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After Buying Galenea s RNAi IP, Nastech Expects To File IND for Flu Drug Around the End of 2006

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When Nastech Pharmaceutical last week unveiled its RNAi-based influenza drug development program and said it had acquired RNAi-related intellectual property and technology from Galenea (see RNAi News, 2/23/2006), it was expected that the bigger firm would be able to significantly accelerate the development of a key drug candidate covered under the deal.

What may not have been expected, however, is the degree to which Nastech plans to speed up the drug's R&D journey.

Speaking with RNAi News this week, Nastech President and CEO Steven Quay said that the company intends to file an investigational new drug application for an RNAi flu treatment "near the end of the year."

The move would put the flu program on virtually the same timeline as Nastech's other RNAi program in rheumatoid arthritis, which was announced a little over a year ago (see RNAi News, 4/8/2005). Both programs are expected to enter the clinic in the first half of 2007, according to Quay. Importantly, the accelerated timeline would also put Nastech in a more competitive position with Alnylam Pharmaceuticals, which plans to file an IND for an RNAi-based pandemic flu therapy around the end of the year.

"We're a real pharmaceutical company, so we don't have the gap between … academic research … and the ability to" move into clinical trials, Quay said. "We have two facilities that are FDA compliant for manufacturing, so we can go from a good idea in the lab to clinical trials pretty fast."


"We're a real pharmaceutical company, so we don't have the gap between … academic research … and the ability to" move into clinical trials.

Quay added that while both influenza and rheumatoid arthritis "are very important priorities, … I think that given the business imperatives, and the status of the data that we've seen [from Galenea, the] influenza program is a slightly higher priority at this point in time."

Nastech's new timeline for G101 sets the company on a much faster track than Galenea, which had been expecting to file an IND on the drug in the second half of 2007, and could also put Nastech within reach of Alnylam, which has thus far been the front-runner in the RNAi-for-flu arena.

Last week, Alnylam said that it had partnered with Novartis Pharmaceuticals on its pandemic flu drug, and that it expects to receive significant research funding as part of the firms' profit-sharing deal (see RNAi News, 2/23/2006). In late 2005, Alnylam also received $240,000 in funding for its flu program from the US Department of Defense's Defense Advanced Research Projects Agency.

Nastech, meanwhile, will inherit Galenea's phase I SBIR grant from the National Institute of Allergy and Infectious Diseases to develop G101, Quay noted. Further, Galenea has "a very favorable priority score on a R01 grant, and they have some additional grants that are under review," he said. "So we will begin to receive some of the return on our investment [from the acquisition] via the grant monies in a fairly rapid fashion."

Quay declined to offer guidance on how much the company expects to receive from the grants and grant applications during the year. He also declined to provide details on the financial terms of the Galenea deal, but indicated that it was a cash-based transaction.

"We think our equity is pretty valuable, so most people are assuming that we didn't use stock for this transaction — and I haven't really disabused them of that opinion," Quay said.

Doing a Deal

According to Quay, Cambridge, Mass.-based Galenea had been shopping around its RNAi flu program and, after Nastech had presented data on its delivery systems at scientific meetings, "they basically came to us" with the possibility of acquiring its IP and technology.

"There was [a] fairly intense bidding war … [and] there were the usual suspects in there with us," he said. In the end "we were pleased to get them to agree to a tie up with a company almost 3,000 miles away" in Bothell, Wash.


"We're really pleased with our arrangement with Alnylam, and we see the potential under our current contract to have that grow into other [disease] areas."

Key to the deal with Galenea were "the early patent filings that [Galenea] have around viral sequences, as opposed to mammalian sequences, for viral respiratory diseases," Quay explained this week. Additional value lay in "the demonstrated efficacy [Galenea has] had in animals," he added, citing two papers published by Galenea co-founder Jianzhu Chen in the Proceedings of the National Academy of Sciences in March 2003 and June 2004.

Quay added that Nastech received access to "confidential data in due diligence … so we have later data than that," but didn't disclose the data for "competitive reasons."

Nastech has also not disclosed the form of delivery its flu drug candidate will use — either inhalable, intranasal, or intravenous — and Quay said that both delivery approaches are being evaluated. "But I think we're going to walk before we run, and the inhaled program is the one that's farthest along." Galenea was working on both inhalable and intravenous formulations of G101, while Nastech is known for its nasal delivery technologies.

As for Nastech's other RNAi program in RA, Quay said that "we've got sequence selection and formulation optimization to do, [as well as] manufacturing scale-up." That drug currently is being developed as a subcutaneous injection.

IP Showdown

Since the beginning, Galenea touted its IP position in RNAi-for-flu as dominant. Last year, former CEO John Oyler told RNAi News that "any siRNA used to treat influenza, whether it's a virulent strain or a non-virulent strain, is covered by the IP that Galenea has."

Oyler made the comment after disclosing that Galenea had been in negotiations with Alnylam about a possible collaboration for flu, and that he was surprised when Alnylam announced that it would be developing its own RNAi-based flu drug after having seen Galenea's IP under a non-disclosure agreement (see RNAi News, 6/3/2005).

During a conference call last week to discuss the deal with Galenea, Quay sidestepped an analyst question about how Nastech might handle its new role as rival to Alnylam, stating that he did not comment on other companies.

That issue is particularly complicated since Nastech already has a relationship with Alnylam: Last July, Nastech took an exclusive license to use Alnylam IP to discover, develop, and commercialize RNAi therapeutics targeting tumor necrosis factor-alpha, the target in its RA program (see RNAi News, 7/22/2005).

"We're really pleased with our arrangement with Alnylam, and we see the potential under our current contract to have that grow into other [disease] areas," Quay told RNAi News this week. "Obviously, it became slightly more complex when they did their deal with Novartis, but we think that the two or three of us can figure out how to maximize the value of each others' IP estate and move forward in a business-like fashion."

As for whether an IP battle could be on the horizon, Quay noted that lawsuits "are never in anyone's best interest, especially the shareholders — it causes a lot of uncertainty for years and years. I think we'll work out a business relationship to expand beyond RA," possibly into the flu arena, he said.

And this relationship could work both ways — with Nastech possibly licensing additional IP from Alnylam, and Alnylam possibly licensing IP from Nastech. "We think our IP is valuable, and we hope that people that think they might infringe some of our claims would come to us for licenses," Quay said.

"We're in the business to make money for our shareholders, and if the numbers are right we can do a deal with anybody," even a direct competitor.

— Doug Macron ([email protected])

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