Dr. Peter French Reply to Dr. KSS Article on Benitec.

Statement from Dr Peter French – CEO of Benitec Biopharma Social media represents significant challenges for public companies like Benitec. With over 4,000 shareholders and a potentially transformational technology, Benitec attracts a lot of interest, passion and associated comment on social media, much of it well intentioned but unfortunately quite often it is misinformed. Benitec has an in-house social media monitoring program, and I receive weekly summary reports of activity. Recently I have become increasingly concerned of reports of posts from an anonymous poster on this forum, “Dr KSS”, who claims to have particular insights into Benitec and who it seems has garnered a significant following. His posts over the past few months have become increasingly critical of Benitec and contain extensive factual errors, many significant, some of which have led to direct queries to Benitec from shareholders very concerned about some issues. In this latest post, which appears to be a definitive work, “Dr KSS” has made many statements and assertions that are incorrect. It is my intention to set the record straight in this post. Before I deal directly with “Dr KSS”’s errors of fact, I would like to comment on Benitec’s policy on communications with shareholders. The Australian Securities Exchange (ASX) on which Benitec is listed, is very clear on this point: Benitec and other public companies listed on it are not able to advantage some shareholders over others by giving selected communications. All communications of new information are required to be done through ASX releases, a highly regulated medium. Whenever Benitec gives a presentation for a roadshow or at a conference, it is required to post these presentations on the ASX. This means that communications are necessarily restricted to material events, and the lack of communication, for which I have been criticized, means that there is nothing, either positive or negative, to report that would affect the share price. It is very important to understand that providing speculative or premature preliminary information can be potentially very damaging, as conclusions can be drawn that are proven subsequently with more data to be completely unfounded. At Benitec we are very cognizant of the need to provide the market with reliable, current information that allows it to be fully informed. We will not provide speculative or premature preliminary information, either positive or negative, but will at all times comply with the continuous disclosure obligations which apply to us as an ASX listed company. If there is a hiatus in communication, then that is for a good reason. Unfortunately, in the absence of communication from the Company, many bloggers and posters fill the gap with speculation. The FDA have recognised this problem and have recently issued draft guidance as to how companies should respond to misinformation on social media (Internet/Social Media Platforms: Correcting Independent Third-Party Misinformation About Prescription Drugs and Medical Devices.http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM401079.pdf). In summary, the relevant part of the draft guidelines provides that if a drug- or devicemaker chooses to correct the information, it may provide the appropriate corrective information or contact information. However, the communication should be: • relevant and responsive to the misinformation; • limited and tailored to the misinformation; • non-promotional; • accurate; • consistent with the FDA-required labeling for the product; • supported by sufficient evidence • posted in the same area or forum (if posted directly to the forum by the firm) Authors of corrections should be identified as being affiliated with the drug- or device maker. I intend to follow these draft guidelines in relation to “Dr KSS”’s post, as follows. It should be noted that I am only posting this response on Stock Gumshoe and not on any other forum in accordance with the above FDA guidance. 1. Dr KSS asserts: Hepatitis C virus is not confined to liver. “…there is a perception … that HCV is primarily a liver disease. It is not. The virus is found not just occupying but actually replicating in nearly every tissue and in lymphocytes and macrophages.” Benitec’s response: This is a controversial area, with no scientific consensus to justify the certainty of this statement. A very recent paper in the Journal of Virology states: “Hepatitis C virus (HCV) predominantly infects human hepatocytes, although extrahepatic virus reservoirs are being discussed.” J Virol 2014;88(3):1433-46. “Being discussed” is a long way from the certainty of statements that ‘Dr KSS’ makes about the issue. On the question of whether the extra-hepatic HCV is replicating, in a publication from 2013, researchers at the NIH reported the following: “(1) HCV RNA was detected in PBMCs of most chronic HCV carriers and was predominant in the B-cell subpopulation; (2) HCV detected in PBMCs was in a nonreplicative form; (3) HCV passively adsorbed to PBMCs of healthy controls in vitro, becoming indistinguishable from PBMCs of chronic HCV carriers; and (4) residual HCV was not detected in plasma or PBMCs of any spontaneous or treatment-recovered subjects or in chimpanzee liver, suggesting that the classic pattern of recovery from HCV infection is generally equivalent to viral eradication.” Hepatology 2013;57(2):483-91. What this means is that Dr KSS’s statement that “HCV is replicating in lymphocytes and macrophages” is contradicted by this NIH-based study.

