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On November 12, 2012, Tekmira Pharmaceuticals Corporation (TKMR) announced that they had settled litigation with Alnylam Pharmaceuticals, Inc. (ALNY). Tekmira shares rose from 9% to over 18% and ALNY shares rose over 5% on the day after the news. Tekmira also signed a new licensing agreement that restructures the relationship and provides clarity on intellectual property and licensing issues between the companies.

Tekmira, a $70M market cap, Vancouver, Canada-based RNA interference (RNAi) therapeutics development firm will receive $65 million within 10 days and is eligible to receive $10 million in near-term milestone payments expected to be received in 2013.

Tekmira's CEO, Mark J. Murray,Ph.D., was understandably elated.

"With our cash runway now extending into 2015, we are excited about our plans to aggressively advance multiple products into human clinical trials," Murray stated.

Alnyam seemed to be happy too.

"With this restructuring of our Tekmira relationship, we are gaining independence in our LNP 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, President and Chief Operating Officer of Alnylam. "Alnylam plans to continue to advance RNAi therapeutic products as part of its 'Alnylam 5x15' product strategy with LNP delivery technologies - as employed with ALN-TTR02, ALN-PCS, and ALN-VSP, in addition to the use of the company's proprietary conjugate-based delivery technology - as employed with ALN-TTRsc, ALN-AT3, and other undisclosed programs."

Tekmira also expects that their lead oncology product, TKM-PLK1, will enter a phase two trial in 2013. The company will also continue to research their TKM-Ebola product in collaboration with the U.S. Department of Defense's Transformational Medical Technologies program, and develop other product candidates within their pipeline. In addition, the company is entitled to future royalty payments based on sales of Marqibo, which was approved by the US Food and Drug Administration (FDA) in August 2012 for adults with a rare form of leukemia known as Philadelphia chromosome negative acute lymphoblastic leukemia.

Marqibo

Marqibo (vinCRIStine sulfate LIPOSOME injection) is a liposomal formulation of the chemotherapy drug vincristine and two other liposomal chemotherapy products, Alocrest and Brakiva, which were licensed from Tekmira to Talon Therapeutics, Inc. (TLON.OB) in 2006. Talon is responsible for all future development of these products. On August 9, 2012, Tekmira disclosed that Talon received accelerated approval from the FDA for Marqibo for the treatment of adult patients with Philadelphia chromosome negative (Ph-) acute lymphoblastic leukemia (ALL) in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies. Tekmira received a $1 million milestone payment based on the FDA approval of Marqibo and is eligible to receive royalty payments based on Marqibo's commercial sales.

Managing illness at its genetic source by silencing genes via RNAi has demonstrated significant potential. In addition to delivery platform research and development, Tekmira is advancing its own RNAi therapeutic candidates.

Tekmira has worldwide licenses to Alnylam's core technology and intellectual property for the discovery, development and commercialization of RNAi products directed to eight RNAi gene targets-including three exclusive and five non-exclusive licenses. Five of the targets, ApoB (high cholesterol), PLK1 (oncology), TKM-Ebola, WEE1 (oncology) and CSN5 (oncology), have already been selected on a non-exclusive basis, and ALDH2 (alcohol dependence) was recently selected as an exclusive target.

TKM-PLK1

Tekmira's lead oncology product candidate is TKM-PLK1. In pre-clinical animal studies, TKM-PK1 was found to selectively kill cancer cells, while sparing normal cells in adjacent healthy tissue. TKM-PLK1 targets PLK1 (polo-like kinase 1). PLK1 is a protein involved in tumor cell proliferation and is a validated oncology target. Research has found that inhibition of PLK1 expression prevents the tumor cell from completing cell division, resulting in cell cycle arrest and death of the cancer cell.

Tekmira's pre-clinical studies have demonstrated that a single, systemic intravenous administration of TKM-PLK1 blocked PLK1 expression in liver tumors causing extensive tumor cell death. After repeat dosing, there was a significant inhibition of tumor growth as well as prolonged survival without evidence of the toxicities often associated with oncology drugs. The TKM-PLK1 anti-tumor efficacy results were confirmed to be the result of silencing PLK1 via RNA interference.

