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Sirna Stock Surges on News of Strong In Vivo Data; Protiva Shares the Spotlight

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Sirna Therapeutics this month sued Protiva Biotherapeutics and its chief executive for breach of contract and fraud, alleging that Protiva licensed to Sirna a drug-delivery technology to which it doesn't have the rights, according to legal documents obtained by RNAi News.

The lawsuit, filed in the US District Court for the Northern District of California, may also shed light on why Sirna decided to use an internally developed delivery technology with its hepatitis C drug candidate rather than the Protiva technology despite having paid to license it.

In a prepared statement provided to RNAi News, Protiva CEO Mark Murray called Sirna's lawsuit "unjustified" and said it "lacks any merit."

About a year ago, Sirna licensed from Protiva a technology termed SNALP, short for stable nucleic acid lipid particle, which essentially comprises a nucleic acid encapsulated by cationic and fusogenic lipids, all of which are surrounded by a polyethylene glycol coating.

SNALPs were originally developed to deliver protein-encoding plasmids, but Protiva had been shopping the technology around since at least late 2003, trying to find companies interested in licensing it for RNAi applications (see RNAi News, 11/7/2003).


"Protiva officers and employees represented … that Protiva fully controlled and owned the intellectual property rights that Protiva was negotiating to license to Sirna," when the company does not.

It its lawsuit, Sirna alleges that the licensing deal gave it the right to use the SNALP technology with RNAi-based drugs against three targets of its choice â€" the initial ones selected being hepatitis B/C virus and PTP 1B, a gene associated with insulin resistance and diabetes. The arrangement also gave Protiva access to certain Sirna technology that it could use to develop RNAi-based drugs in three Protiva-named indications â€" the first one identified being influenza.

By mid-2005, Sirna was seeing promising results from its experiments with SNALPs, and published data in Nature Biotechnology showing that it could use the delivery technology to achieve a significant knockdown of hepatitis B virus in mice (see RNAi News, 7/29/2005).

However, last month Sirna President and CEO Howard Robin said at the JPMorgan Healthcare Conference in San Francisco that his company would be using its own nanoparticle-based delivery technology, not SNALPs, with its hepatitis C clinical candidate (see RNAi News, 1/19/2006).

Although Sirna has released strong in vivo data on its own delivery technology in HCV, it seems there was more to its decision not to use SNALPs with its hepatitis C drug, Sirna-034 (formerly Sirna-AV34).

According to the Sirna lawsuit, in exchange for the SNALP license, Sirna agreed to pay Protiva $1 million, payable in three parts: $100,000 upfront, $400,000 into escrow, and $500,000 in escrow in the form of Sirna common stock.

The cash and stock in escrow would be released once Protiva had amended an agreement it had with Inex Pharmaceuticals â€" the company from which Protiva had licensed the SNALP technology in January 2001 â€" expanding its rights to the delivery technology to include siRNAs, thereby clearing Protiva to out-license the technology to Sirna, the suit claims.

In its lawsuit, Sirna alleges that throughout its negotiations with Protiva for the SNALP license, "Protiva officers and employees represented … that Protiva fully controlled and owned the intellectual property rights that Protiva was negotiating to license to Sirna. These representations included that Protiva held all necessary licenses and rights from Inex Pharmaceuticals … regarding the delivery of siRNAs."

According to the lawsuit, Protiva's Murray made similar assurances to Sirna up until the time the companies signed the licensing agreement, after which Sirna made its required payments to Protiva and into escrow.

However, Sirna's lawsuit charges that "as early as the middle of 2003, Inex's CEO David Mayne informed Protiva representatives … [that] Inex owned and controlled rights to certain intellectual property for the delivery of siRNA that required Protiva to acquire a license from Inex."

Sirna further alleges that Protiva officials, including Murray, acknowledged in correspondences with Inex their company's need for a license in the RNAi space, and "to date, Protiva has not obtained a license from Inex for such intellectual property."

In its suit, Sirna charges that Protiva officials, including Murray, knowingly made false statements regarding Protiva's rights to the SNALP technology, and that Protiva currently retains $350,000 paid to it by Sirna thus far under the companies' licensing deal.

Sirna has asked the court to find that Protiva breached its contract and, along with Murray, "acted fraudulently." Sirna is seeking damages including the $350,000 it claims it paid to Protiva, as well as a ruling that Protiva no longer has rights to use Sirna's technology for influenza.

Officials from Inex and Sirna did not return requests for comment.

In his statement, Murray said that Protiva has "no idea what motivated [Sirna] to rush to the courthouse and completely bypass the dispute resolution process that was laid out in [the companies'] agreement. We are looking into the appropriate response to their action," he added.

According to a copy of Sirna and Protiva's agreement included as an exhibit in the lawsuit, the companies agreed to attempt to resolve any "dispute or difference … relating to the interpretation or performance of [the] agreement" in order to "attempt in good faith to negotiate a resolution of the dispute prior to pursuing other available remedies."

Last week, the court referred the case to an alternate dispute resolution program designed to settle lawsuits out of court. An ADR conference is scheduled to be held on May 26.

- Doug Macron ([email protected])

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