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Alnylam, Reporting Q3 Results, Says It Holds IP Needed by Merck Despite Its Bid for Rival Sirna

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Alnylam Pharmaceuticals officials last week assured investors that the company’s collaboration with Merck, which just announced plans to acquire Sirna Therapeutics for $1.1 billion in cash (see RNAi News, 11/2/2006), will continue to move forward, and that the firms have just initiated three new drug-development programs under their alliance.
 
Alnylam officials made their comments during a conference call to discuss the company’s third-quarter financial results, which showed sharply increased revenues that more than offset a rise in quarterly expenses.
 
During the call, Alnylam CEO John Maraganore weighed in on Merck’s bid for Sirna, calling the deal a “further validation of the pharmaceutical industry’s deep interest in RNAi as a new class of drugs,” although he added that Alnylam feels the purchase price falls short of “the value created by building a whole new class of innovative medicines” based on RNAi.
 
“Accordingly, our focus remains on our mission of building a major biopharmaceutical company where we lead the translation of RNAi into a robust drug-discovery platform to treat disease in a fundamentally new way,” Maraganore said.
 
Part of that focus includes moving ahead with its existing big pharma partnerships, and Maraganore said that despite the planned buyout of Alnylam’s biggest rival, “senior management at Merck have assured us of their commitment to our partnership.”
 
However, the partners may eventually find themselves at odds over Merck’s freedom to operate in the RNAi space, according to Maraganore.
 
“Merck, in the current agreement, is only licensed with Alnylam intellectual property on nine therapeutic targets, in addition to one … co-development program that we have with them on spinal cord injury,” he said during the conference call. “All of our agreements [with Merck] are based on specific target genes. … They licensed on exactly 10 programs and that’s it.”
 
When asked by an analyst during the call what this would mean for any of Merck’s RNAi programs, including those acquired from Sirna, that are not partnered with Alnylam, Maraganore said that “it is our perspective … and I think one that’s been validated … that anybody commercializing any RNAi therapeutic needs access or will need access to Alnylam IP.”
 
During a breakout session with investors at the Rodman & Renshaw 8th Annual Healthcare Conference in New York City this week, Maraganore was a bit more straightforward.
 
“Merck is a very interested company in RNAi therapeutics,” and through their proposed acquisition of Sirna they are trying to “increase their footprint in the space,” he said.
 
However, as far as Alnylam is concerned, “their footprint is still in our sandbox,” and Merck will need to take licenses to Alynlam IP if it wishes to pursue RNAi drug programs beyond those covered under the companies’ alliance, Maraganore said.
 
And apparently Merck agrees.
 
Maraganore said that he was recently told by Peter Kim, president of Merck Research Laboratories and one of the key architects of the Sirna acquisition, that Merck’s “view is that [they’ll] need more [RNAi-related] IP in the future” — IP held by Alnylam.
 
Officials from Merck were not available for comment as of press time.
 
The Merck Deal
 
Alnylam said last week its new co-development and co-promotion deal with Merck focuses on an undisclosed disease target using systemic RNAi technology. Additionally, Merck has selected two unnamed targets for development under the companies’ existing partnership, Alnylam said.
 
Merck and Alnylam first began working together in September 2003 when they struck a five-year alliance to develop RNAi-based therapeutics against Merck-defined targets, as well as related technologies (see RNAi News, 9/12/2003). Almost a year later, the companies inked another drug-development deal, this one focusing on RNAi drugs for ocular diseases and encompassing Alnylam's then-active AMD program (see RNAi News, 7/2/2004).
 
These two deals were restructured earlier this year into a single program that no longer includes work on ocular diseases (Alnylam dropped its AMD program about a year ago) and gives Merck a more active role in the development process see (see RNAi News, 7/6/2006).
 

“Senior management at Merck have assured us of their commitment to our partnership.”

As it stands now, Alnylam and Merck are contracted to work together on 10 RNAi projects. Four of these call for the companies to co-develop and co-promote resulting RNAi drugs, while the other six are licensed to Merck in exchange for royalties and milestones to Alnylam. Thus far, four of these programs have been activated, including the three announced last week and the companies’ previously announced collaboration on spinal cord injury (see RNAi News, 1/28/2005).
 
The Quarter
 
In the third quarter, Alnylam’s revenues jumped to $8.2 million from $1.4 million in the same period last year, reflecting $5.5 million in expense reimbursement, milestones, and amortization of revenues related to the company’s primary collaboration with Novartis (see RNAi News, 9/9/2005). Third-quarter revenues also included $1 million in expense reimbursement under Alnylam’s flu collaboration with Novartis (see RNAi News, 2/23/2006) and $1.2 million from the company’s InterfeRx intellectual property licensing program.
  
Alnylam’s net loss in the third quarter dropped to $7.4 million, or $0.23 per share, compared with a loss of $10.7 million, or $0.51 per share, in the year-ago quarter.
 
Expenses, meanwhile, edged up to $16.8 million from $12.1 million, reflecting a $4.8 million rise in research and development spending to $12.8 million. Alnylam attributed the increase to license fees, clinical trial costs related to its clinical program for respiratory syncytial virus infection, higher external service costs associated with the company's preclinical programs, and an increase in R&D headcount.
 
As of Sept. 30, Alnylam had cash, cash equivalents, and marketable securities totaling $120.3 million.
 
Patty Allen, vice president of finance and treasurer at Alnylam, noted during the third-quarter conference call that the company has already reported $20 million in collaborative revenues during the first three quarters of 2006, exceeding its goal of generating greater than $15 million in alliance-based funding over the entire year, and that the RNAi drugs shop remains on track to meet its year-end cash guidance of more than $115 million in cash, cash equivalents, and marketable securities.
 
Maraganore also said during the call that Alnylam will not meet its previously disclosed goal of filing an investigational new drug application on its pandemic influenza drug by the end of 2006.
 
Instead, the timeline has been pushed out to sometime in 2007 as the company works to “finalize formulations for optimal in vivo delivery … in advance of the scale-up for initiating IND studies,” he said.
 

According to COO Barry Greene, the company is still on track to unveil its latest drug-development program before the end of the year. While details about this next effort have not been disclosed, he said during the conference call that it would be “an Alnylam-proprietary program.”

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