Alnylam Seeks to Prove RNAi Skeptics Wrong After Layoffs, End of Novartis Deal

10/21/10

[Corrected---10/22/10 at 6:30 am ET. See editor's note.] Those of us who follow Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ:ALNY]) have come to expect the biotech to land major deals with large drug makers related to its gene-silencing drugs. The firm’s pacts with Novartis, Roche, Takeda Pharmaceutical, and others have been the envy of the biotech industry for years. But Alnylam struck a more somber note late last month when it cut about 25 percent of its workers in anticipation of the end of its five-year collaboration with Swiss drug giant Novartis.

Novartis, which has its research headquarters in Cambridge, had provided a total of $125 million to Alnylam since 2005. That’s when the two firms began collaborating on the development of RNA interference drugs, which are intended to block the activity of certain disease-causing genes. Novartis’s payments supported about 25 Alnylam employees who were focused on the collaboration, and most of those workers were let go last month.

“I don’t think it’s a setback for us in any way,” says John Maraganore, the company’s CEO, in an interview. “Obviously, at a personal level, it’s never a fun thing to have to put [layoffs] in place and there were some goodbyes that were said that were heartfelt.”

While Novartis didn’t opt to pay Alnylam $100 million for further access to Alnylam’s gene-silencing technology, the Swiss drug company did decide to continue to pursue 31 drug targets with Alnylam’s experimental RNAi treatments. That means Alnylam has the chance to get up to $75 million fees from Novartis for each of those drug targets based on the achievement of certain development milestones. Also, Alnylam expects to have $325 million in the bank at the end of this year, and the firm’s current stockpile of cash will fund its operations for more than three years, Maraganore says. After the layoffs, the company has 175 workers.

Yet the end of the Novartis deal serves as reminder that Alnylam still has a lot to prove before its gene-silencing technology can be considered a success in terms of improving human health. RNAi pioneers Craig Mello and Andrew Fire won the 2006 Nobel Prize for their groundbreaking work, but neither Alnylam nor any of its counterparts have brought an RNAi drug to the market. And at this stage in Alnylam’s eight-year history, it needs to show investors and potential pharma partners more evidence that its drugs have a shot at working in humans. Nobody knows this better than Maraganore.

“I think everybody in the world is looking to Alnylam to pioneer this field and we’re up to the challenge,” Maraganore says. “As Alnylam generates data showing that RNAi works in humans, it’s going to increase the level of conviction around RNAi being a whole new class of drugs.”

Later this year, Alnylam plans to provide an update on its Phase I clinical trial of ALN-VSP, a gene-silencing drug that targets … Next Page »

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