In December 2010, Tekmira announced the initiation of patient dosing in a phase one human clinical trial for TKM-PLK1 in patients with advanced solid tumors. The phase one clinical trial, conducted at oncology centers in the United States, is an open label, multi-dose, dose escalation study designed to evaluate the safety, tolerability and pharmacokinetics of TKM-PLK1. Researchers also hope to be able to determine the maximum tolerated dose, measure tumor response and the pharmacodynamic effects of TKM-PLK1 in patients providing biopsies.

TKM-PLK1 has been administered to 23 patients with a total of 128 doses administered. On August 14, 2012, Tekmira released interim results from the TKM-PLK1 phase one study which found that its RNAi compound TKM-PLK1 in patients with advanced solid tumors were showing promising signs of drug activity. The company anticipates initiating a phase two clinical trial in 2013.

Alnylam no longer has "opt-in" rights to TKM-PLK1. Tekmira now holds all development and commercialization rights related to TKM-PLK1.

TKM-Ebola

The Zaire species of Ebola virus (ZEBOV) is associated with periodic outbreaks of hemorrhagic fever in human populations with mortality rates reaching 90%. There are no approved treatments for Ebola or other hemorrhagic fever viruses.

On August 6, 2012, Tekmira announced that it had received a temporary stop-work order from the U.S. Department of Defense (USDOD) with respect to Tekmira's TKM-Ebola program, which is funded under the Transformational Medical Technologies (TMT) program. On October 2, 2012, Tekmira disclosed that the temporary stop-work order was lifted by the USDOD and Tekmira will continue development of the TKM-Ebola product

Tekmira submitted a modification request to the existing contract to the USDOD in order to integrate recent advancements in LNP formulation and manufacturing technology in the TKM-Ebola development program. The program will utilize an LNP formulation that is significantly more potent (over 10 times) than previous formulations and other LNP formulations currently being evaluated in clinical trials. Tekmira has initiated pre-clinical and chemistry, manufacturing and control studies that support the use of these improvements in the program. This development strategy will be accommodated by modifications to the existing contract, allowing both Tekmira and TMT to benefit from the significant advancements in LNP formulation technology made by Tekmira since the commencement of the TMT-funded program in July 2010. Tekmira expects that the LNP formulation work will be completed and submitted to the FDA in the second half of 2013 in order to initiate a new phase one clinical trial.

ALN-VSP

ALN-VSP is being developed by Alynam as a treatment for liver cancers, including hepatocellular carcinoma and other solid tumors with liver involvement. ALN-VSP is the first RNAi therapeutic using Tekmira's SNALP technology to be evaluated in humans. Tekmira is entitled to receive a $5 million milestone payment related to the initiation of clinical trials for ALN-VSP in China, which is expected to occur in 2013.

ALN-TTR02

Tekmira is also entitled to a $5 million payment upon ALN-TTR02 entering a pivotal trial. In July 2012, Alynam reported the results of a phase one clinical trial that found that the administration of ALN-TTR02 resulted in a "robust knockdown" of serum TTR protein levels of up to 94%. Knockdown of TTR, the disease-causing protein in ATTR, was found to be rapid, dose dependent, durable, and specific after just a single dose. ALN-TTR02 was found to be generally safe and well tolerated.

Transthyretin (TTR)-mediated amyloidosis (ATTR) is a hereditary, systemic disease caused by mutations in the TTR gene. Mutations in TTR cause abnormal amyloid proteins to accumulate and damage body organs and tissue such as the peripheral nerves and heart, resulting in intractable peripheral sensory neuropathy, autonomic neuropathy, and/or cardiomyopathy.

ALN-TTR02 is a systemically delivered RNAi therapeutic being developed for the treatment of ATTR. Transthyretin (TTR)-mediated amyloidosis (ATTR) is a hereditary, systemic disease caused by mutations in the TTR gene. Mutations in TTR cause abnormal amyloid proteins to accumulate and damage body organs and tissue such as the peripheral nerves and heart, resulting in intractable peripheral sensory neuropathy, autonomic neuropathy, and/or cardiomyopathy.

