Genentech Research VP Predicts Industry Productivity to Increase

Besides the cloudy economic picture in the established pharmaceutical markets, much of the current cost-cutting in pharmaceutical R&D can be explained by a loss of confidence of the industry in their own ability to efficiently develop drugs. This assessment is largely made by MBAs without a biomedical background who will measure current industry productivity in terms of how many drugs get approved today, that is 10-15 years after most of the critical development decisions were made. Worse still, instead of considering the new biotechnologies and exponentially growing insights into human biology and disease as a solution, because the downturn in productivity seems to be correlated with the genomic revolution, of which RNAi has become an indispensable part, these very technologies are blamed for increasing the cost of drug development. If you thought Luddites were a phenomenon of the 19^th century, think again.

In this context, I found it quite refreshing to listen to a presentation by the Vice President of Research & Early Development at Genentech at the Stanford ‘DFJ Entrepreneurial Thought Leaders’ seminar series (highly recommended, podcast available on iTunes) in which Richard Scheller predicted that industry productivity is going to improve significantly (note: while Roche owns all of Genentech, Genentech’s R&D remains separate). In his opinion, one of the main reasons for the industry’s poor record these days of getting drugs past the regulatory agencies was a spending glut when biology wasn't ripe for it. In the 90's, right along with the internet bubble, there was a strong belief that the pharmaceutical industry was invincible. When the harvests from the small molecule revolution were aplenty, companies offered their R&D heads quite a bit of the profits for re-investment. Needless to say, these VPs did not hesitate one moment, accepted and spent it. Unfortunately, 'pre-genome era', there were not that many well validated targets and projects to spend that money on and that’s how we end up with the $1-1.5B figure popularly cited for what it takes to get a new drug approved- on average.

This, however, has changed dramatically according to Dr Scheller due to the information explosion brought about by the new biotechnologies (high throughput sequencing, RNAi, proteomics etc). As a result, we have now many more validated targets to choose from. This, he predicts, will be a major force in re-invigorating industry productivity.

It is the ability of RNAi Therapeutics to pretty much go after any drug target, and often not just one but a few in parallel (see Alnylam’s VSP or Tekmira’s Ebola programs), that should make it so valuable to the industry (my thoughts).

Richard Scheller then added that not all Big Pharma companies will participate in reaping the benefits of these advances. Without naming names, he said that some companies have 'lost their way' and will pay for neglecting R&D. Cutting internal R&D and out-sourcing the rest will cause these companies to lack the expertise to make the right technical go/no-go decisions. While commercialization is clearly important at the end of the process, he warned that commercial considerations are often brought into play too early in the process and he cited some examples in which products with mediocre sales forecasts became Genentech’s biggest sellers and vice versa.

I guess John Maraganore referred to this as ‘hyperanalytical insanity’ in a 2009 interview with Xconomy. It also reminds me of comments by Art Krieg, then head of Pfizer’s RNAi Therapeutics efforts, which doubted the commercial potential of drugs that are intravenously administered. If a translational medicine person credited as a father of TLR therapeutics starts to think along these lines, you get an impression of the brain-washing powers of sitting in the boardrooms of Big Pharma.

Intravenously administered RNAi Therapeutics for the treatment of hypercholesterolemia is probably a good example of such mis-placed early criticism. Critics say that with such a mode of administration alone, this can never be a big seller in the lipoprotein-modulating market. This, of course, entirely neglects the high unmet need of the millions of patients not well served by currently available medications alone. It also is not open to the possibility that the eventual clinical profile will be so differentiated and/or superior/complementary to existing approaches that patients and doctors are quite happy to accept infusions every month or two. Without testing it at least in phase II studies, nobody really knows what the commercial profile will be.

To most of the readers here, Richard Scheller probably stated the obvious. Nevertheless, it is good to hear somebody influential in the industry still apply logic to drug development at a time that RNAi Therapeutics has become such a popular punching ball. These pockets of reason within Big Pharma/Biotech will be critical in keeping RNAi Therapeutics move forward for everybody’s benefit.

Tectonic Shifts in RNAi Therapeutics

As consolidation in RNAi Therapeutics in the Old Economies continues, the balance of power is rapidly shifting towards the resource-rich and growing economies of the Far East where national RNAi champions are set to make their mark on the international RNAi Therapeutics scene.

After some notable mergers between private and public RNAi companies (Intradigm-Silence, Cequent-Marina Biotech), and the decision by some, albeit not all, Big Pharma companies to turn their backs on RNAi Therapeutics development in-house, a contraction of the publicly traded pure-play RNAi companies seems inevitable. Arrowhead Research (ARWR), despite its name, has long stopped internal RNAi research and its technology is getting stale by the day, the captains of RXi Pharmaceuticals (RXII) have decided on a course that is entirely incompatible with it continuing to be an RNAi platform company, Marina Biotech (MRNA) despite its good intentions signaling to the world almost daily that it is in distress and has not found anything worth focusing on, and the executives of Rosetta Genomics (ROSG) personally making sales calls as the company continues to bleed money.

Some of these companies do have interesting technologies worth funding in my opinion. RXi’s sd-rxRNAs are well differentiated and complementary to the established RNAi trigger structures, Rosetta had established a prolific microRNA diagnostics machine, and Marina Biotech built a very able and what seems to be enthusiastic RNAi Therapeutics team, but probably invested too aggressively hoping for an early turnaround in RNAi sentiment that would lift all boats. There may be a rationale for conserving some of that value by a) spinning out (RXi) and/or merging technologies that are synergistic (ROSG); and b) selling themselves for a small premium for its practical RNAi research expertise (MRNA).

