Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Clash Of 'Dark DNA' Pioneers

|About: Alnylam Pharmaceuticals, Inc. (ALNY)

Did ALNY Infringe on Rival's Patents?

Silence Therapeutics Lawsuit Could Derail ALNY Drug.

Countersue or Settle and Get Back to Business.

There is an old saying about how journalists are never wrong—they are just early. It can explain almost any wrong call, as almost anything might come true, eventually.

Cut to late 2005: I am the managing editor of Forbes magazine, and one day in my office in the fabulous, since-sold Forbes headquarters building on Fifth Avenue in Lower Manhattan, I ask an intrepid, way-too-smart medical writer to look into an idea that struck me out of nowhere: what about “junk DNA”?

A few years earlier, scientists had decoded the human genome for the first time, a miraculous feat that consumed massive computing power, millions of dollars, brilliant minds and years of research. Today you can accomplish it by sending in a saliva sample to for $99, an epic scientific breakthrough reduced to a stocking stuffer.

At the time, the stars of the genome were the 25,000 or so active genes—but that comprised less than 2% of the 3 billion base pairs of DNA that make up the human genome. The rest of it was deemed junk DNA or “dark” DNA, also known as RNA, and I wondered what secrets it might hold. Forbes published the resulting story in December 2005, Treasures in the Trash, and it was fascinating:

“Treasures in the Trash,” the headline promised. Deck: “What genetic researchers used to call junk DNA may conceal the most important medical secrets of all.”

Body: “Researchers are now finding this junk DNA, overlooked for decades by geneticists, may actually hold an enormous and previously unimagined command-and-control apparatus that regulates what our 25,000 genes do and how the body is assembled. Junk DNA, when it goes wrong, may be a culprit in major killers ranging from cancer to diabetes to infectious disease. That insight could unearth hundreds of new targets for experimental drugs that had previously been aimed only at working genes.”

Great piece, by two writers who are among the best in the business: Matthew Herper and Robert Langreth. They go on to quote an MIT Nobel Laureate, Phillip Sharp, co-founder of a pioneering startup awkwardly named Alnylam, which set out to invent RNA-based drugs to treat Parkinson’s, cystic fibrosis and spinal injury.

Now cut to today: Thirteen years later, in the span of three U.S. Presidents, the advent of the iPhone and the rise of gene therapy, only this year has publicly held Alnylam (ALNY) come out with its first product. Great science is hard. A bigger problem: Alnylam’s debut drug is under the taint of allegations of patent infringement.

The company’s accuser, Silence Therapeutics of the UK and Germany, has filed legal challenges on three separate fronts. If Silence succeeds in even one of these theaters, it could lead to the withdrawal of the new drug from all European markets. That might spill over into the U.S., where the U.S. Patent and Trademark Office and the Food and Drug Administration could take note.

These are risks a plucky former startup like Alnylam should avoid. Now with a market cap of $7.5 billion on the Nasdaq, Alnylam already has seen its stock go down 44% since early this year. The stock could take a kick to the private parts if this patent scrap goes the wrong way for this company.

The telling detail here is that Alnylam could have avoided this scuffle entirely, by giving the bow to Silence and paying it a patent license fee, as a handful of other companies have done. Instead, Alnylam basically has ignored Silence’s pleas and told the patent holder to go pound sand.

Alnylam’s first “RNAi” drug (for “RNA interference”) is called Onpattro, for a rare, degenerative nerve disease with a dizzying name. It treats polyneuropathy (peripheral nerve disease) caused by hereditary transthyretin-mediated amyloidosis (hATTR) in adult patients.

The name Alnylam comes from “Alnilam,” the name of the star in the buckle of Orion’s Belt in the night sky. That star is 375,000 times brighter than the sun, and it peaks at midnight and lies more than thirteen hundred light years away from us. Alnylam and Silence Therapeutics started out in the early Oughts. Silence scientists around 2003 filed for patents for a breakthrough in chemical modification of RNA in both Europe and the US, and they were approved in both territories.

In October 2017, Silence Therapeutics filed suit against Alnylam in the High Court of the United Kingdom, alleging infringement of EU Patents including No. EP 1 857 547 regarding several Alnylam drugs, one of which is in clinical trials with The Medicines Company. The first of those medicines to market, Onpattro, was granted marketing authorization by the European Commission in August 2018. That UK case, now focused only on Onpattro, will be heard in December. Further, Silence filed a second action against Alnylam, this one in Portugal. Silence has sought an injunction against Alnylam in the UK and hopes to have Onpattro withdrawn from the local market, and it may do the same in Portugal.

In response, Alnylam went to court, rather than settle, make peace and get back to business. It counter-sued in the UK in October 2017, seeking to void the Silence patent as illegitimate—and insisting, in any case, its drug was clear of any infringement.

The third case, however, in the Netherlands, may be the most serious threat against Alnylam. The first two filings are patent-infringement actions, and if Silence wins, Alnylam can keep appealing and delaying. By contrast, Silence filed its third action in the Netherlands (where Alnylam’s Dutch subsidiary holds the Onpattro authorization) for a different Silence patent, EP 3 222 724, and under Dutch case-law, which allows patentees to stop Dutch companies from patent infringement, rather than a pure-bred patent-infringement case. Injunctions granted in such cases are effective in every European country where the Silence patent exists. Thus, it could result in a total ban on sales of the new drug across all of Europe where Silence has patent rights.

That would be a staggering blow to Alnylam’s business. Its first and only approved drug, Onpattro is likely to account for 44% of total revenue in 2023, according to Cowen Research; at Morgan Stanley, the estimate is an overwhelming 75% of sales in 2023. Think about the bet that ALNY is making right now: It risks losing the lifeblood of its business for refusing to pay a rival a pittance in patent fees.

What is that old saying about being penny-wise and pound-foolish?