National Editor

The steadily growing field of RNA interference gained yet another vote of investor confidence as privately held Nucleonics Inc. raised $40.9 million in a Series B venture financing.

Malvern, Pa.-based Nucleonics is developing applications of its expressed RNAi therapy for chronic hepatitis B and hepatitis C virus, and plans to file its first investigational new drug application next year.

"We anticipate getting well into the Phase II [in HBV], following six to nine months later with HCV, which we would hope to get into the Phase I or Phase II area," said Robert Towarnicki, Nucleonics' president and CEO.

"We went out to raise $20 million in a Series B that would take us to two INDs, with the understanding we would then go out and raise $30 million more in a Series C round," he said. The idea was to have Phase II data for HBV and about $10 million in the bank, and then move on to HCV.

But then the leader of the round, Baltimore-based New Enterprise Associates, "came back with a term sheet that proposed financing the company all the way to the Phase II data," adding a milestone approach, he said.

"We debated that internally and opted to do this, because it lets the management stay in the office and laboratory and do what we're supposed to be doing, rather than taking a lot of time out next year to have to raise a Series C," Towarnicki told BioWorld Today.

He characterized the undisclosed milestones as "risk-eliminating [for investors] without necessarily, in this market, being value drivers. It worked for everybody."

RNAi, or post-transcriptional gene silencing, lets researchers silence genes in a sequence-specific way by targeting messenger RNA degradation, and Nucleonics takes a somewhat different approach than others in the space.

The company's expressed interfering RNA (eiRNA) method involves inserting plasmid DNA coding for relevant double-stranded RNA (dsRNA) into targeted cells, thus letting the cells produce and deliver specific dsRNA sequences. Cellular mechanisms then cleave the dsRNA into specifically encoded short interfering RNA (siRNA), silencing the targeted genes.

Researchers have proved the ability of long or short dsRNA strands produced this way to stably silence genes, including HBV and HIV, in cell lines and have silenced multiple genes, as well as HBV replication, in adult mice without triggering an interferon response.

"We can deliver multiple different siRNAs targeting different messages with a single plasmid," Towarnicki said, adding that the company can encode up to 600 base pairs.

The Nucleonics method's big advantage is delivery, he said.

"All the RNAi people talk about the difficulties of delivery," he said. "They have to deliver a lot of [siRNAs] and get them to the right cells."

The plasmid DNA strategy for dsRNA expression has demonstrated human safety in more than 500 patients to date, the company said, as part of research in the field of DNA-based vaccines.

HCV, the second-in-line target, "is actually an easier target because it's an RNA virus, and there's less message to attack. On the other hand, with [first target] HBV, we're looking for the help of the body's natural immunity," Towarnicki said.

"In HBV, we've done extensive bioinformatics and identified conserved regions in 95 percent of the known genomes," he said. "We believe we can prevent development of escape mutants, which is one of the major problems that all the small-molecule approaches suffer."

Even respected drugs such as lamivudine (Epivir, or 3TC, the antiviral therapy from BioChem Pharma Inc.) "prevent capsid formation and lower viral titers, but they don't do anything to prevent the other antigens from being produced," Towarnicki said. "Our hope is that we can actually clear the hepatitis over time."

The drug, which has not yet been given a name, is expected to be administered by intravenous bolus injection.

"Until we get to the clinic and do the Phase I, we're not positive, but we're estimating two to six infusions over a one-year period," he said.

Nucleonics plans to use some of the financing proceeds to develop a second-generation, receptor-targeted active delivery system to expand the eiRNA technology beyond liver diseases to other indications, including inflammatory disorders and cancer.

"It uses a ligand approach, and we've demonstrated we can target very efficiently three different tissue types," Towarnicki said.

Along with financing-round leader NEA, the Series B included major new investors: HealthCap, of Stockholm, Sweden; Burrill & Co., of San Francisco; Anthem Capital Management, of Baltimore; and Posco BioVentures Inc., the biotechnology investment arm of Seoul, South Korea-based steel conglomerate Posco. Nucleonics' founding investor, S.R. One Ltd., of West Conshohocken, Pa., was also a major participant.