Wednesday, May 7, 2008

Does the recent Tekmira-Protiva reunion signal more deals ahead?

What has happened between September 2005 when Alnylam signed a pretty broad collaboration agreement with Novartis including a $10M upfront license fee, and July 2007 when it collected a handsome $273.5M upfront cash for a much more limited, non-exclusive deal with Roche? SNALP happened.

It is no secret that Big Pharma, already in the midst of fighting a losing battle against loss of marketing exclusivity for many of their blockbuster drugs, is desperate for innovation. RNAi may have been one answer for Novartis in 2005 for the longer term, but it wasn’t really clear then what the time-lines would be, and Novartis certainly could not have viewed RNAi as a solution for the imminent bleeding. In terms of systemic delivery of synthetic siRNAs, the ability of which would significantly add to the value of the RNAi Therapeutics platform, a 2004 Nature paper on intravenously injected cholesterol-conjugated siRNAs in mice using non-therapeutic dosages was the best Alnylam had to offer. $10M upfront cash and the validation by a respected Big Pharma company seemed like a fair deal at the time in return for quite broad access to the leading IP estate in RNAi Therapeutics.

Novartis-Alnylam was a visionary deal. It does not matter so much if you label a deal a “$1 billion” deal or not, since more often than not, you’ll find that those are biotech dollars, not the kind of money you can actually use to buy something at the supermarket, with little hard, non-dilutive upfront cash. Blue-sky thinking, however, cannot command $M270+ upfront payments, or come even close to justifying Merck’s $1.1billion acquisition of Sirna Therapeutics in October 2006. To demand such numbers, RNAi Therapeutics companies must be able to present Big Pharma with good evidence at the deal table that tools exist that could make RNAi Therapeutics become a reality in the not-too-distant future.

In my opinion, such evidence was provided by two major publications on the systemic delivery of siRNAs using SNALP liposomal technology. One was published in late July 2005 and concerned the successful targeting of HBV in a mouse model using dosages of SNALP-siRNAs that started to look clinically realistic and sufficiently scalable for commercialisation (a Sirna Therapeutics-Protiva collaboration), the other one was the first demonstration of systemic RNAi in non-human primates in March 2006, also using SNALP-siRNA formulations (an Alnylam-Protiva collaboration). The value of this was not lost on Tekmira, Protiva, Sirna, and Alnylam, and soon a messy four-way battle for ownership and access to SNALP-RNAi ensued.

As the dust began to settle, it appeared that while Protiva was to be credited with much of the scientific work, Tekmira owned the IP. Sirna therefore cancelled the relationship they had with Protiva in February 2006 and pressed ahead with their own “proprietary” liposomal formulations, which a judge would later determine may have not been that proprietary after all. Alnylam, on the other hand, was more concerned about respecting both IP ownership and scientific collaborations and, as we know now, continued to work with both Tekmira and Protiva.

What evidence besides the legal wrangling is there for SNALP RNAi having considerably contributed to the $273M and $1.1billion price tags? Three events can be cited: the Merck-Protiva settlement in October 2007, the scope of the Roche-Alnylam alliance in July 2007, and the recent Protiva-Tekmira reunion. Whether or not Merck actually has a SNALP-RNAi candidate in clinical trials or not is open to speculation, but the fact that they were forced into a settlement with Protiva, essentially allowing Protiva to stay alive, after a California Court severely limited Sirna Therapeutics/Merck’s use of SNALP-related technology on issues of trade secret infringement, indicates the importance of this technology in Merck’s RNAi Therapeutics efforts. Similarly, when one carefully analyses the scope of the Roche-Alnylam licensing deal, three out of the four therapeutic areas that Roche obtained access to through this deal, non-exclusively, can be addressed, at least in part, by SNALP RNAi: liver disease, cancer, and metabolic disease. The fourth therapeutic area, respiratory disease, further illustrates that this deal was tightly linked to currently available enabling technologies (note that Alnylam’s lead product, ALN-RSV01 involves a respiratory target), SNALP RNAi most importantly. This could possibly also mean that as the time approaches for Novartis to decide whether to extend their relationship with Alnylam or not, that a new deal will be similarly based on such realities, making it in fact easier for both parties to arrive at fair values. Again, the Tekmira-Protiva reunion came just in time.

