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`Merck’s Alan Sachs, on RNAi’s Big
`Challenge: Delivery, Delivery,
`Delivery
`
`Luke Timmerman
`January 21st, 2010
`
`@xconomy
`
`@xconomy
`
`Like Us
`
`Xconomy National — 
`Merck hasn’t said much in public about what it’s doing in
`the field of RNA-based therapies, since it paid the jaw-dropping sum of $1.1
`billion to acquire Sirna Therapeutics back in October 2006. So when I had the
`chance last week to sit down for an exclusive interview in San Francisco with
`Merck’s RNA therapeutics leader, Alan Sachs, I jumped at it.
`
`What’s the big idea? RNA-based therapies hold the promise of silencing specific
`disease-related genes in ways conventional drugs don’t. They can potentially
`reach targets inside cells that have previously been inaccessible for a whole
`array of diseases.
`
`This promise of a new wave of pharmaceuticals has enticed a generation of
`RNA-based drug companies to exploit this emerging science, including
`Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY),
`Vancouver, BC-based Tekmira Pharmaceuticals, and microRNA drug startups
`like Carlsbad, CA-based Regulus Therapeutics. So whatever Merck does has a
`big impact not just on its shareholders, but ripples through an emerging
`technology sector.
`
`“This is a big story as it relates to RNA therapeutics in general,” says Regulus
`CEO Kleanthis Xanthopoulos.
`
`There was a lot of ground to cover during my 45-minute interview with Sachs.
`Before diving in, I should provide a little background on him. He’s a former
`professor of molecular and cell biology at the University of California Berkeley.
`He joined Merck in July 2001, and has been given a lot of managerial experience
`running a couple of leading edge operations inside Merck, including Sirna and
`Rosetta Inpharmatics.
`
`Here are the highlights of the conversation, edited for length and clarity as
`always. Merck spokesman Ian McConnell was also there for the meeting.
`
`0001
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`PROTIVA - EXHIBIT 2016
`Moderna Therapeutics, Inc. v. Protiva Biotherapeautics, Inc. - IPR2018-00739
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`

`

`Xconomy: How did you first get exposed to RNAi?
`
`Alan Sachs: At Berkeley, I worked on RNA post-transcriptional control. I joined
`Merck in 2001 to help start a clinical genomics group. At that time, we had just
`acquired [Seattle-based] Rosetta Inpharmatics, and so that first year I worked
`with [Stephen Friend, Rosetta’s founder] to build up a molecular profiling unit
`which included gene expression genetics, proteomics, [and] informatics of
`course.
`
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`Alan Sachs
`
`Molecular profiling at Merck was broad. It extended beyond Seattle to research
`sites in Boston, West Point, PA, just outside of Philadelphia, and Rahway, NJ.
`Then as part of the work in Seattle, we were developing siRNA as a tool for
`[drug] target discovery using cell-based screens. Thanks to Stephen, we really
`had more of a therapeutic push. We initiated a partnership with Alnylam, it must
`have been around 2005.
`
`0002
`
`

