This article has been updated to clarify the status of Alnylam Pharmaceuticals' partnering efforts.
By Doug Macron
Arrowhead Research announced last month that its Calando Pharmaceuticals subsidiary would not meet its goal of forging an industry partnership before the end of 2010, making it one of several RNAi drug shops that failed to fulfill promises to secure partnerships last year.
And while Calando's management remains optimistic about deals in 2011, some industry observers said they expect that it will take years of continued advancement in the RNAi field, as well as a shift in its players' expectations, before major deals are consummated.
Calando's key asset, the phase I siRNA-based cancer drug CALAA-01, continues to move through human testing, and early last year company researchers published positive clinical data from the trial (GSN 3/25/2010).
As RNAi matures as a technology, "the landscape for RNAi partnering has shifted," with potential big pharma alliances hinging on positive clinical data, Arrowhead CEO Christopher Anzalone said during a conference call in late December.
"Simply put, we are finding that companies [would] rather pay more for a platform with proven clinical results than pay less for a technology and assume the risk that it may not translate well into the clinic," he said.
Still, Anzalone said that he expects to find a partner in 2011 as Calando completes the phase I study and preps for a phase II program.
New 'Sense of Realism'
Calando was not alone in missing 2010 partnering guidance. At least four other companies in the space — Alnylam Pharmaceuticals, RXi Pharmaceuticals, Marina Biotech, and microRNA firm Rosetta Genomics — had said they would ink at least one new industry alliance in 2010. However, as the new year ticked over, RXi, Marina, and Rosetta have not announced such transactions.
Alnylam considers two separate deals between Regulus Therapeutics, its miRNA joint venture with Isis Pharmaceuticals, and Sanofi-Aventis and GlaxoSmithKline as counting toward its guidance. But the company did not find any partners of its own in 2010.
Some firms had hinted at a probable failure several weeks before the end of the year. In November, Marina disclosed that it may not hit its target as June Ameen, vice president of corporate development, stated that the firm wouldn't enter a deal if the terms were not right (GSN 11/18/2010).
And late the following month RXi President and CEO Noah Beerman said that while his company remains focused on "completing a corporate partnership," it only anticipates being able to do so "in the coming months" (GSN 12/23/2010).
Officials from Alnylam and Rosetta have not made any public statements on having missed their partnering objectives for last year.
To Johannes Fruehauf, vice president of research and development at Aura Biosciences and former vice president of Cequent Pharmaceuticals, 2010's partnering problems reflect growing pessimism over RNAi as a therapeutic modality.
Although the "progress that has been made toward making RNAi work safely and understanding it better has been quite enormous … the field is the victim of its own initial exuberance," he told Gene Silencing News last month.
Indeed, interest in RNAi surged in 2002 when the technology was named by Science as the breakthrough of the year, and hit an all-time high in 2006 when Andy Fire and Craig Mello received the Nobel Prize in physiology for its discovery (GSN 10/5/2006).
Such enthusiasm turned into partnerships and acquisitions with very significant price tags. For instance, in 2005, Novartis paid Alnylam $56.8 million in cash and an equity investment to form what would be a five-year deal to develop siRNA drugs (GSN 9/9/2005).
The next year, Merck shelled out $1.1 billion to buy Sirna Therapeutics (GSN 11/2/2006), and in 2007, Roche agreed to pay Alnylam $274 million upfront to use its technology for RNAi drug development and $15 million for its European operations (GSN 7/12/2007).
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In the following years, however, "some sense of realism" had settled in "that it will take a few more years before we have an approved drug in the field, and it may take us one or two more years until we see solid clinical proof," Fruehauf said.
As a result, some big pharmas have recently begun retreating from the RNAi field as dramatically as they initially courted it: In November, Roche, as part of a broader restructuring, announced it will discontinue all of its in-house RNAi operations (GSN 11/18/2010).
The Swiss drug and diagnostic giant's announcement came just weeks after Novartis in September declined to exercise a $100 million option to buy wide, non-exclusive access to Alnylam's intellectual property and know-how (GSN 9/30/2010).
And the following month, a Pfizer official told Gene Silencing News that the drug maker had backed away from its previously stated goal of filing in 2011 an investigational new drug application on an RNAi drug (GSN 10/28/2010).
Meanwhile, Merck has simply remained silent on the status of its RNAi drug programs.
To Art Krieg, CSO of Pfizer's Research Technology Center, there has been a "clear swing of the pendulum away from unreasonable euphoria over RNAi to unreasonable skepticism."
For instance, he said that while the recent decisions by Novartis and Roche weren't necessarily unreasonable, "the original deals they made were based on excessive expectations.
"Many of us, when we looked at those deals, thought, 'Wow, that's an incredible deal,' and we wondered how on earth they justified them," he told Gene Silencing News. "Now we see the answer to that question."
Krieg said the initial exuberance with which some big pharmas embraced RNAi was a reaction to "the growing realization … that [the big pharma] model for drug development was unsustainable in terms of what it cost them to develop a drug and how long it took.
"Enter RNAi, and many people had the hope that RNAi was going to provide a solution to this challenge of pharmaceutical productivity," he said.
That hope led to huge deals with Alnylam, Sirna, and others, Krieg said, adding that "now, with a new appreciation of the limits of the technology … I don't think any large pharma is going to rush into this with the same huge type of investment."
But big biopharmas weren't solely responsible for accelerating and later slowing down RNAi partnering activity, according to Krieg.
The companies developing the technology were fostering the enthusiasm as much as they could, he noted. "They were in it for the short-term payoffs and the big partnerships with the big upfronts. They were not throwing out all the caveats."
And once companies like Alnylam began closing multi-million dollar deals, other firms in the RNAi space developed unrealistic expectations of what their own deals should look like.
"From the pharma perspective, what we saw a couple of years ago were companies that had very unrealistic partnering expectations: small biotechs that had been started by investors that saw $300 million upfront payments for very early-stage technologies and that that was going to be the new norm," Krieg said. "It's very difficult to have constructive partnering discussions with companies where their investors have that mindset."
Still, both Krieg and Fruehauf see this as a temporary setback for the RNAi space.
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Overall, RNAi technology "has progressed more than I thought it was going to … in terms of the accomplishments and the advances in delivery," Krieg said. "The increase in potency with the newest generations of … [delivery technologies] is really beyond what I would have dared to hope just a couple of years ago. I think things are developing quite well."
"RNAi has not changed — the potential has always been great and I think it still is," Fruehauf added. "We're beginning to understand much better the potential for RNAi as a therapeutic."
In the end, he said, the "doom and gloom" currently felt in the field is not surprising to people familiar with the "cyclic development of biotechnologies.
"It has been predicted by quite a few people that, following a very exorbitant valuation in the 2006/2007 timeframe, there would be a valley of lower valuations and fewer hopes put on the technology," Fruehauf said. "I think this is a very classic curve. People have seen it before in antibodies and it applies again in this field. And it will probably apply to the next technology, too."
Krieg said that to Pfizer, lowered expectations for RNAi "makes things easier because, having a long-term view on the technology, we're finding that the other companies working in the field are more willing than ever to collaborate and partner with us.
"I think what we can hope for is a more measured, steady, and hopefully stable long-term investment in advancing this" technology, he added. "Longer term for the pharmaceutical industry, this is the kind of technology we really do need. We just have to budget it appropriately and resource it appropriately for a payoff that is going to be more evident 10 years from now than next year."
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