The pure-play survivors may be the following: Alnylam, Tekmira, Silence Therapeutics, and Benitec. Alnylam is obvious, because of their cash and an aura that makes investors and pharmaceuticals partners pay a premium for their assets (I expect the VSP and Atu027 deals to reflect this). Tekmira as the delivery experts and also benefitting from diversification tendencies in the resource-driven Canadian economy, an investor base, however, that Tekmira needs to tap more aggressively. Silence Therapeutics with its recent progress in delivery, some valuable RNAi trigger IP, and supported by an investor base that has widened in the wake of its merger with Intradigm to cover the US, UK, and Germany. And finally Benitec which has positively surprised me by its recent recapitalization which puts it again into the category of drug developers and not just an IP play. Certainly, the re-issuances of a fundamental ddRNAi trigger patent have helped, but I don’t think this recapitalization would have been possible without resource-hungry China buoying the Australian economy.

Alnylam: RNAi trigger IP, brand and industry connectivity.

Tekmira: problem solvers, delivery powerhouse.

Silence: RNAi experience, broad investor base.

Benitec: ddRNAi powerhouse, Australian economy and proximity to China.

Benitec probably best symbolizes the shift in RNAi Therapeutics towards the countries with most economic growth. While its commercial focus may still be with the traditional markets for innovative medicines (US, Europe, Japan), its research activity, once in the US, has shifted to the East as illustrated by its collaboration with Biomics on HBV. This collaboration both taps into the geographic proximity with China as well as the growing scientific expertise that can be paid for with the strong Aussie dollar.

Don’t be surprised if the leading RNAi Therapeutics candidate for scarless wound healing will be developed in China (Sirnaomics), and not by RXi in the US, or if the first RNAi agent with human use will be marketed in the Far East and not the US or Europe just as it happened in gene therapy. Some of it may be explained by less stringent standards of patient protection in these countries, but it would be a mistake of complacency to use this as the only explanation.

Whether it will be Biomics, Sirnaomics, BMT, or others remains to be seen, but the flow of investment dollars firmly points towards a global shift in RNAi Therapeutics development and commercialization. Smart minds and outstanding technologies are one part of the equation, financial backers with deep pockets the other.

Sifting Through the Noise in RNAi Therapeutics Delivery

Hardly a day goes by without news of delivery deals, or universities issuing a press release that their scientists have just published on a revolutionary and ‘novel’ delivery technology that, by the way, is available for licensing. To be fair, public relations is a necessary evil of drug development and even academia these days, and don’t expect any company to blink and admit to their weaknesses.

This, however, poses a real problem for RNAi Therapeutics as the noise causes investments to be diverted away from the most deserving technologies, technologies that are more than just wishful theoretical thinking and with reasonable paths towards the clinic. There is, of course, also a place for the more audacious technologies, but this is what universities are for.

When reading about a new delivery breakthrough or deal announcements from sources you have hardly heard of before, it pays to browse through the peer-reviewed and patent literature to get a first impression of whether there is anything of substance to start with. Rest assured, a new delivery technology, especially if ground-breaking, won’t successfully go from scratch into the clinic within the next 10 years.

I don’t want to name any deal or company in particular, but I would also caution you not to put too much faith into the delivery claims of those biotech companies that are run by management and Directors that constantly chase the latest and hottest in science in order to generate constant buzz around their companies so that more shares and options can be issued and dumped on retail investors. Be wary of those companies that get regularly promoted in cheap analyst reports listed on Yahoo! and Google Finance pages, companies that select academic collaborators not based on how they can contribute technically, but based on politics and fame, and where companies are happy to have rumors spread on message boards.

When asked by a newspaper reporter what, in my mind, were the key publications in RNAi Therapeutics delivery over the last 3 years, I answered that it’s not been one or two, but the series of papers describing the transitioning and refinement of SNALP delivery technology from the first non-human primate proof-of-concept data reported in 2006 in Nature into the clinic today. Needless to say, despite the criticality of these de-risking events, also as it relates to the overall investment climate in RNAi Therapeutics for the coming years, this wasn’t picked up as being quotable.

There is no easy solution to this capital allocation problem. All one can hope for is that some of the more deserving technologies can build a network of supporters that, among the boom and bust cycles of the industry, will see them through to at least early clinical studies where they will have to prove their mettle.

Alnylam Responds to Tekmira’s Complaint

Alnylam this week responded to Tekmira’s Complaint a month ago in which it alleges Alnylam to have repeatedly misappropriated and misused Tekmira property (see also blog entry 'Enough is Enough'). In its Response, Alnylam points to the various legal arrangements between the two companies which the company feels entitles it to broad use of Tekmira’s property. In the good tradition of David vs Goliath, Alnylam filed a counterclaim against Tekmira saying that they were wronged by Tekmira for including Alnylam confidential information during a patent prosecution. The full Response can be found here, Alnylam's press release here.

Tekmira’s grievances against Alnylam can be summarized in that Alnylam behaves as if its contractual relationships and past payments entitle that company to essentially and indiscriminately all of Tekmira’s property, never mind non-disclosure agreements and the contractual limitations on Alnylam’s use of Tekmira know-how, trade secrets, and only non-exclusive access to IP generated by Tekmira after October 2008. Tekmira insists that it is still the owner of much of the IP that Alnylam licensed from them, and as the licensee Alnylam has an obligation to inform the owner, Tekmira, in how it uses the licensed technologies. Moreover, Alnylam is alleged to have engaged in a deliberate scheme to misappropriate delivery IP and used all this to marginalize Tekmira in their partnership discussions by posing to be the true liposomal siRNA delivery innovator and enabler.

Alnylam on the other hand, cites those very same agreements as evidence that it, generally speaking, indeed possesses great freedom in how it uses Tekmira property. In their Response and Counterclaim to Tekmira’s Complaint, however, Alnylam did not discuss the important question of how it has been portraying liposomal delivery to Alnylam’s past, current, and potential future partners (including Roche, Novartis, Takeda, and Sanofi-Aventis), an area where I expect some of the juicy revelations to emerge from.

