Thursday, March 17, 2011

Tekmira Tells Alnylam ‘Enough is Enough’

The reason why I have been a strong supporter of Tekmira is because I give them the scientific credit for developing the most valuable systemic RNAi Therapeutics delivery technology without which the field would be in much worse shape. The gate-keeping position of Tekmira being the real enabler and innovator of LNP delivery, the result of having persisted through many years of dogged, high-class research, an effort older than Alnylam itself, however has been increasingly challenged by Alnylam’s apparent attempts to be seen as the go-to-guys for LNP delivery.

Tekmira now accuses Alnylam of having crossed the line by misusing critical trade secrets obtained during their LNP delivery partnership and otherwise undermining Tekmira's reputation and business relationships of the company. In its lawsuit filed with the Business Litigation Session of the Massachusetts Superior Court, Tekmira hopes to be awarded north of $1B in damages.

Since the alleged wrongdoings get to the core of Tekmira’s value as the leader in systemic RNAi Therapeutics delivery, a position which critically depends on its ability to protect ‘LNP’-related trade secrets and know-how, these are very serious allegations indeed. The latest developments, however, don’t surprise me in the slightest since from the outside it looked as if Tekmira was being treated quite unfairly, almost bullied in this relationship.

The $1B in damages most likely reflect the over half a billion in non-dilutive funding Alnylam was able to bring in as a result of its Tekmira/Protiva relationship. While the press releases highlighted that the deals were for RNAi trigger IP primarily, such trigger IP would have been worth much less without realistic delivery, and the four therapeutic areas covered in the Roche and Takeda deals, three of which are amenable to LNP delivery, strongly indicate that LNP, aka SNALP, was a driving force in reaching and valuing the deals.

In return, Tekmira got very little by comparison. A few millions as a result of their IP deal that gave Alnylam access to some of Tekmira's LNP delivery IP and some co-development and especially manufacturing income. Nevertheless, Alnylam seemed unsatisfied with this situation since Roche and Takeda highlighted the fact that it was still necessary to consult with Tekmira if Alnylam wanted to fully use and sub-license Tekmira's LNP technology. As a result, it seems that Alnylam engaged in tactics to downplay Tekmira’s importance which became first apparent in the summer of 2007 when Alnylam went out on a limb and claimed that it would be able use Alnylam-made LNPs with ‘lipidoids’ for its liver cancer program instead of those made by Tekmira (see blog 'Alnylam Chooses Lipidoids over Cationic Liposomes for their First Systemic RNAi Clinical Studies'). Of course, we now know that ALN-VSP01 became ALN-VSP02, a formulation comprising Tekmira technology and lipids.

A patent application by Roche for Factor VII knockdown in the liver (WO 2010/055041) may also be indicative of the dynamics of the Tekmira-Alnylam relationship. Almost throughout the application, LNP01 'lipidoid' formulations were used, but then without much discussion Tekmira formulations were used for the non-human primate part of the study. When I read that application for the first time, it immediately raised questions in my head whether Alnylam led on Roche to believe that it could do without Tekmira's help. Instead, Roche ended up partnering with Tekmira for developing its first RNAi Therapeutics candidates to the IND stage.

The campaign of marginalizing Tekmira reached a point where LNP newcomer Alnylam, still by far the more visible company in RNAi Therapeutics due to its widely admired deal record, started to shape the vocabulary of LNP delivery. Examples of this are terms that were introduced such as ‘lipidoids’ suggesting non-violating IP and superior technology (in fact, these cationic liposomes have shown little promise for clinical development), ‘first-generation’ versus ‘second-generation’ to suggest that Alnylam has by-passed Tekmira in LNP prowess and does not need it any more, and the very term ‘LNP’ itself which replaced ‘SNALP’ that Tekmira, the true liposomal delivery innovator, had once coined. Such simple language created, and still causes significant uncertainty among Tekmira investors consequently damaging Tekmira’s ability to finance.

Alnylam caused further confusion by setting up shop right in Tekmira's very own backyard in Vancouver by helping to form and fully fund Alcana, a company made up largely of former Tekmira scientists that got laid off in the wake of the Tekmira-Protiva merger. Since Tekmira’s value is heavily dependent on its ability to protect its trade secrets around LNP formulation and Vancouver is not that big a place, this move by Alnylam seemed rather brazen. On top of that, Alnylam teamed up with Pieter Cullis, a well known LNP delivery expert from UBC in Vancouver and formerly closely associated with Tekmira. Quite degrading of a business partner, I would say.

