Arrowhead Research Acquires Roche’s RNAi Therapeutics Assets

The long wait is finally over. Almost a year* after infamously announcing its retreat from developing RNAi Therapeutics in-house as part of a corporate restructuring, Roche has sold its related assets to Arrowhead Research. That announcement sent shockwaves through the RNAi Therapeutics World as investors and potential licensing partners alike took this to mean that something was very wrong with RNAi Therapeutics technology. This led to a freeze in business development activities and precipitously falling valuations. Today’s news brings some closure to Roche’s sorry RNAi adventures and also promises a number of interesting revelations and developments in the months to come.

Arrowhead Research, of course, is already a well known player in RNAi Therapeutics through its Calando subsidiary. Arrowhead in my mind has suffered, however, from not realizing that in order to be a credible platform company, you actually need real scientists, and not just collect abstract intellectual property. It has always baffled me how Calando attempted to license its RONDEL delivery technology without even having a laboratory to overcome some of the apparent challenges of this technology.

With about 40 scientists that will join the company from Roche’s Madison, Wisconsin, site ('Mirus') this has obviously changed. This, however, also means that one should expect Calando’s RONDEL technology to be de-emphasized as these scientists will be more motivated to develop the Dynamic PolyConjugate (DPC) delivery technology they invented. As a reminder, DPCs have shown promise in mouse models for delivering siRNAs to selected cell types in the liver. It remains to be seen, however, whether this translates into primates, and whether DPCs have use beyond the liver. A recent imaging paper on DPCs suggests that the latter may be more challenging than one had first hoped (Mudd et al., 2010). Manufacturing and scale-up question will likely also need to be resolved first before entering clinical development.

A key question will be whether Alnylam will bless this spin-out or whether it will it try to undermine Arrowhead Research which has now gained access to, amongst other assets, Tekmira’s SNALP delivery technology and Alnylam’s own RNAi triggers. This could make the New Arrowhead a direct competitor of Alnylam, similar to Tekmira. While I am not sure yet whether Arrowhead management shares my view, but given the advancements of SNALP technology in the clinic, whilst DPCs have been stuck in pre-clinical for some time now, it would be obvious for Arrowhead to create near-term value by taking advantage of the well trodden path of advancing SNALP programs into the clinic. Of course, access to some of the newer lipids would be desirable.

For Arrowhead shareholders, this is likely a good deal given the depressed asset valuations in RNAi Therapeutics and Roche’s apparent desire to get out of RNAi Therapeutics. However, Roche will not be out entirely as it obtained a minority stake in Arrowhead and apparently retained licensing options and milestone/royalty streams to future products which are likely to be somewhat punitive considering that Arrowhead Research did not have much cash to offer.

Equally interesting for Arrowhead shareholders is a financing agreement with Lincoln Park Capital (LPC) under which LPC will provide up to $15M in funding over the next 3 years. Sounds familiar? If so, then you have probably seen LPC reach an almost identical deal with Marina Biotech just last week. The benefit for Arrowhead and Marina is that this source of capital brings some much-needed financial stability to the companies, just as Benitec used a similar arrangement with La Jolla Cove Investors to finance its recent transformation. One can expect, however, that LPC does not view their investments as charitable donations, and based on Benitec’s experience, it will both likely serve to support Arrowhead’s share price, but also somewhat cap its upside.

* An earlier version incorrectly referred to the waiting period as two years.