Alnylam Responds to Amended Complaint by Tekmira

Last week, Alnylam responded to the Amended Complaint by Tekmira in which Tekmira disclosed the full scope of Alnylam’s alleged misappropriation and misuse of Tekmira technology and added Alnylam Canada, aka AlCana, as Co-Defendant (related blog entry here). The alleged transgressions included abusing insights into Tekmira trade secrets that Alnylam gained as a result of their collaborator status and by hiring ex-Tekmira employees to file for a battery of patents covering Tekmira technology, also to contest royalty obligations for ‘second-generation’ LNP formulations, disclosing them to Alnylam’s Big Pharma partners to circumvent Tekmira, and breaching the manufacturing agreement by providing Tekmira formulations to Alnylam partners.

Alnylam vague in Response

In its Response, Alnylam brushed aside Tekmira’s allegations that it took unfair advantage of insights into Tekmira trade secrets by simply stating that the written agreements would speak for themselves and gave them freedom to do so and that much of Tekmira’s technology had been in the public domain anyway. In doing so, Alnylam apparently attempts to hoodwink the court by failing to mention and address the significant limitations in the various agreements between the companies regarding the use of Tekmira trade secrets. These limitations stated that any use by Alnylam of Tekmira LNP delivery trade secrets for purposes other than advancing the agreements would have to be first blessed by Tekmira.

Perhaps realizing their failure to do so, Alnylam’s main defense with regard to the MC series of lipids that it now advertises to be its own and independent of Tekmira was based on a waiver to sue that was included in the Supplemental Agreement dated July 2009 between Tekmira, Alnylam, the University of British Columbia, and Alnylam Canada. For example (Fourth Affirmative Defense):

‘Tekmira has granted Alnylam a covenant not to sue on any contention that MC3 and other alleged “MC Trade Secrets” was misappropriated in an agreement to which it is a party.’ [emphasis mine].

See also:

‘15. The Supplemental Agreement and its attachments contemplated the research that ultimately led to the discovery of MC3 and other novel lipids.” [emphasis mine]

This defense, however, fails to address Tekmira’s allegations that the broader MC trade secrets were disclosed by Tekmira to Alnylam pursuant to the Research Plan of the Tekmira Agreement which pre-dates the Supplemental Agreement (and also Consultancy Agreement between the ex-Tekmira employees and Alnylam for that matter) whereas the waiver would only apply to actions carried out pursuant to the Research Program of the Supplemental Agreement and the Consulting Agreement. This distinction may become important as ownership over the broad MC series of lipids would affect the freedom-to-operate for MC3.

Alnylam's defense that Tekmira never realized that ‘MC’ constituted a series of lipids cannot be taken seriously as a) apparently some of the inventors of MC2 did realize this to be a series by filing for the MC3 patent application soon after their firing from Tekmira, b) the nomenclature implies a series (just as KC did before that), and c) Tekmira should easily be able to prove their disclosure of MC trade secrets via emails etc.

Tekmira statement of when MC trade secrets were disclosed to Alnylam (from the Amended Complaint):

‘34. Prior to its filing of the provisional patent application disclosing and staking its claim of ownership of the MC2 compound, Tekmira confidentially disclosed the MC Trade Secrets to Alnylam pursuant to the Research Plan of the Tekmira Agreement.’ [emphasis mine]

Waiver (from the Supplemental Agreement):

’12. Waiver; Non-suit Covenant. In consideration of the foregoing, Tekmira and Protiva hereby (a) waive all prohibitions and restrictions upon [**] (and any other UBC employee involved in the Research Program who was a former Tekmira employee) and each former Tekmira employee who is subject to the provisions of an Employment Agreement arising out of, under or in connection with their former employment by Tekmira, to the extent that any activities of such former Tekmira employee are carried out pursuant to the Research Program, the Consulting Agreements or in connection with the performance of obligations or the exercise of rights under this Supplemental Agreement; and (b) covenant not to sue Alnylam, UBC, AlCana or any of the former Tekmira employees employed by AlCana or UBC, for any cause of action relating to such activities that arises out of, under or in connection with the former employment by Tekmira of such former Tekmira employees. For clarity, a failure by any party to perform its respective obligations under this Supplemental Agreement shall not entitle any other party to sue any non-breaching party. Such former Tekmira employees are intended Third Party beneficiaries of this provision.’ [emphasis mine]

Therefore, even in the unlikely event that the waiver would be judged to allow for the broad misappropriation and use of Tekmira trade secrets and applied retroactive to the effective date of the Agreement (note that even the MC3 provisional was filed before July 2009), it has no bearing on what Alnylam did with the insights into other MC-related trade secrets. Note that the broad MC patent applications were filed by Alnylam alone- consistent with the timeline provided by Tekmira. To make this point clear, the Supplemental Agreement expressly states that it does not release the parties from liabilities arising from the other agreements:

‘19. Entire Agreement. This Supplemental Agreement is the only agreement between or among Tekmira and/or Protiva, on one hand, and any of Alnylam, UBC, and/or AlCana, on the other hand, bearing directly upon the Research Program and the Consultant IP. Except as expressly stated herein, neither this Supplemental Agreement nor any discussions, proposals or negotiations with respect hereto or otherwise with respect to the Research Program will alter the terms of, or constitute a waiver or release of any party’s rights or obligations under, any of the existing agreements between or among Tekmira and/or Protiva, on one hand, and Alnylam and/or UBC, on the other hand, including without limitation the provisions of such agreements regarding the termination of such agreements and the consequences thereof.’

