Merck ‘Not Pulling Back in RNAi’ as Company Closes RNAi Trigger Research Unit

[Update: important clarification by Merck on the site closure, here]

As reported by the San Francisco Business Times and Xconomy, Merck will be closing its RNAi Trigger research unit in San Francisco as part of global restructuring efforts that include cutting ~12,000 employees by 2015 as Merck seeks to drive short-term bottom-line growth. While not exactly a move that will instill confidence in RNAi Therapeutics, a Merck spokesperson nevertheless was quoted as stating that ‘[Merck] is not pulling back in RNAi’ and that they have ‘still couple hundred employees working in RNAi’.

Global Pressures

Merck’s announcement is certain to be touted by some as representing a devastating verdict on the feasibility of RNAi Therapeutics. The news, however, comes at a time when confidence in innovative R&D in the pharmaceutical industry in general is at an all-time low to the degree that Big Pharma extols the licensing of phase III candidates (and beyond) as investments in innovation.

You’ve all heard it, too: Economic uncertainty and strained healthcare systems in the US and Europe, the patent cliff and declining R&D productivity worsened by a challenging, extremely risk-averse regulatory environment, all mean that the easiest way for Big Pharma executives to keep their jobs is to slash early-stage R&D and have their successors deal with the mother-of-all R&D productivity declines that undoubtedly will hit the industry 10 years down the line.

Merck actually has been one of the more vocal Big Pharma supporters of R&D. In February it withdrew its long-term financial guidance to preserve R&D flexibility, and Merck's CEO Ken Frazier as recently as in a July 13 opinion piece in the Wall Street Journal warned US politicians that their policies are killing pharmaceutical innovation and threaten US leadership: click here for the must-read.

Merck’s agony of having to decide between Wall Street and Washington-mandated short-term bottom-line growth (mind you, London, Berlin, and Paris are no better when it comes to appreciating the benefits of biomedical innovation), has also been apparent in recent comments on RNAi Therapeutics. In a June 28 interview with FierceBiotech from the BIO International Convention, David Nicholson, Senior VP and Head of Worldwide Licensing and Knowledge Management, stated that Merck has ‘chosen to stick with RNAi’ drawing parallels to the monoclonal antibody space that had undergone similar moodswings before becoming a widely accepted new drug modality.

This interview by the way was also picked up and tweeted by Alnylam which must have been concerned how the SF site closure, a development certainly in the making and rumored then, would be interpreted.

Importantly, the revelation today that a ‘couple hundred’ employees will continue to work on RNAi is consistent with Merck being far from giving up on RNAi Therapeutics, just as Novartis’ decision last fall not to expand their relationship with Alnylam was more a verdict on that specific relationship rather than Novartis' general view of RNAi Therapeutics.

Closure of SF Unit as Focus Shifts Towards Products and Delivery

If you accept these statements and RNAi Therapeutics remains viable at Merck, then the move to close the RNAi Trigger research unit at San Francisco Mission Bay and eliminate ~50 jobs can be interpreted as a shift in Merck's strategic focus from RNAi triggers to products and delivery.

RNAi triggers and related IP, of course, remain important for RNAi Therapeutics development and it is inconceivable that Merck would write off the $1B investment in Sirna Therapeutics' RNAi trigger IP as it continues to consider RNAi Therapeutics. It therefore seems that as Merck puts less effort into RNAi triggers, it must have felt satisfied with its IP position and acquired expertise there so that it was prepared to sacrifice this part of RNAi Therapeutics at a time that every unit, but emerging markets and biosimilars it seems had to contribute their cost savings.

Going forward, much of the success of Merck's RNAi Therapeutics will probably rest on its West Point, Pennsylvania, formulation/delivery unit. Among the research conducted there have been detailed liposomal siRNA delivery studies with the goal of using RNAi as a therapeutic and not merely target validation tool. Still, as Jeremy Caldwell, a person with a target discovery/validation background takes over responsibility for RNAi at Merck, we will have to see how fast Merck will transition RNAi into clinical development.

In addition to progress in delivery, it is the adoption of RNAi Therapeutics by the global R&D organization that will determine the clinical success of the technology at Merck. It may be one of the ironies of Roche’s RNAi efforts that they tried to preserve RNAi innovation by isolating the Kulmbach unit as a Center of Excellence, but then failing to rally broad support for the technology from the disease area groups. Because of liposomal delivery and Merck’s product focus, acceptance of RNAi Therapeutics by its lipid management, metabolic disease, and, of course, oncology groups will be particularly important.

PS (8/2/2011): In a statement to Gene Silencing News, Merck confirmed that the closing of the San Francisco site does not represent a departure from its RNAi Therapeutics strategy and that it still considers the technology to be transformative for human disease treatment.