Alnylam, RXi On Collision Course Over Intellectual Property From Massachusetts Life Sciences Initiative

Xconomy Boston — 

Alnylam Pharmaceuticals may have to be careful what it wishes for. The Cambridge, MA-based biotech company (NASDAQ: ALNY) supported Gov. Deval Patrick’s 10-year, $1 billion initiative to boost the life sciences industry in the state, and now that it’s become law, the company says the initiative might give one of its competitors an unfair advantage.

Alnylam’s beef is essentially that the state’s new initiative could give the upper hand to Worcester, MA-based RXi Pharmaceuticals (NASDAQ: RXII), a rival in developing drugs through RNA interference technology, says Alnylam CEO John Maraganore. The new law is expected to pump significant amounts of state money into top state research institutions, like the University of Massachusetts Medical School, particularly the lab of 2006 Nobel Prize winner Craig Mello. That lab, which has done pioneering work in RNA interference, has a “blanket” agreement to provide licenses to RXi for technology emerging from its research, Maraganore says, citing RXi’s regulatory filings.

What it all means is that state money could end up strengthening a single company, which would block other companies from getting a shot at licensing the discoveries and creating jobs, Maraganore says. The issue was first aired, in a somewhat cryptic op-ed piece in the Boston Herald by Maraganore and Amir Nashat, a general partner with Polaris Venture Partners. They point out that California lawmakers nipped this problem in the bud in their $3 billion stem cell research initiative, making it clear that any intellectual property generated with state funds should be eligible for licensing to all comers, and can’t be steered to a single company, even if it has a pre-existing agreement with a state-supported lab.

“We were huge supporters of the life sciences initiative, it’s a bold and timely initiative,” Maraganore says. “It’s interested in fostering innovation, and new jobs, so IP takes on a lot of importance. Having the IP available to existing companies and to new companies on a level playing field is quite important. We think it’s important as a matter of public policy.” Otherwise, he added, “It may not foster as many new companies and new jobs.”

This issue of what to do with the intellectual property stemming from discoveries with state money falls squarely on Susan Windham-Bannister, the newly hired CEO of the Massachusetts Life Sciences Center. State lawmakers left this matter vague in the legislation, and are leaving those decisions up to the agency that will carry it out, Maraganore says. It doesn’t appear that anybody stuck a special provision or earmark into the law to specifically benefit a buddy with RXi or any other company, he says.

Alnylam has raised the IP rights issue with Windham-Bannister, and the company has had what it considers “excellent conversations with her,” Maraganore says. “She’s outstanding, she’ll certainly take this issue on. We’re very confident the Life Sciences Center will address this in a high-quality way.”

Windham-Bannister’s office is clearly thinking hard about how to get through this thicket. “A high priority issue for the Center is one that relates to the issue of exclusive licensing agreements for intellectual property developed using state funds between state-funded colleges and universities and private companies and institutions,” said Melissa Walsh, the center’s chief operating officer, in an e-mailed statement. “There is language in the life sciences law that requires the Center and its Board of Directors to review and make recommendations on this topic. We are committed to exploring the issue in a comprehensive and objective manner before rendering our recommendations to the Legislature.”

RXi Pharmaceuticals CEO Tod Woolf was unavailable for comment, according to a spokesman.

It’s likely that Alnylam’s complaint is just the first of many, says David Resnick, a partner with Nixon Peabody (and Xconomist) who specializes in intellectual property law. There are a lot of companies with sponsored research agreements at state institutions, and those deals often give them right of first refusal on technologies emerging from the research, Resnick says. “It’s probably good that Alnylam brought this up,” Resnick says. “It’s bound to come up in a number of offices.”