Letter to Shareholders from 2008 Annual Report
Dear AVI Shareholder,
It is a pleasure to be able to report to you on the progress AVI has made over the past 12 months as it has transformed itself from an antisense pioneer to one of the leading companies focused on the discovery and development of RNA-based therapeutics. This transformation has been achieved through an intense focus on our clinical development pipeline; today each of our four lead candidates is in, or has regulatory approval to enter, human clinical trials. In addition, we have built a strong, new leadership team with the talent and expertise to move us towards full execution of AVI’s drug development and commercialization strategy.
During the past year, we have seen an increasing level of interest by both the scientific community and the pharmaceutical industry in the growing field of RNA-based therapeutics. Our judgment is that the near 20-year climb toward commercial success for antisense is now at an inflection point, as years of research and development work are beginning to pay off in the form of new and improved chemistries with superior properties for therapeutic application. AVI’s stunning results in non-human primates against the deadly Ebola and Marburg viruses (AVI-6002 and AVI-6003, respectively) using our new PMOplus chemistry demonstrated the power of our translation suppressing oligomers (TSO) and their potential to be applied to future targets such as HCV or those selected by development partners and/or collaborators.
AVI’s splice switching oligomers (SSO) have opened up an entirely new and exciting area within the RNA therapeutics industry and one that is exclusive to antisense chemistry. The Company’s exon skipping program in Duchenne muscular dystrophy (DMD) has demonstrated both the power and potential of this approach. The field of directed alternative splicing – the deliberate, directed alternative splicing of pre-mRNA — is truly emerging in real time as a major driver of a new therapeutic approach to disease. We believe that as the understanding of this area continues to grow, so will the value of AVI’s programs, chemistry and intellectual property in this fast emerging area. This application has the potential to apply not only to many genetic diseases, but also to diseases and disorders where therapeutic intervention by blocking mRNA translation via antisense or siRNA is not as effective or simply not possible because of the more limited mechanism of action. We expect that 2009 will bring further recognition and credibility to our current and emerging drug candidates within both the pharmaceutical and investment communities.
In the world of neuromuscular diseases (NMD), our proof of concept IM trial with AVI-4658 for the treatment of Duchenne muscular dystrophy (DMD) achieved each of its clinical endpoints and encouraged us to immediately begin the IV trial, which is now underway in Europe. AVI-4658 induced a robust expression of dystrophin following IM injection in a series of treated patients such that overall up to 100% of fibers were positive for dystrophin expression after drug treatment (equivalent to up to 80% when one allows for background expression in the other, saline-treated foot) and individual fibers showed new protein expression at a level up to 40 % of normal. Importantly, there was no immune response to the protein and no serious, treatment-related side effects were observed. The success of the IM trial greatly increased our credibility in NMD and enhanced our access to the collaborations required to develop drugs in orphan indications such as DMD. We have growing and productive collaborations with the clinical and scientific MDEX Consortium in the UK, the global patient registry Treat-NMD, the CINRG network in USA as well as several DMD clinical centers and charitable foundations such as Charley’s Fund in the USA and Action Duchenne in the UK. Immediately following the release of data from our IM study in the UK we received telephone calls from the FDA to discuss the status of our IND application for AVI-4658, and we are in discussions with the FDA to lift the clinical hold imposed by the FDA on our IND submission.
Our second DMD drug candidate, AVI-5038, is a PPMO-based drug candidate designed to skip exon 50 and is on course for IND submission in the first half of 2010.
At our Analyst and Investors meeting held in September 2008, our partner, Cook Medical Group, reported on the clinical development of AVI-5126, which was about to enter the clinical trial in Germany for the prevention of restenosis. This is a PPMO-based drug candidate targeted to the transcription factor C-MYC. The drug is delivered by a novel third generation, drug-eluting stent designed to circumvent the problems seen with the current generation of drug-eluting stents, which have shown a long delay in vessel re-endothelialization (covering of the bare metal stent by blood vessel cells) — believed to be a critical event in the return to a near-normal blood vessel wall after stent implantation. Since the update, the clinical trial has been expanded from the initial tertiary care site to include a series of primary care sites with an associated increase in patient availability and recruitment rate. The first data on efficacy are expected to be disclosed in the fourth quarter of 2009. AVI also had AVI-5126 in the clinic on its own account for the reduction of clinically significant graft failure in coronary artery bypass grafting (CABG). Following a futility analysis and data review, the Company decided to discontinue this trial in June 2008 as the probability of successfully attaining the study’s clinical endpoint, even at an early stage in the trial, was deemed to be too low to warrant continuing the study. The analysis and decision was not focused on clinical safety concerns since there was no significant difference between the AVI–5126 or placebo groups with respect to Major Cardiac Adverse Events (MACE). MACE is conventionally defined to include cardiac death, myocardial infarction, need for repeat CABG, stroke, major bleeding complications and organ failure.
