M&A: Panning for Gold - Pharmaceutical Executive


M&A: Panning for Gold
The industry must sift through the small pharmas and biotechs that are powering the engine of drug discovery. But searching for the right partner company can be like...

Pharmaceutical Executive

The deal is interesting because it includes terms for Pfizer to sell the test outside of the United States and make the most of the relationship between it and Mavirivoc. Roche tried a somewhat similar partnership in June, when it attempted a $3 billion hostile takeover of Ventana Medical Systems to gain access to a test for the HER2/neu gene, which identifies appropriate candidates for Herceptin. At press time, Ventana's Board had rejected the deal. However, if Roche could gain control, it could market the test as a companion diagnostic to the drug itself.


In late 2006, RNA interference (RNAi) came of age. It was then that the Nobel Prize was awarded to Andrew Fire and Craig Mello for their discovery of RNAi, or gene silencing by double-stranded RNA. The discovery enjoyed the fastest recognition by the Nobel Prize committee ever—the duo had published their research less than a decade before winning the coveted prize.

Now, there had been several RNAi partnerships before 2006. Merck, Novartis, Biogen Idec, and Medtronic all had deals with Alnylam, for example. But in some ways, the Nobel Prize was the tipping point: Just one month later, Merck made the bold move to acquire Sirna Therapeutics for a whopping $1.1 billion. More recently, Roche put a huge stake in RNAi in a $1 billion-plus deal with Alnylam, which allows it to license Alnylam's RNAi technology and also to buy Alnylam's research site in Germany, which will become Roche's Center of Excellence for RNAi.

"To help us get to the end game, we are partnering on a target-by-target basis with the pharmaceutical industry," says Alnylam's CEO John Maraganore. "Today, there are six RNAi therapeutics that are in clinical development. By the end of the year, there should be at least 10."

Sirna and Alnylam have built a powerhouses of partnerships, which help to validate their technology. But what analysts want to know, given the two companies' stronghold on RNAi: Is there life after Sirna and Alynylan?

"There's a big dropoff in terms of scale, scope, and quality," says Cowen's Eric Schmidt. "Our question is: Is RNAi in the first or the third inning? We're at least eight years away from getting anything commercially viable out of that platform. You have to be really patient there."

Philippe Chambon, managing director for New Leaf Venture Partners (which was an early and major investor in Sirna), has additional doubts about the companies cropping up in the space. "The intellectual property is consolidated in the hands of Alnylam and Sirna," he says. "Until companies come out with different IP, it is going to be limited."

Indeed, no other RNAi companies have the kind of name recognition or price tags as Sirna and Alnylam, but smaller deals are being made. In July, AstraZeneca moved forward on partnering with Silence Therapeutics for a three-year R&D deal focused on respiratory diseases, with payments of up to $400 million plus royalties on product sales. Silence has also sublicensed other technologies to Pfizer through its partner Quark Biotech, for the treatment of age-related macular degeneration and a number of other indications.

Despite the deals, no company has solved the delivery issue on how to get RNAi into the target cells, though there are a few promising and novel approaches.

Nucleonics, a biotech incorporated in 2001, is pioneering an approach based on "expressed, interfering RNA," or eiRNA, which it feels amplifies the RNAi mechanism. "There are probably another 10 or 20 companies in the space, of which we think Nucleonics is the best player," says Steven Burrill.

Kylin Therapeutics has also gained attention as an RNAi specialist. It has licensed from Purdue University packaging RNA, or pRNA, which is thought to overcome the delivery barrier and selectively deliver RNA-based therapeutics to diseased tissues. At press time, it still had no partner.


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