2. Dr KSS asserts: CSIRO sold all its shares in February. “In February of this year, CSIRO, Australia’s version of America’s National Science Foundation, divested its entire position in Benitec shares.” Benitec’s response: CSIRO has in fact not sold a single share. If it had done what ‘Dr KSS’ asserts, we would have been required by the ASX to report it. We didn’t because it did not happen. Ms Jan Bingley, General Manager Business Development and Commercial at CSIRO, has confirmed that CSIRO remains a committed and enthusiastic Benitec shareholder.

3. Dr KSS asserts: Benitec is not defending its patent position Benitec has done nothing about Gradalis “Benitec knows of this [patent violation], and does nothing”. Benitec’s response: Benitec is and has long been very cognizant of the need to defend its patent position. Far from doing nothing, as reported in Gene Silencing News in 2012, Carl Stubbings, Benitec’s CBO, indicated that Benitec has attempted to communicate with Gradalis on this issue and our communications have been ignored. Benitec has taken legal advice and has acted in accordance with that advice. Excerpts from the Gene Silencing News article demonstrates this: “According to Stubbings, Benitec has been hoping to add Gradalis to its licensee list, but has not had contact with the firm following an initial letter describing Benitec’s IP position. Gradalis acknowledged receipt of the information, but has yet to respond, he said. Stubbings said that Benitec’s US patent attorneys have determined that Gradalis’ drug candidates do fall under Benitec’s IP, but conceded that, as a development-stage company, Gradalis remains within the safe harbor provisions of US patent law. Still, “we think that the ['099] patent covers the area they are working in,” he said. “What we’d love to be able to do is have a conversation about a relationship. We can give what we believe is the freedom to operate that they need.” For its part, Gradalis disagrees. In a recent interview with Gene Silencing News, David Haselwood, Gradalis’ head of business and corporate development, said that his company is aware of Benitec’s IP, but “we have not felt the need at this point to license any additional technology … when it comes to interfering RNA” (GSN 10/11/2012)… “Our intent is to work with people, develop commercial relationships, and help validate our shRNA technology,” he [Stubbings] said, adding that “we would prefer to explore every reasonable commercial avenue” to achieve this, rather than legal ones. He did not, however, entirely rule out the possibility that Benitec would pursue litigation, or that it would seek a re-examination of Gradalis’ IP with the USPTO. Any such decision, he noted, would be made “in conjunction with our patent attorneys.” “Benitec Looks to Outlicense IP While Avoiding Litigation Mistakes of Its Past” Gene Silencing News, November 08, 2012.

4. Dr KSS asserts: Hepbarna (Benitec’s hepatitis B therapeutic program) utilizes AAV5. “A closer analysis of the Hepbarna construct reveal something Benitec is not talking much about now. The vector is based on AAV5… Benitec stands to undermine confidence in its own HCV program, based on AAV8, by moving forward with an AAV5-based HBV program.” Benitec’s response: This is incorrect. For example, in the most recent communication where this was expressly commented on, Shaw Stockbroking’s June 2014 research note, the vector designated for Hepbarna is AAV8. (http://www.benitec.com/documents/BLTDV201406061.pdf, p.5) That remains our intention for Hepbarna.

5. Dr KSS statement: I said, regarding patient dosing in the hepatitis C trial, ”It is not up to us, it’s up to Duke Medical.” Benitec’s response: No source is given for this quoted statement of mine, and it does not represent my view. In this and previous posts, ‘Dr KSS’ has asserted that Benitec has control over patient dosing. The trial site, Duke Clinical Research Unit, is running the trial, not Benitec, and they are obliged to follow the clinical protocol, including patient selection criteria, that was developed in conjunction with the FDA, and regulatory consultants. The trial protocol, including the selection criteria, was vetted via extensive review by both the FDA and the NIH Recombinant DNA Advisory Committee (RAC).

6. Dr KSS asserts: Benitec’s shareholder communication regarding patient dosing was ‘hamfisted’, and suggests Benitec should “impress your shareholders with a press release that you dosed the patient a week ago, and that by the way, he feels great and looks great, too.” Benitec’s response: Withholding announcing dosing until a week later would violate the ASX listing rules around continuous disclosure (“Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.”http://www.asx.com.au/documents/rules/Chapter03.pdf) Under the protocol, there is a 6 week monitoring period of each patient post dosing, with the DSMB reviewing the data at the end of that 6 week period. In the absence of a material adverse occurrence, an interim announcement before the end of the monitoring period and proper review of the data would be inconsistent with the process and the protocol and violate the requirement for information released to ASX to be reliable and current information.

