Tuesday, June 21, 2011

Tekmira’s Amended Complaint Suggests that Alnylam’s Transgressions More Severe than Suspected

The Amended Complaint against Alnylam filed in early June by Tekmira revealed that the potential damages to the company as a result of Alnylam’s alleged transgressions may be much more severe than initially feared based on the original Complaint and their public relationship over the years.

In particular, Alnylam apparently used their insights into Tekmira’s technology, gained as a result of its collaborator status and by secretly hiring ex-Tekmira employees (in breach of non-compete agreements) to file for patents that may question Tekmira’s freedom-to-operate in the technology that it itself developed. One example concerns the MC class of lipids.

From the Amended Complaint:

‘35. After learning Tekmira’s MC Trade Secrets in the collaboration, Alnylam misused those trade secrets by, among other things, filing for patents in its own name, and without including any Tekmira inventors, on a lipid structure that was broad enough to include the MC class of cationic lipids developed by Tekmira. In so doing, Alnylam improperly claimed ownership over Tekmira’s MC Trade Secrets, including the MC class of cationic lipids, for itself.’

Even worse, Tekmira’s significant competitive advantage of being pretty much the only company that can make quality SNALP/LNP at commercial scale is threatened as regulatory demands allowed Alnylam to learn of Tekmira's LNP manufacturing know-how and trade secrets which it abused to not only make such information fair game apparently throughout the Alnylam organization, but even to disseminate it to 3rd parties such as Takeda- all despite of Tekmira's best efforts to limit such information to only a few Alnylam employees on a need-to-know basis, password protection, written agreements, and all:

From the Amended Complaint:

Tekmira provided the MBR for the Lead Formulation, which is one of Tekmira’s MBR Trade Secrets, to Mr. Konys and specific, identified employees within Alnylam pursuant to the terms of the September 2008 MBR Agreement. Tekmira tightly controlled access to this information, including by securing the MBR computer files with password protection in order to limit the universe of individuals within Alnylam who could gain access to the MBR Trade Secrets.’

Tekmira learned about Alnylam’s wrongful disclosure of Tekmira’s MBR [Master Batch Records] Trade Secrets to Takeda when Alnylam’s David Konys told Tekmira that Alnylam had received questions from Takeda about Tekmira’s delivery technology.

Mr. Konys forwarded Takeda’s questions and asked Tekmira to answer them. The questions included information taken directly from Tekmira’s MBR.’

In addition, Alnylam has been manufacturing LNPs for 3rd parties, including at least Takeda and Novartis, in an alleged violation of the exclusive LNP manufacturing status of Tekmira which apparently included certain non-clinical LNP manufacturing. No wonder Tekmira investors have been waiting in vain for those sure-fire Novartis and Takeda deals and were instead diluted by about 15% in a capital raise this month. Meanwhile, Alnylam pocketed $50M in ‘technology transfer’ milestones from Takeda.

From the Amended Complaint:

‘83. On information and belief, Alnylam is manufacturing delivery formulations for at least Takeda and has also done so for another third party pharmaceutical company called Novartis. On further information and belief, the delivery technology that Alnylam is providing contains, is based upon, and derives in whole or in part from Tekmira technology, including its confidential information and trade secrets.

Alnylam’s use of Tekmira’s manufacturing and delivery technology to manufacture formulations for third parties is not authorized by the restrictions on use and disclosure in the Protiva Agreement, Tekmira Agreement, September 2008 MBR Agreement, and Manufacturing and Supply Agreement. Alnylam’s manufacturing activity also constitutes a breach of the Manufacturing Requirements provisions of the agreements, which require Alnylam to use Tekmira as its “exclusive manufacturer to Manufacture and supply its requirements” for toxicology and other non-clinical studies and clinical development, through the completion of all Phase II studies for each product licensed from Tekmira. §11.1.1, Manufacturing and Supply Agreement.’

