Rosetta Genomics – Mining Gold Out of Junk (Part I)

 

Rosetta Genomics (ROSG) represents one of the most exciting revolutions in biology in recent decades. The company is a pioneer in the field of microRNAs (miRNAs), a group of recently discovered genes that may serve as a novel class of diagnostic markers and drug targets. Unlike “traditional” genes we were familiar with, miRNA genes are not expressed as proteins, but as small RNA fragments that regulate the expression of many proteins. Rosetta Genomics’ impressive pipeline, unparalleled discovery capabilities and intellectual property make it one of the most exciting biotech companies out there.

The field of miRNA have captured the scientific community’s attention only in recent years, and is expected to become an important field in the drug development industry. The ultimate proof for how hot miRNAs are is the increase in the number of published scientific articles that focus on this new gene family. Using the Pubmed database, I looked for articles that contain the term “miRNA” in their title or abstract. There were only 38 such articles in 2003 but the number increased more than fourteen-fold in 2007. Even more striking is the diverse list of medical areas in which miRNAs are investigated, from oncology to cardiovascular diseases, from tissue engineering to women’s health.

   

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The existence of miRNAs sheds new light on two basic foundations of molecular biology. The first has to do with how we view the human genome, and the number of genes it contains. After the completion of the human genome project, it was evaluated that there are anywhere between 30,000-50,000 genes that comprise only 2% of the genome, with the remaining 98% arrogantly termed “junk” DNA. In what looked like a bizarre initiative, Rosetta Genomics started to investigate the “junk” portion of the genome, searching for previously undiscovered genes. What made this search even more unusual is the fact that the company looked for very short genes that are not expressed as proteins but as small RNA fragments, at a time when there was limited evidence supporting the existence of this kind of genes. After several years of intense digging in the genomic junk, Rosetta collected large amounts of the biological equivalent of  gold – new genes.  

 

This leads us to the next misconception miRNAs shattered, which is the identity of the players that regulate protein expression in our cells. It is common knowledge that every cell in our body contains exactly the same genetic information, however, each type of cell is totally different from others. This difference is a direct result of different profiles of gene expression. A kidney cell expresses a different repertoire of genes than that of a brain cell or a muscle cell. Thus, regulation of gene expression is the basis for the proper function of our body as well as, unfortunately, most diseases. Until recently, it was held that proteins are the exclusive regulators of gene expression. The discovery of miRNAs revealed a whole new level of gene regulation and called for adjustments to this theory, as it is now believed that miRNAs regulate more than 30% of all human genes. Moreover, many miRNAs are positioned very early in gene regulatory networks and seem to act as “master switches” of the human genome, regulating some of the most important genes, including such with proven linkage to serious illnesses.

 

The first  miRNA gene, lin-4, was discovered in a nematode in 1993 at Victor Ambros’ lab, although back then this gene wasn’t referred to as miRNA. The Harvard University group found that a mutation in the gene caused some severe developmental defects but they were also very surprised to discover that this gene did not encode a protein but a short fragment of RNA. It has been more than 8 years until the official birth of  miRNAs occurred in late 2001, after  Science published three papers showing that miRNAs are a large family of genes, that can be observed in many creatures and have important functions in many biological processes.

Rosetta Genomics, which started operating in 2000, was the first company to identify the importance  of miRNAs as therapeutic and diagnostic targets. In addition to being the first company focused on miRNAs, Rosetta Genomics managed to position itself as the dominant player in the miRNA arena, utilizing what turned out to be a brilliant strategy.

 

Most groups that investigate miRNAs usually start from the biology side, hence, working with living cells or creatures and trying to find evidence for the existence and function of miRNAs. The collected data is then analyzed by computational tools. In contrast, Rosetta Genomics started from the computer side and then moved to the biology side. The company generated a sophisticated computational engine that scanned the entire human genome, looking for potential miRNAs, based on sequence and various structural elements. The first cycle of scans generated  10,000 potential miRNAs candidates. Before turning to biology, the company filed patents, covering many of the 10,000 sequences. Only then did it start biological evaluations that proved that in the minority of cases the identified sequences are real miRNAs that play important roles in biology. The company estimates that it has access to the vast majority of miRNAs, either as a result of its patent portfolio or as a result of partnerships with other leading research groups.  

Rosetta Genomics activity can be separated into two distinct business models. The first one is developing drugs and diagnostics based on miRNAs independently or in partnership with other companies. The second business model is holding the intellectual property for the lion’s share of miRNAs, so that anyone who wants to develop products based on miRNAs originally discovered by Rosetta Genomics, would have to license them from the company. That way, Rosetta Genomics can benefit from the strong momentum miRNAs gain among leading pharmaceutical companies without direct involvement.

