Alnylam CEO: Tekmira Accusation of Trade Secret Misuse was a “Big Surprise”

3/18/11Follow @xconomy

Alnylam Pharmaceuticals CEO John Maraganore found out his firm was getting sued by one of its business partners for more than $1 billion when an e-mail arrived in his inbox a few minutes after a press release on Wednesday.

This was a bombshell, to say the least. The CEO of Vancouver, BC-based Tekmira Pharmaceuticals said in a conference call that Cambridge, MA-based Alnylam has committed “relentless and egregious” misappropriation of Tekmira’s trade secrets. Alnylam, as companies often do, responded in a statement the next morning, saying it believes the accusation has no merit and it plans to defend itself.

I spoke to Maraganore by phone shortly after Alnylam issued its statement to find out more. But before diving into what he had to say, a little background is necessary:

On one side, you have Alnylam (NASDAQ: ALNY), one of the leaders in RNA interference therapy—which seeks to specifically silence disease-related genes. On the other, there’s Tekmira, a leading developer of lipid nanoparticles which are used to get those RNA-specific therapies where they must be in cells. No RNAi treatment has yet won FDA approval, and scientists say delivery remains one of the major challenges that must be solved for this field to reach its potential. These two companies have been working together since at least 2006, according to Alnylam’s statement. Two of Alnylam’s most important drug candidates in development now use the Tekmira delivery technology.

You can listen to what Tekmira CEO Mark Murray said about this case, through the archived teleconference. Here’s what Maraganore had to say, edited as always for length and clarity:

Xconomy: How did you actually find out about this litigation?

John Maraganore: An e-mail.

X: From your lawyer?

JM: No, from Mark (Murray) saying they just filed suit against us. We weren’t even aware until the press release of any dispute or concern they have with our relationship. It was, completely, a big surprise. We had no information, no evidence raised, no concern voiced, no anxiety voiced, no phone call that said ‘hey, we’re worried about XYZ.’ Nothing. It was very surprising and a completely unanticipated move on their part. I don’t think it’s a good strategy when you have a partnership. It’s certainly not a good strategy when you have a partner that has done as much funding as we have in the past, and frankly, has been there to support them for many, many years. It’s not what I would call the best example of relationship management I’ve ever seen.

Alnylam CEO John Maraganore

X: But John, Mark Murray said on the conference call that Tekmira asked you repeatedly to stop this activity which they say is infringing on their trade secrets, and they got no response.

JM: In our view, that is completely untrue.

X: How does this affect you operationally? ALN-VSP, the liver cancer program, relies on their lipid nanoparticle delivery system. I think ALN-TTR (for TTR amyloidosis) does too. Is that right?

JM: Yes. All of our LNPs (lipid nanoparticles for RNAi delivery) are being manufactured by Tekmira. Right now, Alnylam’s current relationship with Tekmira is really limited to manufacturing. The work we do on new LNPs in discovery is done through our relationship with MIT, our relationship with AlCana, our relationship with the University of British Columbia, our relationship with Max Planck Society. We have separate and distinct research going on for new LNP delivery technologies. So right now, the work with Tekmira is focused on manufacturing. And as part of the communication we received from them, they made it clear they will continue their obligations in manufacturing. So we see no operational limitations.

X: Where might this be coming from? Do you guys have a lipid nanoparticle program of your own that reduces your need to rely on Tekmira? Do you envision a day when you won’t need to rely on Tekmira at all?

JM: Not necessarily. We have many delivery activities going on. We have conjugates and direct delivery programs that don’t use LNPs. We’re letting the science drive where we go. But if we are using lipid nanoparticles, our goal is to continue to use Tekmira as our manufacturing partner, and that’s the plan for the foreseeable future, provided they continue to provide high-quality material.

X: Have you ever been through a litigation quite like this one? I know people litigate over patents all the time, but this is somewhat different when you are talking about such an important strategic partner, and it’s a serious accusation they are making.

JM: I have not personally. But partnership disputes happen. Typically, they are resolved within dispute resolution mechanisms in agreements. That was not what was done here, which is unfortunate. But I think ultimately this is the kind of dispute that can happen between partners. Occasionally, they get resolved through lawsuits, which is not what we intended or expected to see happen. Especially with a partner like Alnylam, which has been their most significant partner to date, and has contributed over $45 million in funding to Tekmira, and on an annual basis funds Tekmira with more than $6 million. We’re also a company that owns about 4 percent of Tekmira. It’s a bit odd.

X: I remember when you guys struck the manufacturing agreement in 2009, and it sounded like both parties were pretty happy. Has trouble actually been brewing for some time over some other issues?

JM: No. Not at all. There are always ups and downs in discussions that happen, whether it’s trying to reach agreement on something related to a press release, or reaching agreement on wording for XYZ. But everything has been very steady. It’s very surprising.

X: How much of a distraction might this be for you and your management team, taking you away from the scientific and clinical decisions you need to make?

JM: Very little distraction. We deal with multiple things at a time. It’s an unfortunate action on the part of Tekmira. But it’s certainly not a distraction from the core focus of our business, and it won’t be. It just so happens that we settled our broader IP-related lawsuit. So that suit is behind us. We were hoping we wouldn’t have a suit in play at this point, but the fact Tekmira has chosen to go down this path is something we can deal with.

X: Are things still OK between you and AlCana (a spinoff from Tekmira)?

JM: Absolutely. Fantastic. And also between us and the University of British Columbia, and MIT. We have very strong relationships.

X: Is the long-term vision here at Alnylam to have delivery technology wholly owned by your company through some of these research collaborations?

JM: Yes. We’re a consolidator. Both in terms of the IP we consolidated early on, and in terms of the delivery technologies we’re investing in across the world. The investments in novel technologies are done internally, or through third-party agreements. Those agreements are almost always associated with IP provisions where the company that pays, owns it. It’s very straightforward. You pay for it, you own it.

Those are the types of deals we’ve done historically with Tekmira, on research agreements, and the type of relationship we’ve done with AlCana, and with UBC, and with MIT. It’s a very standard way of doing partnerships based on sponsored research. The smaller company gets the benefit of funding, but also of milestones and royalties on products that Alnylam progresses. Tekmira stands to gain enormously based on milestones and royalties in the future. It seems to me that ought to be their focus. It seems to me this is a very misguided approach. The focus should be on clinical progress and science, and frankly, receiving their milestones and royalties.

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