In general, it is quite clear that Alnylam’s own, ‘independent’ LNP development efforts were in competition with that of Tekmira. This actually is nothing new as David Bumcrots lipidoid-vs-SNALP comments four years ago illustrate. However, by not only licensing Tekmira IP, but also seeking practical help in using the technology, Alnylam greatly restricted its ability to build a competing LNP technology platform as that would have been destined to collide with the collaboration agreement that protected Tekmira’s ownership over its technology during and after the collaboration. This includes that Alnylam could not develop and claim technology that would have been derived from Tekmira’s technology and benefited from Tekmira know-how and trade secrets. It won’t take much effort for an expert witness to demonstrate that ‘2nd generation’, MC3, formulation ratios etc as claimed in patent applications by Alnylam, including its Canadian subsidiary Alnylam Canada, are all obviously derived from Tekmira technology and know-how.

The Amended Complaint further illustrates that Alnylam showed no respect for its partner. Is it because it believed that money entitled them to all of Tekmira property, to the degree that it confuses an exclusive license with actual ownership (e.g. Alnylam citing, in defense of allegations that it misappropriated MC technology, the Greene-Murray letter in which Tekmira's CEO acknowledged Alnylam's exclusive rights to MC3)? Is it because it considered Tekmira’s existence a potential weakness in its quest for RNAi Therapeutics world domination? Or is it because historic business development successes (which ironically are largely based on Tekmira's technology) made them lose touch with reality?

I’m not exactly sure, but what I do believe is that all this has been a concerted scheme to marginalize and, yes, destroy Tekmira. The fact that Alnylam has published and been claiming to have discovered that ApoE explains the preferred functional uptake of ionizable SNALPs in the liver, although this was based on confidential information provided to it by Tekmira, nicely captures that Alnylam knew no shame when it came to Tekmira. In the long-term, no matter how this litigation ends, a company that interprets Open Innovation to mean that first you evaluate, and if you like it then marginalize the inventor, will find it difficult to attract (small) biotech companies with real enabling RNAi technologies.


A word about myself and the Tekmira-Alnylam litigation

It is not surprising that there is speculation about my motives and strong language in supporting Tekmira in their litigation against Alnylam. Yes, I am a shareholder of Tekmira and have disclosed that a number of times- not that I would have to anyway. This, however, is not without reason and based on Tekmira’s critical contributions to siRNA delivery, a leadership that is continuing to this day (see e.g. nebulized LNPs or the manufacturing of quality antibody-targeted SNALPs). I have long taken exception with the way Alnylam has been treating Tekmira and have seen it getting worse. Tekmira’s Complaint therefore only confirms what I had feared some time ago, and I see no reason to mince my words and expect Tekmira to vigorously pursue this case until it regains rightful ownership over all of its technology- plus damages and more.

For discussion purposes, here the Amended Complaint.

18 comments:

Anonymous said...

Excellent summary. The strength of the case against Alnylam is summed up here;

"‘Tekmira learned about Alnylam’s wrongful disclosure of Tekmira’s MBR [Master Batch Records] Trade Secrets to Takeda when Alnylam’s David Konys told Tekmira that Alnylam had received questions from Takeda about Tekmira’s delivery technology.

Mr. Konys forwarded Takeda’s questions and asked Tekmira to answer them. The questions included information taken directly from Tekmira’s MBR.’

There isn't a jury anywhere that will be able to overlook that. It's time for Alnylam to suck it up, and settle up.

Thank you Dirk.

sherk said...

I dunno - that doesn't sound like the behavior of someone trying to hide their evildoing. You may chalk it up to "arrogance" - but something is very off here to me. It's way too premature for any side to claim victory - and with all due to respect to our host, he is presenting a very one-sided view of the ALNY-TKM relationship.

Anonymous said...

"a company that interprets Open Innovation to mean that first you evaluate, and if you like it then marginalize the inventor"

Unfortunately, this kind of behavior happens all the time in the tech sector, starting with Microsoft crushing Netscape back in the 90s, and continuing right though today with Apple appropriating all the good ideas from its app store developers and creating their own versions without attribution or compensation. Look at all the patent-related lawsuits in the tech sector right now--all the biggest players are involved, Google, Apple, Oracle, and on and on. I just hope Tekmira has good lawyers and deep enough pockets to see this through. It's gonna' need them.

