noted that the 1 patient that received the lowest dose of 1.5 mg/kg of DCR-PHXC and the other 2 patients with 3 mg/kg of the treatment had an average reduction of 24-hour urinary oxalate of 42%.

The phase 1 PHYOX1 study remains on track with solid clinical data to back up the advancement of the drug. Which of course is a good thing, considering that DCR-PHXC is the main clinical product in the pipeline. The latest update for the phase 2 PHYOX 2 study is that Dicerna had a good meeting with the FDA in a Type A meeting. The whole point of this meeting was to establish a potential pathway for full approval of DCR-PHXC in PH1. The company is still in discussions to figure out full endpoints to get approval for PH2 and PH3. PH3 is the 3rd form of PH disease.

The eventual goal is to get approval for all 3 forms. For the time being, the phase 2 study is a pivotal one to gain full approval for PH1. Even though the phase 2 study will treat both PH1 and PH2 patients, the target for approval is PH1. It’s not guaranteed, but further discussions with the FDA might allow Dicerna to reach an agreement for PH2 patients as well. Whether this will be incorporated into PHYOX2 or another study needed for approval remains to be seen. Besides the potential for accelerated approval of DCR-PHXC, the study is a short one.

Financials

According to the 10-Q SEC filing, Dicerna Pharmaceuticals has cash, cash equivalents and held-to-maturity investments of $312.7 million as of September 30, 2019. However, this doesn’t include the $200 million upfront payment from Roche. Adding this cash into the mix, the guidance is that Dicerna will have enough cash to fund its operations beyond 2021. This will be enough to finish the pivotal PHYOX 2 study, along with the regulatory filing and commercialization of the DCR-PHXC product. It will also be enough to fund the other parts of the pipeline. The only downside is that manufacturing activities will start to increase expenses of the company. On the flip side, this cash estimate doesn’t include any of the other potential milestone payments that it may receive based on its other partnerships.

Conclusion

A partnership for Dicerna Pharmaceuticals as it relates to hepatitis B was inevitable. That’s because its technology platform seems to have garnered the attention of many other big pharmaceutical companies as I highlighted above. The biggest risk with respect to the hepatitis B program is that it is still being explored in a phase 1 study. That means it is too early to tell how well it will do upon completion of the phase 1 study and then possibly in phase 2 testing. The good news is that Dicerna has already been able to reduce investor risk with its main clinical product DCR-PHXC, which is being used to treat patients with Primary Hyperoxaluria. There has already been positive results reported from the PHYOX1 study. Even better, DCR-PHXC is being explored in the PHYOX 2 study. This is significant, because the FDA has agreed to make this a pivotal study. The risk is that there is no guarantee that the primary endpoint of this study will be met. However, the good news is that Dicerna has a large pipeline full of other indications it is going after like: NASH, pain market, neurodegenerative diseases and complement mediated diseases. That means it has many shots on goal, besides the ones I noted above.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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2019-11-12