`

`Somewhere around the middle of 2006, we realized that Alnylam did a big deal
`with Roche, and we realized the area was heating up. We needed to do more
`than a collaboration per se. It ultimately led to the decision to acquire Sirna
`Therapeutics, which closed at the end of 2006.
`
`So I was asked at that time to lead a new department at Merck called RNA
`Therapeutics. The Sirna site which you’re sitting in now is a geographic identifier.
`The department at Merck is called RNA Therapeutics. Sirna San Francisco is
`responsible for lead discovery and optimization. On the East Coast, we have a
`very large effort in RNAi delivery in West Point, PA. In Rahway, NJ, all of our
`manufacturing of oligonucleotides and delivery vehicles occurs. So RNA
`Therapeutics is split over three research sites within the company.
`
`What you often read about, but many people don’t understand, is how hard it is
`to make a drug. Our approach to RNA Therapeutics is made with a recognition
`of the full package it takes to launch a successful commercial product. We work
`based on that strategy. That’s versus another strategy you see from smaller
`companies, which is to get an interesting experimental result, and publicly
`disclose it in an attempt to increase the value of your investment or a VC’s
`investment, without a real [awareness] of what it will take to make a therapeutic
`eight years later. Timelines are very abbreviated for biotech. They can’t do the 5-
`10 year plan. Nobody has that kind of runway, except maybe Alnylam and Isis.
`There are very few companies with the infrastructure to do long-term planning.
`
`We immediately, after the acquisition, invested not just heavily in the RNA piece
`that is here in San Francisco, but we built an entire delivery group in West Point,
`PA. The thing that continues to differentiate Merck is that we have people with
`decades of experience in pharma R&D, drug safety, metabolism,
`pharmacokinetics. To us, the delivery vehicle is a really big medicinal chemistry
`program. It really is the blend of pharmaceutical and medicinal chemistry that’s
`allowing us to make the advances we’re making. Then with the appreciation of
`issues on safety, and input we can get from our regulatory and clinical
`colleagues, we feel we have a very strong engine here for developing RNA
`therapies.
`
`X: You said there are three key components from around the company.
`The discovery group and optimization is here in San Francisco, delivery,
`and a third. What does the third group really do?
`
`AS: Manufacturing. It’s the synthesis of the oligos, not just in a standard way, but
`modified. And the delivery vehicles, whether it’s a polymer or lipid, or an RNA
`conjugate. All of that is a specialized set of chemistries. They do all our small
`scale synthesis, and large scale synthesis that’s need for large clinical trials and
`preclinical studies.
`
`X: How many people across the company are working on RNAi?
`
`AS: A lot.
`
`X: How many?
`
`AS: We don’t disclose how many. It’s viewed as, in the pharmaceutical industry
`is constantly re-inventing itself. To a large degree, Merck did not move quickly
`enough in the biologics space to be leading. Although we have plans to be a
`player The decision to acquire Sirna for $1 15 billion was for us to be a leader
`
`0003
`
`

`

`player. The decision to acquire Sirna for $1.15 billion was for us to be a leader
`in a modality that could differentiate our company. While we don’t talk about the
`size of the investment, the size of the original investment is an indication of the
`seriousness with which Peter Kim has toward making sure we are successful.
`
`X: I won’t belabor this, but can you say how many people you have here
`in San Francisco?
`
`AS: We have two floors here, and it’s about 60,000 square feet. We’re
`effectively fully staffed. But we don’t disclose headcount.
`
`X: Obviously the Sirna acquisition was a high-profile public event. But
`has Merck formed any other less visible partnerships with small biotech
`companies or academic groups to work on key parts of the problem,
`like delivery? Or is everything in-house?
`
`AS: At the time of the acquisition of Sirna, we had two existing agreements. One
`was with GlaxoSmithKline, the other was with Allergan. GSK was for respiratory
`diseases, and Allergan was for the eye. We successfully completed both of
`those collaborations, per the terms of the agreement. The GSK collaboration
`ended about a year ago, or a year and half. Those are pretty good sized-
`collaborations in which both of those companies have the rights to RNAs we’ve
`discovered. They can develop them for indications they’ve specified. We have an
`enormous external licensing evaluation effort.
`
`We have a graph we’ve disclosed which represents the number of opportunities
`we have looked at to do exactly what you describe, which is collaborate,
`particularly in the delivery space to advance this field. We are fully funded to do
`that, not just the evaluation, but the actual work. And what’s really disappointing
`is that when you look at that graph, which is current as of mid-2009, there were
`250-260 interesting opportunities, and there are really only two or three which
`have data that’s valuable—meaning they have data from non-human primates.
`
`Our approach to external licensing has been very much an evaluation prior to the
`collaboration. We have done a number of evaluations, and I’m sorry to report
`that the number that has progressed to a true collaboration has been only a
`handful.
`
`So the yield here is reasonably low. Less than 2-3 percent of the things we are
`told are true are things we can confirm to be true enough to have value.
`
`X: So I guess that means there’s a lot of hype here, right?
`
`AS: There’s a lot of hype, and there’s a lot of ideas. But it’s not a straightforward
`problem. Injecting something in the bloodstream, leading to something
`appearing in the cytoplasm in the RNA-silencing complex, there are a lot of black
`boxes between those two steps. People who are entering the field start with a
`white paper. It’s much like people who started on targeted therapeutics years
`ago started with a white paper. If it were so easy, one would have to describe
`why so few examples exist. The same is true in the RNAi delivery process. You
`can write down the steps. You can write down what you think will happen. But
`then you have to put it in a 50-nanometer particle that’s safe and potent to
`deliver.
`
`X: OK, so you have a graph that shows the 250 or so opportunities that
`you’ve evaluated. You’ve actually consummated a handful of
`
`0004
`
`

