Tuesday, October 1, 2013

Merck’s RNA(i) Therapeutics Unit on the Chopping Block

After more than 6 years of playing it safe and producing nothing tangible in terms of clinical development candidates, I fully expect that the time has come for Merck’s RNA(i) Therapeutics unit to be slashed.  This morning, Merck announced a company-wide cost-cutting re-org, as part of which it aims ‘to reduce its focus on platform technologies’.  Remember Roche 3 years ago

Similar to Roche, the immediate financial benefits of scrapping the unit not only come in the form of savings in R&D expenses, but also likely tax write-offs due to for example the $1.1B purchase of Sirna Therapeutics in 2006.  Expect the company to exceed analysts’ expectations for coming financial results.

However, the most important factor why I believe the unit's fate had been sealed was the departure of Peter Kim as the Head of Merck Research Laboratories.  It has been said that he had been a key backer of the unit, and with the biologics guy from Amgen, Roger Perlmutter, probably intent to erase Dr. Kim’s legacy…


It is hard for me to feel sorry about such an event.  Their RNAi science was probably the best among the Big Pharmas, but hiding behind the VIOXX experience forever while taking home monthly salaries was asking for trouble.  Meanwhile, the likelihood that Merck will partner with the real innovators in the space on specific product candidates has increased today. 

10 comments:

Anonymous said...

The question is what will then happen to MRK's RNAi assets (including its hard fought and won Tuschl2 license).

Martin A.

Steve_382 said...

If you are correct, does this put another cloud over the RNAi space? Sure seems like as much money as Merck and Roche threw at RNAi, they should have something besides tax deductions to show for their efforts. Are Alnylam, Tekmira, and Arrowhead really that much smarter?

experiencedmentor said...

They should double-down with a $1.1B buyout of Tekmira. Imagine the possibilities!
A drug company without a pipeline is a dying company.

Dirk Haussecker said...

Martin and Steve. Yes (Steve), similar to the Roche situation, but we now know that Arrowhead, the acquirer of the assets, made out like a bandit. I believe it is also amply clear by now that innovation and Big Pharma don't go hand in hand (just look at Merck's decision today to de-emphasize 'platforms' in general).

The validation that the field needed came in form of clinical results.

Who would be the potential acquirers? Merck does not have much more in terms of IP than Alnylam. Merck has tried to copy DPCs, but Alnylam has probably also been trying, so not much there for Alnylam. The rest of the field could not afford it, except if Merck makes a deal similar to Roche.

Let's see...

Anonymous said...

Merck announced a company-wide cost-cutting re-org, as part of which it aims ‘to reduce its focus on platform technologies’.

Is this an indication it is out of interest in Benitec and its ddRNAi platform as well?

Merck were the agents who orchestrated the failed takeover of Benitec after Pfizer took a research licence.

Writing on the wall does not look good.

Anonymous said...

It seems Novartis may also follow Merck and exit from RNAi space. All the big pharmas have heard mentality so this shouldn't come as a surprise. After all Novartis was the first one to get into RNAi space and they haven't produced anything yet.

Anonymous said...

Is this a result of the delivery challenges or lack of success in the RNAi therapies?

Anonymous said...

Last 3 posters, with due respect, suggest you go re-read the planned Merck cut-backs, and Dirk's write up. You are currently missing some key points.

Anonymous said...

There are no easy paths to product commercialization for nucleic-acid drug products (siRNA, dicer, mRNA, etc.). The challenge isn't just delivery, but ensuring lack of toxicity and other side effects.

This is the paramount challenge for the entire field, and no one is close to achieving this with synthetic delivery vehicles. They may look OK in small clinical trial with a 12 person cohort or less, but the chance for an idiosyncratic toxicity to appear, such as an autoimmune response or other is quite large when these treatments go into the general population.

Big pharma doesn't suffer from herd mentality, but has a realistic appreciation for the challenges and safety issues posed. Just because an RNA delivery company states a therapy has no inflammation or is generally well tolerated has no bearing on a whole host of subtle effects such as peripheral neuropathy and other effects that accompany these drugs. While I maintain a positive outlook for the field, I believe there is a significant road ahead before these types of therapies are successfully commercialized.

Dirk Haussecker said...

Fair enough. Maybe Merck or another Big Pharma should come out and detail the specific issues. Based on the clinical experience in thousands of subjects I posit that the risk:reward for a number of delivery strategies appear more than acceptable for the devastating diseases they address.

Quite frankly, your theoretical concerns serve as a lame excuse for the lack of innovative juices among Big Pharma. It's a sorry state and part of me wishes they get out of the platform business altogether and instead pay up when these therapies are closer to market. Good riddance!

It is also amusing to see Big Pharma punt on biotech biz development in general when it was dirt cheap and small biotechs needed them desperately, and now decry the market as too expensive while biotechs can get capital through the public and private markets.

Roche single-handedly almost destroyed RNAi Therapeutics in 2010. I expect an RNAi Rx company or two to surpass them in market cap in 20 years.

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