And finally, the Protiva-Tekmira reunion clearly signals that clarifying the legal situation around SNALP RNAi and streamlining its scientific development, was important for both Protiva-Tekmira and Alnylam in their future business development efforts. Since Alnylam enjoys exclusive rights to SNALP for RNAi Therapeutics uses, the reunion strengthens their ability to close the next major platform alliance deal by being able offer access not only to scientifically promising technology, but also the peace of mind to their partners that they would be using technology with sound IP to support it. Roche took a risk and took this step without the clarity, but has now been rewarded with being the first major pharma to get access to fundamental SNALP RNAi IP, and likely know-how relatively soon as well by way of an R&D collaboration with Tekmira. The $5M equity investment at a close to 200% premium by Roche in the new Tekmira only underlined the importance it places on SNALP for its RNAi Therapeutics activities.

According to Tekmira-Protiva, there are, however, four additional Big Pharma/biotech companies actively evaluating SNALP-RNAi (possibly SNALP for microRNA therapeutics as well). What this means is that access to SNALP will have to be through Alnylam, the gatekeeper of SNALP RNAi. I would not be surprised to see Alnylam announce the next platform alliance deal after Protiva-Tekmira closes at the end of this month. SNALP RNAi should account for a considerable fraction of the deal value. Novartis, and then somebody else? The plot thickens.

Disclosure: the author holds shares in both Alnylam and Tekmira. These are my interpretations and conjectures only of past events, and do not necessarily reflect actual events. SNALP technology has not been clinically proven yet, and it is a real possibility that trials fail to show therapeutic effects at acceptable doses.


Anonymous said...

Hi Dirk

Are you that anyone seeking to use SNALP for RNAi delivery will have to go through Alnylam? I thought that Sirna/Merck had a license for SNALP RNAi delivery from Protiva.

Also, there was an interesting discussion on today's Alnylam Q1 earnings call relating to the Novartis alliance. John Maraganore said that the Novartis option is for a "platform license" from Alnylam. He provided more information on the timing of exercise - Novartis may exercise any time during the term of the cooperation, i.e., until fall 2008 but if they elect to prolong for another year then they also get another year within which the option may be exercised (they may prolong twice for a year). He did not, however, provide any details on the terms or scope of such "platform license".

Finally, it is interesting that the Novartis equity issue announced today is the first time from the signing of the Novartis alliance that Novartis chose to exercise its anti-diltuion option to purchase additional Alnylam equity. This would appear to indicate that Novartis is more bullish about the technology (or Alnylam's value compared to market price) than in previous years.


Dirk Haussecker said...

Martin- excellent observations.

With regards to Sirna/Merck, well, they don't have the probably necessary access to the Semple and Wheeler patents that were with Tekmira. My thesis is that they settled not because they believed in Protiva's IP position, but rather so that the temporary injunction would be lifted.

With regards to Novartis, it would be inappropriate for JM to state that they would exercise this year. The final decision is up to Novartis. However, if they do not want to be left behind in SNALP-RNAi (think cancer), I would think that they will exercise this year rather than postpone the decision. This morning's investment may signal that they will have to be reckoned with in the near future.

Anonymous said...

Hi Dirk,

Given Protiva's IP covers encapsulated molecules, Silence's AtuPlex could seem one way to bypass the 'gatekeeper'?

AstraZeneca's recent delivery collaboration would seem to suggest so? Although AZ's move to develop new delivery methods with Silence could be seen as an indication that AtuPlex is not yet entirely appropriate for their planned use?


Dirk Haussecker said...

You may find the comment section from another blog relevant to your question:

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