Roche Dumps RNAi, Sends Shock Waves Through Alnylam, Tekmira

11/17/10Follow @xconomy

The world’s biggest spender on pharmaceutical R&D, Switzerland-based Roche, made news today with a sweeping series of cutbacks, and the ripple effect is extending to leading biotech companies in New England and the Pacific Northwest—including Cambridge, MA-based Alnylam Pharmaceuticals and Vancouver, BC-based Tekmira Pharmaceuticals.

Roche said today it is terminating its efforts to discover and develop drugs through RNA interference, the hot gene-silencing technology that is supposed to be able to halt disease processes that are untouchable by existing biotech drugs or conventional small molecule pills. This means it’s the end for RNAi research at Roche facilities in Kulmbach, Germany, Nutley, NJ, and Madison, WI. The company is cutting more than 4,000 jobs as part of its global restructuring, of which the RNAi move is just one part.

Roche, which spent $8.7 billion on R&D in 2009, has been one of the important benefactors that RNAi companies have been counting on for research support and validation. Alnylam (NASDAQ: ALNY) made big news in July 2007 when it enticed Roche to pay $331 million upfront, and potentially more than $1 billion over time, for non-exclusive access to use Alnylam’s technology to develop drugs for cancer, respiratory diseases, metabolic disorders, and certain liver conditions. Tekmira (NASDAQ: TKMR), a leading developer of nanoparticle technology to deliver RNAi molecules where they need to go inside cells, also struck an important deal in May 2009, in which Roche agreed to pay $18.4 million over two years, plus potentially another $32 million in milestone payments if the Tekmira programs hit certain development goals.

This is the second setback this fall for Alnylam, which cut 25-30 percent of its workforce in September after another Swiss drug giant, Novartis, ended an RNAi alliance with Alnylam.

Alnylam CEO John Maraganore was out with a quick statement this morning to reassure his shareholders and employees about the latest news of cuts at Roche. Alnylam still has alliances with GlaxoSmithKline, Takeda Pharmaceuticals, Medtronic, Cubist Pharmaceuticals, Sanofi-Aventis, Biogen Idec, and others.

“While we are disappointed and surprised to hear of their portfolio decision given the progress being made in the RNAi field, we remain more confident than ever in our efforts to advance RNAi therapeutics as a whole new class of innovative medicines to patients,” Maraganore said in the statement.

Tekmira CEO Mark Murray also issued a statement this morning, in which he essentially said the company has enjoyed a “productive relationship” with Roche, but losing the partnership isn’t a death blow.

“We do not expect Roche’s decision to have a substantive impact on our business going forward,” Murray said. “The majority of our revenue now comes from our exclusive manufacturing relationship with Alnylam Pharmaceuticals and our growing relationship with the United States Government’s Transformational Medical Technologies program. We expect these will be the principal drivers of revenue through 2011, along with the ongoing research relationships we have with Pfizer, Takeda and Bristol-Myers Squibb as well as the opportunity for new business relationships.”

The news of the Roche cutbacks surely will have an even bigger effect on smaller RNAi companies who will now find one less blue-chip partner to provide cash and validation. The pool of prospective suitors has been narrowing with the mega-mergers of Pfizer and Wyeth, Merck and Schering-Plough, Roche and Genentech, (and potentially Sanofi-Aventis and Genzyme). The littler RNAi firms probably won’t issue press releases today to reassure nervous shareholders and employees, but you can bet there’s a fair amount of scrambling going on with those executive teams too.

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