Alnylam crossed the line

While one might shelve much of the above under the category 'bullying behavior', Tekmira’s Complaint alleges that Alnylam clearly crossed the lines of legal propriety and caused substantial harm to the Company by improperly disclosing trade secrets to third parties, in an apparent effort to marginalize Tekmira in business development discussions, by filing for patent protection for inventions based on such trade secrets, and maybe worst, by documenting some of them in patent applications.

Followers of this blog may not be surprised to learn that I believe Tekmira to have a good chance at proving their case in front of a jury as this latest development has been a trainwreck a long time in the making. For what it’s worth, I had written both companies that theirs seemed to be a very unhealthy relationship and that they should take action to remedy it. The most logical option, of course, would have been for Alnylam to acquire Tekmira. It would have given Alnylam not only full ownership of Tekmira technology and, equally important, filled up Alnylam’s pipeline with three promising development programs. In fact, acquiring Tekmira may still be Alnylam’s best hope to come out of this unscathed. Counter-suing Tekmira into bankruptcy would only mean that it is destroying the manufacturing base for almost all of its pipeline candidates. Unfortunately, based on the allegations and actions it may require some reminding that Alnylam does not actually already own Tekmira.

I have no good explanation as to why Alnylam treated Tekmira the way it apparently did. Alnylam has been much more generous to partners such as ISIS and to MIT (see lipidoid deal). Is it because it deemed Tekmira’s financial and political clout to be much more limited? Has it put politics over fairly compensating for scientific value?

Merck lurking again?

This week, of course, has also seen the settlement of the Tuschl litigation (best documented in the RNAi Litigation blog by John Leavitt and colleagues) where Alnylam and Max Planck regained control over the valuable Tuschl II patent estate, but not without granting UMass the right to sublicense some of it to Merck. As I was walking the streets of Paris this week just as the Tuschl settlement was coming down the pike, I was reminded by the above poster of the possibility that without access to Tuschl II and leading RNAi delivery, Merck employees working on RNAi Therapeutics may soon be looking for new job opportunities.

So with Tuschl II in the bag, Merck may now want access to LNP delivery. One scenario envisages that as part of the settlement Alnylam provides Merck with access to LNP delivery. In that case, it would be easy to understand Tekmira’s frustrations. However, given the historical rivalry between Alnylam and Merck, this is difficult for me to imagine.

The other scenario would be that should the current lawsuit lead to Alnylam forfeiting their rights to Tekmira’s LNP technology, it would open up Tekmira for a sale to Merck. Yes, Protiva/Tekmira once sued Merck for similarly misappropriating LNP-related trade secrets and got a nice $45M plus potential $12M from Merck as part of a settlement, but that lawsuit was filed for events that happened before Merck acquired Sirna Therapeutics and most of the people involved in that affair are likely to have left Merck by now. Supporting the view that Merck is somewhat Tekmira-friendly and, more importantly, thinks highly of their technology and scientific team are comments made by Alan Sachs, the Head of RNAi Therapeutics at Merck, at the RNAiAsia conference: ‘[Tekmira] are truly LNP experts’.


Update: Alnylam just responded to the lawsuit, calling it 'surprising and extremely unfortunate'. Read more 'here'. Furthermore, Alnylam believes that its investments in Tekmira, approx. $50M including an equity investment, entitle it to broad use of its technology.

22 comments:

Anonymous said...

ALNY and its CEO and Board has seen fit to destroy market cap in wave after wave of arrogant behavior. Tekmira's suit and your analysis points out again that ALNY and their management are not to be trusted. It should have been obvious by the years of deal promises and the high compensation they received.

It would not surprise me in here if TKM gets a white knight via a collaboration. ALNY's formitable cash hoard does not seem to bother he TKM folks...

ALNY what a bunch of scum

sherk said...

That elusive white knight has been a long time coming. Furthermore, it's likely Tekmira resorted to this lawsuit after failing to close any collaborations on its own - don't expect any deals to happen until after the lawsuit is resolved.

Anonymous said...

Dirk

The sad part is,,ANLY could have issued 10MM shares and bought TKM for chump change. Now my legal mind says the well is poisoned and TKM has no use for the people at ALNY. Sad.

Anonymous said...

