Alnylam Pharmaceuticals Inc. and Merck & Co. Inc. consolidated and revised their two existing RNA interference-based collaborations to allow for earlier involvement by the big pharma firm and a chance for Alnylam to earn more than $120 million in milestone payments.

The amended deal calls for Merck to provide nine therapeutic targets for initial development by Alnylam. Cambridge, Mass.-based Alnylam will be allowed to select three of those programs to develop jointly with Merck on a 50/50 basis. Merck also agreed to begin co-funding the joint programs from the outset, rather than waiting until the completion of certain preclinical work.

That's "more consistent with Alnylam's capacities," and meets "our needs for earlier funding," said John Maraganore, president and CEO of Alnylam.

Merck will be responsible for moving forward on the remaining six programs, with milestones and royalties to Alnylam. Successful development and approval of three RNAi drugs would yield milestones exceeding $120 million, in addition to potential royalties and research and development funding, Maraganore said.

Alnylam signed its first deal with Whitehouse Station, N.J.-based Merck in September 2003. Terms called for an up-front payment and a "significant equity investment" by Merck, which agreed to provide 12 drug targets over a four-year period, Maraganore said. Alnylam would handle the discovery and early development work through GLP toxicology, at which time Merck had the option to take over the program in exchange for milestones and reimbursement funds.

One RNAi candidate has emerged from the program so far: a drug to target Nogo, a protein involved in the inhibition of nerve cell regeneration. The companies have advanced that candidate into animal studies.

A second collaboration signed in July 2004 focused on developing candidates for ocular disease, and Alnylam brought forward an anti-VEGF compound, ALN-VEG01, to treat age-related macular degeneration. However, the drug was placed on the back burner last fall due to competition in the AMD space, and Merck opted to return to Alnylam all rights to ALN-VEG01.

When Phase III data from South San Francisco-based Genentech Inc.'s VEGF inhibitor Lucentis came out last year, "we looked at the market place and felt that the game had changed dramatically," Maraganore said. "We felt it was prudent to focus on higher-value opportunities."

Lucentis (ranibizumab) gained FDA approval last week. (See BioWorld Today, July 5, 2006.)

Alnylam said it is evaluating other partnership opportunities for ALN-VEG01, which has completed investigational new drug-enabling studies.

When the company began working with Merck three years ago, it was the first significant RNAi collaboration in the industry, Maraganore said.

"Merck was really a pioneer in terms of a pharmaceutical company [becoming involved] with RNAi," he said, though the perception of RNAi-based therapeutics has changed a lot in the past couple of years.

"I think we've seen nothing short of an explosion of interest in the pharmaceutical industry and large biotech industry," Maraganore told BioWorld Today. "People who might have been on the sidelines three years ago are now really viewing this as something that could hold up to the promise of being a whole new class of drugs."

Since signing the initial Merck alliance, Alnylam has struck multiple collaborations, the largest of those a multiyear discovery deal with Basel, Switzerland-based Novartis AG last fall. Under the terms, Alnylam could earn more than $700 million in up-front and milestone fees. (See BioWorld Today, Sept. 8, 2005.)

Earlier this year, Alnylam signed a second deal with Novartis, that one to focus on RNAi-based therapeutics against pandemic flu. Maraganore said an IND for that candidate could be filed as early as this year. (See BioWorld Today, Feb. 22, 2006.)

In addition to cultivating multiple collaborations, the company also is at work on its own RNAi-based drug pipeline. Its lead product, ALN-RSV01, has completed two Phase I trials and was found to be safe and well tolerated in healthy volunteers. ALN-RSV01, aimed at respiratory syncytial virus infection, is designed to be delivered directly into the patients' lungs to silence a viral gene in infected lung cells.

Alnylam posted a net loss of $8.9 million, or 30 cents per share, for the first quarter. As of March 31, the company had cash, cash equivalents and short-term investments totaling $132 million.

Shares of Alnylam (NASDAQ:ALNY) closed at $14.45 Thursday, down 35 cents.

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