Dicerna Focuses Operations Following Settlement With Alnylam

Last Friday, Dicerna and Alnylam announced that they had settled all ongoing litigation between the parties just as the acrimonious fight was about to court. 

Settlement terms

As part of the settlement, Dicerna will pay Alnylam $25M in stock and cash and drop its anti-competitive practices counter-suit against the RNAi behemoth.  In addition, Dicerna has agreed to not pursue certain targets/indications (see discussion below).  In return, Alnylam will drop its trade secret lawsuit it had filed on grounds of suspected GalNAc-conjugate trade secret misappropriation in the wake of Alnylam’s acquisition of the Merck RNAi assets in early 2014.

Litigation background

Allegedly, ex-Merck employees who had been hired by Dicerna had taken along competitively advantageous information that Alnylam claimed that it paid for.

Personally, given the timing and fuzziness of the litigation, I had always believed that Alnylam primarily filed the lawsuit to drain a much smaller, but direct competitor of vital financial resources.  In particular, even if these ex-Merck employees took with them information important to Alnylam, Merck obviously didn’t protect such knowledge as expected for trade secrets.  Moreover, Dicerna’s application of GalNAc-RNAi conjugate looks extremely different from that of Alnylam.  Even a more negative outcome should therefore not have adversely affected Dicerna's ability to further develop its technology.  

Coming out from underneath the litigation cloak

Still, this strategy had almost worked out.  Ironically, it was Alnylam’s own success in the clinic (à primarily Patisiran phase III APOLLO data last fall, but also GalNAc-related data) that had provided Dicerna stock with sufficient strength for the company to be in a position to ward off the existential threat posed by the litigation: $25M just 15 months ago would have been a mortal blow to ~$50M market cap minion Dicerna.  Today, the $600M market cap makes the $25M almost immaterial.

Nevertheless, based on the extremely bullish market reaction to the deal (up close to 40% following announcement of the settlement before settling the day at +18%), I believe that an important facet of the deal has been widely underappreciated.  Specifically, the fact that Dicerna had to agree not to pursue certain targets could completely change the face of this company. 

From the Alnylam press release:

'Dicerna will be restricted in its development and other activities relating to oligonucleotide-based therapeutics directed toward a defined set of Alnylam targets, for periods ranging from 18 months up to four years.'

Instead of a broad pure-play GalNAc RNAi company, Dicerna now probably needs to be considered a 5-or-so development candidate company for which the end game will be its sale to a larger company.  Except for the long-promised deal on the mystery candidate (AAT?), this reduces expectations for future strategic blockbuster deals.

Disclosure: Especially in light of the target selection restrictions, I view the settlement as incrementally negative for Dicerna and expect the market to realize the same soon.  Following Friday's strong move to the upside, Dicerna is a short-term conviction short with a $10 near-term price target.  Also expect Alnylam to sell the 2M million Dicerna shares almost as soon as it receives them (please read comments section below for correction).  Long Alnylam.

Tekmira Regains Control over Leading Delivery Technology

When Tekmira filed its lawsuit against Alnylam in March 2011, it found itself in an impossible position: Alnylam’s apparent mis-use of SNALP-related trade secrets not only diminished their strategic value to Tekmira, including depriving it of potential pharmaceutical partnerships, Tekmira may even not have been able to use the technology it invented.  As a result, it might have been left to die in a little cage with ‘1^st generation’ technology as its technology was making rapid progress.    

Cash and Control

Based on the disclosed terms of last night’s settlement with Alnylam (Tekmira's version here, Alnylam's version here), Tekmira got essentially all that it needed: control over its leading systemic RNAi Therapeutics delivery technology, including the contested MC3 lipids of which the IP was assigned to Tekmira, and a $65-75M payment (~$16-18M of which will go to pay outstanding legal fees).  The payment, of course, will finally allow the otherwise financially conservative company to push forward their development pipeline with interesting therapeutic candidates such as TKM-PLK1.  Notably, as part of the settlement, Tekmira obtained full ownership over this candidate which I believe addresses one of the most exciting RNAi targets in oncology. According to the Q3 financial results, also released today, TKM-PLK1 has been making good progress, including showing signs of drug activity and will advance into phase II studies next year.

Beyond the cash, the new IP licensing arrangement between the companies is at least as valuable.  Importantly, Tekmira has regained exclusive sub-licensing rights to ‘LNP intellectual property’, an incredibly important part of the settlement as before that Alnylam enjoyed such control, mainly via its rights to the Semple-Wheeler IP covering important aspects of ionizable SNALP technology.  This should open the door for Tekmira to enter into the long-expected pharmaceutical partnerships. Novartis and Takeda are here the most obvious near-term candidates for platform-type relationships.