7. Dr KSS asserts: Benitec has a “lack of confidence in female accountability” as the reason why the trial protocol excludes “fertile females”. Benitec’s response: This is completely incorrect, and objectionable. The first in man trial of TT-034 is regulated as a gene therapy, and it is the first time that ddRNAi has been used systemically with a viral vector. Appropriate caution in patient selection has been applied. There are criticisms of other programs. Without wanting to appear to appear to be promoting the worth of the programs, I would like to make the following point as an example to assure shareholders that the Benitec Board and management see significant value and opportunity for the use of ddRNAi in all of our programs. Dr KSS on AMD: “I have considerable doubts about ddRNAi as an intervention for AMD. I would prefer that Benitec utilize its non-profligate capital to pursue illnesses where its treatment is novel, where the competition is not so vast, and where the chances of failure are not so high.” Benitec’s response: Benitec disagrees that the chances of failure are particularly high (although, of course, there is no certainty of success), because: • The target (VEGF-A) is validated; • The construct has shown high levels of silencing efficacy in vitro • The ddRNAi technology provides the potential to produce a therapy that is a single intra-ocular injection that will last months to years, which would have a strong appeal to patients and physicians alike. The AMD program is a unique and novel approach to the treatment of this prevalent disease. One other minor point serves as a further example where Dr KSS professes knowledge but is in fact incorrect: • Dr KSS states that Benitec has been “six guys in an office in Sydney since 1997”. Benitec has only had an office in Sydney since 2010, when I became CEO. For the first 12 months we had a maximum of three people (initially when I started it was me and a part-time, Melbourne based, CFO), and have only in the last month reached a total of six in the Sydney office, half of whom are women.

There are many other points in Dr KSS’s extensive post with which I disagree or take issue, but they are primarily opinion regarding strategy and operational matters based on false or incomplete premises. My response has been limited to highlighting the most obvious areas of misinformation or errors of fact, in line with the FDA’s draft guidance, to be “limited and tailored to the misinformation”. I am not going to debate opinion differences in this forum. Notwithstanding the above, the anonymous “Dr KSS” and I agree on Benitec’s potential to be a transformational solution for a large number of diseases, and the Benitec team and I are united in our approach and committed to driving the technology forward to ensure that potential is realised.

Dr Peter French, CEO, Benitec Biopharma Limited Sydney, June 27, 2014

Gene therapy technologies, ddRNAi.

Since the late nineties, we’ve witnessed the rise of several gene-silencing approaches, from “antisense” oligonucleotides and RNA interference (RNAi) to the latest targeted genome-editing techniques, such as those based on zinc finger nucleases or CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) technology. These rapid developments raise the stakes for companies that have wagered on a particular gene-silencing approach.

Take the case of an approach known as DNA-directed RNAi (ddRNAi). In January, Australia-based Benitec Biopharma received a green light from the US Food and Drug Administration to begin the first human trial of an intravenous viral gene therapy based on ddRNAi. The therapy, dubbed TT-034, is essentially a modified form of adeno-associated virus 8, which naturally infects people but is not pathogenic. In TT-034, the viral DNA has been engineered to encode short hairpin RNAs (shRNAs) that silence three different components of the hepatitis C virus (HCV). The approach is referred to ddRNAi because the shRNA that carries out the gene silencing is continually produced by the cell from a DNA vector.

In the trial slated to begin imminently, patients infected with HCV will receive a single injection of TT-034; if it works, it should eliminate the virus from their livers and provide lasting immunity to the disease. Benitec sees it as a potential alternative to existing HCV antiviral therapies, which can involve injections and daily pills for a period of time and can sometimes have debilitating side effects. But some question the need for an RNAi-based HCV therapy. “The available drugs that have just been approved, or will be approved in the next 6 to 12 months, will essentially eliminate the virus from the majority of patients,” says Ralf Bartenschlager, a virologist at Heidelberg University in Germany who studies HCV.

Others worry about whether the vector is optimal for the approach. “I think this concept is something that is going to work,” says Mark Kay, head of the division of human gene therapy at Stanford University in California, and co-founder ofVoyager Therapeutics, which launched in February and aims to develop adeno-associated virus-based gene therapies for neurological disorders. “I just don’t think they’re using the right vector. At the time they started, it was the obvious choice. But as more data has accumulated over time, in my opinion, it’s not the right choice.”

