Update -- Merck's $1 Billion Bet
Matthew Herper, Robert Langreth and Peter Kang 10.30.06, 7:00 PM ET
Updated share price information and added comments.
Merck (nyse: MRK - news - people ) said Monday it is buying Sirna Therapeutics (nasdaq: RNAI - news - people ), a tiny biotech specializing in a new drug technology called RNAi, for $1.1 billion in cash, a premium of more than 100% to today's closing price.
The pricey deal puts a spotlight on the new science and also provides a glimpse into the research reorganization going on at Merck, as the drugmaker fights to maintain investor excitement while fighting off thousands of lawsuits related to the withdrawn painkiller Vioxx.
Sirna's lead drug is a treatment for macular degeneration, a leading cause of blindness, and is seen as one of the most promising immediate avenues for RNAi research. That market now is dominated by Genentech (nyse: DNA - news - people ) (nyse: DNA - news - people ), whose Lucentis drug has been hailed by ophthalmologists as breakthroughs. But Lucentis must be injected into the eye as much as once a month.
Sirna Therapeutics (nasdaq: RNAI - news - people ) and competitor Acuity Pharmaceuticals are testing RNAi based blood-vessel blockers for the eye that might not need to be given as frequently as Lucentis, limiting unpleasant eye injections.
In a prepared statement, Merck (nyse: MRK - news - people ) research head Peter Kim said RNAi "could significantly change the way in which we go about discovering and developing drugs." The molecule, he stated, could also provide a new way to treat patients.
Jim Niedel, managing director at New Leaf Venture Partners, Sirna's largest shareholder, said Merck is "exactly the right place to take RNAi interference to the next level."
The former Sirna chairman and former head of R&D at pharmaceutical giant GlaxoSmithKline (nyse: GSK - news - people ) is a firm believer in Sirna's new approach.
"As technology like this slowly matures, people get more comfortable and begin to see the possibilities," Niedel said in an interview. "Merck is among the earliest big pharma company in this area."
The discoverers of RNAi technology, Andrew Fire and Craig Mello, won the Nobel Prize in medicine for their work just a month ago. The tiny RNAi molecules upended biological dogma by unveiling a brand new kind of genetic messenger that blocks the function of other genes like an off switch. Companies have raced to the technology because it provides new avenues for discovering medicine.
Mello and Fire's 1998 discovery shook biology. "It was pretty amazing," Thomas Cech, head of the Howard Hughes Medical Institute, recently said, "because you read the textbooks and think all the big themes are already discovered." Now, that biological upheaval is making its way to the drug business.
There has been hope about another idea: that the RNAi molecules themselves could be used to treat disease. This is actually the second big bet Merck has made in the technology -- it also has a deal with Alnylam Pharmaceuticals (nasdaq: ALNY - news - people ), seen as Sirna's rival.
New Leaf's Jim Niedel said as the technology matures, there will be more than enough opportunities for either Sirna or Alnylam to handle.
"I think the technology has developed tot the point that we can see what the next steps are and what is needed to accomplish that," he said. "Sirna was doing it reasonably well but there is no doubt with Merck the technology will develop all the more quickly and into many more developing areas."
The purchase of Sirna is one in a series of acquisitions of small biotechs Merck has made in recent years to bulk up its research labs.
In 2001, the company bought Rosetta Inpharmatics, a tiny genomics startup for $620 million. That company's chief executive, Stephen H. Friend, has become a key player in Merck's laboratories. In March 2004, the drug giant bought a cancer drugmaker called Aton Pharma for an undisclosed sum. Zolinza, the drug it acquired from the merger, has already reached the market as a treatment for a rare skin treatment. |