 

This is the place to emphasize that, to date, Rosetta Genomics has received only 2 patents, with the rest pending in several regulatory stages. In addition, patenting naturally occurring genes is a very problematic issue, and the current policy is not to grant patents for plain gene sequences. This issue resulted in concerns with regard to the strength of the company’s patent portfolio. However, company’s management has been constantly reassuring investors that its patents are valid since they include two additional layers  on top of the gene sequences. One layer  shows the utility of the sequences by associating them with specific medical conditions or biological pathways. By doing so, the company can claim to have proven “composition of matter” for the sequences. On top of the second layer, in some cases the company filed the sequences in the context of “uses and methods”, covering the uses of miRNAs as diagnostic biomarkers and therapeutic targets. In addition, the company filed several patents covering certain technologies for identifying and extracting miRNAs from body fluids and tissue samples, which may prove extremely important for the diagnostics market.

 

In July 2007, Rosetta Genomics’ patent strategy was finally validated, as The United States Patent and Trademark Office (USPTO) issued the company the first ever patent for a human miRNA gene (miR-492). This patent is an important precedent for the company’s strategy, although there is no guarantee regarding the rest of the pending patents. According to  management,  additional patents are in advanced stages of reviewing and are expected to be awarded this year.

  

 The next article will go over Rosetta Genomics’ pipeline.

 

Author is long ROSG

17 thoughts on “Rosetta Genomics – Mining Gold Out of Junk (Part I)

  1. Yep, I am as bullish as one can be on the comapny’s position in the field of miRNA. When this field will finally mature is a different question…

    Regarding the quote you brought, everyone is entitled to his/her own opinion and I don’t know whether ROSG was even mentioned in the above research report, but I think that ROSG’s focus and IP make it the undisputed leader in the field. Don’t forget that ISIS itself partnered with ROSG for developing mir-based liver cancer treatments.

    All in all, this report is positive for ROSG because it draws investors’ attention to miRNAs.

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  2. ROSG is certainly not alone now, but it was alone for several years in which it managed to get its advantage in terms of IP and discovery capabilities. From what I see, Asuragen and Exiqon are the two prime competitors in the diagnostics area. Asuragen beat ROSG in launching the first commercially available miRNA-based diagnostic product, and there will certainly be additional miRNA products, but from what I see, ROSG is the only pure microRNA company (the two other companies have non-miRNA activity and both target research labs as well) and it has the broadest and deepest pipeline. Therapeutics is another story and by the time miRNAs therapeutics reach commercial maturity, most pharmaceutical companies will become involved.

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  3. Rosg is touted as a leader is field of mirna and especially good because it has filed so many patents. The problems i see are:
    (i) the only commercial products on the horizon are diagnostic and there is just isn’t a lot of $$$ in diagnostics (therapeutic products take 7-10 years and most of them fail, so as of today you’d have to think the chances of any therapeutic product from Rosg is at least 15 years away; consequently, no value could be attributed to a therapeutic product).
    (ii) its patent estate is vulnerable because:
    (a) there’s lots of chatter about why a company should be allowed to patent something that appears in nature; and (b) whatever the patent rights, they are inherently problematic both because (I) they may not be enforced and (II) right don’t mean anything unless ROSG has the resources to protect the rights by initiating and financing the enormous cost of litigation.

    So ROSG could be spending a lot of $$$ to protect IP that is ultimately useful only in low revenue diagnostics. (Of course, this assumes the patents are upheld) so it seems to be high risk and relatively low reward. I wonder if this is good bet.

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  4. Hi Peter

    (i) I addressed these issues in my recent piece on the miRNA market:

    http://www.hammerstockblog.com/investing-in-microrna-beware-of-hype-follow-the-money/

    Totally agree with you on the therapeutics side. Diagnostics, however, represent a huge opportunity as part of the personalized therapy trend.

    (ii) Intellectual property is always a delicate issue and the arguments you brought up are are very relevant. Nevertheless, I still see Rosetta’s patent estate is an important ingredient because:
    a) ROSG is not an IP company that files patents and wait for someone to license them. It is a very active company and its patents enable it to operate freely in the miRNA space and consequently develop the best products in the industry.

    b) The patents include more than just the miRNA genes, so they could be very valuable.

    c)From what we’ve seen so far, licensing miRNAs to pharmaceutical companies has become very acceptable by all stakeholder and I expect to see several licensing deals by ROSG already this year.

