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For Sirna, Talks on Drug-Development Deal Turn Into $1.1B Bet by Merck

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Merck this week said it plans to acquire Sirna Therapeutics for $1.1 billion in cash, making it the boldest bet big pharma has made on RNAi to date.
 
According to Bharat Chowrira, vice president of legal affairs and patent counsel for Sirna, the acquisition grew out of discussions the company had been having with Merck over a possible drug-development collaboration.
 
“We were not out there shopping the company,” he told RNAi News this week. “We had no intention of selling the company because, as we have said publicly, we wanted to be an independent, fully integrated biotech company.”
 
In the end, however, the price offered by Merck, which has been one of the first big pharma companies to make large investments in RNAi, proved too good to pass up.
 
“Ultimately, what we do is build shareholder value,” Chowrira said. “And when the shareholders are going to realize a 100 percent premium [through a buy-out offer], it’s hard not to take it seriously.”
 
“We are delighted about our agreement to acquire Sirna,” Peter Kim, president of Merck Research Laboratories, said in a statement. “We believe that RNAi could significantly change the way in which we go about discovering and developing drugs, and could become a new way to treat patients.”
 
The deal is expected to close in the first quarter of 2007.
 
To Buy or Not to Buy?
 
Merck has been one of the earliest industry movers in RNAi, forming two of the RNAi therapeutics field’s earliest collaborations, both with Sirna rival Alnylam Pharmaceuticals (see RNAi News, 9/12/2003 and 7/2/2004).
 
Since then, the company has continued to embrace RNAi as a therapeutic modality, but decided that it would take more than partnerships to capitalize upon the gene-silencing technology’s potential, according to Alan Sachs, vice president at Rosetta.
 
“Merck recognizes the advantages of using siRNA as a therapeutic and recognizes that there is a significant challenge with respect to delivering these molecules,” he told RNAi News this week. “The amount of work that we will need to do to realize the [technology’s] true value is well beyond what we thought a partnering agreement would allow us to do.”
 
At the same time, however, Sachs said that Merck’s decision to acquire Sirna was not the result of a dedicated effort to find and buy a key player in the RNAi drugs space. Rather, it was “more a scientific evaluation of where we are and where we knew we needed to go,” he said.
 
“We had already worked with Alnylam and were considering working with Sirna, and it really was a scientific progression of thought that led from initial discussions with Sirna to where we are now,” Sachs explained.
 
“So I would not say that Merck … decided to acquire a company involved in siRNA therapeutics, but instead Merck … is making a concerted effort to use new technologies to focus on our key mission [of] delivering differentiated products that help human health. This was just a natural extension of that.”
 
Given that Merck had already established ties with Sirna rival Alnylam, its decision to acquire Sirna — a company with which it has had no formal relationship — came as a bit of a surprise.
 
Sachs declined to comment on this, noting that “comparing and contrasting the two companies, which are each leaders in the field of siRNA therapeutics … is not reasonable.”
 
He instead pointed to Sirna’s extensive patent portfolio and scientific expertise as key drivers of the acquisition.
 
But even if Merck had ever been interested in Alnylam as an acquisition target, a deal seems unlikely as it would have required Merck to buy the 19.9-percent equity stake Novartis took in the RNAi firm about a year ago as part of a broad drug-discovery and -development alliance (see RNAi News, 9/9/2005).
 
However, Sachs stressed that Merck will continue to work with Alnylam under their existing partnership, which was recently restructured to eliminate drug-development work in ocular indications (see RNAi News, 7/6/2006).
 
He added that the decision to drop ocular diseases from the arrangement with Alnylam was not made in anticipation of meeting regulatory requirements to close the acquisition of Sirna, which has its own RNAi-based ocular disease programs underway with partner Allergan (see RNAi News, 10/7/2005).
 
“Merck … plans on not just recognizing our existing agreements, but those agreements … that exist for Sirna Therapeutics,” he added, referring to Sirna’s ongoing collaboration with Allergan, as well as its partnerships with GlaxoSmithKline in respiratory indications (see RNAi News, 4/6/2006) and Targeted Genetics in Huntington’s disease (see RNAi News, 1/14/2005).
 
“There will be no change to what there is today,” Sachs said of the collaborations.
 
Chasing Indications
 
Change, however, may be in store for Sirna’s in-house drug-development programs.
 

“Merck recognizes the advantages of using siRNA as a therapeutic and recognizes that there is a significant challenge with respect to delivering these molecules. The amount of work that we will need to do to realize the [technology’s] true value is well beyond what we thought a partnering agreement would allow us to do.”

Currently, Sirna is developing a hepatitis C drug candidate, called Sirna-034, which is slated to enter phase I testing before the end of the year. The company is also working on a permanent hair-removal drug, which is expected to enter human testing around the same time through its Sirna Dermatology unit (see RNAi News, 12/10/2004).
 
In a press release announcing the acquisition, Merck and Sirna stressed the potential of RNAi in cancer, a field Sirna has been exploring but which is still in the discovery phase and has been rarely mentioned during company presentations.
 
Sirna was working with Eli Lilly on developing siRNAs against various cancer targets under a deal signed in early 2004 (see RNAi News, 1/30/2004), but that 18-month collaboration apparently yielded little and was not renewed.
 
“We can potentially use [RNAi] to target the activity of genes which control the activity of cancer cells, and so produce their destruction without damaging normal cells,” Stephen Friend, executive vice president and franchise head of Merck Research Laboratories’ oncology and neuroscience division, said in a statement.
 
Sachs declined to comment specifically on whether cancer would become a major focus for Sirna after the acquisition.
 
“Merck has publicly announced that it works in six major therapeutic areas, and the acquisition of Sirna allows Merck to consider how to use [RNAi] technologies in any one of the six areas,” he said, referring to oncology; diabetes and obesity; atherosclerosis and cardiovascular disease; neuroscience; vaccines and biologics; and bone, respiratory, and endocrine disorders.
 
Sirna is an “early-stage company that will require a lot of research to solve some of the delivery issues, and so discussions of the longer-term plans to enable one or another of our therapeutic areas is premature,” Sachs said, adding that beyond Sirna’s existing clinical candidates, “we’re all going to have to wait and see how Merck will enable itself through the use of [Sirna’s] technologies.”

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