Tuesday, November 13, 2012

Tekmira Regains Control over Leading Delivery Technology

When Tekmira filed its lawsuit against Alnylam in March 2011, it found itself in an impossible position: Alnylam’s apparent mis-use of SNALP-related trade secrets not only diminished their strategic value to Tekmira, including depriving it of potential pharmaceutical partnerships, Tekmira may even not have been able to use the technology it invented.  As a result, it might have been left to die in a little cage with ‘1st generation’ technology as its technology was making rapid progress.    


Cash and Control

Based on the disclosed terms of last night’s settlement with Alnylam (Tekmira's version here, Alnylam's version here), Tekmira got essentially all that it needed: control over its leading systemic RNAi Therapeutics delivery technology, including the contested MC3 lipids of which the IP was assigned to Tekmira, and a $65-75M payment (~$16-18M of which will go to pay outstanding legal fees).  The payment, of course, will finally allow the otherwise financially conservative company to push forward their development pipeline with interesting therapeutic candidates such as TKM-PLK1.  Notably, as part of the settlement, Tekmira obtained full ownership over this candidate which I believe addresses one of the most exciting RNAi targets in oncology. According to the Q3 financial results, also released today, TKM-PLK1 has been making good progress, including showing signs of drug activity and will advance into phase II studies next year.

Beyond the cash, the new IP licensing arrangement between the companies is at least as valuable.  Importantly, Tekmira has regained exclusive sub-licensing rights to ‘LNP intellectual property’, an incredibly important part of the settlement as before that Alnylam enjoyed such control, mainly via its rights to the Semple-Wheeler IP covering important aspects of ionizable SNALP technology.  This should open the door for Tekmira to enter into the long-expected pharmaceutical partnerships. Novartis and Takeda are here the most obvious near-term candidates for platform-type relationships.

Assuming that the new relationship is not restricted to RNAi Therapeutics, an added bonus is that the settlement could similarly pave the way for relationships in the microRNA Therapeutics space, particularly for the delivery of microRNA mimics.  Only recently, privately-held Mirna Therapeutics made headlines by raising $34.5M to fund the development of a microRNA mimic into the clinic, indicating the significant interest in this area of drug development.


Value of the Trade Secrets

Less clear is the damage to the trade secrets that were at the center of the dispute and on which much of Tekmira’s strategic advantage rested.  Numerous groups and companies have attempted home-brew liposomal RNAi trigger delivery, but only Tekmira’s technology has made it into the clinic.  Especially the ability to formulate and manufacture the particles is what set Tekmira apart from the competition.  In their press release, however, Alnylam stated their intention to use its own LNP manufacturing capabilities.  Apparently, it has already established such GMP manufacturing capability over the last year (in a separate building apparently for added suspense).  Assuming that Tekmira did not assist them in establishing such manufacturing, this indicates that the number of people with critical knowledge to the trade secrets has grown.  This can be particularly a problem in the wake of lay-offs in a place like biotech world capital Cambridge, Mass. 

Still, I assume there to be significant hurdles for other companies to replicate Tekmira’s processes, and with its liposomal experts, Tekmira should continue to lead in advancing SNALP delivery, making it the liposomal delivery partner of choice.


With cash of around $50M (excluding the $10M which are contingent on likely 2013 development milestones for ALN-VSP02 and ALN-TTR02), partnerships likely to come in due to the clarified IP situation, the $141M DoD Ebola biodefense contract (a new more potent and safer formulation will be used) and the income stream from Talon Therapeutics, Tekmira has thus emerged as the vibrant RNAi Therapeutics company it should have become 3 years ago.  Nevertheless, today's terms underline the value of Tekmira and RNAi delivery in general.  Exciting times ahead.

15 comments:

Anonymous said...

Given that it was Alnylam's scientists that developed MC3, (formerly Tekmira employees)it would not be surprising if Alnylam's future delivery formulations surpass Tekmira's. Although it was wrong for Alnylam to build on Tekmira's formulations,it is apparent that the scientists that Tekmira fired were the truly innovative ones.

Gene genie said...

Derek , I have been a fan of yours for years , butI feel the industry underestimates your genius , you always get it right , I hope to seen you running a big company one day

Anonymous said...