Instead, Alnylam is focusing our attention on the ownership of the new star lipid ‘MC3’ and Tekmira’s supposed interference with one of Alnylam’s VSP-related patent applications. The MC3 issue opens the whole can of worms related to the historical animosities among some of the world's top liposomal researchers in Vancouver and Alnylam’s meddling therein. The VSP issue to me seems like a red herring, quite common in patent prosecution and normally to be resolved by the USPTO in the ordinary course of patent prosecution. It adds, however, to the ample evidence contained in Alnylam’s Response that there have been tensions between Alnylam and Tekmira/Protiva going back to at least 2007 which is in contrast to Alnylam’s initial reaction that Tekmira’s Complaint completely caught them by surprise.

The Surprise Myth

That Alnylam was ‘surprised’ (see the 'Big Surprise Interview' in Xconomy) by Tekmira’s apparent grievances is a tough sell at best, if not purposefully insincere. Most industry watchers have been well aware that this has been a very delicate relationship. Alnylam’s own Response actually is one of the best pieces of evidence for this. It cites a history of differences between the parties of how Alnylam was able to use the very same confidential information that are now at issue (from the Response):

“19. In contrast, Tekmira has sought to preclude Alnylam from obtaining the benefits of the agreements, including by interfering with Alnylam’s inclusion of information that is not owned or controlled by Tekmira in Alnylam patent submissions. Tekmira has also claimed confidentiality over information that is either in the public domain or to which Alnylam has contractual rights. Tekmira has also asserted an ownership interest in technology that was funded and/or independently developed by others including Alnylam.”

Furthermore, Alnylam describes that AlCana was set up specifically to avoid Tekmira eventually suing Alnylam over technology developed by Tekmira’s ex-employees. Clearly, Alnylam felt uneasy about hiring Tekmira’s ex-employees as consultants to work on competing technology.

That the tensions go back to at least 2007, is illustrated by that article in Gene Silencing News where it was reported that David Bumcrot publicly discredited Protiva’s technology only to shortly thereafter find Alnylam, hat in hand, seek help from Protiva with the clinical development of their product pipeline (here my take at the time). It is also a myth that Roche and others were altruistically led by Alnylam to Protiva/Tekmira. Roche and Alnylam, as evidenced by Roche’s Factor VII patent application, obviously tried quite hard to make liposomal siRNA delivery work without Protiva and in fact could serve as yet another piece of evidence of Alnylam's attempts to marginalize Tekmira. That Roche ended up working with Tekmira is most likely because Alnylam was afraid that it would not be able to keep the promises it made to Big Pharma when it sold those hundred million+ licenses. Alnylam’s supposedly selfless efforts in re-uniting Tekmira have to be seen in the same light.

Considering the admitted tensions over confidentiality and complaints/objections by Tekmira made in private, it rather seems to me like Alnylam is splitting hair in accusing Tekmira for not following the contractual dispute resolution mechanisms before going public. I am in no position to tell in which way Tekmira expressed its grievances to Alnylam. Email, phone call, CEO-to-CEO chat, registered letter to company headquarters or not, it is also debatable whether such procedures would even apply in a case of pre-meditated IP theft as alleged in the Complaint, or if irreparable harm were imminent. This I leave up to Tekmira’s attorneys to decide which to me look quite capable in making such a judgment.

Alnylam further cites as evidence for Tekmira’s failure to resolve their issues in private a 6-month absence of discussion between the companies’ CEOs:

“Indeed, where the initial dispute resolution procedure of the companies’ agreements requires a defined period of discussion between the company CEOs, Tekmira’s CEO’s last communication of any form with Alnylam’s CEO occurred over six months prior to the e-mail correspondence notifying Alnylam of the currently filed complaint. These actions have irreparably harmed Alnylam’s reputation with its collaborators and investors.”

I am not sure how Alnylam thinks this unambiguously proves their claim that Tekmira failed to try and resolve the dispute(s) in private. A 6-month absence does not exclude prolonged and heated discussions before the period of quiet. In a partnership that important, such a long period of no high-level discussions seems rather odd and indicative of a poor relationship. Curiously, 6 month before Tekmira filed their Complaint would seem to coincide with Novartis’ ‘surprise’ decision not to expand their relationship with Alnylam (see 'Novartis wake-up call'). Novartis, of course, is one of the companies named in the Complaint.

It may also be worth mentioning that it is Barry Greene, President and COO of Alnylam, that seems to be more the senior contract guy at Alnylam, as supported by the evidence provided by Alnylam (the Greene-Murray Letter). I just mention this since Alnylam seems to be awfully concerned about technicalities, not the spirit of their arrangements with Tekmira.

Alnylam Confused Over MC3 Inventorship

Ownership over the MC3 ionizable lipid is certainly one aspect of the Complaint. While Tekmira is constantly improving its lipids, it obviously would hurt Tekmira’s competitive position if Alnylam could also offer improved lipids without sharing the benefits with Tekmira, especially if Tekmira believes that what lipids Alnylam wants to sell belong to Tekmira after all.

Alnylam cites as evidence of their ownership over this lipid a letter by Barry Greene (not JM) to Mark Murray on March 13, 2010, in which Mr Greene seeks to confirm Alnylam’s exclusive rights to this lipid (subject to limited rights of Tekmira to use MC3 for their own product candidates), apparently concerned that Pfizer might access this lipid without Alnylam’s involvement. Mark Murray signed that letter.

As another piece of evidence of Tekmira blessing Alnylam’s ownership over MC3, the Reponse says that onAugust 7, 2009, Tekmira reviewed and signed off on the provisional patent application for MC3 presented to it by Alnylam. Finally, Alnylam says that in July 2009, as part of AlCana’s founding, Tekmira waived its rights to sue Alnylam over technology invented by ex-Tekmira employees (‘Supplemental Agreement’).

While this seems to make MC3 a cut-and-dry case, two aspects about the MC3 inventorship had made me pause when I first saw that patent application, even before the current dispute: (1) the absence of key AlCana founders as inventors in the subsequently published patent application; and (2) the fact that the two ex-Tekmira employees that are named as inventors, are named so only for United States purposes.

