This is the fifth in a series of posts analyzing Rosetta Genomics stock.

Currently most tests for diseases look at protein (or sometimes mRNA) levels in the cells to determine if the cells are diseased. A good example of this is the prostrate specific antigen (PSA) test for prostrate cancer. The test looks at the amount of PSA in the blood stream and then tries to gauge the likelihood of cancer based on the amount of the protein. The problem with this (and many other) diagnostic tests is that they only look at a single marker and there can be a wide variation between normal patients leading to high level of false positives and false negatives.

Rosetta Genomics is attempting to build a better mouse trap. Since a single miRNA often affects the expression of multiple proteins, measuring the miRNA levels in cells may allow for increased specificity in diseases where miRNAs have been shown to have altered expression. Rosetta Genomics is primarily designing tests to detect cancer and/or predict how aggressive the tumor may be. By combining a panel of several miRNAs whose levels are changed in the diseased tissue relative to the normal tissue, they can increase the specificity of the test.

Prostrate, Lung, and Colorectal Cancer

Rosetta Genomics is working on separate tests for the detection of these three types of cancer. So far, they have found four miRNAs whose expression are different in tumor samples vs normal tissue for each of the three tumor types. When combined, they have a p-values in the 0.002-0.006, so there is a very low chance that the difference in the miRNA expressions are due to chance alone. They don’t say what percent of the tumors that they have tested have these particular expression patterns, so it’s difficult to determine how high the false negative rate will be.

Breast Cancer

Research on diagnostic tests for breast cancer are in early stages. Rosetta Genomics is looking for differentially expressed miRNAs in patient samples that had a high recurrence rate vs those with a low recurrence rate to develop a test to predict if a tumor is likely to come back. As you can imagine, predicting the likelihood of recurrence would be helpful for doctors to determine the best treatment options. Like the above tests they are also testing normal vs tumor tissues to develop an early detection test for breast cancer.

Cancer of Unknown Primary site (CUP)

About 70,000 malignacies a year are diagnosed as metastases of unknown primary tumor (CUP). It’s exactly what it sounds like; the doctor discovers a secondary tumor (metastases), but the primary tumor is unknown. There are a variety of expensive tests that can be run to try to find the primary tumor, but in 70-80% of the cases, the primary tumor is never found.

Since miRNAs have different expression profiles for various cell types, it may be possible to determine the cell type (origin of the primary tumor) by measuring miRNAs levels in the cells of the metastatic tumor. Using 6 different miRNAs they can identify the origin of the primary tumor in 80% of the tumor samples with 90% accuracy. This is based on 6 different cell types, so I think they will probably need to add a few more miRNAs in order to increase the ability of the test to detect other cell types and to increase the accuracy of the test.

None of the tests are in the clinical validation stage yet, but fortunately, the time frame for approval is much shorter for diagnostic tests than for drugs. Rosetta Genomics is actually working on some therapeutic drugs as well, and I’ll get to those next time.

Filed under: Rosetta Genomics (ROSG) | 2 Comments »

Does anyone have any idea why a company without any products to sell might be using Google adwords to advertise? I saw the image to the right on my blog the other day.

Here’s some potential ideas I came up with:

1. They’re trying to get even more research collaborations (but I would think anyone in the business would know about them already).
2. They want to attract potential employees (although the ad doesn’t say anything about them hiring)
3. They want to get people interested in their stock (too bad they didn’t know I’d give them all this free publicity).
4. They got some “free” adwords dollars with their website hosting package, so why not use them?

My guess is that it’s the 3rd one but I’m not sure it’s a good use of investors’ funds. Maybe it’s the scientist in me, but I think using the money from your IPO on lab supplies (and therefore developing products) would probably be a better way to drive demand for your stock than trying to increase investors’ knowledge of your company/stock.  I heard from a reader that they also had an ad in Science Magazine pre-IPO, so maybe this ad campaign is left over from that campaign.  I don’t know why, but pre-IPO advertisements seems less scummy than post-IPO ads.

I have an e-mail into investor relations to try to find out the real reason for them spending money on advertisements. I’ll let you know if I hear anything back.

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This is the third in a series of posts analyzing Rosetta Genomics stock.

When analyzing Synta, I decided to take a pass on buying their stock right now because I was worried that there wouldn’t be anyone to partner with them; Rosetta seems to have the opposite problem. Almost every product they’re developing has a partner.

Ambion incorporated their miRNAs into its line of miRNA-based research kits at the end of 2005. This is the only product that has currently made any money ($228,000) for them.

