It’s crunch time for Bothell-based biotech company AVI BioPharma. Despite pioneering advanced genetic therapies for a range of rare and infectious diseases, the small firm faces mounting problems: a clinical trial that is failing to impress Wall Street, expiring patents, international litigation, and a cash squeeze that could thrust it into the arms of Big Pharma.
CEO Chris Garabedian doesn’t pull any punches. “A lot of investors would like to see us remain independent but the financial reality is that the market valuation of a public company dictates how much money we can raise to continue on our own.”
At press time, AVI’s stock price was well under $1 a share, far from its 10-year peak of $8.40. It took another tumble in early April, when interim results from a trial of its flagship drug, eteplirsen, failed to show any clinical benefit in the treatment of Duchenne Muscular Dystrophy (DMD), a rare degenerative disease affecting children.
The news was not all bad, however. The 24-week test showed a significant increase in the production of new dystrophin, a protein that plays a key role in muscle development, and one that is missing in sufferers of DMD. Duchenne is the most common and severe form of muscular dystrophy, striking about one in 3,500 boys worldwide. It is caused by a failure of the gene that codes for dystrophin, leading to weakness, disability, paralysis and, invariably, death, usually before the victim’s 30th birthday.
AVI BioPharma’s drug eteplirsen is designed to “skip” a part of the dystrophin gene, restoring its ability to make a shorter, but still functional, form of dystrophin. And it seems to work, with patients in the trial showing low but useful levels of dystrophin production, about a fifth as much as in healthy people. What it did not show was any improvement in key walking or running tests.
“Investors were hoping that we would hit a grand slam,” says Garabedian. “But what we learned was that this is a long, progressive disease and that it’s likely to take longer—maybe 48 weeks, maybe longer still—before we start to see significant clinical benefits.”
As if uncertainty over the clinical trial were not troubling enough, eteplirsen also faces competition. Prosensa, a Dutch biotech company, has already partnered with deep-pocketed multinational GlaxoSmithKline to develop a similar drug. Although the compounds have different chemistries, they both skip the same nucleic acid sequence, or exon, and Prosensa won a patent battle last year for European rights.
That development could be a serious blow for a drug that, with a prospective annual cost of around $250,000 per patient, is unlikely to be widely used outside the wealthier nations. “As we sit here today, we would hesitate to bring forward eteplirsen in Europe because we would be worried about potential infringements,” says Garabedian. “We are shaping a study to consider appealing the verdict, and there are other ways to get around it, like cross-licensing.”
Talking of intellectual property, AVI BioPharma finds itself in the awkward position of having some of its several hundred patents—albeit less important ones—expire before it has sold any drugs based on the technology. That’s because the company was formed in the earliest days of biotech in 1980, starting in Oregon and relocating to Bothell in 2009. “It was decided that if we want to be a company that is sustainable for the long term, we needed to find an area with a much more thriving biotech community and talent pool,” says Garabedian. “The research talent is very strong in Seattle. We are very pleased to have made the move.”
Although the labs may have shifted, the company is still developing the technology it was founded on: phosphorodiamidate morpholino oligomer antisense therapeutics, more sensibly known as PMOs. The science is complex, but PMOs are essentially synthetic structures modeled after RNA, the molecules in our bodies that control the expression of genes and other biological reactions. PMOs can turn on or off the production of certain proteins within the genes of human DNA, and can also interfere with RNA in viruses, preventing them from causing harm.
This research caught the attention of the United States government, which has provided AVI BioPharma with its only significant revenue. The Department of Defense awarded the company $300 million in 2010 to identify possible drugs to tackle pandemic influenza as well as the deadly Ebola and Marburg hemorrhagic viruses. These programs were largely successful, creating treatments that led to 100 percent survival for animals against Marburg and up to 80 percent survival against Ebola.
“We have the technology platform to address a Contagion scenario, where something hits the globe that is very lethal and very bad,” says Garabedian, alluding to the 2011 film starring Matt Damon. “If there’s not enough time to produce a vaccine, we could turn a treatment around very rapidly.” In 2010, AVI BioPharma conducted a rapid response exercise against H1N1 flu that identified target genetic sequences in the virus, designed drug candidates and made enough for preclinical testing, all in one week.
But flu scares come and go, and with them, fickle government support. AVI BioPharma did not secure the funding to take its influenza treatments through to full clinical trials, and the Ebola and Marburg programs are unlikely to ever make much money. “Government funded programs are not very attractive to most investors,” says Garabedian. “People all over the world don’t need an Ebola drug; it’s only for emergency situations. Investors are asking, ‘How do you know you’ll ever sell a dollar of these drugs?’”
Garabedian now intends to lead AVI BioPharma in search of more rare conditions that could benefit from its PMOs, perhaps including central nervous system diseases. “Every month, there’s a paper out that identifies a new gene implicated in a disease. This is cutting-edge technology for the future of medicine, coming at just the right time,” he says.
The right time for sufferers, perhaps, but not necessarily for a cash-strapped AVI BioPharma, which shed nearly a third of its 133-strong workforce last December. The 48-week results from the eteplirsen trial, due in October, are critical to the company’s future, admits Garabedian. “At 48 weeks, we would really like to see a signal that we are getting some hint of a clinical benefit. It could make the difference between our ability to fund continued development of the program or letting somebody else do it.”
If eteplirsen is proven effective against muscular dystrophy, AVI BioPharma could ultimately earn a half-billion dollars in annual revenue, providing the funds for Garabedian to tackle infectious pandemics and rare genetic diseases alike. If not, young boys will continue to die, and Seattle might lose a local, independent innovator to a massive multinational. A clinical trial has seldom had so much at stake.