Assuming that the new relationship is not restricted to RNAi Therapeutics, an added bonus is that the settlement could similarly pave the way for relationships in the microRNA Therapeutics space, particularly for the delivery of microRNA mimics.  Only recently, privately-held Mirna Therapeutics made headlines by raising $34.5M to fund the development of a microRNA mimic into the clinic, indicating the significant interest in this area of drug development.

Value of the Trade Secrets

Less clear is the damage to the trade secrets that were at the center of the dispute and on which much of Tekmira’s strategic advantage rested.  Numerous groups and companies have attempted home-brew liposomal RNAi trigger delivery, but only Tekmira’s technology has made it into the clinic.  Especially the ability to formulate and manufacture the particles is what set Tekmira apart from the competition.  In their press release, however, Alnylam stated their intention to use its own LNP manufacturing capabilities.  Apparently, it has already established such GMP manufacturing capability over the last year (in a separate building apparently for added suspense).  Assuming that Tekmira did not assist them in establishing such manufacturing, this indicates that the number of people with critical knowledge to the trade secrets has grown.  This can be particularly a problem in the wake of lay-offs in a place like biotech world capital Cambridge, Mass. 

Still, I assume there to be significant hurdles for other companies to replicate Tekmira’s processes, and with its liposomal experts, Tekmira should continue to lead in advancing SNALP delivery, making it the liposomal delivery partner of choice.

With cash of around $50M (excluding the $10M which are contingent on likely 2013 development milestones for ALN-VSP02 and ALN-TTR02), partnerships likely to come in due to the clarified IP situation, the $141M DoD Ebola biodefense contract (a new more potent and safer formulation will be used) and the income stream from Talon Therapeutics, Tekmira has thus emerged as the vibrant RNAi Therapeutics company it should have become 3 years ago.  Nevertheless, today's terms underline the value of Tekmira and RNAi delivery in general.  Exciting times ahead.

Tekmira and Protiva Reunification Forms Leading RNAi Therapeutics Delivery Company

[Corrections/clarifications following Tekmira conference call: Apparently, the new company has also exercised an InterfeRx pick for the ApoB program. In addition, the PLK-1 option by Alnylam is for a 50:50 development and commercialisation arrangement to be exercised any time before start of phase II trials.]

Over the past weekend, as the RNAi world was congregating in nearby Whistler, something very unusual happened in Vancouver, BC. For the sake of RNAi Therapeutics, personal ambition has been set aside and an equitable and very cleverly crafted outcome was found. The outcome relates to a fight for one of the leading systemic RNAi delivery platforms that has cost the Tekmira and Protiva literally almost as much in legal and other related expenses and management time as was spent on technology development. It has also put their many partners, currently Alnylam, Regulus, Merck, Roche, and others, with at least four more pharmaceutical parties evaluating the technology, in a difficult situation and created many inefficiencies.

With more than $35M in cash (Tekmira: ~$20M; Protiva: ~$15M; Roche and Alnylam equity investments: $10M; minus fees, minus severance pay), leading liposomal siRNA delivery IP and science, numerous and lucrative partnership activities, lawsuits out of the way, plus 7 InterfeRx licenses from Alnylam, the new Tekmira will emerge as the first strong public RNAi Therapeutics delivery-focused company. The $10M equity investments for $2.4 a share, $5M each by the Roche Venture Fund and Alnylam, values the combined company at over $100M, almost 3x the current price, with 48% owned by former Tekmira, 44% by formerly privately held Protiva, and 4% by Alnylam and Roche each. It is moreover more than likely that this sets the stage for further partnership arrangements, some of them potentially similar to the one involved in the exercise of the first target pick under the InterfeRx license.

Through this reunion, Tekmira has now also selected its long-awaited first target under InterfeRx. The target is polo-like kinase 1 which Protiva had been developing for the treatment of liver cancer and metastatic colorectal cancer. Perhaps related to the fact that one of Alnylam’s lead development programs is also aimed at liver cancer, Alnylam has retained the right to obtain this program prior to the start of phase II trials. The other development program in Protiva’s portfolio is/was ApoB 100, for which no InterfeRx pick was exercised. This is consistent with the observation from probably half a dozen RNAi studies on ApoB knockdown that I have heard from which have reported sequence-specific fatty liver phenotypes in pre-clinical models.

This very positive business development goes hand in hand with the recent presentations of much improved SNALP and SNALP-like formulations pushing the IC50s down to the 0.1mg/kg range, particularly important since the therapeutic index is by far the most pressing issue with liposomal RNAi delivery. Methods enabling the delivery of liposomes into the endosomes of target cells, with subsequent safe, yet efficient escape of the siRNA cargo into the cytoplasm, will be critical. I am sure the scientific group led by Ian MacLachlan will be best qualified to find such solutions.

This is also the time to congratulate the managements of the parties to a deal that until now almost seemed impossible given the complicated entanglements and heated exchanges in the past. One can only hope that this sets an example for RNAi Therapeutics to hold off on the legal battles until real products come close to reality.

Disclosure: The author currently owns Tekmira stock.