AVI Biopharma Out to Reinvent Itself, Making RNA-based Drugs for Ebola and Other Nasty Things

9/10/08Follow @xconomy

The first five minutes of digging on Portland, OR-based AVI Biopharma turns up some jaw-dropping facts. It’s been in business since the dawn of biotechnology in 1980. Never has it developed an FDA-approved drug. Never has it become profitable. It has burned through $243 million in investor capital in its history, according to its most recent quarterly report with the Securities and Exchange Commission.

As you can imagine, AVI Biopharma (NASDAQ: AVII) has to reinvent itself to stay in business. I spoke with new CEO Leslie Hudson, who began his turnaround effort in February. He comes to the company after stints as a CEO at two small-cap biotechs, Nabi Biopharmaceuticals and DOV Pharmaceutical.

The aim here, Hudson says, is to dedicate the company to developing new drugs instead of just honing its technology. AVI is now putting its resources into a wide variety of therapies: RNA-based drugs against Duchenne Muscular Dystrophy, a treatment to stop excessive scarring around stents that prop open clogged arteries, and drugs that might save people’s lives after being exposed to the deadly Ebola and Marburg viruses. He’s going to show off his new plan to investors at an event in New York today to lay the groundwork for raising some more capital. The company had about $18.8 million in cash and investments at the end of June, and 85 employees working to make it happen.

“We are re-positioning an antisense pioneer as an RNA-based therapeutics company,” Hudson says. “The technology is superb. The challenge was in leadership and business planning. So many companies limp around with old drugs that never get around to crossing the finish line. Our job is to bring two or three of these to fruition.”

Hudson makes it sound like he’s been dealt a great hand at AVI. His company’s drugs can bring the kind of specificity seen with drugs that work by gene-silencing, or RNA interference, like those being developed by Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY). AVI thinks its drugs have an edge because its drugs are easier to deliver to tissues throughout the body, easier to manufacture because they are conventional small-molecule chemicals, and can remain active for longer periods in the body.

Wall Street sees this all a little differently. The scoreboard says Alnylam’s market capitalization is $1.1 billion. AVI Biopharma’s is $82 million. Still, Hudson has been recruiting new members of his management team, who are looking for a challenge to work on what he calls “an unpolished diamond.” CFO David Boyle, formerly of Berkeley, CA-based Xoma, pointed to one area where he sees potential: treatments for people who have been exposed to Ebola and Marburg virus, as well as Dengue fever.

The company has run tests that show monkeys who have been exposed to the Ebola virus can survive 75 percent of the time after taking the AVI drug, while 100 percent lived after being exposed to Marburg. (These experiments are being done at secured U.S. Army biodefense labs, by researchers geared up in space suits, so the good folks of Corvallis, OR who live near AVI’s research and development center can rest easy that the nasty virus won’t be cut loose in the countryside.) Still, it has to give the willies to anybody who’s read Richard Preston’s book, The Hot Zone. )

AVI will have to carefully work out the next steps of development for the Ebola and Marburg drugs. After all, you can’t expose people to those viruses and see whether they live or die. More tests will be needed to demonstrate effectiveness in animals, and to show that the drug at least meets FDA safety standards in people, Boyle says. (Interestingly, Boyle said the U.S. Department of Health and Human Services can decide to buy a drug like this through the Project BioShield program even if it isn’t FDA-approved.)

At the end of our interview, I asked whether Hudson sees special challenges having the company based in Oregon, where there isn’t a biotechnology industry cluster. He said it’s the kind of place you’d want to have a drug manufacturing plant, but he’s looking to expand biology and chemistry R&D labs, and for that, he says he needs to tap a deeper biotech talent pool.

He’s thinking West Coast, so that means San Francisco, San Diego, and Seattle would be the natural choices. He hinted that Seattle might be the pick, even though he hasn’t gotten much assistance from anybody locally. “I guess I just like coming to places with bad weather,” he joked.

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  • Thomas R. Wheeler

    Luke: Glad to see that the PR machine of the short hedge funds is still on the job. You have once again taken a positive event for the company and turned it into a negative press release.

    If you really like to report negative things Luke; why don’t you report that a collaborative attack by short hedge funds has destroyed shareholder value. Why don’t you report on the Failure To Deliver record of AVI shares; which shows the day after day, month after month record of Failure To Delivers.

    A very nice record of this is posted on the Investor Village AVI Message Board by member pineappleguava.

    If you really want to go NEGATIVE, why don’t you talk about how the SEC’s failure to regulate Naked Shorting has cost investors HUNDREDS OF BILLIONS of dollars over the last few years.

    Luke, do some real research on how Naked Shorting was used to take the AVI share price to the point it is today.