They have an agreement with Asuragen to co-develop a diagnostic test for prostate cancer. Basically, both companies will do initial research to determine the best miRNAs to use in the test and then Asuragen will develop the assay and obtain regulatory approvals. Rosetta will be compensated by being paid royalties for the miRNAs used in the test.

Rosetta is collaborating with Isis Pharmaceuticals to co-develop a drug to regulate miRNAs to treat liver cancer. The project is in early stages, but if successful, will be co-developed by the two companies.

They are collaborating with Hadassah Medical Organization on discovering miRNAs that might be used in the suppression of hepatitis C infection. Rosetta would develop any drugs or tests that come out of the collaboration and pay Hadassah royalties. Rosetta has an additional agreement with Hadassah to do general research in the field of miRNAs where any miRNAs discovered will be jointly owned.

Rosetta has been partnering with U.S. Genomics to develop an early detection test for lung cancer using their miRNAs and U.S. Genomics’ miRNA expression profiling platform, but they believe that their expression profiling platform is better and may terminate this collaboration. In either case, the lung tumor samples used are provided by an agreement with Tel Hashomer Medical.

In addition to their collaborations, they have also directly licensed quite a few miRNAs to be used in the development of tests and drug targets:

• From Johns Hopkins approximately-130 human microRNAs
• From The Rockefeller University-80 human microRNAs and approximately 30 viral microRNAs
• From Max Planck Society-110 Max Planck Society

In case you haven’t been keeping track, that’s 9 partners. Trying to figure out how much money they could potentially make off of any given product is going to be next to impossible. They are also developing diagnostic tests on their own, and I’ll get into those next time.

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This is the second in a series of posts analyzing Rosetta Genomics stock. If you haven’t already, you may want to read my primer on what a micro RNA is and how companies can capitalize on them.

There’s really two ways to find a miRNA. The first is to isolate RNA from the cells of tissue (or a cell line grown in the laboratory). Then purify the relatively small miRNAs from the rest of the RNA molecules. Reverse transcribe the miRNAs to make DNA molecules and ligate the newly synthesized DNA molecules into a vector and transform that into bacteria. Grow up enough bacteria to isolate the vectors with the miRNA sequence inserts and sequence them. After all these steps, you’ll have the most abundant miRNAs in the one tissue that you isolated them from. You’ll miss the miRNAs that aren’t highly expressed and you’ll need to repeat the process for every different cell type that you want to find miRNAs in. As you can see, it’s a relatively inefficient and fairly costly way to find a lot of miRNAs.

Rosetta Genomics has decided to take a different line of attack. They used a computer approach to define potential miRNAs based solely on sequences in the human genome database and then tried to figure out whether they were real (were expressed). The approximately 10,000 potential miRNAs they identified due to their sequence were put on microarrays and their expression was tested in multiple tissues and body fluids. They have identified 1,500 potential miRNA sequences that showed expression in one or more tissues. Since the microarray can have a high background which may lead to false positives, they further confirmed them through either quantitative RT-PCR or by cloning and sequencing them. To date, they’ve confirmed 320 through this method, which is half of all the miRNAs that have been discovered. And, since they have certainly not tested every tissue possible, there’s potential for them to identify even more tissue specific miRNAs by checking additional tissues with their array.

With patents on each of the miRNAs they’ve discovered, Rosetta Genomics certainly has a lot of intellectual property. I’ll look at exactly what they’re planning on doing with that IP in the next couple of posts.

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Aside: I have a post up in the Festival of Stocks at Investor Trip. If you’re looking for ideas of non-biotech stocks to investigate further, go check out the festival.

Filed under: Rosetta Genomics (ROSG) | 1 Comment »

Before we get into investigating Rosetta Genomics in detail, I thought I would give a little background on micro RNAs since it’s the molecule that Rosetta has based its entire platform on.

Micro RNAs (miRNA) were discovered in worms about 14 years ago, but they have been found in a wide range of organisms (including humans) in the last few years. A subset of our genes encode miRNAs which are transcribed in the usual fashion creating primary transcripts (pri-miRNA). These long single stranded pri-miRNAs fold back on themselves to create hairpin stem-loop structures. The hairpins in the pri-miRNA are cleaved into short 70 nucleotide pre-miRNAs through drosha processing. These Pre-miRNAs are then exported from the nucleus. In the cytoplasm, dicer processing takes place where the RNA-induced silencing complex (RISC) binds to the hairpin RNAs and further cuts the RNA to make the final miRNA.