`

`ated a a d u o
`you e e a uated ou e actua y co su
`collaborations? Have they been announced?
`
`AS: No. But we’ve done a lot of evaluations in anticipation of collaborations. A
`few have proceeded to collaborations, and we don’t disclose those. We
`generally don’t unless it’s something unusual. There’s a lot of activity we’ve done
`that we can’t or choose not to disclose.
`
`X: Why? Because of the competition?
`
`AS: It’s a combination of the competition, and from our seat, a misunderstanding
`of the intent of the collaboration. That is, the field is so ready to put money in,
`we don’t want a Merck collaboration to be read as a sign of approval. The goals
`of our collaboration, after an initial period, are to develop something that is
`usable in the non-human primate.
`
`Ian McConnell: It’s fundamentally about managing expectations.
`
`X: On a different train of thought, what kind of delivery technologies do
`you like or think have promise at the moment?
`
`AS: There are three main areas of delivery. First are lipid-based delivery
`systems. At the time of our acquisition of Sirna, they had successfully shown
`lipid-based delivery to the liver. Initially, it was through a collaboration with what
`is now called [Vancouver, BC-based] Tekmira. That was really the leading
`standard for the area. Several [applications to begin clinical trials] have been
`filed with the FDA. We spent a lot of internal research money and time on novel
`lipids. The liability of that platform is absolutely its safety. As you know from
`writing about the area, the biodistribution of lipid is focused toward the liver.
`Which has some indications that are useful for IV therapy, but it’s restrictive with
`respect to cancers and diseases of other organs.
`
`We’ve also moved into two other delivery areas. One is polymer-based delivery.
`It’s exemplified by the Mirus delivery system that Roche fully acquired in 2008
`for $125 million. That’s a really nice delivery system because it’s a targeted
`delivery system. But, it too, has liabilities as does every delivery system.
`
`The last one is a conjugation to RNA system. You directly attach to the RNA
`molecule a targeting agent. It’s a defined complex, which for local delivery,
`works well. It can work well for systemic delivery as well. By local I mean
`something like injection into the joint.
`
`X: What kind of data do you have in hand at this point to support your
`programs? What’s the best thing that happened in this department in
`2009?
`
`AS: There have been a lot of breakthroughs in the department. I think one thing I
`emphasize, and is good to capture, is that the value for this space is in the
`commercial product. That’s the long-term goal. The short to mid-term goal may
`be somewhat opaque to a biotech company, because they don’t have the same
`pipeline needs as someone like Merck or another large company. It’s about
`increasing the probability of success of this pipeline. In order to do that, we
`need to validate targets, and de-risk targets. Before we inject three years and,
`Lord only knows how many chemists and support people, to make a small
`molecule, we better be sure the target is the right target. Before we build a new
`medicine for diabetes, for example, we want to be sure it doesn’t raise LDL
`
`0005
`
`

