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RNA: The New Building Blocks Of Biotech Investing

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These companies are capitalizing on a growing trend in big pharma.

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RNA, DNA's less-talked-about counterpart, has been all the rage in biotechs over the last few years. If you aren't following these companies you're missing out on a wealth of opportunity.

RNA acts like DNA in the body, but helps make the proteins. RNA can be manipulated in several different ways to help block, or silence, these proteins and keep them from spreading disease in the body.

While some RNA approaches have been more popular than others, GlaxoSmithKline (GSK) is making a $1.5 billion bet that antisense therapy, one of the ways RNA is used, will be the key to curing a slew of diseases.

The British pharma announced Wednesday that it has struck a deal with Isis Pharmaceuticals (ISIS) for the company's antisense drug discovery platform. The agreement provides Isis with $35 million upfront, plus $20 million for each of the six programs included in the deal.

GlaxoSmithKline will have the right to license the drugs after proof of concept and Isis will be eligible to receive a total of $1.5 billion through milestone payments and licensing fees when all is said and done.

"As a platform, the Isis antisense approach offers us an exciting opportunity to target certain severe diseases in a way that has not previously been possible," said Dr. Patrick Vallance, senior vice president and head of drug discovery at GSK.

Isis is the leader in this sort of technology and has enough early patents on antisense that it has its hand in virtually every antisense program out there. Yet, the RNA technology that is garnering the most attention of late is the RNA interference, or RNAi, space.

Some of the players to watch in the space include MDRNA (MRNA), Alnylam Pharmaceuticals (ALNY), RXi Pharamceuticals (RXII), and big pharmas like Merck (MRK) and Pfizer (PFE).

Alnylam is currently partnered with Cubist Pharmaceuticals (CBST) on a respiratory treatment that is in mid-stage studies, but expect to hear more about its earlier phase program for liver cancer, which is expected to have data out in the next quarter.

MDRNA recently announced that it has received further coverage for its intellectual property, but the company is also looking for a large partner on its bladder cancer therapy -- investors are expecting this very soon. But be weary; the company had cash problems in 2009. It was able to raise almost $5 million in January, but will need further funding from a partner for its programs to make it through the rest of the year.

Keep an eye on Canada's Tekmira Pharmaceuticals, which cut a deal with Pfizer earlier in the month. Pfizer is using Tekmira's technology as a drug-delivery system for its RNAi programs. The company also has deals with Merck, Alnylam, and Roche.

Silence Therapeutics (SLN) announced Tuesday that it was expanding its RNAi collaboration with Dainippon Sumitomo Pharma. The collaboration includes Silence's proprietary lipid delivery and targeting technologies. "We believe that the decision to expand this collaboration less than eight months after its initiation and within three months of the merger between Silence and Intradigm provides clear evidence that both Silence and Dainippon Sumitomo are not only pleased with the progress already achieved through this partnership but also with its future potential," said Philip Haworth, Ph.D., chief executive officer of Silence Therapeutics.

While this space seems like the next wave of drug discovery, be careful. This sector is bogged down by intellectual property/patent lawsuits and the chips could fall in any company's favor.
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No positions in stocks mentioned.

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