Late in 2008 — in time for Christmas Eve — we heard informally from the FDA that our two INDs for AVI-6002 and AVI-6003 (for Ebola and Marburg virus infection, respectively) had been approved as safe to proceed to Phase 1 clinical trial in human subjects. The confirmation letters were received early in 2009. These two drugs are based upon several novel design principles which, our data suggest, account for their extraordinary efficacy in non-human primates infected with one thousand times the minimum lethal dose of these highly variable and currently untreatable viruses. Firstly, each drug works specifically on those genes that we have shown to be the most vulnerable to antisense interference. Secondly, each drug targets two independent sites in the virus genome (so the virus must mutate in two different places at the same time to escape the effects of our drug). Finally, through judicious placement of positive charges on the drug backbone, we have ensured that even if a couple of base pairs are lost, the positive charges on the drug will bind to a negative charge on the virus (we have determined the number and position of these critical positive charges on the drug so that we can target hyper-variable parts of the virus and also maintain off target effects to a minimum).
We have recently received notification of bridging funding as an expansion of our current Transformational Medical Technologies Initiative (TMTI) contract from the Defense Threat Reduction Agency (DRTA) of the U.S. Department of Defense (DOD) to increase the clinical trial readiness of these drugs. Currently there is a public solicitation from the Federal Government requesting information on companies that have antisense drugs against these viruses, which are regarded to be among the first rank of bio-terror weapons. Given the specifics of the public solicitation on the Federal Government business opportunities website …
“The indication for the therapeutics candidates being sought will be post agent exposure, post-exposure prophylaxis. TMTI is seeking anti-sense pharmacologic agents against … Ebola virus and Marburg virus. The therapeutic candidate(s) must have documented a well characterized and proven efficacy in non-human primates, enough GMP grade bulk and formulated drug product needed for clinical testing and a well defined ADME/Tox profile (conducted under GLP) that would allow the therapeutic candidates to readily proceed into Phase I clinical trials.”
… we believe that AVI is well positioned to bid for these contracts.
Dr. John Fara decided that he would not stand for re-election at the next Shareholder’s Meeting and so will retire from the Board. On behalf of the shareholders, Board and employees of AVI, I wish to thank John for his dedication of time and effort as a long- serving member of our Board. AVI also announced the appointment of two new Directors — Drs. Christopher S. Henney and M. Kathleen Behrens. Kathy and Chris each have an excellent track record in their respective career mix of finance, government service and biotech R&D, in each case marked by their role in the development of several highly successful companies. Both rank highly among the leaders and founders of the U.S. biotechnology industry and we will benefit greatly from their knowledge and insight.
Like all innovation driven companies, our most valuable asset base is our people. We have had an effective recruitment effort that has added new leadership talent and experience to the Company which we believe is an essential first step for us to capture the economic value of RNA-based therapeutics for AVI shareholders. You will have seen the individual announcements of the appointment of new members to our leadership team and consequent changes in the Company’s management throughout the past 12 months. I hope you will take the opportunity to meet our new leadership team in person if you attend our Shareholder’s Meeting.
What will be less obvious is that we have also completely rebuilt certain key company functions from top to bottom. For example, financial control, project management and investor relations have seen complete changes in personnel. Some of the results have been obvious and delivered early — the sustained reduction of our cash burn, the simultaneous filing of two INDs for the treatment of Ebola and Marburg virus infection. Yet others are still in progress — such as the turnaround of our clinical and regulatory efforts under the leadership of our new Chief Medical Officer and new VP of Clinical Operations, as well as our rebuild of Business Development under a new executive currently under recruitment. Increasingly, AVI is building a business process that is able to source key external resources and expertise when this will improve speed to and certainty of result. The fact that we not only filed two INDs in November 2008 but had them approved by the FDA before the end of the year was due to the combined efforts of AVI and CATO Research, a CRO differentiated by its excellence in regulatory matters. AVI will increasingly rely on outsourcing as we scale our activities, especially for the supply of the increasing quantities of drug substance required for our clinical programs.
Whereas 2008 was characterized by the need to assess, stabilize and develop the focus and competencies in AVI, I believe 2009 will mark the beginning of a productive cycle whereby our drugs advance through development to the stage where we will know about their clinical efficacy. If efficacy is demonstrated, we will be well equipped to enter into further collaborative agreements, which will not only speed our development and commercialization activities but provide a public validation for our new therapeutic portfolio as well as our proprietary antisense platform.
I greatly look forward to our upcoming annual Shareholder Meeting to meet some of you face to face, to present a more detailed update on our Company’s R&D pipeline, and, above all else, to have the chance for myself and my management team to answer your questions in person.
Yours sincerely,
Leslie Hudson, PhD
President and CEO
AVI BioPharma
AVI 2008 Annual Report on Form 10-K