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Nastech Confirms Change in Focus While Alnylam Addresses Partnering Concerns

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Nastech Pharmaceutical’s top official last week confirmed the company will refocus its research and development efforts on RNAi therapeutics in the wake of a corporate restructuring and said that in-house small-molecule programs will not be continued after the completion of ongoing clinical trials.
Steven Quay, who is chairman, president, and CEO of Nastech, made the disclosure during a conference call held to discuss the company’s first-quarter financial results, which included a sharp drop in revenues and operating costs and a rise in losses.
 
Also last week, Alnylam Pharmaceuticals’ CEO addressed concerns over the company’s ability to find new partners following its large-scale alliances with Novartis and Roche, and provided some details on plans to examine the phase II respiratory syncytial virus therapy, ALN-RSV01, in pediatric populations.
 
Alnylam’s John Maraganore made his comments during a conference call discussing the RNAi shop’s first-quarter results, which included significantly lower losses on a surge in revenues derived from collaboration funding.
 
As reported by RNAi News, Nastech last week disclosed in a filing with the US Securities and Exchange Commission that it has decided to focus on RNAi and dropped plans to spin out a recently established subsidiary called MDRNA as a pure-play RNAi shop (see RNAi News, 5/8/2008). Instead, Nastech has proposed to take the MDRNA identity itself.
 
“Last summer, when the company had an overall valuation of $350 [million] to $400 million, the spinout of a $100 million [subsidiary] made a lot of sense,” Quay said during last week’s conference call. With the termination of a non-RNAi alliance by one-time partner Procter & Gamble, “our stock has shown a significant decline and it no longer is feasible to spin [the subsidiary] out as planned. We believe the current plan to rename the company and to refocus on RNAi will effectively achieve the same ends given where we currently are with resources and capabilities.”
 
Quay noted that Nastech intends to complete ongoing phase II trials of non-RNAi drug candidates but has “no current plans to take these … [or other non-RNAi programs] further into development” on its own. As a result, the company has hired a strategic advisor to help it find partners or buyers for the small-molecule programs, he added.
 
At the same time, the company is weighing options for new programs to add to its RNAi pipeline, which currently includes an effort to target TNF-alpha for rheumatoid arthritis and a pandemic and seasonal influenza project picked up when Nastech acquired the RNAi assets of Galenea in 2006 (see RNAi News, 2/23/2006).
 
Quay said that Nastech expects to provide information on the new programs, one of which is highly likely to include cancer, in the “next few weeks to months.” He noted that during the first quarter the company began partnering discussions with a number of undisclosed pharmaceutical firms and hopes to be able “to establish one or more big pharma partnerships in RNAi during 2008.”
 
Alnylam Alliances
 
For Alnylam, forming partnerships has not been a problem so far in its short history. However, during last week’s conference call, an analyst raised concerns that the RNAi drug shop may have difficulty finding new collaborators given the scope of its two biggest deals.
 
The first, forged in 2005, was a drug-discovery and -development deal under which it agreed to work exclusively with Novartis on multiple, undisclosed disease targets (see RNAi News, 9/9/2005). This arrangement also gives Novartis the right of first offer on targets Alnylam may wish to partner with third parties.
 

“There certainly was a lot of anxiety when we did our Novartis alliance … from people that felt we maybe couldn’t do other alliances. Well, I think we very clearly documented that we can with our Roche alliance back in 2007.”

In the second deal, which was signed last summer, Alnylam gave Roche a non-exclusive license to use its fundamental RNAi intellectual property to develop therapeutics in oncology, respiratory diseases, metabolic diseases, and certain liver diseases in exchange for up to $1 billion (see RNAi News, 7/12/2007). Additionally, Alnylam sold its German subsidiary to Roche for $15 million.
 
According to Maraganore, “there certainly was a lot of anxiety when we did our Novartis alliance … from people that felt we maybe couldn’t do other alliances. Well, I think we very clearly documented that we can with our Roche alliance back in 2007.”
 
As for future partnerships, Maraganore noted that “there is literally nothing about the Roche alliance that we cannot replicate … tomorrow. It’s a non-exclusive deal [and] it has simply no encumbrances upon doing future alliances, so we have many degrees of freedom as to how we partner and the strategy around partnering.”
 
Adding that discussions are ongoing with potential partners interested in taking broad licenses to Alnylam’s IP estate, Maraganore said that “we don’t feel, nor do people we talk to feel, any limitations whatsoever in terms of how we do this and when we do this.”
One program that Maraganore has previously said is the subject of many alliance talks is Alnylam’s RSV effort (see RNAi News, 3/6/2008).
 
Currently, ALN-RSV01 is being tested in a phase II trial of adult lung-transplant patients naturally infected with RSV. Akshay Vaishnaw, Alnylam’s vice president of clinical research, noted during the company’s conference call last week that these patients represent a “very high unmet medical need” since infection with the virus can trigger transplant rejection.
Still, pediatric RSV patients represent “the most important population” for a therapy, Maraganore noted. As such, Alnylam is planning to begin another phase II trial of ALN-RSV01 later this year in this population.
 
“There are almost 800,000 cases of RSV bronchiolitis … in kids every year, with about 125,000 hospitalizations,” Vaishnaw explained. “That’s what we’ll be turning our attention to in the second half of the year. As ever, the first steps will be safety and tolerability [since] it’s a new population … [but we’ll also be] attempting to demonstrate antiviral activity in an exploratory sense.”
 
In response to an analyst’s question about other populations that Alnylam may target for ALN-RSV01, Maraganore said that the company is going to be “opportunistic … to see if there are near-term and more rapid paths forward,” but said that “it would be premature to have people’s expectations set on that” instead of the upcoming study in pediatric patients.
 
The Financials
 
During the first quarter, Nastech reported a drop in revenues to $1.3 million from $5 million, reflecting in part the loss of funding from the Procter & Gamble alliance.
 
The company’s net loss in the quarter climbed to $16.5 million, or $0.63 per share, from $11.5 million, or $0.47 per share, a year ago as the company dealt with the revenue drop-off and charges associated with its restructuring.
 
Nastech’s first-quarter research and development spending fell $2 million to $10.9 million, while selling, general, and administrative costs slid to $4.3 million from $4.8 million in the same period a year earlier.
 
As of March 31, the company had cash, cash equivalents, and investments totaling $41.6 million.
 
Alnylam, meanwhile, posted a surge in first-quarter revenues to $22.2 million from $7.2 million, primarily on payments tied to its alliances with Roche and Novartis.
 
The company’s net loss in the quarter dropped to $1.2 million, or $0.03 per share, from $21.6 million, or $0.58 per share, in the same period the year before.
 
Research and development expenses in the quarter dropped to $20.3 million from $26.7 million as general and administrative spending jumped to $5.9 million from $4.5 million in the same period of 2007.
 
As of March 31, Alnylam had cash, cash equivalents, and marketable securities totaling $443.9 million.

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