Arrowhead Research keeps mopping up the billions of Big
Pharma dollars spent on RNAi Therapeutics R&D and IP. After acquiring the Roche assets for dimes on
the dollar in 2011, heralding Arrowhead Research becoming a real biotech company, it is now Novartis’ turn to give their RNAi assets to dedicated
RNAi hands.
What Arrowhead bought
For $10M and $25M in cash and stock, respectively
(representing a dilution of ~5%), Arrowhead research acquired
1)
new Novartis RNAi trigger chemistry that the
company claims to fall outside competing RNAi trigger IP (thus avoiding milstone
and royalty obligations);
2)
intriguing new RNAi trigger chemistry that supposedly enhances RISC RNAi effector loading of RNAi triggers in the cytoplasm and which could enhance the potency and duration of gene silencing; and
3)
the RNAi-related IP rights that Novartis
acquired from Alnylam in 2005, most notably the 30 target picks.
Arrowhead in the house
10 years ago, Novartis made headlines by getting access to
30 exclusive target picks under Alnylam RNAi trigger IP. For the privilege of picking targets not only ahead of Alnylam, but also excluding Alnylam from these targets, Novartis paid $10M in cash and made a $58M
equity investment at a 16% premium to the ALNY trading price back then
(so say $20M overall), plus the usual biotech milestone (up to $700M) and
royalty obligations.
At the time, Alnylam was criticized for selling much of the
farm. This is because 30 target picks might have been too much given the state of RNAi
delivery technology at the time.
Archrival Sirna Therapeutics gloated that it would never
enter into such broad sweeping deals and consequently started to win business
from other Big Pharma names, culminating in the $1B acquisition by Merck in
2006.
Novartis had time until October 2010 to officially nominate its target
picks. At the time, SNALP LNP delivery to the liver was the only game in town
for clinically relevant RNAi delivery. Therefore,
if Novartis had any brains, it would have spent some of the picks on the
juiciest liver targets in addition to their oncology dreams.
Usually, I don’t give much credit to the
critical thinking ability of Big Pharma, but given that a number of Novartis
RNAi folks came from Sirna Therapeutics and had worked on liver targets such asHBV early on, it is a good assumption that, yes, a few targets are aimed at the liver.
Note also that Alnylam never entered the HCV drug development race, instead
pointing to their unwillingness to compete with its microRNA joint venture
Regulus Therapeutics for the target.
This, of course, adds an interesting facet to the somewhat
uneasy relationship between Arrowhead Research and Alnylam and how today's deal impacts Alnylam’s 3 STAr franchises, namely viral
hepatitis, cardiometabolic, and orphan diseases.
Value of Novartis RNAi assets in the eye of the beholder
I fully expect the usual suspects to spin today’s news as
Arrowhead Research (once again!!) acquiring assets that a Big Pharma had put on hold (in the case of Novartis in
early 2014) and nobody else allegedly wanted.
This may be partly true given that Novartis did not appear to be
successful at developing strong RNAi delivery technologies. So the Novartis RNAi assets in isolation may
not have been worth that much.
Arrowhead, however, is in a different position given that its DPC
delivery technology is being validated in the clinic. I expect the ARC-AAT results towards the end
of the year to remove any doubt about that.
Moreover, Arrowhead is on track to commit its subQ DPC version into
clinical development, instantly increasing the value of any cardiometabolic
targets that Novartis may have picked.
This illustrates that for Arrowhead Research today was about
expanding its RNAi trigger IP leverage in addition to increasing its chances of finding the best possible RNAi trigger against a given target from its broad
stable of RNAi trigger structures and chemistries (usiRNAs, Dicer-substrates,
canonical), and finally adding a unique RNAi pharmacology trick to its
toolbox. All of this to be married with
its DPC delivery technology so that the result would be worth far more than the
sum of its parts.
Today, we have only glimpsed part of the strategic and
technological importance of the deal. Stay tuned as the movie unfolds. Kudos to Arrowhead Research for making the
bold, but mostly right strategic decisions.
