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Nastech Unveils Plans for RNAi Spinout As it Reports Restructuring, Layoffs

Officials from Nastech Pharmaceutical this week provided new information on the planned spinout of its RNAi operations, telling investors during a conference call that the new company is expected to be up and running as a publicly traded entity next year.
According to Nastech Chairman, President, and CEO Steven Quay, the company has begun the process of “spinning out its RNA-based technology, assets, and people into a subsidiary named MDRNA.
“The first step is to drop the internally generated and in-licensed [intellectual property] into MDRNA, specifically over 150 US patent and applications filed on RNAi inventions,” he said.
The company will then seek around $20 million in independent financing from “qualified institutional investors and certain venture capitalists” to support MDRNA through its first year of operations. Quay said during the call.
Nastech aims to complete the fund-raising by the middle of the first quarter of 2008, after which it will seek a public listing for MDRNA from the US Securities and Exchange Commission.
“While the SEC review time [of the filing related to the public listing] cannot be predicted, it is expected to be approximately two to four months in duration,” he noted. Following SEC approval of the filing, Nastech “will immediate distribute a portion of its MDRNA stock to Nastech shareholders of record as a dividend.”
MDRNA will be staffed with the approximately 45 Nastech employees currently working on the company’s RNAi efforts, which began when Nastech bought RNAi drugs startup Galenea early last year (see RNAi News, 2/23/2006).
The spinout is expected to be located in Bothell, Wash., where Nastech is headquartered.
Nastech unveiled its plans for MDRNA the same day that it announced a corporate restructuring and roughly one week after it reported the termination of a non-RNAi research and development collaboration with Procter & Gamble.
As part of that restructuring, Nastech is planning to cut between 70 and 75 jobs from its current headcount of approximately 230 employees.
However, as Quay noted during the conference call, “MDRNA is not a recent idea for Nastech and is not a reaction to recent events.
“Management and the board have been working for many months on the question of the best way to unlock the value of [our] RNA interference technology for the benefit of Nastech shareholders,” he said.
Indeed, as early as June, Nastech official have publicly stated that the company was considering a number of options to improve the valuation of its RNAi assets including through a spinout (see RNAi News, 6/28/2007).
“A special committee of the board was appointed in September of this year for the purpose of advising the board … and to make recommendations of the path forward” for Nastech’s RNAi operations, Quay said during the call. “The committee hired advisors to analyze the situation and review all options, including the spinout.

"The establishment of MDRNA as an independent company will better serve our shareholders by providing a structure [that] will help us unlock the value of Nastech's RNAi assets, as well as expedite the development of new therapeutics based on this new technology.”

“In management and the board’s considered judgment, the spinout of MDRNA is the means to maximize value for Nastech’s shareholders,” he added.
Nastech isn’t the only company with both RNAi and non-RNAi operations to come to this conclusion.
In January, CytRx announced that it would spin out its RNAi assets into an independent, publicly traded firm called RXi Pharmaceuticals in a bid to gain better traction in the marketplace among such rivals as Alnylam Pharmaceuticals (see RNAi News, 1/11/2007).
Like Nastech, CytRx is also planning to distribute RXi shares to its stockholders in the form of a dividend, and earlier this month RXi filed those shares with the SEC (see RNAi News, 11/1/2007).
"The establishment of MDRNA as an independent company will better serve our shareholders by providing a structure [that] will help us unlock the value of Nastech's RNAi assets, as well as expedite the development of new therapeutics based on this new technology," Quay said in a statement this week.
"We have developed a proprietary platform for the creation and delivery of novel RNAi therapeutics with several candidate molecules in development,” he said. “We look forward to recognizing the value of this innovative work."
Specifically, Nastech has placed its bets on a novel RNAi approach involving so-called Dicer-substrates.
Dicer-substrates are 27-nucleotide long RNA duplexes that have been shown to be up to 100 times more effective at silencing genes than conventional 21 nucleotide-long siRNAs without inducing an interferon response or activating protein kinase R in cells.
Since they are longer than standard siRNA duplexes, Dicer-substrates are also expected to not be subject to the IP controlled primarily by Alnylam and Merck subsidiary Sirna Therapeutics.
As first reported by RNAi News, Nastech Pharmaceutical this time last year acquired the exclusive therapeutic rights to the technology for five undisclosed targets and non-exclusive rights for all other mammalian targets (see RNAi News, 11/9/2006). 
Last week, RNAi News also reported the establishment of Dicerna, a startup that has exclusively acquired the remaining Dicer-substrate rights for human therapeutics (see RNAi News, 11/8/2007).

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