`

`cholesterol. Because it may be great for glucose control, but if it has a liability
`like [raising] LDL, it would be a cardiovascular risk.
`
`So target validation and target de-risking are approachable using RNA as a tool.
`Not a therapeutic, but a tool. In a correct non-human primate model, you can
`really rapidly validate and de-risk targets. That’s the major advance for us. It’s
`about realizing the value of the acquisition partially by increasing the [odds] in
`our pipeline with RNA. That was not available to Merck before. Previously, you’d
`have to make a drug. But by time you get to the primate, you’ve already made a
`multi-year investment. With RNA, going from when the gene is named to the
`primate, it’s just 9 to 12 months.
`
`X: OK, so this is not the kind of typical value creation that the external
`world, Wall Street or whoever, can look at and say ‘Oh, you’ve de-risked
`a target.’ They aren’t going to value that. But you’re saying that within
`Merck, this is proving something to say you can have a batch of
`candidates with a higher probability of success.
`
`AS: Exactly. If we move that little bar of POS [probability of success] by 10
`percent—and Ian can get exact numbers—but it comes down to a savings of
`something like $125 million per program. Because the cost of failure is what
`makes drug development a $1.3 or $1.4 billion investment. It’s all in the failure.
`By changing the rate of failure, a little bit, by percentages, the aggregate
`savings to the company are huge.
`
`X: But you won’t really know the answer to whether you’ve done that for
`another 10 years or so, right, as the clinical trials play out?
`
`AS: This is why only a large company can afford to invest in an early technology
`that has a payout that valuable for discovery and development, not just for the
`commercial products that will come from it. When people look at RNA
`therapeutics, all the excitement is in making the drug. We know how hard it will
`be to commercialize these medicines, because with the delivery space there are
`issues around safety. Less so with the RNA itself. But still, it’s a new modality.
`The $1.15 billion was not meant to be recovered by a commercial product within
`five years. It’s meant to do what I just described, to increase the POS [probability
`of success] of our pipeline.
`
`X: Do you have a lead drug candidate that’s been identified and ready
`for the clinic, or anything demonstrating safety and efficacy in the
`clinic?
`
`AS: Again, our Phase Ib, IIa clinical trials [of RNAi molecules] biomarker driven
`studies are for target validation and de-risking. We wouldn’t disclose those,
`because those are targets that are quickly followed by a small-molecule or
`biologic. Because the indication might not be consistent with an RNAi
`therapeutic delivered through intravenous means. No diabetic in the general
`population, if you’re a Type 2 diabetic on [multiple oral drugs], then IV therapy
`isn’t going to work.
`
`X: I understand that. But I’m talking about your RNAi therapeutics that
`are being developed for commercialization.
`
`AS: We broadly state that we anticipate RNAi-based therapeutics, targeting the
`liver will be used for hepatocellular carcinoma (HCC) and likely hepatitis, whether
`it’ h
`titi B
`h
`titi C Thi
`th t
`f
`t
`t
`t
`t
`t
`
`0006
`
`

