"Unquestionably, we're the leaders [in RNA interference]," Van Miles, senior vice president of business development for Alnylam Pharmaceuticals Inc., said about a year ago. Howard Robin, CEO of Sirna Therapeutics Inc., disagreed, choosing to "stand by our position that [our firm has] the dominant estate" in small interfering RNA.

Novartis AG had just signed a potential $700 million, three-year deal with Alnylam, and the overseas pharma firm bought 20 percent of the RNAi company as part of the arrangement.

Alnylam already had landed eight agreements providing nonexclusive rights to its patents, including four deals in the same year as the Novartis pact. Licensing RNAi property for their research were the German firm MWG Biotech AG, along with Eurogentec in Belgium and Sigma-Aldrich Corp. in St. Louis. With Novartis, Alnylam also is seeking through RNAi a therapy to beat avian flu, adding (earlier this year) that effort to the original deal. (See BioWorld Financial Watch, Sept. 12, 2005.)

Last week's RNAi headlines put a new perspective on the race, in which Sirna leads clinically with its Phase II-ready Sirna-027, a therapy for age-related macular degeneration, partnered in a potential $250 million ophthalmic-diseases deal with Allergan Inc. Strong Phase I data this summer excited Wall Street about Sirna-027 as a possible stealer of market share from Lucentis (ranibizumab), the AMD therapy from Genentech Inc., approved in June. (See BioWorld Financial Watch, Aug. 21, 2006.)

The validation of that lead compound surely figured into Merck & Co. Inc.'s eye-opening plan to buy Sirna for $1.1 billion in cash, or $13 per share, a 102 percent premium over the previous trading day's closing price.

Some analysts expressed surprise, given that Sirna's ophthalmic program already is partnered, along with the program for respiratory diseases, which (like the Novartis deal with Alnylam) is worth as much as $700 million to Sirna from GlaxoSmithKline plc. But 36 percent of Sirna investors already have backed the Merck buyout by entering voting agreements, and the rest seem likely to do the same, given the high price Merck is willing to pay.

Merck's move came amid speculation that Novartis or another pharma firm wanting a footprint in RNAi might take over Alnylam, whose stock had been rising and gained a substantial boost on the day the acquisition of Sirna became news. Alnylam itself has a deal with Merck, but analyst Pamela Bassett of Cantor Fitzgerald wrote in a report that the agreement, thanks to Merck's grab for Sirna, "is no longer relevant to Alnylam's future, and [we] do not expect any product candidates to be selected for development."

This summer, Merck and Alnylam consolidated and revised their collaborations, which stem from a relationship begun in 2003. The amended deal calls for Merck to provide nine therapeutic targets for initial development by Alnylam, which is allowed to select three to develop jointly with Merck, splitting the costs. Merck agreed to begin co-funding the joint programs from the outset, rather than waiting until the completion of preclinical work. Alnylam stands to gain as much as $120 million in milestone payments.

Merck's takeover of Sirna signals the pharma giant's continued hunger for platforms. Earlier this year, Merck bought Abmaxis Inc. (for its monoclonal antibody technology) and GlycoFi Inc. (for its glycoengineering expertise) for $80 million and $400 million, respectively. Debates aside regarding "who's on first" in the maturing field of RNAi, the Sirna buy gives Merck yet another platform - and one with applicability so broad that even existing deals in two therapeutic areas did not stop the deal from taking place.

Bret Holley, analyst with CIBC World Markets, said he was surprised, but Jonathan Aschoff, with Brean Murray Carret & Co. in New York, told BioWorld Financial Watch that Merck "clearly picked the best horse to bet on," and he expected no GSK counter-offer.

Mark Monane, analyst with Needham and Co., said the deal represents a strong vote not only for Sirna's work, and by extension Alnylam's, but also for the likes of Nastech Pharmaceuticals Inc., as well as oligonucleotide-focused firms such as Isis Pharmaceuticals Inc.

It didn't hurt Sirna's chances with Merck that Stanford University School of Medicine professor Andrew Fire won the Nobel Prize in medicine along with Craig Mello of the University of Massachusetts Medical School for their discovery of RNAi, about a month before the buyout was disclosed.

Formerly called Ribozyme Pharmaceuticals Inc., Sirna in 2003 underwent a name change, took on the "RNAI" Nasdaq symbol, and got agreements for $48 million from investors. Half of that money came from The Sprout Group, which later spun out its health care fund into New Leaf Venture Partners, Sirna's largest shareholder, with just more than 25 percent of the outstanding shares.

As Ribozyme, Sirna "had a 10-year run working with RNA in the form of its enzymatic activity, and all that transformed into RNAi [research]," James Niedel, managing director of New Leaf Venture Partners, told BioWorld Financial Watch.

"Over the last couple of months, [Merck and Sirna] began talking about a discovery collaboration," he said, adding that the buyout was "a surprise, to the Sirna side of the table." Using chemistry in RNAi, the specialty of Sirna and Alnylam, makes pharma more comfortable than others taking a viral-vector approach, he said.

Intellectual property, Niedel acknowledged, will become more important as RNAi drugs near approval, and he described Sirna's and Alnylam's portfolios as "formidable." (See BioWorld Financial Watch, Feb. 6, 2006.)

Whose IP bundle is best?

"It's hard to say. My view would be that the patent area, frankly, is still a little murky," Niedel said. "Some of the early patents haven't issued, including Tuschl I."

Earlier this year, the U.S. Patent and Trademark Office allowed a second Alnylam patent application that "broadly covers methods for preparing siRNAs, the molecules that mediate RNAi," part of the Tuschl II patent series backed by research by one of Alnylam's founders, Thomas Tuschl.

"There's probably some overlap [in the IP]," Niedel said. "As things get into development, I would hope the two companies strike some kind of cross-licensing agreement" rather than spend money to fight in court, he said.

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