Anonymous said...

Good analysis Dirk. I believe Alnylam used their position to marginalize all the RNAi players, not just Tekmira. They were probably actively discouraging and probably even marginalizing everyone who competes against them in this space, including Dicerna, RXi, Marina Bio, Silence, etc. Some folks (no names) had known of disparaging comments made by Alny representatives against competitors in closed room discussions in order to belittle their technological accomplishments, and maintain a stranglehold on the field. The unfortunate part is that it has made it hard for the other players to compete and obtain business. Thus, the old adage of a rising sea lifts all boats is turned on its head and shows how all boats are now sinking as the sea gets lower and lower.

Losing money and it hurts said...

I hope tekmira can make a strong enough case to take down big ol' alny with its cash reserves. I want to see them win.

I am a very long shareholder in tkmr and personally feel robbed as well IF their allegations were true.

Some one pointed out on another board that this happens all the time. Ie, Apple did it with their app developers, Microsoft with Netscape, etc.

That may be true, but in these downtrodden times, I wish someone can point examples of companies that rather than be bullied over have taken down the big dawg.

Any one think of some examples. I dont know, sigh Im just looking for some hope I guess.

Anonymous said...

Dirk,
I am looking forward to seeing some status report on Oxford Biomedica, I know you are one of shareholders of Tekmira, but, it looks promising of lentivector, it is safe and it can hold heavy gene cargo. Do you have any comment on Oxford Biomedica's ProSavin ?

Anonymous said...

Losing Money and It Hurts:
take heart - CSIRO took on not just one, but many big guys, over their wifi patent.

With a hell of a lot of resilience they eventually won.

http://www.itnews.com.au/News/142482,more-giants-buckle-in-csiro-wi-fi-patent-case.aspx

Dead Silence said...

Mr DH ... many thanks for your contributions.

How about the status of the targets owed to Tekmira?

Any idea which combatant has the best legal counsel?

Any liquidated damages provisions in the contracts for breach of trade secrets?

Anonymous said...

two questions:

1) when is alny going to respond to the amended complaint?

2) why no volume either way? Im not into the technical aspect of stocks too muchs so I wonder why did the "dilution" not lead to the shares plunging ???

Anonymous said...

two more questions:

what pharma is tekmira working with regarding nebulized drugs?

how come they cant come out and say its Genentech (avastin, etc)?

are they teasing us???

Anonymous said...

In response to Sherk:

You said, "..that doesn't sound like the behavior of someone trying to hide their evildoing. You may chalk it up to "arrogance"

You're right it doesn't. It sounds more like an employee who had comfortable partner relations with Tekmira, and didn't realize (or wasn't instructed) that he was violating a legal agreement in regards to proprietary science.

There was no evil intent in that act, but it was a violation of the agreement,and it happened. It clearly establishes that Alnylam management was very loose in their duty to instruct and monitor their employees actions in regard to the agreement.

That example will be driven into the jurors IF this goes to trial.

Anonymous said...

Looks like Alnylam has a very strong objection and countersuit to Tekmira. It's difficult to predict how this will all come out, but at this stage I think that Alnylam has a very strong position and with their 10 countersuits, may have a 1-2 punch of their own that could knockout Tekmira.

I found the "Prayer for Relief" rather interesting. And they are seeking a jury trial. This should get very interesting.