Provisional patent applications are normally not available from the public domain. Provisional patent applications are a way of proving one’s possession of the invention in order to secure the priority date. This can be done by providing a bunch of early data and the guidelines are rather loose. This also means that no formal inventors’ oaths have to be provided. It is therefore possible that Tekmira signed off these documents due to incomplete information, under the false impression that this indeed was an invention by Alnylam. Importantly, it was only on December 16, 2010, that the MC3 patent application WO 2010/144740 was published and presumably available to Tekmira. Before that, in conference presentations and the Q3 2010 conference call in November 2010 in which it praised MC3 as the new wonder-lipid (see 'Alnylam Green Shoots' blog), it was clear that Alnylam wanted keep the exact nature of this lipid secret.

In their Response, Alnylam claims that MC3 and certain derivatives were the invention of the scientists fired from Tekmira and that would go on to form AlCana:

“49. The MC3 lipid and certain derivatives were invented by the scientists who were fired from Tekmira and who formed AlCana, pursuant to research funded by Alnylam and with respect to certain MC3 derivatives, under a research plan agreed to by Alnylam, AlCana, UBC, Tekmira and Protiva.”

But looking at the (published) patent application, all these key people are actually missing as named inventors. I would identify these key scientists as Thomas Madden, Sean Semple, and Michael Hope and it would have been natural for Tekmira to have non-compete arrangements in place for these individuals. Importantly, these are also the senior authors on the KC2 Nature Biotech paper from January 2010, a lipid from which MC3 is derived (see also e.g. slide 28 in August 4, 2010, presentation by Alnylam at the International Liposome Research Days held in…Vancouver).

However, despite of Alnylam’s assertions that it was the fired Tekmira employees now working, for apparently legal purposes, at AlCana (but practically for Alnylam) that invented MC3, the published patent application only lists Alnylam employees (and maybe some consultants) as inventors and Alnylam as the applicant: Akinc, Dorkin, Qin, Cantley, Manoharan, Kallanthottathil, Narayanannair, Jayaraman; and (for US purposes only) Chen, Ansell. (the latter two being the two ex-Tekmira employees, but no mention of AlCana).

You would think that, as the inventors of KC2, the inventive contributions by Madden, Semple, and Hope would have played an important role in MC3, much more so than the number of trained oligonucleotide chemists from Alnylam listed as inventors on the application. Given that the Response admits that Alnylam hired the ex-Tekmira employees that would eventually form AlCana as consultants, it seems highly unlikely that Madden, Semple, and Hope played no role in the MC3 patent application.

It is equally strange that the two ex-Tekmira that are named as inventors, Chen and Ansell, are named so only for US purposes. It will be interesting to find out whether they were only added at the time that the ‘real’, that is not provisional patent application was first filed with the US, i.e. after Tekmira signed off on the provisional.

Why this is important is because the US as a first-to-invent jurisdiction is particularly strict about inventorship. In most of the rest of the world where first-to-file is practiced, particularly in Europe, inventorship isn’t that important. Practically anybody can be named as inventor on a patent application as long as nobody else challenges that inventorship. This could be used to hide the real people behind an invention as long as they are fine with it.

To be fair, there is no reason for me to believe that Chen and Ansell did not contribute to the invention, and Chen is listed with an AlCana address on the KC2 Nature Biotech paper. The absence, however, of their former, more senior colleagues at Old Tekmira and now running AlCana is rather strange and raises questions and stands in sharp contrast to Alnylam's own assertions in the Response that it was them who invented MC3 and certain derived lipids.

Why the haste in establishing Alnylam Canada, oh I meant AlCana

In their Response, Alnylam admits that AlCana was established in order to prevent Alnylam being sued by Tekmira over inventions made by Alnylam’s consultants. As Tekmira’s lawsuit proves, Alnylam had good reasons to believe that it is in a gray legal zone here- at best. Non-compete arrangements are pretty standard in the industry and just as Alnylam will do in the case of key inventive people among the 25-30% of its workforce that it fired post-Novartis, it would surprise me if Tekmira had no such arrangements in place.

Also, why would Alnylam seek to establish a separate legal entity with AlCana, when it could easily have hired these ex-Tekmira people as full Alnylam employees? After all, Alnylam de facto owns and controls AlCana as it is fully funding AlCana’s operations and enjoys exclusive rights to those inventions. It's even in the name, ‘Alnylam Canada’, oh I meant to say AlCana.

It would be wrong to underestimate Alnylam’s legal savvy. Alnylam must have had a very good reason not to hire these people directly, and don’t be surprised to find Alnylam focus on legal technicalities instead of on the spirit of Tekmira’s allegations.

In October 2008, following the merger of the Old Tekmira-Protiva research organizations (note: the two organizations were kept separate until that date in order to avoid Merck accessing IP made with the help of Alnylam’s funding of Old Tekmira), the Protiva management that took over the reins at New Tekmira fired a number of Old Tekmira people, likely the result of the long-standing rivalries between these two groups. Be that as it may, Alnylam has no business in expressing its disgust over the firings, just as Tekmira does not meddle in Alnylam’s affairs when Alnylam fires 25-30% of its workforce- not all of which were Novartis FTEs in case you believed that myth, too. It’s just another example of Alnylam’s patronizing attitude towards Tekmira which finds its ultimate expression in their apparent belief that it is entitled to essentially all of Tekmira’s property.

As mentioned above and in yet another show of altruism, Alnylam hired these people as consultants. In little more than half a year, in June 2009, the provisional patent application for MC3 was filed. This means that the work leading up to that filing must have started at least in early 2009, a spark of invention that must have occurred right after being fired from Tekmira, but also before AlCana was formed.

Curiously, the ‘Supplemental Agreement’ in which Tekmira supposedly waived its right to sue Alnylam over AlCana inventions, was signed just a month after the provisional filing date on July 27, 2009. This to me looks like trying to cover your legal bases after the fact, and it remains to be seen whether that waiver also applies to inventions made by ex-Tekmira employees before the Supplemental Agreement.

