Snipping Genes to Cure Diseases

When U.S. President George Bush asked Congress to write laws that would ban “human-animal” hybrids last week in his State of the Union speech, it was a chilling reminder of the more bizarre implications of the genetic research going on around us.

So it’s comforting to remember that the miracles of genetic modification are also being tapped to protect human life and treat diseases.

A good example of these efforts is a Cambridge, Mass.-based company called Alnylam Pharmaceuticals (ALNY), where a director recently bought a big slug of stock, worth $1.3 million.

Running interference

Alnylam – named after a star in the constellation Orion – works in an area of science called “RNA interference.”

You may remember from biology classes that RNA, or ribonucleic acid, is a chemical that plays a role in the creation of proteins inside cells. Since most ailments can be traced back to the production of proteins, knowing how to stop RNA from making proteins means you have the keys to preventing all kinds of diseases.

This technique is called RNA interference, or RNAi for short, and it’s the main focus at Alnylam. “What we can do with our RNAi technology is stop those diseased proteins from being made in the first place,” says Alnylam chief executive John Maraganore.

RNAi works by slicing certain genes in our bodies, to disable RNA from producing specific proteins. It can also be used to attack viruses by disabling the genes inside of them that help the viruses reproduce.

If RNAi therapies ever see the light of day, patients will likely take them via regular injections, or inhalers.

Embarrassment of riches

Since proteins are at the root of most diseases and even problems like chronic pain, the potential here is huge. “There could be a whole new class of drugs based on RNAi,” says Maraganore. “We have an embarrassment of riches in the different diseases we can tackle.”

Here’s a brief look at some of the main ones Alnylam is working on first.

* Bird Flu

No one knows whether the H5N1 avian flu virus will ever make the jump to humans in a way that causes widespread problems (http://moneycentral.msn.com/content/P132582.asp). But it might. That would be devastating for us. But it could light a fire under Alnylam stock. That’s because the company believes its RNAi can neutralize the bird flu virus. Alnylam hopes to file an investigational new drug (IND) application with the Food and Drug Administration as early as the second half of this year in this area.

* Respiratory Syncytial Virus (RSV)

RSV is the leading cause of lower respiratory infections in infants. There are millions of cases in the US each year. Alnylam recently started enrolling patients for Phase I trials of a potential RSV therapy, to test for safety and dosage levels. It could release results in the first half of this year. The therapy could work by delivering a drug to the lung to neutralize a gene in the virus, preventing it from reproducing.

* Neurological diseases

Since ailments like Parkinson’s disease, Alzheimer's disease and cystic fibrosis can all be traced back to the production of certain kinds of proteins inside cells, RNAi might work against these problems, too. Alnylam is also in the early stages of trying to apply the technology to help regenerate nerves damaged in spinal cord injuries or stop certain kinds of pain.

Success factors

So many biotech companies sound so promising when you talk with the scientists, it’s hard to single a few out to invest in. I think Alnylam makes the cut for three reasons.

First, Alnylam has three key partnerships that suggest big drug companies believe in their tech. The partnerships are with Merck (MRK), Medtronic (MDT), and Novartis AG (NVS). These alliances have brought in about $100 million for Alnylam. Novartis owns just under 20% of the stock.

Next, Alnylam has some of the key scientists in the space on its team. They include: Thomas Tuschl who is the head of the Laboratory of RNA Molecular Biology at Rockefeller University, and Phillip Sharp who is the director of the McGovern Institute for Brain Research at the Massachusetts Institute of Technology. The company may ultimately lay claim to much of the intellectual property and patent rights behind RNAi.

Third, Paul Schimmel, a director, bought $1.3 million worth of the stock at the end of January. Insiders are often wrong in biotech, but that’s a significant bet.

The bottom line: Many biotech companies with a lot promise flame out. And this is a company that lost 51 cents a share in its last reported quarter. In short, it has a long way to go to profitability. But it’s got the stamp of approval of some major pharma companies. And several catalysts this year could move the stock. They include: the completion of Phase I studies on the RSV drug and the launch of Phase II trials here; the release of data from primate research on other therapies; and more funding for bird flu work and possible regulatory advances here. If you buy, just remember that early stage biotech companies are most suitable for investors with a long-term view.

Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.