PRAYER FOR RELIEF
WHEREFORE, Alnylam respectfully requests entry of judgment in its favor and against Tekmira as follows:
A. Dismissing Tekmira’s Complaint in its entirety, with prejudice;

B. Entering judgment in favor of Alnylam;

C. Awarding Alnylam damages resulting from Tekmira’s breach of contract, violation of statutes and common law;

D. Entering a preliminary and permanent injunction enjoining and restraining Tekmira, and its officers, directors, agents, servants, employees, attorneys and all others acting under, by, or through them, directly or indirectly, from further prosecution of U.S. Patent Application No. 11/807,872;

E. Entering a preliminary and permanent injunction enjoining and restraining Tekmira, and its officers, directors, agents, servants, employees, attorneys and all others acting under, by, or through them, directly or indirectly, from claiming any ownership in MC3 or ALN-VSP;

F. Entering a preliminary and permanent mandatory injunction requiring Tekmira to deliver forthwith all documentation that it is required to provide under the Manufacturing Agreement and the Quality Assurance Agreement;

G. Awarding to Alnylam its costs, expenses, and reasonable attorneys’ fees incurred in this action; and,

H. Granting Alnylam such other and further relief as this Court may deem just and proper.

Anonymous said...

It seems that the crux of the lawsuit surrounds who invented and owns the "MC" lipids. Both Tekmira and Alnylam claim they are the rightful inventors and owners, so this does appear to need to go to a jury to decide.

Anonymous said...

Would love to see a copy of the July 2009 Supplemental Agreement between Alnylam, Tekmira, Protiva, Alcana, and UBC, that purportedly abrogates former Tekmira employee non-compete/non-disclosure agreements. Also, Tekmira (Murray) needs to explain why he signed the acknowledgement statement to Barry Greene regarding Alnylam's exclusive rights to MC3. Those were the 2 strong points highlighted in Alnylam's response to the Amended complaint and counterclaims.

Conversely, the Development, Manufacturing, and Supply Agreement that Alnylam and Tekmira entered into on January 3, 2009, is very strong and favors much of Tekmira's Amended complaint/claims. The definition of "Excluded Claims" -- disputes that concern the validity or infringement of a patent, trademark or copyright, or any antitrust, anti-monopoly or competition law or regulation, whether statutory or not; and the provision in the Agreement that says the parties are "free to submit any Dispute relating to an Excluded Claim to any court having jurisdiction over the parties and the submject matter of the disputes" and that such claims are not subject to binding arbitration -- favor Tekmira and contradict some of Alnylam's claims. The Agreement makes it clear that each Party can directly seek injunctive relief regarding the competitive and technical value and the sensitive and confidential nature of the "Confidential Information" for any breach of Article 11 or Section 14.1 of the Agreement, without proof of actual damages. Recall that Protiva was very effective in obtaining an injunction against Sirna (acquired by Merck) back in 2006, which resulted in a settlement agreement to the tune of about $47 million in Protiva's favor. This is not new stuff to Murray and gang, or their attorneys, whom I'm sure played a key role in drafting the various agreements.

See the definitions of Intellectual Property, Technical Transfer, Confidential Information, "Know-How", and "Formulation Design Know-How", as well as "Third Party", in Article I of the Agreement. That is one huge catcher's mitt in ensuring the protection of IP (the ball) is not dropped/lost. That agreement strongly favors Tekmira's claims.

The case will never go to jury. Either it'll be resolved in motions for summary judgment, or via settlement. Going to a jury trial is too risky for both sides, especially when dealing with such highly technical matter and the often irrationality of jury decisions with regard to laying blame or fault as well as assessing damages. Just a question of time as to when the case will be settled.

Good luck to both Alnylam and Tekmira longs, and hope that settlement arrives sooner rather than later.

Anonymous said...

Is this not the supplemental agreement you are looking for?


http://www.sec.gov/Archives/edgar/data/1178670/000095012311062604/b87115exv10w2.htm


Still, it says there were trade secrets the alcana scientists were not supposed to disclose.

Anonymous said...

sorry,

here is the corrent link.

http://www.sec.gov/Archives/edgar/data/1178670/000095012311062604/b87115exv10w2.htm

Anonymous said...

ok try this.

http://tinyurl.com/3evlt6p

Anonymous said...

Dirk, excellent summary. Thanks for your open disclosure as well. I like that, no mincing words.

With that in mind, what is your take on the July 2009 supplement?

How do you fit that in to your discussion above?

thanks and happy 4th to all here. Lets go party!

my disclosure: Long TKMR at average 5 dollars and change.

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