Alnylam to Pay Tekmira $65M to Settle RNAi Delivery Dispute

Xconomy Boston — 

[Updated: 11:27 pm ET] Cambridge, MA-based Alnylam Pharmaceuticals has agreed to pay Vancouver, BC-based Tekmira Pharmaceuticals $65 million upfront, and potentially another $10 million next year, to settle a legal dispute over technology that enables Alnylam’s RNA interference drugs to be delivered where they are supposed to go inside cells.

Alnylam (NASDAQ: ALNY) and Tekmira (NASDAQ: TKRM) released separate statements today (see Alnylam’s here and Tekmira’s here) that said they have agreed to resolve all their ongoing litigation, and that the companies have restructured and clarified their relationship, so that Alnylam still has a license to Tekmira’s lipid-nanoparticle delivery technology.

As part of the deal, Alnylam has agreed to pay $30 million to terminate a contract manufacturing agreement with Tekmira, plus another $35 million to terminate previous license agreements to use Tekmira’s RNAi drug delivery technology. The new licensing agreement provides Tekmira with lower future milestone payments and royalties on three Alnylam products in development—ALN-VSP, ALN-PCS, and ALN-TTR02—although the altered financial terms weren’t disclosed in today’s announcements.

Besides the $65 million payment—which Tekmira said it expects to get within 10 days—it is also eligible to receive an additional $10 million in milestone payments expected in 2013. Alnylam has agreed to make a $5 million payment that will be triggered when Alnylam’s second-generation drug for transthyretin-mediated amyloidosis (TTR) enters a pivotal clinical trial, plus another $5 million payment to Tekmira when clinical trials of the liver cancer drug ALN-VSP start in China. The deal was reached just as the dispute was scheduled to go to a jury trial on Wednesday, says Alnylam spokeswoman Cynthia Clayton. [Updated to add comment about timing of the trial.]

The settlement brings to a close a bitter dispute that started when Tekmira filed a lawsuit in March 2011 which accused Alnylam of “relentless and egregious” misappropriation of its trade secrets, and asked for $1 billion in damages. Alnylam CEO John Maraganore said he was blindsided by the accusation, which he only learned of when Tekmira CEO Mark Murray sent him an e-mail informing him of the suit. The suit was a high-risk move for Tekmira, which had much less cash in the bank to sustain such an expensive, and high-risk legal battle.

Now that the settlement has been reached, it provides a big financial lift for Tekmira. The little company had just $6.9 million of cash left in the bank at the end of June, and it said in that quarterly report it only had enough money to operate into the second half of 2013.

Mark Murray, CEO of Tekmira Pharmaceuticals

“Today’s announcement provides assurances for our stakeholders that we accomplished what we set out to do when we initiated this litigation. We now have clarity around the intellectual property that protects our lipid nanoparticle (LNP) technology and a cash payment that will enable us to continue the execution of our business plan into 2015” Murray said in a statement.

The stakes in this dispute were so high because delivery of RNAi treatments remains one of the major challenges that must be solved for this field to reach its potential in fighting diseases that aren’t adequately treated by today’s small molecules or protein therapies. Alnylam, a leading developer of RNA interference molecules, has long sought help from a network of scientific collaborators to help it solve this central challenge for the field.

Tekmira, which makes lipid nanoparticles that serve as delivery vessels for RNAi, agreed to provide Alnylam with access to its technology in 2007. That deal was followed by a further manufacturing supply deal in 2009.

Over time, Tekmira alleged, Alnylam misused the information it obtained under the agreements. Tekmira claimed that Alnylam abused its status as a collaborator by attempting to copy the Tekmira methods for its own proprietary delivery technology, and by sharing Tekmira’s delivery technology with a third party without Tekmira’s consent.

By breaking off the manufacturing relationship with Tekmira, Alnylam will now have to manufacture the lipid nanoparticles on its own, or find another partner to help it produce sufficient batches for clinical trials and eventual commercial use. Alnylam said in today’s statement that it has its own manufacturing facility that meets common Good Manufacturing Practices required by regulators. Alnylam said it plans to use that manufacturing space to produce the ALN-TTR02 batches it will need for the beginning of pivotal clinical trials, which are expected to start by the end of 2013.

“With this restructuring of our Tekmira relationship, we are gaining independence in our LNP (lipid-nanoparticle ) manufacturing and decreasing the milestone and royalty burdens on several of our LNP-based products. Further, the companies have created clarity around the overall patent estate for LNP-based products, while ensuring Alnylam’s full access to use this technology for our products in the future. Of course, we are also pleased to put this legal matter behind us and continue our focus on advancing RNAi therapeutics through clinical trials with the goal of bringing them to the market where we can make an impact in the lives of patients and their caregivers,” said Barry Greene, Alnylam’s president and chief operating officer, in a statement.

Alnylam said it will take a $65 million hit from the settlement in its fourth-quarter financial report, which means that it expects to close the year with $215 million in cash. The company plans to discuss the settlement with shareholders on a conference call at 8 am ET/5 am PT tomorrow (Tuesday Nov. 13).

Tekmira has also agreed to settle separate litigation with AlCana Technologies, a fellow Vancouver, BC-based company that has sought to improve upon RNAi delivery technologies. Tekmira said in today’s statement that it expects to enter into a cross license agreement with AlCana, and that AlCana has agreed not to compete in the RNAi field for five years. Tekmira accused AlCana in its litigation of being “an instrument of Alnylam.