Staff Writer

Two firms that dominate in RNAi drug development - Isis Pharmaceuticals Inc. and Alnylam Pharmaceuticals Inc. - have formed an alliance to develop single-stranded RNA interference (ssRNAi) technology in a deal worth up to $31 million.

Cambridge, Mass.-based Alnylam, considered the leader in the RNAi field, will fund the research activities at a minimum of $3 million a year for three years.

Alnylam has mainly focused on traditional RNAi technology using double-stranded small interfering RNA (siRNA). But Isis's chemically modified, single-stranded RNA technology could result in RNA-based drugs that have better properties and are better tolerated, and are easier and cheaper to make, Stanley Crooke, chairman and CEO of Isis, told BioWorld Today.

Both companies will have the opportunity to discover and develop drugs employing the new single-stranded RNAi technology.

The two firms have worked together before under a 2004 cross-licensing deal that covered double-stranded siRNA. Carlsbad, Calif.-based Isis has received about $55 million from the 2004 alliance, which has been extended under the new collaboration.

In 2007, Alnylam and Isis formed a new company, Regulus Therapeutics LLC, which focuses on micro-RNA therapeutics. And they recently jointly funded a $20 million Series A financing of the joint venture.

Alnylam's lead program, ALN-RSV01, is being developed for the treatment of respiratory syncytial virus infection (RSV) infection and is partnered with Lexington, Mass.-based Cubist Pharmaceuticals Inc. and Tokyo-based Kyowa Hakko Kogyo Co. Ltd. Isis has commercialized the world's first antisense drug.

Speaking during a conference call Wednesday, Crooke said, "We think that both companies have benefited greatly from this relationship, and we are very pleased to have shared in Alnylam's scientific and business successes."

John Maraganore, CEO of Alnylam, who also was on the call, described the new collaboration as "sort of like renewing wedding vows; what's there not to love?"

While he said that Alnylam's primary focus has been on double-stranded siRNA, "We think that the ssRNAi technology pioneered recently by Isis represents a compelling approach that, if successful, could strengthen our overall leadership efforts in the RNAi field."

Maraganore also said that the alliance consolidates the intellectual property for single-stranded RNAi, "creating a dominant IP position in this field as we have previously done with double-stranded siRNA and with Regulus with micro-RNA."

He said that the next steps for the new collaboration will be "to evaluate an even broader range of these drugs from a chemical structure standpoint in both cells and animals, to pick the best medicinal chemistry and design platform to advance further."

Under the deal, Alnylam could pay up to $31 million in license fees in four tranches: $11 million on signing, $10 million in 18 months or earlier if in vivo efficacy in rodents is demonstrated sooner, $5 million upon achievement of in vivo efficacy in nonhuman primates, and $5 million upon initiation of the first clinical trial with an ssRNAi drug.

If Alnylam develops and commercializes drugs utilizing ssRNAi technology on its own or with a partner, Isis will receive milestones and royalties.

Initially, Isis is eligible to receive up to 50 percent of any sublicense payments due to Alnylam based on Alnylam partnering of ssRNAi products. Those payments will decline over time as Alnylam's investment in the technology and drugs increases.

In turn, Alnylam is eligible to receive up to 5 percent of any sublicense payments due to Isis based on Isis' partnering of ssRNAi products. Both Isis and Alnylam are eligible to receive royalties from each other on any ssRNAi products developed by the other company.

With $650 million in the bank, Isis has said publicly that it does not expect to have to ever return to Wall Street to raise money. The company has been profitable for the last seven quarters.

Alnylam ended 2008 with $513 million in cash and earned $96 million in revenues, a near doubling of 2007 revenues.

Shares in Isis (NASDAQ:ISIS) rose 38 cents closing at $16.10. Shares in Alnylam (NASDAQ:ALNY) rose $1.07, closing at $18.40.