Merck’s $1 billion bet on RNAi

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WHITEHOUSE STATION, N.J.—December 29, 2006—Merck announced it successfully completed its acquisition of Sirna Therapeutics, one day after the later announced shareholders approval for the deal.
WHITEHOUSE STATION, N.J.—Looking to enhance its posi­tion in the nascent RNAi-based therapeutics market, Merck announced it would acquire mar­ket leader Sirna Therapeutics. The $1.1-billion agreement will see the San Francisco-based biotech become a wholly owned subsidiary of the pharma giant.
In a prepared statement, Merck Research Laboratories President Dr. Peter Kim said: "We are delighted about our agreement to acquire Sirna Therapeutics, a company that has established a leading pres­ence in the critically important area of RNAi."
Dr. Kenneth Krul, analyst for Kalorama Information, expressed surprise at the hefty price, but notes that Merck appears to be banking on RNAi to bolster its pipeline. "I also think Merck is trying to lock up the technology, eliminating potential competi­tion by taking the key stuff off the market," he adds.
The acquisition bid start­ed life as a discussion about research partnerships, accord­ing to Bharat Chowrira, Sirna vice president of legal affairs and chief patent counsel.
"We had been in conversa­tions with a number of compa­nies, including Merck, looking to form partnerships, such as the ones we have with Allergan and GSK," he says. Merck and another company began to bid for the same therapeutic area so Merck decided to bring the technology in-house. "Merck wasn't the only company inter­ested in acquiring Sirna, but they offered a significant pre­mium over the market value."
Chowrira sees Merck follow­ing the same acquisition model it practiced with its 2001 purchase of Rosetta Informatics, providing funding and support in exchange for innovations that will feed the parent company's pipeline. In essence, he says, Sirna would become a center of excellence for RNAi for all of Merck.
While he assumes redundancies will be eliminated, Chowrira is con­fident Sirna will not see significant changes, and may actually grow.
Furthermore, Merck committed to honoring Sirna's collaboration obligations with other pharmas. Krul sees these as a source of reve­nue for Merck; however, he expects Merck will limit future deals and not extend the existing ones.
For Sirna, the acquisition is as much about pushing the compa­ny's pipeline to the next level as it is a validation of their work to date. As Chowrira explains, Sirna has a history of building the neces­sary infrastructure and overcom­ing technological obstacles. But as a small company, it didn't have the resources necessary to push the products through the clinic.
He gives the example of system­ic delivery—perhaps the biggest hurdle facing RNAi-based thera­peutics. To do these studies, Sirna needs the resources and expertise of a large company like Merck.
When taken in the context of Merck's other recent acquisitions—GlycoFi and Abmaxis—Chowrira sees the acquisition as good for both the field of RNAi and biotechnology as a whole. Repeating a phrase that has become some­thing of a mantra in the industry, he says: "Pharma will have to rely on biotech to feed the pipeline."
The companies expect to com­plete the transaction in the first quarter of 2007.

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