The miRNA is partially complementary to a messenger RNA (mRNA) that has been transcribed. This allows the miRNA/RISC complex to bind to the mRNA and inhibit its translation (production of proteins) either by directly blocking the translation machinery, or by stimulating the degradation of the mRNA. In essence, miRNAs work the same way as transcription factors in that they can control protein expression.

Interestingly, miRNAs have been observed to be overexpressed in some cancers. Increasing miRNAs should decrease protein expression, so you can imagine that these miRNAs might inhibit the expression of tumor suppressors although it is difficult to determine what genes miRNAs target.

How can biotechnology companies make money from miRNAs?

• Reagents-The easiest way for scientist to understand the function of a protein is to eliminate it from the cell and see what happens. The synthetic equivalent of miRNAs is small interfering RNAs (siRNAs) which can be used to inhibit translation and thus expression of a protein. Since miRNAs occur naturally in the cell, they may be favored by researchers if for no other reason than that they have been validated (ie they have been shown to lower protein levels). Additionally since understanding the impact of miRNAs on the cell is important, kits that measure the concentration of miRNAs may be marketable.

• Diagnostics-Currently protein levels are measured as an indication of disease in many diagnostic tests. Since miRNAs control the protein levels, the amount of miRNA in cells could also be used as a test for diseases like cancer where the levels of miRNAs have been shown to be altered.

• Therapeutics-miRNAs could be used to decrease a protein’s level in a diseased cell by overexpressing the miRNA that controls it. Conversely the level of the protein could also be up-regulated by inhibiting the miRNA in the cells with molecules that are capable of binding to (and inhibiting) the endogenous miRNAs.

Are miRNAs going to cure every disease? Probably not, but I’m looking forward to digging deeper into Rosetta Genomics plan for monetizing their intellectual property.

With the holiday weekend eating up my free time, the next report will likely be delayed until Tuesday or Wednesday.

Filed under: Back to the Basics | 2 Comments »

Basic Info

Stock symbol:ROSG
Website:http://www.rosettagenomics.com/
IPO date: 2/27/07
Total shares outstanding: 11.8 million
Market Cap: $77.5 million as of 4/4/07
Other reviews: History of attempts at Rosetta Genomics’ IPO and some background info
If you know of others please add them in the comments.

Drugs/Platforms

Diagnostics:
Cancer of Unknown Primary (CUP) diagnostic test using miRNAs
Prostate cancer diagnostic test using miRNAs (with Asuragen)

Drugs in development:
Drugs that regulate miRNAs in liver cancer (with Isis Pharmaceuticals)

Financials

Income: Yeah Right!
Money on hand: $37 million including $26.2 million from the IPO
Burn Rate: about $7.6 million in 2006

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Before I get into evaluating the next stock, I thought I’d start a new intermittent series called Back to the Basics. If you have a degree in biology, this is may bore you a little, but I promise, they won’t all be this basic and feel free to throw your two cents in the comments. As a side benefit of reading this post, you’ll get to find out which stock I’m going to review next.

The building blocks of cells looks like this:

DNA—–>RNA—->Proteins

It’s a pretty linear process with potential for feedback to regulate the expression of the protein. I’ll break down each one briefly and talk about drugs that are made from them and drugs that affect each one.

DNA

DNA encodes our genes. In the large scheme of things, DNA doesn’t really do anything. It just sits there and gets transcribed (see RNA below). Mutations in genes often result in cancer. Mutations can be inherited, but they can also occur spontaneously.

Drugs that affect DNA:

• Some chemotheraputic agents (anti-cancer drugs) like cisplatin damage the DNA in an attempt to kill the cancer cells

• Drugs like dacarbazine/DTIC inhibit DNA replication (making copies of itself), thus preventing cancer cells from dividing.

Drugs that are made of DNA:

• In order to alleviate the protein instability problem (see below), many attempts have been made to make DNA drugs. The DNA enters the cell and is then made into proteins by the cells (gene therapy). I don’t think that any have been given FDA approval, but please correct me if there’s ones I’m unaware of.

RNA

The DNA is transcribed into messenger RNA. There are some RNAs that do actually perform functions in combination with proteins, but the majority of RNAs don’t really do anything. This step of the building blocks is basically a regulatory step. The transcription levels of any particular gene can be tightly regulated and this how cells end up having different functions. The muscle cells transcribe genes for structural proteins while immune cells transcribe genes that encode for proteins that help fight infections. There are certainly other places that a cell can regulate protein levels, but it usually starts at the RNA level.