Your blog clearly suggests how ill-informed you are about TKM claims and their attitute when it comes to their bussiness of bullying to get money. When they clearly realised ALNY no longer need them for LNP Delivery they want to get money some other way. After merging with TKM Protiva got rid of their original founders and now they are claiming the founders' brain belong to them for ever. This case has no merit and it will soon be proved at that time do not regret having a lot of TKM stocks.

Anonymous said...

I believe this lawsuit will cause irreparable damage to Tekmira, and perhaps Alnylam too, and the RNAi field as a whole. It mostly damages Tekmira as their litigious M.O. is clearly indoctrinated as a cultural aspect of their company DNA and is now sure to turn away potential partners.

As bad as things are currently in the field, this action only furthers the demise as these petty squabbles will cause more potential partners to shun working with any of the small biotechs working in the area, as they wait to see how the landscape further evolves. But most small companies do not have the cash resources to ride out these storms, and will most likely fold over the next several months.

This lawsuit is the beginning of the end for the field.

Anonymous said...

I can't help but weigh in...

First some context...

- Big Pharma pulls back from siRNA to focus on near-term projects that can have an impact on the bottom-line in the next quarters or couple of years

- ALNY and Merck settle - recall that Merck's $1 billion investment in Sirna was at stake. If Merck lost the suit, they'd lose $1 billion.

- Days after the ALNY/Merck settlement, TKM files suit against ALNY

- In TKM Press Release mngt states they are good for cash, even with legal costs, into 2012

- We don't know the terms of the ALNY/Merck settlement, but I can see something like this... both parties have full access to use the IP estate for TuschI/II. Both parties must agree before licensing to others. Effectively, Merck has all the IP to develop their own siRNA drugs.



So here is my far-fetched scenario:

- Merck knows it can't develop siRNA without delivery. And knows they can gain access to delivery via TKM.

- Merck enters into discussions with Tekmira and learns that ALNY has been stealing its technology, and misrepresenting itself in the market place and with TKM customers

- Merck sees the opportunity. Buy TKM to gain access to LNP delivery. And sue ALNY to repatriate full control of TKM delivery technology. If Merck wins the litigation... ALNY is screwed. Yes, ALNY would still be able to use TKM technology per existing license for LNP, however, Merck would gain access to compensation and damages draining ALNY cash and patriate ALNY entire pipeline of products in the clinic - effectively wiping out the company and the only remaining competitor in the siRNA space.

- Merck agrees to partially fund the TKM suite against ALNY, as a good faith gesture to initiate a purchase agreement to aquire TKM.

Told you it was far fetched... but don't forget that Merck has it BAD for ALNY... but more importantly, has a $1 billion investment to protect.

Full disclosure... I own 60% TKM and 40% ALNY

sherk said...

How would it look to a jury if the primary financial backing for the lawsuit came from ALNY's main competition? I think people need to back away from buyout fantasies and conspiracy theories and just take a deep breath. Hopefully this all gets resolved amicably soon (or as amicably as possible given the circumstances). The whole RNAi space is struggling enough as it is without a protracted fight.

Anonymous said...

I don't agree with the premise that the big-pharma players are pulling out just to focus on near term projects. They should have known that developing an RNA based therapy would be a long and difficult road.

I don't see Roche walking away from a half-billion dollar investment because of short term focus. Same for Pfizer, why do they shut down a 100 person OTU division, after building it up?

The actions by the big pharma players speak to deeper issues with the technology, and a growing conviction that they won't be overcome anytime soon, if ever.

Compound those issues with this new lawsuit, and you have a serious double whammy for the existing players. The end-game doesn't look pretty.

Anonymous said...

then how come City of Hope are proceeding with next stage in the expressed RNAi HIV Stem cell trial??

Anonymous said...

...which has already proven safe in humans

Anonymous said...

Quite interesting discussion..you can tell who is long ALNY or TKM.

But what I want to know is are there any employees of either enetity posting here?

Opinions are easy, and do not cost anything.

Dirk Haussecker said...

"I believe this lawsuit will cause irreparable damage to Tekmira, and perhaps Alnylam too, and the RNAi field as a whole. It mostly damages Tekmira as their litigious M.O. is clearly indoctrinated as a cultural aspect of their company DNA and is now sure to turn away potential partners."

There is a general good point here I believe in that partnerships in which roles are not clearly separated have the potential to end up ugly. It's been the same with Merck and Alnylam. However, I strongly disagree with you that the lawsuit will turn potential partners off Tekmira. If Merck/Sirna gave them $50M, you ought to believe that Protiva/Tekmira had a strong case. If anything, it gives Tekmira's current suit added credibility.