    There is obviously a great risk with any company in this segment, let alone a small company but I think it actually represents a very good risk/reward ratio.

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  5. Ohad hammer,

    I retired last year from Pharma after a 33 year career in Sales.Spent 5 years w/BMY, 21 w/ Bayer and 4 w/ SGP! Started out w/ a small pharma called Reed/Carnrick my first 3 years!

    Have just picked up on your blogg and I wanted to thank you for educating me in this exciting area of miRNA! I hold between 10-15 Pharma-Bio’s and my two windfalls this year MLNM and KOSN have yielded me some new capital to invest.Doing my DD on ROSG! Have been less thrilled w/ ISIS and ALNY but diagnostics in the Personalized Trend Space(ROSG) intrigues me!

    It is rare that I write down a URL to learn from but yours is the exception that proves the rule!You are spot on! My compliments!

    Serendipity is the mother of Invention so I like the concept of “Junk-miRNA”! I have seen this play out in my career repeatedly time and again! Amikacin was taken from a fungal soil sample outside Bristol Labs-Syracuse,NY in the 70’s if my old memory serves me correct! Viagra was to be a BP med not ED! Who knows what miRNA will yield?

    My other long BIO positions are EPIX,CRIS,FOLD…. watching INFI(Julian Adams), AVAN closely trying to get in on Price pull-backs!

    My pharmas are the usual JNJ,MRK,BMY,SGP(loyalty-401-K),LLY,PFE(not so proud here),and ZMR/MHS(Baby boom aging plays)!

    Any thoughts?

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  6. Hi Frank

    Thanks for the kind words. I am happy you found my stuff useful. miRNA is indeed one of the most exciting areas in research today.

    From the list you brought, I like CRIS and INFI. Also watching EPIX.

    Ohad

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  7. Thanks for posting this, peter. I didn’t know Pathwork already launched their product. We’ll have to wait and see how ROSG’s test will look like, but this is certainly a threat.ROSG’s product will be based on fewer genes and will include more tumor types. Specificity should also be superior, but there is still no updated data.

    ohad

    Like

  8. here’s another one:
    Pacific Edge, LICR Publish Prognostic Gene Expression Profile for Melanoma

    [August 15, 2008]

    Welcome,

    Email this Story
    Printer-Friendly Version
    Ask the Editor
    RSS Feed

    In This Week’s Issue

    Affymetrix Discusses Next-Gen Array Format, True Materials Buy, at Investor Conference
    In Its SNP-Genotyping Biz, Illumina Shifts Focus from Higher-Density Arrays to Content

    Microarray-Relevant NIH Grants in Fiscal Year 2008, July 2 — Aug. 2

    Applied Precision, Microchips, University of California, Agilent Technologies

    Researchers Compare CNV Analysis Between Several Microarray Platforms

    Gentel Biosciences, Agnitio Science and Technology, Agilent Technologies, IMGM Laboratories, Bayer CropScience, Ariadne Genomics, Genomics, Illumina, Immucor, BioArray Solutions

    Ingenuity Systems

    Colin Collins, Derek Potter

    By a GenomeWeb staff reporter

    NEW YORK (GenomeWeb News) – Researchers from the Melbourne, Australia, branch of the Ludwig Institute for Cancer Research and New Zealand firm Pacific Edge Biotechnology reported today that they have developed a gene expression-based test for melanoma progression.
    http://www.genomeweb.com/issues/news/148865-1.html

    does any of this change you take on Rosetta?

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  9. None of this chnages my take on Rosetta.

    There will always be intense competition from other diagnostics based on micro-RNA or other technologies, and ROSG may have inferior products in some cases, no doubt. the great thing about this company is its highly diverse pipeline, so it won’t rely on one or two or even 5 products going forward. In addition,their strong grip on the miRNA market increases their chances to domiante this field, and there are resons to believe miRNAs ideal biomarkers for cancer and other fields (in particular, the pre-eclampsia program looks great).

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  10. Hi Ohad,

    I am new to your blog and truly enjoy reading your articles. However, I am not sure how to seek your portfolio. Kindly advise.

    Also, which small cap medical device and/or diagnositic stocks are you following.

    Best regards,
    Keith

    Like

  11. Hi Ohad,
    all your articles are great and I can learn a lot from them.
    Could you please explain why ROSG is no longer in the portfolio?

    Thanks,
    Gregor

    Like

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