Considering the timeline of events, Alnylam was obviously very keen to put in place numerous legal arrangements in light of MC3 and AlCana (Barry Greene Letter, Provisional Review and Sign-Off, AlCana Waiver). These are certainly good arguments in favor of Alnylam. However, these are only indirect pieces of evidence, and the question that will decide over the MC3 ownership issue is whether Alnylam purposefully misled Tekmira in getting their various agreements signed by hiding the true inventorship history. The inventorship data around the MC3 patent application is just too unusual to ignore.

MC3 Timeline of Events

March 2008: Tekmira-Protiva merger. Because of their rivalries with Merck, Alnylam requires Protiva and Tekmira to operate separately until 2008.

October 2008: Combination of the Protiva and Old Tekmira research organizations, and date whereupon Alnylam only has non-exclusive licensing rights to subsequently generated Tekmira IP (possibly MC3). ‘Protiva management’ promptly fires Old Tekmira scientists with which Alnylam subsequently enters into consulting arrangements and which would go on to form AlCana.

June 10, 2009: Provisional filing/priority date of MC3 patent WO 2010/144740 A1.

July 27 2009: “Supplemental Agreement” in which Tekmira waives right to sue over AlCana inventions, i.e. inventions of their former employees.

August 7, 2009: Provisional patent application 61/185,800, which was assigned to Alnylam and filed on June 10, 2009, provided to Tekmira for review. Tekmira signs off on provisional patent application. Note: A provisional patent application is a simple priority document and typically not in the public domain. It has lax requirements, also with regard to inventorship data.

March 13, 2010: Greene-Murray Letter seeking to confirm Alnylam’s exclusive rights to MC3. Mark Murray signs off.

April 15, 2010: KC2 patent application WO 2010/042877 published. Named as inventors are Hope, Semple, Chen, Madden, Cullis, Ciufolini, Mui.

December 16, 2010: First publication of the MC3 patent application naming as inventors Akinc, Dorkin, Qin, Cantley, Manoharan, Kalllanthottathil, Narayanannair, Jayaraman; and (for US only) Chen, Ansell. Chen and Ansell both ex-Tekmira employees. However, despite Alnylam’s assertions that it was the key Old Tekmira scientists that invented MC3 and certain derivatives and that would go on to form AlCana, Hope, Semple, and Madden are missing as inventors. Hope, Semple, and Madden were also key authors in the 2010 Nature Biotech paper on KC2 from which, also according to Alnylam’s presentations, MC3 is derived. Only Chen is shared with the KC2 patent application.

Alnylam Trying Hard to Find Reason to Countersue Tekmira- Try Harder

That Alnylam would countersue Tekmira could have been expected. After all, Alnylam is the one with the cash and wants Tekmira to feel it. I am surprised, however, that despite the intricate relationship between Alnylam and Tekmira, all Alnylam could come up with were two patent applications that, due to the vagaries of patent prosecution, happened to collide with each other. Hardly a pattern of Tekmira willfully and illegally sabotaging Alnylam’s development plans.

In their Response, Alnylam says that Tekmira used confidential information from Alnylam to obstruct a patent by Alnylam related to ALN-VSP02. Specifically, Alnylam states that in 2006, Tekmira filed for a patent on Eg5 (Kinesin Spindle Protein). In that patent application, Tekmira, as was customary at the time, claimed essentially all possible siRNAs that would cover the target gene. It is also worth mentioning that Tekmira filed this patent application to claim not an siRNAs against Eg5 in isolation, but when formulated in LNPs. In addition, Eg5 was just one of the cancer-related target genes contemplated by that application.

When asked by the patent examiner to narrow down its sequences, Tekmira elected the siRNA sequence used in ALN-VSP02 (SEQ ID 20) which is the reason why the USPTO has now decided that the two patent applications clash with each other and called for an Interference. Importantly, Alnylam claims that Tekmira could only have selected the VSP sequence due to confidential information Tekmira had as a result of their collaboration. What is unusual, Alnylam claims that by the machinations of Tekmira’s patent agent, the publication of Alnylam’s patent was delayed to 3 years after the initial filing of the provisional, instead of the customary 18 months:

“58. Normally, US patent applications are published approximately 18 months from the filing date of the first priority application. However, due to the actions of Tekmira through their agent, Townsend and Townsend and Crew (now Kilpatrick Townsend and Stockton), the Alnylam VSP patent application did not publish for nearly three years from the date it was filed;

59. During this time, Alnylam freely shared details of ALN-VSP with Tekmira. In connection with the parties’ manufacturing agreement, Alnylam provided Tekmira with confidential information regarding the composition of ALN-VSP, including the 21-nucleotide sequence Alnylam used as the active ingredient in its ALN-VSP drug to target the Eg5 gene;

60. In response to a request from the US Patent Office related to their patent application, Tekmira was required to select one sequence to patent from the many thousand sequences disclosed in its patent application. Tekmira elected to patent the exact sequence present in Alnylam’s ALN-VSP drug, that was demonstrated by Alnylam to be particularly effective and which Tekmira could only know by virtue of its access to confidential information as part of their manufacturing agreement.”

For this claim of misuse of confidential information to stand, the nomination of SEQ ID20 by Tekmira would have had to occur, at the minimum, before the publication of Alnylam’s patent application. After such a publication, this sequence is fair game. There are a couple of items that are at odds with Alnylam’s claim:

Firstly, in their Response, Alnylam mentions the filing date of its patent application for what would become US patent 7718629: March 2007. If Alnylam’s claims were true, the publication of that patent application should not have occurred until after 3 years of the filing of the provisional patent application:

“56. The application to the Eg5 component of ALN-VSP was filed on March 30, 2007 as U.S. Patent Application No. 11/694,215, assigned to Alnylam Europe AG (and subsequently to Alnylam), with David Bumcrot, Pamela Tan, Hans-Peter Vornlocher and Anke Geick as inventors. It issued on May 18, 2010 as United States Patent No. 7,718,629.”