Anonymous said...

While I am pessimistic on the role of big pharma and the wide-spread commercial success of RNAi (at least for the next 5 yrs), I don't believe the technology is dead and there isn't hope for its future success. It may be like MAB's 2.0, as many have compared the historical parallels in the development cycle. We're currently in the "valley of death" cycle of technology development (maximum pessimism/maximum profit potential).

The City of Hope trial and other clinical trials have the potential to reignite the enthusiasm for the technology, if they're successful.

Also, the claims of safety are debatable and I believe do not adequately address the potential for inflammation, and other immue related responses.

Not long either ALNY or TKMR.

Anonymous said...

I read the complaint from the TKM website..If I was a betting man I would say TKM has a whilstle blower from ALNY giving them data an mot likely hard data like memorandums....

TKM keeps saying they are informed. I think as a practical matter they may be well informed and that is not good for ALNY.

Anonymous said...

For those that think TKM has a litigious MO bear in mind that the two previous lawsuits they were involved with were actually lawsuit actions launched by the other side: 1. Sirna (Merck) and 2. the previous Tekmira (Inex) Mnmt who were replaced by the Mnmt from Protiva upon their merger and settlement of their lawsuit. There are many similiar "theft of IP" issues with this ALNY lawsuit that TKM faced with Sirna (Merck) and TKM gained a decisive win in that battle. They know what they are doing...

Anonymous said...

Litigation is always a last resort option in commerce. When it does happen the rule of thumb is the plaintiff nearly always has a genuine case and always ends up the loser. Any win being pyrrhic in nature.

Anyone who is long on TKM. Good luck.

ALNY will be bought out I am guessing and then TKM will probably be picking a fight with PFE.

Anonymous said...

" ALNY will be bought out"

Why...for their patent estate???
Why would anyone get in bed with those people..Their CEO has been a bullsh&t artist from the start..they wrecked shareholder value and now they seem to be stealing someones else's work.

And what CEO in his right mind would do an interview with a publication right after the lawsuit..The CEO is an idiot.

Anonymous said...

Dirk

Do you know if there is a standstill agreement that prevents ALNY from trying to buy TKM???

Dirk Haussecker said...

The standstill between Alnylam and Tekmira expires on January 8 of 2012. But there are many circumstances where this standstill becomes ineffective:
Tekmira in talks with another party on strategic transaction (e.g. Merck, Novartis);
both companies thinking that it is in the best interest of all to merge now etc

Anonymous said...

Dirk,

You seem to be very pro-TKM. Are you/were you a consultant for them? Have you seen the actual agreements on patents?

Dirk Haussecker said...

"Have you seen the actual agreements on patents?"

The patent offices determine the rules of patenting, not company agreements. This case is also not about changing the agreement on the circumstances under which Tekmira or Alnylam have access to SNALP-related IP, but whether Alnylam engaged in abusive behavior to misappropriate SNALP IP and know-how and undermine Tekmira's strong competitive position in the field, to build a competing SNALP technology that it can sell to potential partners without Tekmira's involvement, or at least without fairly compensating for Tekmira's contributions.

On your other question: I'm getting exactly zero cents from Tekmira, and have never received any other compensation from them. Sad to say, but they don't need me.

Anonymous said...

Another major RNAi player sued for infringement , and this act although justified set that company back years and almost sent it insolvent , today with the US and other patents reissued the company now has the strongest and most tested IP position in the RNAi space , I doubt however that the company would ever litigate again , except as a very last resort. Tekmira has put itself in such a position , financial and management focus is now diverted to the lawyers not scientists , bad news for patients , scientists and shareholders. The sector needs to work together at this most difficult time, patients and the world needs collaboration ,not conflict . Very sad and very bad news , many patients will now die that could have been cured if people focussed on medicine not ego and money.
Good news on Rossi and the City of Hope HIV program , great news for Benitec as City of Hope is fully funding it , the results published in June were much stronger than the very limited press coverage indicated. Pfizer so far say they will proceed with the Tacere HepC program another shRNA - Benitec treatment , human trials expected sooner rather than later. Btubulin 3 data on the way , HepB and pain programs moving ahead , Revivacors program positive as well. ddRNA is one area RNAi living up to expectations . A research report on Benitec available at www.viriathus.com , the first report written in 5 years! I like Dirk am long the stock.

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