Drugs that affect RNA:

• Antibiotics often inhibit the transcription of RNA in bacteria. Since the transcription machinery is different in bacteria, the drugs are designed to bind to the bacterial transcription machinery, but don’t affect our cells.

Drugs that are made of RNA:

• Rosetta Genomics, the subject of the next stock I’ll be reviewing, is partnering with companies looking for microRNAs theraputic treatments of liver cancer and virus based infectious diseases.

Proteins

So the messenger RNA in the last section encodes for proteins. Scientists call this process translation. You shouldn’t think of proteins in the same way as proteins that you eat. Those are mostly structural proteins in muscle cells, but proteins do so much more. Most of the interesting proteins are enzymes that catalyze reactions in the cells; for instance, proteins are responsible for the steps of transcription and translation. Proteins are also responsible for regulating the levels of nutrients in the cells (membrane channels). Other proteins move between cells and act as signaling molecules (growth factors).

Drugs that affect proteins:

• This would be a majority of the drugs on the market so I’m not going to list them all. The basic idea, is you design a small molecule that will bind to a protein and inhibit it’s function. By inhibiting it’s function you can turn off a pathway (for instance, one that is promoting tumor growth). Its also possible to find a molecule that makes a protein constitutively active, thus stimulating the pathway. Alternatively, if you inhibit an inhibitor of a pathway, you can actually stimulate that pathway.

Drugs that are proteins:

• This would be a ton too. Sometimes the protein is an antibody which binds a protein and inhibits it’s function. Other times the protein is itself active and the drug’s purpose is to get more of the protein into the cells so that the pathway it affects is activated. In general, small molecules make much better drugs than proteins because they are more stable in the body.

Clear as mud? Feel free to ask questions in the comments. You might spawn another post in this series or if it’s a quick answer, look for the reply in the comments.

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After the exhaustive analysis of Synta Pharmaceuticals, it’s time to make the call to buy the stock or put it on the watch list (I haven’t seen any real red flags that would lead me to throw it out completely).

My biggest concern is with their cash flow. Even with the cash from the IPO, Synta is going to run out of money sooner rather than later. In fact, their CEO, Safi R. Bahcall, said in a slide show talk at the Lehman Brothers Global Healthcare Conference (free registration required) that they were planning on finding a partner in 2007. Depending on the deal, I could see a partnership sending the stock price in either direction. Certainly the more desperate they are (due to lack of money), the more likely they’ll take a partnership that is giving away more of the potential profits than the stock holders would like.

Synta’s IPO was fairly recent, so there’s potential for the initial (private equity) investors to liquidate some of their position, but, some of the major early investors were buying additional shares at the IPO, so the end of the lock up agreement is probably not a major concern. At any rate, I’ll keep an eye on the 28 million shares that will be available for sale after the lock up agreement concludes (180 days from Feb 6th, 2007 which is August 5th if I counted correctly). There are some potential extensions of the lock-up agreement if there are earnings calls prior to the agreement, so that date has potential to change.

Here’s my predictions for the stock:

First quarterly report-I’d imagine this will continue to say they’ll run out of money in mid-2008 so there won’t be much change in stock price. UPDATE:It came out two days ago: As of Jan 1st, they had $91.5 million in the bank (including $44.7 from the IPO after expenses) and they had a burn rate of $57.2 million for 2006. Given that the clinical trial will cost $22-24 million, their burn rate will likely be higher in 2007, and my mid-2008 prediction for them to run out of money looks on target. The stock didn’t really move on the earnings announcement (although there was a big (7%) drop at the close today on a large volume, but no news as far as I can tell).

Phase 3 clinical trial for treating melanomas with STA-4783 announced-I’ll bet there’s an unjustified small bump in price just because people like to see progress, even if it’s on target progress.

Partnership-It will result in a large boost in stock price. It will alleviate fears that they’ll run out of money and give support to their product since it means other scientists think that their product will work. The biggest question is when this will happen.  Look for the stock price to head down slowly until the partnership occurs.

So, I think I’m going to take a wait and see approach. The problem is really in the cash flow and Synta really needing a partnership to complete their clinical trial. We could bet on them getting one sooner rather than later, but I prefer to bet on good science rather than the managements ability to make partnerships.

I’ll revisit the stock after their first quarter 2007 report when I can get a better idea of their current cash flow.

