Alnylam Caught Off-Guard by Roche Decision to Drop Alliance

 |  Includes: ALNY, RHHBY
by: The Burrill Report

By Michael Fitzhugh

Roche (OTCQX:RHHBY) will cut thousands of jobs and end a closely watched gene silencing partnership with Alnylam Pharmaceuticals (NASDAQ:ALNY) as part of a deep cost-cutting and reorganization plan.

The Swiss drug giant will trim and outsource 6,300 U.S. and European positions altogether, mostly in sales, marketing, and manufacturing. The job and program cuts have been anticipated ever since the company announced plans to reorganize in September.

But Roche’s decision to abandon Alnylam caught even Alnylam off-guard, prompting CEO John Maraganore to say the company is “disappointed and surprised to hear of their portfolio decision given the progress being made in the RNAi field.” The decision would not fundamentally impact Alnylam’s financial position or its current or future plans, Maraganore added.

Alnylam has long benefited from its relationship with Roche and fevered industry interest in the Nobel-winning potential of gene silencing methods, a fire Merck (NYSE:MRK) helped fuel with its $1.1 billion cash acquisition of Sirna Therapeutics in 2006.

Since 2007 Roche and Alnylam have worked on four major therapeutic areas, including oncology, respiratory diseases, metabolic diseases and certain liver diseases. Roche invested $331 million upfront to jumpstart the partnership and even bought Alnylam’s European research site in Kulmbach, Germany, making it Roche’s Center of Excellence for RNAi therapeutics discovery.

Now the Kulmbach site will close, as will RNA interference research operations in Nutley, New Jersey, and Madison, Wisconsin, impacting about 600 jobs altogether.

Fall hasn’t been kind to Alnylam, which came to the end of a five-year partnership with Novartis (NYSE:NVS) in September, a loss that prompted it to cut 25 to 30 percent of its workforce. But the company remains confident. Its technology platform holds the potential to leverage a naturally occurring biological pathway within cells to selectively silence and regulate gene expression. That could open up a whole new class of drugs for treating a wide range of diseases that current drugs can’t touch. It also has a host of other alliances with companies such as Cubist Pharmaceuticals (CBST), Medtronic (NYSE:MDT), Takeda Pharmaceuticals (OTCPK:TKPHF), Biogen Idec (NASDAQ:BIIB), and Sanofi-Aventis (NYSE:SNY).

“We believe we are on the frontier of demonstrating human proof-of-concept for these and other programs in the near term, and we are confident that these data will provide a strong foundation for continued execution on our business model and value creation strategy,” says Maraganore.

Tekmira Pharmaceuticals, a Vancouver company with an exclusive manufacturing relationship with Alnylam, will also lose some business due to Roche’s cutbacks, but says that it doesn’t expect Roche’s decision to have a “substantive impact” on its business going forward.