Instead of citing the patent application date, it would have been more helpful for Alnylam to mention that the provisional filing date for ‘629 was March 2006. This difference of one year may be important, because according to my study of the patent history of Tekmira’s patent application in question, No.11/807,782, Tekmira chose SEQ ID 20 in May 2010, which seems well after the supposed Alnylam provisional application date. Mind you, ‘629 issued in the same month.

What is stranger still, the information page on Alnylam's ‘629 patents shows the publication date for underlying US 2007/0281899 A1 to be...October 11, 2007 just as one would have expected from the normal prosecution of a patent application, and well before Tekmira’s election of SEQ ID20. No sign for a Tekmira-induced delay.

In summary, even assuming that the information on the Alnylam patent has it all wrong about the publication date (I highly doubt it) and that the patent publication was delayed not to three, but even four years after the initial provisional filing and more or less coincided with its issuance (has never happened in patent history IMO), is this all the dirt that Alnylam thinks, hopes it can get on Tekmira? If not, this looks like desperation and obstruction of justice by seeking to delay the resolution of the Tekmira Complaint.

VSP Patent Timeline of Events

March 2006: Alnylam files provisional application No. 60/787,762 which would become the ‘629 patent covering siRNA sequences against KSP and used in ALN-VSP02.

May 2006: Protiva (Tekmira) files provisional application No. 11/807,782 directed towards LNP formulations with siRNAs against Eg5 and other cancer-related genes.

March 2007: Alnylam files US patent application (US 2007/0281899) for what would become the ‘629 patent

August 14, 2007: Original Protiva License Agreement following which Alnylam provides Protiva/Tekmira with confidential information related to ALN-VSP.

October 11, 2007: Alnylam's US 2007/0281899 publishes. This date is in sharp contrast with Alnylam’s claims of substantial delays in the publication of this patent application.

June 11, 2009: Protiva patent application publishes as US 2009/0149403. It seems that if anything, it was the publication of the Protiva patent application that got delayed, not the ‘Alnylam VSP patent application’ as paragraph 58 of Alnylam’s Response claims. But then again, maybe Alnylam, once again, mistakes Protiva’s property as their own:

“58. Normally, US patent applications are published approximately 18 months from the filing date of the first priority application. However, due to the actions of Tekmira through their agent, Townsend and Townsend and Crew (now Kilpatrick Townsend and Stockton), the Alnylam VSP patent application did not publish for nearly three years from the date it was filed.”

May 4, 2010: Upon the request of the US patent examiner, Tekmira elects SEQ ID20 which is the same as the KSP siRNA sequence in Alnylam’s VSP. At this point, Alnylam’s sequence was long in the public domain.

May 18, 2010: United States Patent No. 7,718,629 issues.

February 28, 2011: USPTO declares Interference.

The Alnylam Response: An Exercise in Saving Face

Overall, the Response by Alnylam to Tekmira’s allegations seems meek. Alnylam knows that without digging into the data, their audience will find itself confronted with two equally plausible views. Rightfully, Alnylam admits in its Response that it is concerned about its reputation, a reputation that in the past caused many in Big Pharma to seek out Alnylam instead of Protiva/Tekmira, also for liposomal siRNA delivery.

However, upon review, Alnylam’s superficially convincing arguments leave open alternative explanations, do not get to the ground of Tekmira’s allegations, and contain a number of factual inaccuracies:

• Alnylam claims broad use of Tekmira property, but Alnylam fails to explain how they represented Tekmira property to partners, a key allegation in Tekmira's Complaint;
• Alnylam provides indirect evidence in the form of legal documents, but fails to explain the relevant background for these, especially it does not provide adequate inventorship history of MC3;
• In making these arguments, Alnylam paints a complicated web of relationships, a web however that contains a number of inaccuracies and conflicting information, e.g. (a) claiming that it was the ex-Tekmira employees that invented MC3 and went on to form AlCana, yet the patent application names mostly Alnylam oligonucleotide chemists and, for US purposes only, two ex-Tekmira employees that are not the key people of AlCana; and (b) materially getting the VSP timeline wrong.

My prediction: If this comes anywhere close to trial, somebody will get caught in their web of lies, and it won’t be pretty given the emotions running high in Vancouver and Alnylam’s meddling therein. There are three outcomes:

• Alnylam swallows its pride and makes Tekmira a takeover offer too sweet to ignore;
• The White Knight scenario, where Merck, Novartis, or another Big Pharma company takes advantage of the lawsuit and sticks it to Alnylam by acquiring Tekmira;
• Alnylam and Tekmira drag each other down by delaying a resolution.

It’s getting late, but it’s not too late yet.

Disclosure: The account above reflects my personal beliefs only and is based on my studies of publicly available documents and could contain material mistakes. No company has contributed to or encouraged the account, and no money or other forms of compensation was or is expected to be received.

RXi Pharmaceuticals Invites Biotech Speculators

Times have never been tougher if you are a preclinical-stage biotechnology company with a high demand for cash to support operations. At least this must be the conclusion that RXi Pharmaceuticals drew after it struggled to attract investor interest in their self-delivering RNAi trigger technology, but a technology that has yet to enter the clinic. As a result, it announced today that it will acquire late-stage cancer immunotherapy company Apthera.

Biotech investment these days is largely placing bets on the next drug approval candidate. There is little patient money that allows public companies to see through their technology development which especially hits those platform companies hard which cannot find alternative sources of non-dilutive capital. Talk about RNAi Therapeutics.

Actually, I liked the way that RXi has recently developed their fairly differentiated rxRNAs. These should have utility for a number of localized RNAi approaches. But it seems that RXi’s raison d’etre has never been the science anyway. So as we say good-bye to short-time CEO Noah Beerman, I wish everybody more of the Happy Trading that RXII has become known for.

