Sunday, May 8, 2011

The Settlement That Wasn’t

Shareholders of Alnylam Pharmaceuticals may be forgiven for heaving a sigh of relief when news broke of a Settlement between Alnylam and Max Planck on the one hand and the Whitehead Institute and the University of Massachusetts (UMass) on the other hand which seemed to resolve the Tuschl II ownership issue and finally put an end to the lengthy and costly Tuschl Litigation (follow filings and commentary here).

At the heart of the dispute was Alnylam’s fear that Merck could gain access to the siRNA 3’ overhang feature if UMass got its way and certain data concerning such overhangs were left in the US Tuschl I patent application. UMass found itself to be in a particularly tough spot since whether it gave in to Alnylam’s demands or not, somebody, Alnylam or Merck, would be quite unhappy with them. So when Alnylam announced that it had ‘reach[ed] settlement in litigation regarding Tuschl patents’ and noted that Alnylam granted as part of the settlement UMass the right to sublicense the U.S. Tuschl II patent family to Merck (emphasis mine), it seemed like Alnylam, UMass, and Merck achieved the impossible and untied the Gordian Knot that Tuschl II had become.

Exhibits (Exh. 10-2 and 10-3) filed as part of Alnylam’s quarterly securities filings, however, strongly suggest that the settlement effectively solved nothing and only delayed/slightly shifted the problem. Importantly, there is no evidence that Merck agreed to or conceded anything with this settlement. In fact, the filings indicate that Merck was not part at all of the settlement negotiations as it had yet to see its details. The Merck reference is only a reference that UMass will present Merck with the option to utilize Tuschl II in the US. The only reason why Merck would remotely see any value in this is if Alnylam succeeded in stripping away the 3’ overhang claims from Tuschl I.

But even then, I very much doubt that Merck would be agreeable. One insight into its current thinking about Tuschl II comes from a recent opposition that Merck filed against that patent estate in Europe. On April 4 2011, that is after the news of the Tuschl Settlement, it and others (including Pfizer and Silence Therapeutics) appealed a recent decision by the EPO to uphold Tuschl II. In Europe, it will be the objectives of Merck and UMass, still responsible for Tuschl I patent prosecution there, to eventually get a broader Tuschl I issued and/or invalidate Tuschl II. Personally, I’m wondering whether the EPO will eventually raise the same double patenting issue the USPTO raised.

The main problem with solving the Tuschl situation is that when Alnylam sold its licenses to various Big Pharma companies, they must have been under the impression that Merck had either only limited or no rights at all to Tuschl II. After all, at least some of that half a billion dollar plus was for the strategic value that Tuschl II would give them. This is why Alnylam adds that the Tuschl II sublicense to Merck, or rather the offer of such a sublicense, is subject to certain 3rd party obligations, pretty much meaning that Novartis will not easily give up on the exclusivity of its 31 target picks. Rest assured, Merck, having invested more than anybody else in RNAi Therapeutics, will never agree to such terms.

Something about the Settlement seemed odd to me, and I’m sure to others as well. It is, however, clear to me now that peace between Merck and Alnylam has not broken out yet.

6 comments:

Anonymous said...

Good observation, Dirk,
Can I say that the law suit by TKMR against ALNY is intentional as a follow up of the settlement which does not settle the dispute for T1 and T2? A plot from Merk against Alnylam? Or maybe not a plot but a business strategy?

sherk said...

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Considering that MP/ALNY are now responsible for prosecuting Tuschl I *and* Tushl II in the U.S. isn't this a fait accompli as far as the U.S. rights to the Tuschls? As just a licensee of Tuschl I and not one of its owners, Merck might be in a position to sue UMass, but I don't see how they'll be able to affect prosecution of Tuschl I/II in the U.S.

Dirk Haussecker said...

We will also have to see whether the USPTO feels happy about how the 3' overhang data was handled and whether it will be as easy as just taking them out of the T-I application. If they are taken out, then Bass might become a slight problem because her review preceded T-II.

There is a good chance that should a strong T-II issue, Merck would need access to it if they were to use 3' overhang siRNAs in their programs. Knowing of that risk, they may want to exert pressure on UMass before that happened. Alnylam is also in a bind, because even if they wanted to do a deal with Merck, particularly Novartis (but also others such as Tekmira because of their target picks) would likely have to make some kind of concession. Delivery could become an important part in sorting this out.

Steve_382 said...

I would tend to agree along the lines of what Sherk is indicating that Merck pretty much had to sign off on this agreement for the settlement to be signed. I can't see UMass signing something and expecting Merck to sue them. As usual, there are no numbers in the exhibit about how many targets have been sold, but we know NVS has 31 and TKM has 6? or so.

Hard to say what Merck may be doing in the background on both the Utah and TKMR cases, but that probably just how the business is going to be.

Anonymous said...

Hi Dirk, what's happened to your ASCO post, I was half way through reading it, came back and it's vanished?

Dirk Haussecker said...

Blogger/blogspot had technical issues and the entire post disappeared. A bit painful to get it back up again, but hopefully the new post is better edited than the last one.

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