Filed under: Synta Pharmaceuticals (SNTA) | 6 Comments »

The only way to figure out the future value of a biotech company is to figure out how much they might make off of their drugs in clinical trials if they get approved by the FDA. Today, I’ll take a look at the markets for two of Synta’s potential drugs: STA-4784 and Apilimod. If you need to get caught up, check out the rest of the posts in the Synta Pharmaceuticals stock evaluation category.

STA-4784

STA-4784 will start phase 3 clinical trials for melanoma, but it’s mechanism of action (stimulating the production of oxygen radicals) isn’t specific to melanomas; in theory the drug should work for many different cancer types and in combination with many different current cancer treatments. It certainly has the potential to be a blockbuster after they get additional label indications (which I believe requires additional clinical trials, but doctors can choose to prescribe it off label before that).

STA-4784’s biggest competition for melanoma treatment will be with dacarbazine/DTIC and interleukin 2, the only two drugs currently approved by the FDA. It will also have to compete with drugs that are used off label by dermatological oncologists to treat melanoma including cisplatin, temozolomide, vincristine, carmustine, and melphalan.

The patents for STA-4784 expire in 2022 (and possibly later if they can get cancer type specific patents), so, if it’s approved in 2009, they will have quite a large window of exclusivity before they need to compete with generics.

Aplimod

Aplimod is probably not in as good of a position to compete since there are quite a few imunosuppressant drugs available to treat chronic inflammatory diseases including injectable TNF alpha-antagonists (Remicade, Enbrel, and Humira) and broadly immunosuppressive small molecule agents including corticosteroids and azathioprine.

There are also two injectable anti-IL-12 antibody drugs (CNTO-1275 and ABT-874) currently in clinical trials, but, since Apilimod is taken orally, it has an advantage over those products in my opinion.

The patents for Aplimod run out in 2021, but FDA approval is at least a couple of years away, so this one might not have as many years of exclusivity as STA-4784.

I’m having a horrible time trying to figure out how much the drugs that they would compete against currently make.  I can’t seem to find the size of the markets anywhere. Does anyone have an idea of where I can find this information?

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Welcome to the March 27th version of the Carnival of Biotechnology. Thanks to Yali for letting me guest host the carnival. If you’d like to enter a post for a later edition or maybe even guest host, see the Carnival of Biotechnology submission and host information page.

Editor’s Picks

These weren’t submitted to the carnival, but I think they’re worth the read, so they get their own section:

If you haven’t read it yet, I have a post on whether Progression-free survival is a good end point to measure for clinical trials.

Wall Street Mayhem suggests two small biotech companies that might be good buys since they have a lot of cash.

Atlas Bioresearch has a long post on toll-like receptors and the companies that are trying to exploit them for the treatment of cancers, infectious diseases, asthma and allergies.

Finance and Business Development

Yali Friedman talks about how venture capital companies are decreasing their funding of startup biotechs and that angels are filling the biotechnology funding gap at Biotech Blog.  Now if I could only find some rich guy/gal (Angel) to do research for, I’d be a happy camper.
Derek Lowe discusses the future of Atherogenics’ drug AGI-1067 which failed its phase 3 trial in his post AGI-1067: Dead or Alive? at In the Pipeline.

Christopher Depelteau has a post describing FoxHollow Technologies’ SilverHawk™ Plaque Excision System at MRI LINKS AND OTHER COOL THINGS.

Regulations and Politics

David Williams has a suggestion for the Senators on the Health, Education, Labor and Pensions Committee about how to keep the price of biologics low but still safe in his post Senators still seem to be missing the point on generic biologics at Health Business Blog.

Yali Friedman talks about the clash between governments need for reasonably priced drugs during “crises” and companies’ desire to defend their patents and make money in his post Price controls and compulsory licensing give buyers more power … for a price at Biotech Blog.

Science

Attila Csordas has a proposal for the beloved section of the scientific paper that doesn’t make it into the journal, but is (sometimes) worth looking at: Let’s make ’supplementary’ peer-review scientific videos free and youtubish! posted at Pimm - Partial immortalization.

Barry Mahfood compares “nanomachines” to protein machines that act in our cells in his post Do You Believe in Nanomachines? You Should at The Price of Rice!.

John posts a basic explanation of genes, sequencing, and how it may lead to more specialized medicine in his post DNA And BioTechnology Allows You To live Forever at OhCash.com.

And that concludes this week’s carnival.  If you’re interested in investing in stocks, I’ve got a post in the Festival of Stocks.  I think I was the only biotechnology stock, but then again, you’re not investing in just biotechs, are you?  Go have a read once you’re done with this weeks carnival.

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