Syngenta Acquires RNAi Speciality Co. Devgen: Is RNAi History Repeating Itself?

An important factor ailing the pharmaceutical industry is that the managements of large companies are not equipped to independently evaluate the merits of innovative technology platforms.  Too far removed from the lowly laboring scientist, laser-focused on meeting next quarter’s numbers and increasingly with non-science backgrounds, this frequently leads to odd deal dynamics driven by herd behavior.  Needless to say, while the technologies may be deserving, much money is wasted not only by overpaying, but also by putting it to work in the wrong places setting the stage for investor backlash and lawsuits.   

We have seen this herd behavior in RNAi Therapeutics in 2006-8 culminating in Merck's $1.1B acqusition of Sirna Therapeutics and Roche's $300M+ non-exclusive platform license from Alnylam.  We now know that these companies grossly overpaid for the RNAi trigger IP and that they would soon panic realizing that they had not paid enough attention to RNAi delivery.

Those vested in the agricultural applications of RNAi gene silencing must similarly be feeling like in the land of milk and honey these days.  In fact, Alnylam’s reputation as a company that aggressively enforces what it believes (?) to be its intellectual property in RNAi triggers, has earned it a juicy $30M upfront from Big Ag Monsanto less than a month ago.  This came after a similar-sized deal for plant RNAi in May involving crop protection juggernaut Syngenta (the marriage of the plant businesses of Zeneca and Novartis) and Belgian plant RNAi specialty company deVGen.  What I did not understand about the Alnylam deal is why Monsanto would let its collaboration with Devgen expire in 2011 and instead decide to go for RNAi trigger IP.  Is Monsanto repeating here Big Pharma’s mistake of undervaluing enablement?

This week’s announcement that Syngenta in fact is now fully buying deVGen, of course, provides a good explanation for the Monsanto-Alnylam deal: Syngenta made deVGen an offer it could not refuse (over half a billion US dollars, representing a 68% premium over its market cap) and Monsanto was left scrambling for alternatives and found in Alnylam a very willing provider of IP ammunition in the fight for dominance in RNAi-based pest control. If history is any guide, one or both companies will likely regret their decision due to lack of enablement and lawsuits will fly in 3-5 years. 

Note: although deVGen is also engaged in seed business, especially rice, it's annual $50M revenue run-rate from this part of the business would unlikely warrant the $500M+ price tag. 

RNAi Therapeutics Poised for another Round of Deal Making

Although the clinical dataflow in RNAi Therapeutics has significantly improved the valuations of a number of RNAi Therapeutics companies and has also generated renewed interest in the technology among the wider pharmaceutical industry down to the VCs, we are still waiting for this important validating deal where a large pharmaceutical company will pony up a sizeable upfront (>$30M) in an RNAi Therapeutics deal.  My expectation is that such an event would spawn a number of further financially meaningful deals.  Being an eternal RNAi Therapeutics optimist, I hope that this time will be slightly different in that Big Pharma will have learned its lessons and technical enablement will feature prominently in this new round of deal making.

Big Agriculture Bankrolling RNAi Therapeutics

After years of pouring millions, if not billions into RNAi-related intellectual property (IP) and the development of double-strand RNA delivery, the RNAi Therapeutics industry is now harvesting returns from an unlikely source: agricultural companies.

Most notably, Alnylam reported yesterday an IP license and collaboration agreement with Monsanto which is widely known for its transgenic seed business.  Particularly eye-catching was the $29.2M in upfront monies, an amount not seen in RNAi Therapeutics for a long time.

However, Alnylam is not the only RNAi company that has been approached by Big Ag.  Admittedly somewhat flying under my radar, Devgenclosed a similarly upfronted RNAi collaboration with Syngenta in May of this year.  Interestingly, that deal came after Devgen’s 4-5 year RNAi partnership with Monsanto had ended in 2011, earning the Belgian (ag) company tens of millions.  This suggests that there is an RNAi scramble in the Ag space reminiscent of what happened in RNAi Therapeutics in 2006-8.  Moreover, Marina Biotech, also in May, exclusively licensed RNAi IP to Monsanto, and Tekmira mentioned in their last two conference calls that it was undertaking evaluative work with a large agricultural company: Monsanto or Syngenta?