"This should open the door for Tekmira to enter into the long-expected pharmaceutical partnerships. Novartis and Takeda are here the most obvious near-term candidates for platform-type relationships"
Great joke!
After their great track record for generating value 1) Protiva Suing Inex (which later became Tekmira) which resulted in their merger that became the current Tekmira; 2)Suing SIRNA which resulted in Merck paying 60 million to settle; 3) Suing Alnylam which helped them in merger, investment, manufacturing contract, contract with Roche, the list goes on.
After this great track record partners are lining up to do platform deals with Tekmira so that they can get sued!
Nobody in their right mind would do that.

Anonymous said...

The previous poster would have let Alnylam steal their Intellectual Property. What BS. I suspect he also wrote the first post. Sour grapes, huh? Alnylam (in effect) admitted they are (expletive deleted) theives. They deserve nothing. Theives. For once, the good guy stood up to the 250 pound bully in the schoolyard and kicked his ass. Thanks for your wisdom, Dirk - even in the face of great adversity. Xman

Nick, poster #91 from OTS said...

I appreciated the varying estimates (from lots of different press releases/blogs/articles) regarding how much this was going to cost, ranging from ~$10-15 million all the way up to $100+ million. The people making these estimates are much more in tune with the whole situation than I am. Yet, for no good reason, I had a feeling it was going to be neither of those one-sided amounts, but somewhere right in the middle. And, indeed, $65 million is somewhere in-between. Thanks for your posts.

Anonymous said...

Congrats Dirk,
My only complaint is your following is not larger. If investors were aware of your quality insight TKMR would trade at a huge multiple over cash.
You have nailed many forecasts while others were critical.
LNP is it. Anything else for delivery comes with huge risk.
ALNY knows PR. They will talk up non LNP.
The proof is in the pudding. I look forward to a stream of partnering deals.

Anonymous said...

Even if a cheating wife wants to divorce her wealthy husband for any reason, if he does not have a well written pre-nub, he will end up losing half his wealth plus alimony even if it isn't husband's fault. Most often the wife wins the custody battle for the kids as well. Unfortunately this is how things work in our judicial system.

Anonymous said...

Dirk

Congrats! The Tekmira longs really appreciate your insights. Many would have lost faith but for your discussion board.

Regarding Murray's pledge to expound on the PLK1 Phase I results at a future scientific event, do you know which event is most likely and when that would be? Since he said Tekmira expected to begin Phase II in 2013, I would assume the scientific event would be in early 2013, correct?

TIA

Anonymous said...

Response to "Anonymous" who posted Comment No. 1

<"it is apparent that the scientists that Tekmira fired were the truly innovative ones.">

Yeh, real innovative, lol -- and now stuck with a 5-year RNAi non-compete contractual obligation. I guess your idea of "innovation" is a pickpocket sitting in a jail cell. Tricky Dick (Nixon), of Watergate fame, was real innovative, too.

Anonymous said...

I was just pointing out the obvious. It was not Tekmira's scientists who formulated MC3, it was Alcana's (Alnylam's). It was a big mistake for Tekmira to fire the scientists that subsequently went to work for Alcana. If the scientists Tekmira retained were as innovative as the ones they fired, they would have made similar advances. BTW I am long in both Tekmira and Alnylam. This is revolutionary medical technology.

Dirk Haussecker said...

Thanks for all the kind comments, as well as for the seemingly unkind ones as long as those are sincere.

A point on the allegation that Tekmira is a litigatious bunch. XMan has made the point that if your corporate life were threatened by illegal acts, why would the fact that you had been involved in other litigations matter make your case any weaker? And keep in mind, Alnylam has sued Merck and is involved in the Bass action (still), and that it was Sirna/Merck that sued Protiva/Tekmira first, then got countersued, and as a result had to pay Tekmira/Protiva 45+12M.

Dirk Haussecker said...

TKM-PLK1...no idea where the results will be presented. Since that study is still recruiting and analyses ongoing, maybe next year's ASCO meeting would be a good place to come out with the initial results.

Jerry said...

Not wanting to turn this into a forum for trading, I can't help but point out that the share price of TKMR is up only about 10% since the settlement was announced. Yet, the settlement ostensibly should effectively double the enterprise value which was only about $58M the day before the news was announced. Counting on $65M settlement, plus $10M in expected near term milestones, less $15-18M in legal fees, I figure the EV has increased $57-60M, a neat double from the beginning of the week. Unless I am missing something, TKMR is a screaming value at current price.

Anonymous said...

I think Jerry is asking a legit question. Why is TKMR languishing? By the way Dirk are you adding, holding or done with TKMR? If you dont mind one asking.

Dirk Haussecker said...

Haven't bought nor sold since settlement.I agree though that Tekmira looks quite attractively priced here.

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