BioWorld International Correspondent

LONDON - Europe's leading RNAi specialist Silence Therapeutics plc has written a New Year letter to calm investors' nerves after a run on the shares in December that saw the stock price fall as low as £0.64, a far cry from the £1.45 it reached in July 2007 when the company signed a $400 million deal with AstraZeneca plc.

The author of the report, company Chairman Iain Ross, admitted part of the cause was making slower progress than promised in terms of both clinical and commercial development. But he told BioWorld International the main reason for the fall was due to retail investors misinterpreting reports on the U.S. Patent and Trademark Office's website that claims in the company's key AtuRNAi patent application would not be allowed.

"Obviously, we're trying to get the broadest coverage we can, so you do get claims knocked back; and obviously our competitors are trying to restrict our claims," Ross said. "But the problem is that retail investors don't understand this is an iterative process. We went through exactly the same thing in Europe, the difference is that the European Patent does not publicize details of the negotiation on its website."

London-based Silence Therapeutics is unusual among public biotechs in having a highly liquid stock, with about 2 million shares trading each day. "In a sense we are hoist by our own petard; we do get speculators who don't know what we do playing the market," Ross said.

The company is attempting to change the complexion of its investor base. It wants to attract additional institutional shareholders and broaden their geographic spread, and Ross said there will be a number of investor road shows in the next few weeks in Europe and the U.S.

The New Year letter was written at the suggestion of existing institutional investors. In it, Ross acknowledges there has been a low level of news flow. In particular, the market was expecting clinical trials of the company's first in-house developed product, Atu027, a systemically delivered treatment for pancreatic cancer, to begin before the end of 2007.

Ross said that progress was slower than anticipated in part because of new rules about first use of novel biological products in humans.

Those were introduced by the European drug regulator EMEA in the wake of the TeGenero TGN1412 drug trial fiasco in which six healthy volunteers suffered near-fatal cytokine storms. (See BioWorld International, May 30, 2007.)

Those new rules require companies to ascertain and begin dosing systemically at the minimum anticipated biological effect level. Multiple doses of Atu027 have been tested preclinically, and to date, there has been on-target activity with each, not only in the target tissues, but also in the lung, indicating the product could be developed as a systemic treatment for lung cancer.

"We are being very cautious in the face of the additional regulations, and doing far more extensive preclinical work than we would have anticipated," said Ross, adding "I don't think the shareholders would thank us if we went into the clinic and then there was a problem." He expects the first trial to start in the second half of 2008.

Atu027 uses Silence Therapeutics' AtuPLEX liposomal delivery system, which protects naked siRNA while enabling it to be delivered systemically. Ross said that on the basis of the preclinical data he expects the technology to be more efficient than viral vectors in systemic delivery of RNAi constructs.

However, the company does not believe that this system is suitable for all possible applications of RNAi and is investigating other delivery methods in a number of collaborations. "We are setting up collaborations and waiting to see if they work before publicizing them," said Ross. "But don't forget we have been working on RNAi delivery for eight to nine years. A lot of the delivery systems now being considered by the competition we've looked at already."

Ross said that Silence Therapeutics financial position is comfortable. After signing the deal with AstraZeneca, the company had more money at the end of 2007 than a year earlier, and he expects to complete two or three deals that will include up-front payments in the near term.

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