ALN-PCS

Alnylam is developing ALN-PCS, an RNAi therapeutic for the treatment of hypercholesterolemia, or high levels of cholesterol in the blood. Hypercholesterolemia contributes to many diseases, most notably cardiovascular disease, which is the leading cause of death in the United States.

Alnylam reported results that showed that administration of a single dose of ALN-PCS, in the absence of concomitant lipid-lowering agents such as statins, resulted in statistically significant and durable reductions of PCSK9 plasma levels of up to 84% and lowering of low-density lipoprotein cholesterol (LDL-C), or "bad cholesterol," of up to 50%. ALN-PCS was shown to be safe and well tolerated in this study.

On September 26, 2011, Alnylam announced the initiation of a phase one clinical trial for ALN-PCS which triggered a $500,000 milestone payment to Tekmira. Tekmira is eligible to receive royalty payments based on commercial sales of ALN-PCS. Tekmira is eligible to receive royalty payments based on commercial sales of ALN-PCS.

Other LNP-Enabled Products

Tekmira is eligible to receive up to an aggregate of $16 million in milestones and royalties for each additional LNP-based product developed by Alnylam.

Partner-based Programs

In addition to Tekmira's agreements with Alnylam, the company has an agreement with Merck (MRK) whereby Merck has access to certain Tekmira delivery technology for the delivery of small interfering RNAs (siRNAs). Currently, there is no active research program underway with Merck (MRK). However, Tekmira is eligible to receive up to $17 million in milestones and royalties on each and every RNAi product that Merck advances using Tekmira's technology.

In the second quarter of 2010, Tekmira entered into a multi-year, target validation agreement with Bristol-Myers Squibb (BMY). Tekmira will provide LNP formulations of siRNA provided by Bristol-Myers Squibb to silence target genes of interest. Bristol-Myers paid Tekmira $3 million concurrent with the signing of the agreement. Bristol-Myers Squibb will share the target validation data it generates and Tekmira can use this data to develop its own RNAi therapeutic products. In May 2011, Tekmira announced a further expansion of the collaboration to include broader applications of Tekmira's LNP technology and additional target validation work.

In July 2010, Tekmira was awarded up to a $140 million contract with the United States Government's Transformational Medical Technologies (TMT) Program, to advance an RNAi therapeutic, TKM-Ebola, to treat Ebola virus infection. In the initial phase of the contract Tekmira is eligible to receive up to $34.7 million over the next three years. This initial funding is for the development of TKM-Ebola through pre-clinical development, filing of an Investigational New Drug (IND) application with the FDA, and completion of a Phase 1 human safety clinical trial. In February 2012, Tekmira initiated its TKM-Ebola phase one clinical trial.

In August 2011, Tekmira obtained an exclusive worldwide license to Halo-Bio's multivalent ribonucleic acid ((MV-RNA)) technology. Under this collaboration, Tekmira can work together with Halo- Bio to design and develop MV-RNA molecules directed at gene targets of interest to us and to combine MV-RNA molecules with our LNP technology to develop therapeutic products. MV-RNA technology comprises single macromolecules capable of mediating RNAi at multiple unique target sites. MV-RNA can target three sites on a single gene or up to three separate genes simultaneously. Tekmira has already successfully demonstrated multi-gene knockdown using MV-RNA enabled by proprietary LNP formulations.

Talon Therapeutics, Inc. is developing three targeted chemotherapy products under a license agreement with Tekmira. Marqibo, which is a liposomal formulation of the chemotherapy drug vincristine, along with two other liposomal chemotherapy products - Alocrest (liposomal formulation of the chemotherapy drug vinorelbine) and Brakiva (liposomal formulation of the chemotherapy drug topotecan) - were licensed from Tekmira to Talon in 2006. Tekmira is eligible to receive milestone payments as well as royalties on product sales. In September 2011, Talon announced its NDA for Marqibo had been accepted for filing by the FDA. In August 2012, Talon announced that Marqibo (vinCRIStine sulfate LIPOSOME injection) had received accelerated approval from the FDA for the treatment of adult patients with Philadelphia chromosome negative (Ph-) acute lymphoblastic leukemia in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies. Talon is responsible for all future development of Marqibo. Tekmira will receive a $1 million milestone payment based on the FDA's approval of Marqibo and will receive royalty payments based on Marqibo's commercial sales.

