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Novartis AG made a major move to get in on the RNA interference action, entering a three-year deal with Alnylam Pharmaceuticals Inc. and acquiring almost 20 percent of the firm as part of the agreement - which could be worth more than $700 million.

Alnylam's stock (NASDAQ:ALNY) soared $4.19 Wednesday, or 43.8 percent, to close at $13.75. It traded as high as $14.04.

Vin Miles, senior vice president of business development for Cambridge, Mass.-based Alnylam, called the deal a "landmark" in RNAi, noting that Novartis, of Basel, Switzerland, agreed to buy as much of a stake in the company as possible without having to consolidate the bookkeeping.

"We think, unquestionably, we're the leaders" in RNAi, he added, making Alnylam a logical choice for the pharma giant.

Jeremy Levin, global head of strategic alliances for Novartis, told BioWorld Today that his firm's experience proves "we know how to advance the science in this area," and he expects the relationship with Alnylam to be "very long term."

Novartis will make initial payments of about $56.8 million to Alnylam, consisting of up-front payments and the purchase of about 4.2 million shares of the company's stock at $11.11 per share. The exact amount of stock to be bought will be determined before the closing of the deal, and will equal 19.9 percent of Alnylam's outstanding shares.

Alnylam also is in line to get, across multiple programs, research and early development funding, plus milestone payments for progress including preclinical and clinical advances, as well as sales. Royalties are part of the deal, too.

The deal is extendable for two more one-year periods, and Miles said he expects the companies to stay together for the full five years.

Novartis holds a nonexclusive option to integrate Alnylam's RNAi platform into its internal efforts, which would mean more milestone payments and royalties on any products resulting from those efforts.

Alnylam also gets an opportunity to co-invest and share profits for a defined number of products resulting from the collaboration, while keeping rights to develop its own pipeline of RNAi therapeutics, including its push for a compound against respiratory syncytial virus, along with unpartnered and partnered programs.

If Alnylam seeks more partners for those other programs, Novartis has the right of first offer.

Alnylam has chalked up eight other agreements providing nonexclusive rights to its patents, including four deals this year. Licensing RNAi property for research were Ebersberg, Germany-based MWG Biotech AG, St. Louis-based Sigma-Aldrich Corp. and Seraing, Belgium-based Eurogentec. (See BioWorld Today, Aug. 3, 2005.)

In July, Nastech Pharmaceutical Co., of Bothell, Wash., entered an exclusive licensing deal with Alnylam to discover, develop and commercialize RNAi therapeutics directed against the protein TNF-alpha. No terms were disclosed, but the arrangement was said to include up-front, annual and milestone payments, as well as royalties. (See BioWorld Today, July 21, 2005.)

Nastech's license represents the third partnership with Alnylam's InterfeRx program, two others being with GeneCare Research Institute Co. Ltd. in Kamakura, Japan, and Sydney, Australia-based Benitec Ltd.

Alnylam said at the time of the Nastech deal that plans were in the works for a full pipeline of RNAi products using direct RNAi - that is, small interfering RNA delivered directly to cells of interest.

"Starting in about 2000, the scientific founders of Alnylam - some of them from Ribopharma [AG, of Kulmbach, Germany, which Alnylam bought in 2003] - figured out that the molecules responsible for RNA interference happening were these short interfering RNAs," Miles said.

The company has partnered an age-related macular degeneration program with Merck & Co. Inc., of Whitehouse Station, N.J., expected to enter the clinic this year, and Alnylam's internal RSV and pulmonary-disease programs are still in the preclinical stages, though the RSV compound should reach the clinic next year.

With the power of Novartis as a partner, Miles told BioWorld Today, Alnylam has a vast landscape of therapeutic opportunity.

"We won't be limited to the classes of targets typically available for small molecules and antibodies," he said. Using RNAi, "there's no gene you can't silence, in theory."

Levin agreed about pursuing a "host of new targets that were otherwise abandoned." Novartis and Alnylam will form an advisory group to review the overall strategy, and Levin said that, because of RNAi's broad potential, he could not speculate on which indications might be tried first.

"That question would better be posed in about a year's time, when we've had an opportunity to explore all areas," Levin said.

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