That’s in part because recent research using mice with humanized livers suggests that the version of the virus used in TT-034 doesn’t seem to be as effective at infecting human cells as it is animal cells, says Dirk Haussecker, an independent RNAi consultant based in Germany. But David Suhy, senior vice president of research and development at Tacere Therapeutics, a subsidiary of Benitec that originally developed TT-034, says that the humanized mouse models may not accurately represent the architecture and gene expression patterns of human liver, making it unclear whether the virus will actually be less effective in humans compared to mice. “We firmly believe that the best way to see how the TT-034 compound will work in humans is to test it in humans,” he says.

Betting on bifunctionality

Benitec isn’t the only company pursuing the ddRNAi strategy. Gradalis, which is based in Dallas, Texas, is also testing ddRNAi-based therapies in Phase 1 and 2 clinical trials, but has taken a slightly different approach. The company has developed two different types of therapies, both of which impede cancer cells using a so-called bifunctional shRNA design. In this approach, a DNA plasmid produces an RNA that adopts a structure containing two short hairpins—one that is processed by the cell to a small interfering RNA (siRNA) that binds to complementary mRNAs and causes them to be degraded, and another that is processed to a microRNA that binds to the same mRNA target and blocks protein production. “Therefore, you get increased strength of the knockdown, and it lasts longer,” says Charles Brunicardi, a cancer surgeon at the University of California-Los Angeles, who is involved in the clinical and pre-clinical trials of Gradalis’s gene-silencing therapies.

But based on what is now known about the molecular biology of the cellular RNAi machinery, some question the rationale behind the bifunctional approach. That’s because siRNA-mediated gene silencing is faster and more efficient than microRNA-mediated inhibition, says Shuo Gu, a cancer researcher at the US National Cancer Institute in Frederick, Maryland, who studies the molecular mechanisms of RNAi. Therefore, mRNAs that are tied up in microRNA complexes might be less accessible to RNAi cleavage, which would reduce inhibition, he says. “More needs to be known about the mechanisms before we know what we’re dealing with here.”

A third company, Calimmune, which is headquartered in Tucson, Arizona, has licensed the ddRNAi technology from Benitec to develop an experimental anti-HIV agent known as Cal-1, which is currently in phase 1/2a trials. Calimmune’s construct is derived from a lentivirus, which integrates its genetic material into host cells. The therapy delivers an shRNA that knocks down a receptor known as CCR5, which HIV uses to gain access to T cells of the immune system, and also contains the instructions for making a protein known as C46, which blocks HIV’s ability to bind to T cells.

But actually giving the Cal-1 therapy to patients is a complicated process that involves harvesting stem cells from the bone marrow of HIV-infected patients, treating the cells with the therapy in vitro, and then putting the engineered cells back into the patients, who must undergo a ‘conditioning’ process that obliterates much of their immune system so that the engineered stem cells can take hold and repopulate the blood with HIV-resistant cells. “That’s an additional risk and challenge, and there are obvious potential drawbacks in trying to implement that in a large scale way,” says David Margolis, an HIV expert at the University of North Carolina School of Medicine in Durham.

The road ahead

Several companies have already tried their hand at ddRNAi therapies, but with little success. In 2007, the now defunct Pennsylvania-based biotech company Nucleonics prematurely ended its phase 1 trial of a systemic non-viral ddRNAi therapy for hepatitis B virus** after treating only three patients; the drug failed to knockdown its targets and triggered mild immune responses. Similarly, Amsterdam Molecular Therapeutics once pursued viral ddRNAi therapies, but sold its assets to the newly formed biotech company UniQure in late 2012.*** And Pfizer, which partnered with Tacere to develop TT-034, halted it ddRNAi efforts in 2012 and handed the rights to the therapy back to Tacere.

Even if the latest ddRNAi-based therapies turn out to be safe and effective, there’s tough competition from the latest genome-modifying tools, including zinc finger nucleases (ZFNs) and CRISPR, which use DNA cutting enzymes to specifically alter or inactivate genes of interest. For example, California-based Sangamo BioSciences is currently conducting using a ZFN-based approach to delete both copies of the CCR5 gene in the T cells of patients infected with HIV. The modified cells are then expanded in the lab and transplanted back into patients. And just last month, researchers at the Massachusetts Institute of Technology (MIT) in Cambridge reported using CRISPR to cure adult mice of a genetic disorder caused by a single point mutation.

Daniel Anderson, who led the MIT study but has also studied RNAi, says he is personally very optimistic about the therapeutic potential of the gene-editing approaches, although he admits that they have delivery challenges and raise concerns about the potential for off-target genetic modifications. But he acknowledges that there is room for both RNAi and gene-editing forms of gene therapy. “To me, it’s still pretty early to call winners or losers.”