Alnylam and Big Pharma: Tekmira Caught in a Tangled Web of Interests

(Notice: The following account is a largely hypothetical explanation of what is underlying Alnylam's current troubles)

The last time Alnylam expressed surprise and regret was in September 2010 when Novartis declined to exercise an option for wide, non-exclusive rights to Alnylam’s RNAi Therapeutics IP estate ('Adoption License'). Since then Alnylam has been hit with a string of other partnership setbacks and other not-so-positive news pieces. The official party line, of course, is that these are all isolated events and Big Pharma does what it does because it has to cut down on R&D that won’t generate significant revenues in the next 3-5 years. Meanwhile, the popular story line is that Big Pharma has given up on RNAi Therapeutics because of the delivery challenge.

I believe that neither of these views are correct, and instead like to propose that while it is true that delivery is a challenge, there are technologies that show great potential, and it is the fight for ownership over and access to these technologies that is at the root of the recent developments. As you’ve heard me preach over the last 3 years or so, Tekmira’s SNALP delivery technology is at the forefront of systemic delivery and has consequently become the major bone of contention as Alnylam, its partners, and Merck struggle to protect their investments in RNAi Therapeutics.

Novartis Poses Target Threat to Alnylam and Partners, but needs SNALP

In retrospect it is clear why Novartis has acted the way it did. Initially, I had thought that Novartis' target selection strategy might be uncoupled from delivery considerations and instead would focus on the industry’s hottest GPCRs and kinases. Instead, Novartis appears to have done the scientifically sensible (Big Pharma and scientifically sensible in the same sentence...must be a first in this blog) and held off with their decisions until there was more clarity which targets and indications could be addressed based on the most advanced delivery technologies. As such, I believe that Novartis has mainly picked a bunch of targets in the liver, solid cancers, and maybe a few ocular and CNS indications, too.

In the Novartis post-mortem conference call, I was surprised to learn that as part of selecting their targets, Novartis and Alnylam had conducted quite a few pre-clinical in vivo studies in anticipation of IND filings, meaning that SNALP delivery was most likely employed, and that along with the targets came rights to some of Alnylam's current, and future (!) delivery capabilities!!! This to me was a bombshell because I had believed that delivery was Alnylam’s biggest negotiating advantage in making sure that Novartis will pay the $100M exercise fee. Well, the reason for my belief was that since Alnylam liked to emphasize that the Adoption License excluded delivery, similar restrictions applied to Novartis target picks.

Note that Novartis, which only recently appears to have ramped up their RNAi-related staff to around 100 (not really what you consider a sign of their losing interest in RNAi Therapeutics), was named in the Complaint by Tekmira as a company that Alnylam might have improperly shared SNALP delivery with. It may also be of interest that the first author of a high-profile Nature Biotech paper in 2005, David Morrissey, describing the use of SNALP delivery in a mouse model of hepatitis B is now heading RNAi Therapeutics efforts at Novartis.

31 targets, exclusive, heavily focused on the liver and solid cancers…what does that leave for Alnylam and its other Big Pharma partners? Is ‘5x15’, Alnylam’s strategy launched in January, i.e. after Novartis, a reflection of Novartis having picked higher-profile targets such as hepatitis C?

So 2 months after Novartis, Roche announces that it does not view RNAi Therapeutics a sufficiently broad commercial opportunity to justify the significant operations they had going. Since Roche, like Alnylam and Novartis, were likely to have focused their efforts on liver and cancer targets as they were looking at the same delivery technologies, this comment can also be interpreted as ‘After Novartis has taken many of the targets that we were interested in, what we are left with isn't attractive enough to make our large-scale effort worthwhile. Moreover, we are contrite that Novartis got so much paying so little'. And when they licensed the liver, metabolic, and cancer fields from Alnylam for $50M each, they must have done so in view of SNALP delivery.

Soon after, or even a little bit before the 2007 alliance, Roche together with Alnylam already got underway with validating targets and moving them into clinical development. But then another snag hit: Despite of what Alnylam might have promised Roche, Tekmira’s SNALP turned out to be more difficult to replicate than they thought. This is very apparent from Roche’s Factor VII patent application which started out with lipidoids up to the mouse stage, but then adopted Tekmira’s SNALPs for the non-human primate studies. If you are from Big Pharma and reading this, it is a lesson not to be blinded by company brands, but closely look at who actually has the know-how and partner with them instead.

These frustrations first came to the fore in comments by Alnylam’s David Bumcrot in the summer of 2007 in which he proclaimed that the MIT lipidoids that Alnylam helped fund are much superior to Tekmira’s SNALP technology and will be used for their upcoming clinical programs. To boot, he added that Tekmira’s ApoB was a terrible target. But, of course, despite of Alnylam’s efforts already in 2007 to marginalize Protiva/Tekmira, both Roche and Alnylam had to admit defeat and come back to Tekmira which allowed Alnylam to file their IND for liver cancer.

All this made it clear to Roche that it needed alternative delivery options. Roche went out to look for alternative delivery technologies and in 2008 bought Mirus Bio for the Dynamic Polyconjugates (DPCs) for $125M (almost 4x Tekmira’s current market cap). This number just illustrates the value of delivery in any of Alnylam’s deals, and if you consider that Alnylam most likely passed on DPCs and is betting the house on SNALP instead, the $1B figure that Tekmira demands is very well anchored in what actual money has changed hands.

In addition to Novartis crossing Roche’s RNAi plans, another reason for Roche unhappiness could therefore be that Alnylam over-promised them in terms of what Alnylam had to offer in delivery. As Roche interacted with Tekmira, it may also have noticed that Tekmira’s views on what SNALP know-how and IP access could be gotten from Alnylam and what Roche had to come to Tekmira for strongly differed with what Alnylam might have told them. As a result, on top of the ~$300M upfront they had given to Alnylam, they now had to close a separate deal with Tekmira to actually be able to do something with that RNAi trigger IP.