Alnylam Admits to Providing Delivery Formulations and Tekmira Manufacturing Know-How to Novartis and Takeda

Much of the immediate financial damage to Tekmira and their investors arises from Alnylam allegedly stealing Tekmira’s manufacturing trade secrets and violating the manufacturing agreement by providing SNALP/LNP delivery formulations to Big Pharma companies with interest in RNAi Therapeutics. In its Response, Alnylam admits that it provided delivery solutions to Novartis and Takeda. Alnylam denies, however, that Tekmira took adequate care to protect its manufacturing trade secrets which was formalized, amongst other, in the September 2008 MBR agreement which limited Alnylam’s access to Tekmira trade secrets solely for the purpose of their regulatory obligations. Overall, with the Agreement and the Konys emails it should be relatively straightforward to prove this allegation which should be a key element in assessing the financial damage suffered by Tekmira.

The Big Picture Remains Unchanged: Alnylam Intent on Marginalizing Tekmira

If anything, Alnylam’s Response further emphasizes that it has been and still is intent on marginalizing Tekmira by having the audacity to claim ownership and control over Tekmira technology and to advertise itself to be leading in SNALP technology. It's the same company that 4 years ago along with Roche had to admit defeat and seek chemistry and manufacturing help from Protiva, and just 2 years ago still seemed to be learning the ropes of LNP delivery technology (see 2009 Molecular Therapy paper). To top it off, this company now claims that Tekmira’s work, including the newly disclosed lipids, is based on the misappropriation of Alnylam LNP trade secrets.

If that were not enough, Alnylam pretends to be an advocate of Tekmira shareholder interests by casually dropping in the Response that Tekmira failed to issue a financial regulatory filing due to Alnylam’s apparent notice to Tekmira that Tekmira lacked a license to its very own rights to the Semple-Wheeler patents, as well as the ISIS patent estate under its InterfeRx license from Alnylam!

From the Response:

‘23. Consistent with this pattern, Tekmira has failed to adequately disclose the limitations of its licenses to investors. Despite the clear terms of the license agreements and notice from Alnylam that it lacked licenses to the Semple & Wheeler patent series and Isis patents, Tekmira made representation to the contrary in its public filings with the SEC and in other documents provided to investors.’

Remember that Old Tekmira originally provided Alnylam the exclusive license to its rights to Semple-Wheeler for therapeutic RNAi and microRNA applications, in return for Alnylam RNAi target picks under InterfeRx, which includes ISIS, and the use of Old Tekmira SNALP-related IP for these target picks. Obviously, events have escalated and with the apparently unilateral revocation of the licenses Alnylam management apparently wants to cause additional pressure on Tekmira's share price hoping to outlast Tekmira financially, not based on arguments. I wonder which Alnylam top executive or lawyer came up with this admittedly innovative interpretation of the companies' agreements and would not be surprised if this move was also coordinated with Alnylam's connections to the financial world.

On the other hand, Tekmira has told Alnylam that it would not release certain data with regard to the hypercholesterolemia candidate ALN-PCS, for which guidance to submit an IND in H1 2011 has likely been missed, unless Alnylam gave added assurance that it would not use such information for purposes other than the clinical trial.

Why would Alnylam have problems agreeing to this measure and is willing to miss important guidances it gave to investors and resort to desperate acts like the Semple-Wheeler and ISIS stunt? Why does Alnylam not just pay off Tekmira and tell them to go away, as this would seem to be the least costly option to them at the moment? Is it really just greed that has been driving Alnylam’s actions? I cannot believe it and instead suspect that at the root of Alnylam’s conundrum are its deals with Big Pharma in which it took in over half a billion in non-dilutive funding, much of it quite obviously based on the strength of and access to Tekmira’s SNALP technology.

Tekmira continues to advance science

Despite the legal battle with top-heavy Alnylam (ironically it is Alnylam that tells Tekmira to focus on the science), Tekmira continues to make critical advancements in refining and expanding the uses of its LNP delivery technology. Following the recent conference report that it succeeded in generating defined LNPs for respiratory and directed delivery applications and the scale up of manufacturing to 1kg batches, a patent application (WO/2011/066651) by Tekmira published last month disclosed important advances in ensuring the long-term stability and therefore quality of its formulations. In order to avoid any confusion, some of the experimental examples involved MC3 (and MC4) to make it clear that the claims cover SNALPs independent of the specific lipid used. With this, Tekmira demonstrates that it continues to stay a step ahead and provides further reasons of why pharmaceutical companies would want to partner with Tekmira in order to practice SNALP delivery.

Related blog posts:

1) Tekmira Tells Alnylam 'Enough is Enough';

2) Alnylam Responds to Tekmira's Complaint;

3) Tekmira's Amended Complaint Suggests that Alnylam's Transgressions More Severe than Suspected

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 3^rd 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 ‘2^nd 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.