Tekmira has a licensing agreement with Aradigm (ARDM.OB) under which Aradigm licensed certain liposomal technology for delivery of the antibiotic ciprofloxacin. Tekmira is entitled to receive milestone payments and royalties on product sales for any products advanced by Aradigm that use Tekmira's technology

Finances

For the first nine months of 2012 (year-to-date (YTD) 2012) Tekmira's net loss was $8.5 million ($0.63 per common share) as compared to a net loss of $8.1 million ($0.73 per common share) for YTD 2011. For Q3 2012, net loss was $3.4 million ($0.25 per common share) as compared to a Q3 2011 net loss of $1.5 million ($0.12 per common share).

Revenue was $3 million in Q3 2012 as compared to $4.2 million in Q3 2011.

On July 14, 2010, Tekmira signed a contract with the United States Government to advance an RNAi therapeutic utilizing Tekmira's LNP technology to treat Ebola virus infection. Under the contract Tekmira is being reimbursed for costs incurred, including an allocation of overheads, and is being paid an incentive fee. U.S. Government revenue was $1.9 million in Q3 2012 as compared to $2.0 million in Q3 2011.

In August 2012, the Company announced that it had received a temporary stop-work order from the U.S. Government in respect of its TKM-Ebola contract. On October 2, 2012, Tekmira announced that the stop-work order had been lifted and work was to be resumed. As a result of the stop-work order, U.S. Government revenue was lower than the Company had forecasted for Q3 2012 and YTD 2012.

In Q3 2012, the Company earned a $1 million milestone payment from Talon Therapeutics, Inc. based on the FDA approval of Marqibo and will receive royalty payments based on Marqibo's commercial sales.

Research, development, collaborations and contracts expenses were $3.1 million in Q3 2012 as compared to $4.4 million in Q3 2011.

Third-party expenses on the TKM-Ebola program and Alnylam manufacturing were considerably lower in Q3 2012 as compared to Q3 2011.

Spending on Tekmira's internal research programs was reduced as the Company focused on TKM-Ebola, TKM-PLK1 and its litigation against Alnylam and AlCana.

General and administrative expenses were $1.5 million in Q3 2012 as compared to $1.2 million in Q3 2011. This increase in Q3 2012 largely relates to legal fees incurred in respect of Tekmira's lawsuit against Alnylam and AlCana.

As at September 30, 2012, the Company had a contingent obligation to Orrick, Herrington and Sutcliffe LLP, lead legal counsel for the lawsuit against Alnylam and AlCana of $15,887,877). As a result of the settlement of the litigation between Tekmira and Alnylam plus costs incurred after September 30, 2012, are now payable to Orrick and will be recorded in Q4 2012.

Conclusion: Strong Buy

Tekmira Pharmaceuticals Corporation is a biopharmaceutical company focused on advancing novel RNA interference therapeutics (RNAi therapeutics) and providing its leading lipid nanoparticle delivery technology to pharmaceutical partners. Tekmira has been working in the field of nucleic acid delivery for over a decade and has broad intellectual property covering LNPs.

RNAi therapeutics have the potential to treat a broad number of human diseases by "silencing" disease causing genes. The discoverers of RNAi, Stanford University's Andrew Z. Fire and University of Massachusetts' Craig C. Mello, were awarded the 2006 Nobel Prize for Physiology or Medicine "for their discovery of RNA interference - gene silencing by double-stranded RNA," a gene silencing mechanism used by all cells.

RNAi therapeutics, such as "siRNAs," require delivery technology to be effective systemically. Tekmira's LNP technology is probably the most widely adopted delivery technology for the systemic delivery of RNAi therapeutics. Tekmira's LNP formulations are manufactured by a proprietary method and LNP-based products have been reviewed by multiple FDA divisions for use in clinical trials. LNP formulations comprise several lipid components that can be adjusted to suit the specific application. Tekmira may be small, but this company has a big lead in RNAi therapeutics that could translate into significant rewards to shareholders who invest at this stage of their promising development.

Source: Tekmira Could Offer Stockholders Huge Rewards