Obviously, as SNALP delivery solidified its position as the industry's leading systemic delivery technology with not that many other advanced options (maybe Silence's lipoplex comes closest, but for endothelial indications), it turned out to be a bad deal for Roche.

Coming back to Novartis and SNALP delivery. In early 2009, Novartis surprisingly bailed out Marina Biotech, under the name of mdRNA then, by giving them $7.25M for kicking the tires on their ‘DiLa2’ liposomal delivery technology. This came a bit surprising to me, because I had considered Tekmira to be leading in systemic liposomal delivery. This to me indicated that Alnylam indeed is trying to keep Novartis’ RNAi ambitions in check by restricting access to delivery and this is why Novartis, knowing of the potential of liposomal delivery, took a chance with Marina.

You can easily see what pressures Alnylam might be facing from its current and former partners. It has taken over half a billion in license fees, a lot of that presumably driven by Alnylam’s claims about the maturity of and, importantly, control over SNALP delivery. The question is: Do the partners want their money back or are they insisting on their promised access to SNALP delivery?

One of these partners not mentioned so far in this story is Takeda. In 2008, Takeda paid Alnylam $100M for non-exclusive access to the metabolic and cancer fields, plus $50M in technology transfer payments, the latter of which has apparently been completed just in the nick of time to meet the guidance provided by Alnylam. In other words, Takeda paid Alnylam $150M for SNALP technology. In previous conference calls, Tekmira noted that it was working together with Takeda to sort out SNALP delivery (as Takeda and Alnylam were working on the ‘tech transfer’). Despite of Takeda’s complementary comments in yesterday’s press release, I would not be surprised if Takeda, like Roche, is quite frustrated by now over the uncertainties over SNALP access and the Novartis exclusive target picks, and you’ve got to wonder what role Takeda will play in Tekmira’s case against Alnylam.

Merck

And lest we forget, there is, of course, Merck. Once spurned by Alnylam and having invested probably over $1.5B in RNAi Therapeutics development already with hundreds working on the technology, Merck has every reason to turn the table on Alnylam. Merck's publication record also makes it clear that they harbor strong ambitions in SNALP delivery. While the details of the Tuschl II settlement under which Merck gained access to Tuschl II IP are unknown to the public, it is quite possible that Merck is satisfied with that outcome and is now focusing their attention on gaining control over the most advanced systemic delivery technology. Should it view the Tekmira litigation against Alnylam an opportunity to gain leverage over Alnylam, I would bet that they will indeed grasp at it.

Considering this tangled web of interest and the central importance of Tekmira’s technology, it is no wonder that Alnylam is scrambling to stand on its own SNALP feet. Alnylam- setting aside personal issues for a moment, the decision can’t be that hard, can it? In fact, I don’t think there is even a choice.

Alnylam Now Sued by University of Utah Over 3’ Overhang Inventorship

Not a day goes by without a lawsuit involving Alnylam. This time it would seem unjustly so.

The company disclosed in a regulatory filing today that the University of Utah (‘Utah’) is suing the owners of the valuable Tuschl II (T-II) patent estate (Max Planck, the Whitehead Institute, MIT, and UMass) along with licensee Alnylam (but not Merck) for wrongfully omitting Utah scientist Brenda Bass as the inventor of the 3’ overhang feature central to that patent family. While the demands of the plaintiff, i.e. naming Dr. Bass as the sole or at least joint inventor plus damages, are unlikely to be met, it is a reminder that the validity of the T-II invention has yet to be confirmed in the US and that Alnylam’s aggressive bid to control the world of RNAi Therapeutics may have triggered a backlash gathering steam.

In the Complaint, Utah basically asserts that Dr. Bass first conceived of the 3’ overhang feature of the small RNA gene silencing mediators that Tuschl and colleagues saw in their elegant Drosophila lysate experiments. The plaintiffs cite as evidence a review on the Tuschl work that she began writing on March 21, 2000 and which incorporates a highly speculative model featuring small 3’ overhang siRNAs as the intermediates and likely mediators of RNAi. On April 11, 2000 she then presented her ideas at a conference at which Zamore, a co-inventor of T-I and claimed by some to be a co-inventor of T-II also, was present. More such presentations and communications as is normal in academia took place and which allegedly involved other inventors named on T-II.

The Complaint further alleges that the named T-II inventors improperly used that information to file on December 1, 2000, the first T-II priority document with the European patent office- but without naming her and therefore depriving the University of Utah of the economic benefit of T-II, arguably Alnylam’s crown jewels.

I find it very hard to believe that Utah’s request of Max Planck naming Dr. Bass as an inventor on the T-II patent application will go anywhere. First, she speculated that 3’ overhangs might be involved in the pathway, but it was only the presently named T-II inventors that actually demonstrated the utility of such overhangs. More importantly, however, if Dr. Bass and Utah really believed the 3’ overhang feature had economic value, they should have filed for their own patent application before publishing the review. Since this has not happened, the review became a public disclosure and a free-for-all. According to the description in the Complaint, there never existed a ‘real’ collaboration between Dr. Bass and the Tuschl inventors so that including her as an inventor would be wrong in my opinion.

But then again, because of her disclosure, whether she were to be included or not, it would be an invalid patent due to her own prior art if the review held up as such.

I would have expected the Bass issue to come up as part of the US T-II examination back-and-forth anyway, but not to the extent that it would have real threatening power. It is, however, highly unusual that Utah would challenge the inventorship of T-II already at this stage, in the same court that heard the Tuschl litigation, as inventorship questions are normally dealt with during patent prosecution or after a potential grant. The timing is even more so unfortunate for Alnylam, as they have to now deal with two lawsuits simultaneously, lawsuits that are challenging the two most important elements of Alnylam’s RNAi world domination strategy: SNALP delivery and T-II.

My humble advice: Deal with the Tekmira issue first, i.e. acquire Tekmira as Alnylam should have done all along, then focus on clinical progress. The Utah issue will then feel less of a nuisance and distraction.