The fact that Tekmira is involved in this business development opportunity for RNAi Therapeutics companies suggest that general RNAi IP is only one reason for Big Ag’s approach.

At first, this left me scratching my head: how would you apply double-strand RNA delivery by LNP in a commercially meaningful way in agriculture?  After some research though, it became obvious that Monsanto, Devgen and Syngenta are interested in using orally ingested dsRNA to fight insect pests such as the Western corn rootworm (WCR).  The need of finding new solutions for WCR has dramatically increased as the long-standing transgenic Bacillus thurigiensis toxin-incorporating crop by Monsanto has been plagued by resistance.

Another compelling reason for using non-transgenic approaches in agriculture is the fact that it should speed up the regulatory process as RNA is Generally Regarded as Safe (GRAS) by the FDA. This much reduces the hurdles compared to transgenic plants which might spread in the environment and further express biologically active proteins.  Moreover, unlike a toxin like Bt, the RNAi trigger can be highly specific to the targeted pest species.

The question, of course, is whether this approach, despite its attractions is technically and financially feasible in the first place.  The seminal work by Devgen and Monsanto (Baum et al., Nature Biotech2007) suggests that this is in fact the case: sub-nanogram per cm2 amounts of relatively cheap T7 in vitro transcribed RNA were sufficient to specifically and effectively silence essential genes in the entire body (!!!).  As a result, the growth inhibition caused by the pest was much reduced after ingesting the RNA.  I guess that the delivery work is aimed at even further reducing the required amount of RNA by a log or two.

The mechanism of this amazingly efficient gene silencing is likely the same as the early finding in nematode worms (another group of agriculturally important pests no less) that feeding them with E. coli bacteria expressing dsRNAs can cause potent and long-lasting silencing.  This phenomenon is referred to as ‘systemic RNAi’ and involves RNA amplification.  Although such systemic RNAi is unlikely to operate at the same high efficiency in all pest species, harnessing it in a species like WCR would already be highly commercially lucrative.  Monsanto apparently is close to commercializing such an RNAi-based insectizide.

Transkingdom RNAi and ddRNAi

When thinking about RNAi in plants, DNA-directed RNAi (ddRNAi) usually comes to mind, the type of RNAi where long hairpin RNAs are expressed from a transgene inserted into the host genome.  Certainly, a ddRNAi approach e.g. in corn against the same transgenes is also possible and indeed this has proven to be equally effective when compared to sprayable RNAi in the 2007 Nature Biotech paper.  It should also be added that unlike in your typical protein-expressing transgenic crop, ddRNAi per se does not involve transgenic protein expression, thereby lowering the regulatory hurdles.

When thinking about oral RNAi, especially in light of the RNAi history of feeding dsRNA-expressing bacteria to nematode worms (the first ‘transkingdom RNAi’ example), one may also consider the ‘Transkingdom’ RNAi technology by Marina Biotech (originally from Cequent).  One can speculate that Monsanto’s interest in Marina Biotech is related to this as part of a wider RNAi initiative by the Ag giant. An issue of feeding pests with such bacteria, however, is that again you release transgenic organisms into the wild.  While this may not be so much an environmental or health problem, you know that there are many out there that are religiously against anything ‘GM’, smashed windows and all.

Has Tekmira vs Alnylam been settled?

If we assume that LNP delivery is part of the package in the Alnylam-Monsanto deal and that Monsanto is the Ag company that has been working with Tekmira (until at least just two weeks ago), one can come up with at least three hypotheses for how the deal reflects on the Alnylam-Tekmira litigation:

1)     Tekmira and Alnylam competed, and Alnylam won;

2)     Monsanto will also tap Tekmira to cover all bases;

3)     There is an understanding that Alnylam will use the $30M to settle the lawsuit, and as part of the settlement/M&A, Monsanto will gain access to Tekmira technology.  Announcing the Monsanto deal before settlement is beneficial as it further bolsters Alnylam’s reputation and balance sheet. In that line of reasoning, the Regulus IPO should come SRTL.

The next weeks will tell.