Sunday, July 20, 2008

Speaking of the Devil: Genentech Receives Full Takeover Offer from Roche; Stands to Become Alnylam’s Partner

Just as I was speculating that Genentech may become Alnylam’s next major RNAi Therapeutics partner, Roche makes an offer to buy the rest of Genentech’s shares that it does not own already. I’m sure the pundits will be all over what this event will mean for drug development, so just a few notes on its relevance for RNAi Therapeutics.

From the press release and based on historical comments against the notion of mega-mergers with fellow Big Pharma and against entering generics, it is clear that Roche is very keen on leading the development of innovative medicines, particularly personalized medicine. What better candidate than Genentech with all its know-how in this arena as well as size to sufficiently impact Roche's top and bottom lines? Just to demonstrate that personalized medicine is more and more becoming a reality, Roche appropriately also announced today European approval for an interferon-ribavirin treatment regimen for hepatitis C based on individual viral titers and rapid viral response. Interestingly, Alnylam disclosed really for the first time in the Pharmaceutical Executive report its interest in hepatitis C which might be best addressed by SNALP delivery. And how much more personalized can hepatitis C treatment get than to sequence the virus in a given patient and then deliver the appropriate siRNA combination?

Reassuringly, the press release prominently mentions RNAi Therapeutics as a central component of the innovation engine of the combined company:

“The structure of the combined company will allow for a diversity of approaches in research and early development, while also strengthening cross fertilization between the companies, leading to enhanced overall innovation within the Group. Roche's recently adopted Disease Biology Area approach, which allows five diverse groups to manage their innovative portfolios, will be maintained and strengthened. This, together with recent moves into RNAi (Ribonucleic Acid interference) and delivery technologies, as well as licensing activities, continues to provide a stimulating
environment for the creation of medically differentiated medicines.”

And on the “enhanced ability to innovate”, the press release goes:

“The transaction will over time significantly enhance cooperation and cross fertilization among all research hubs inside and outside of the combined company. Sharing of technologies (e.g. RNAi, novel protein architectures), assets (e.g. chemical libraries), intellectual property(e.g. antibody production), unique capabilities (e.g. exploratory development, modeling and simulation) and know-how of the combined research organization will strengthen the Group's ability to innovate.”

I wonder how much Genentech will be surprised by the offer. In this regard, it is also interesting to speculate whether Alnylam had been in negotiations with Genentech or not. If so, would an unsolicited takeover of Genentech by Roche mean that Alnylam has to forego platform license fees that it would have otherwise received if Genentech remained independent? On the other hand, could it be that Genentech’s moves into RNAi Therapeutics had long been co-ordinated with Roche’s efforts, relying on being able to access RNAi know-how and IP through Roche? I guess the answer will come whether the $89 a share offer will be recommended by Genentech management to shareholders or not. Given the close ties between the companies a Ventana-like takeover battle is difficult to imagine. The weak dollar may also aid Roche in increasing the price a little bit to satisfy all Genentech shareholders.

Today’s development promises to be a defining moment in the history of drug development. With the recent acquisitions of diagnostics company Ventana and now Genentech, Roche has now fully committed to embracing the future of personalized medicine. Based on comments by the new CEO Severin Schwan who has now more than amply demonstrated that he really means what he says, RNAi Therapeutics is to play a key part in this.


Anonymous said...

Wow. It will be most interesting to see how this unfolds and where Alnylam and Tekmira fit in.

I would be surprised if this was not pre-negotiated with Genentech (to some extent at least) in view of the fact that Roche is already the majority shareholder.

If the deal was prenegotiated, then I would be surprised even more if there was no related plan for ALNY and TKM.

A critical issue here is whether and if so to what extent will DNA be able to access ALNY's and TKM's IP and enabling technology under the existing ALNY/Roche agreement.

This depends on the terms of the agreement and whether an amendment will be required for DNA's access.

Without the knowledge of this, it is difficult to speculate, but I would be somewhat disappointed in ALNY's management if the current agreement did not bar DNA from taking a free ride on Roche's back.

This will likely be the determining factor as to whether your DNA/ALNY prophecy comes true.

With the remaining cards in Roche's hand soon to be dealt, it will be most interesting to watch Novartis' play. I was very surprised by the way the extension of the current Novartis/ALNY was presented. A single paragraph release, no statement from Novartis, unusual... Does this in any way relate to what we are now seeing or to any related cards in Roche's hand that are yet to be played? I wonder.


Anonymous said...

"Interestingly, Alnylam disclosed really for the first time in the Pharmaceutical Executive report its interest in hepatitis C . . ."

Isn't JM merely referring to the already disclosed miR-122 program at Regulus in the Pharmaceutical Executive report?

Anonymous said...

This really leaves the American pharma companies in the shade as far as innovative and progressive strategies for developing next generation therapeutics.

What is Pfizer doing? Kindler must be asleep at the wheel.

We at least know Merck are playing around with whats left of Sirna.

Unless something dramatic unfolds soon I would say the Europeans are going to take the lead on this.

The consequences could be dramatic. Perhaps leading to a shift in the power balance back to Europe in drug development.

BTW, great blog Dirk. Keep up the good work.

Dirk Haussecker said...

Martin- from the reaction, it seems that Genentech had been truly surprised by Roche’s bid. Maybe there were some plans in place to coordinate the RNAi efforts between Alnylam, Roche, and Genentech, but Genentech probably didn’t know where it all would fit in in the end. Without a merger, although Roche owned the majority of Genentech, it would not have been possible to share access to Alnylam IP and know-how because of Genentech’s third-party shareholders. So this development makes a lot of sense for RNAi, probably the technology efficiency area most highlighted in Roche’s statements. Maybe Alnylam will miss out on some payments for the separate field licenses that it would have obtained in a separate deal with Genentech, but it will stand to benefit from expanded and more efficient (Chinese Wall before) RNAi activities by the enlarged Roche (more programs, more milestone and royalties) and possibly one or two more field licenses (immunology e.g.), in addition to all the scientific know-how and technologies that Genentech brings to the table.

Novartis- possible that the two events are related. Wild speculation: Roche or anybody else cannot buy majority stake in Alnylam with the current Novartis-Alnylam agreement in place.

With regards to Novartis, the one question that I have is whether the current relationship gives them access to SNALP or not. I had been under the impression that it did not, Alnylam made the deal with Tekmira and paid for it. But maybe the collaboration means that they do, and then there would be little pressure on Novartis to exercise now.

Dirk Haussecker said...

Thanks for correcting me. In the rush I wasn’t thinking about Regulus’ microRNA therapeutic programs. Aside from that, it makes probably even more sense to target the hepC virus directly by RNAi than to antagonize miR-122. Current delivery technologies should allow for efficient direct HepC knockdown, and maybe that’s a program that Alnylam or Roche are looking at, too.

Dirk Haussecker said...

I agree. Pfizer runs the risk of falling behind without broad access to fundamental RNAi IP.

Anonymous said...

Dirk, what do you think Pfizer are going to do to make it up?

Surely, the longer it goes on for the more the sector matures, the more the licencing fees become and the further they fall behind.

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