`

`it’s hepatitis B or hepatitis C. Things that are for acute treatment, represent an
`unmet need, or for people who are really suffering. [Unlike] companies
`developing [RNA-based] ApoB or PCSK9 therapies, for familial
`hypercholesterolemics, we’d stop our studies at Phase I to show that LDL is
`lowered or HDL is raised and follow with a small molecule.
`
`X: I don’t know if you saw, but I just did an interview with Alnylam CEO
`John Maraganore in which he’s calling this the ‘RNA decade.’ By that he
`means this will be the decade that RNAi demonstrates efficacy. Do you
`agree?
`
`AS: I have no doubt that RNAi, if it hasn’t already, will absolutely demonstrate
`efficacy. It’s an incredible drug. What’s interesting about what we do is that the
`drug isn’t the problem. It’s the delivery of it. It’s almost an inversion of the
`standard problems in this industry. Chemists struggle with PK
`[pharmacokinetics] and they struggle with oral bioavailability, but they really
`struggle with target selectivity. In this field, the RNA is a natural mechanism. It’s
`incredibly potent. And we’re maturing it to make it even better with RNA
`chemistry. But the challenge is in pharmaceutical chemistry, the delivery of the
`molecule.
`
`John’s absolutely correct, this is a time in which RNA will bear fruit. It will be
`limited only by how easily, and how safely, it can be delivered.
`
`X: Do you worry about things getting a little too frothy RNAi? Because
`history with other new therapies, like monoclonal antibodies, there was
`tons of hype in the 1980s, followed by a long bust in the 1990s, before
`a few products got across the finish line.
`
`AS: My background in molecular profiling was around when the Human Genome
`Project sequence came out in 2000 and 2001, and living through that bubble.
`What you realize is that the essence of the excitement is correct, and the
`reduction to practice may make it less-than-anticipated, but it’s still real. The
`same thing will be true of the RNA therapeutics space. There is a lot of
`expectation and anticipation. The reality will be somewhere between that and
`zero. We’d like to think because of the experience we have in our company that
`we have a clear line of sight on what’s practical within a certain time frame.
`
`This will settle down. The acquisition of Sirna by Merck really set this thing off.
`We’re three years past that. I think in two more years, you’ll see this settle down,
`much like in the genomics space. In genomics, many of the opportunities
`consolidated into a few big players. The same thing will happen here. But the big
`companies like Merck, Roche, Novartis and Pfizer, that have committed to do
`this, ultimately will be there. Because of the long-term potential of the modality,
`not the immediate potential, but the long-term potential. It’s huge.
`
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`By posting a comment, you agree to our terms and conditions.
`
`14 responses to “Merck’s Alan Sachs,
`on RNAi’s Big Challenge: Delivery,
`Delivery, Delivery”
`
`1.
`
`Roger says:
`January 22, 2010 at 11:57 am
`
`So Merck spends $1.1 billion for Sirna and Dr. Sachs talks
`mostly of target validation by RNAi. RNAi knockout of target
`genes can be done without spending $1.1 billion. He’s
`remarkably standoffish about RNAi pipeline therapeutics.
`
`2.
`
`Eric Lynch says:
`January 22, 2010 at 1:43 pm
`
`Nice article Luke thanks for putting it together. Alan is giving
`some great insights here after a drought of information on RNAi
`at Merck post siRNA. Very nice to see Alan devote so much time
`to the delivery aspects of this modality as being core to future
`success. His honesty throughout the article is refreshing. I hope
`Merck succeeds in their efforts surrounding RNAi therapeutics.
`
`3.
`
`Luke Timmerman says:
`January 22, 2010 at 2:16 pm
`
`Roger–you raise a fair point While I think this interview definitely
`
`0008
`
`

`

`Roger you raise a fair point. While I think this interview definitely
`shed some new light on Merck’s thinking about RNAi, I was
`hoping to pry loose some more specifics on how Merck is going
`to use this to create important new drugs.
`
`Eric–thanks for the comment. I’m curious if you have something
`more to add on Alan’s comments about the RNAi delivery
`challenge. Do you think biotech startups have been downplaying
`the delivery challenge too much?
`
`4.
`
`Raj Bandaru says:
`January 23, 2010 at 1:20 pm
`
`Thanks for interviewing Alan. I heard Alan before in few
`conferences and he is absolutely right on money about delivery
`of RNAi. Unless we improve pharmaceutical properties and
`delivery of RNAi, it is extrmely difficult to think that these
`molecules will work in the clinic. I agree with Alan, we should not
`repeat same old mistakes by rushing the technology into clinic
`and downplay lessons learnt from similar technologies such as
`antisense and ribozyme. There is no rush and it is very
`important to prove new RNAi drug delivery technologies work
`first.
`
`5.
`
`Eric Lynch says:
`January 27, 2010 at 7:38 pm
`
`Luke, in a word, yes. Anyone saying they can apply RNAi
`topically in a cream or just inject it IP or IV and bang it goes
`where it is needed and works well, needs to be questioned
`thoroughly.
`
`6.
`
`RAM says:
`January 29, 2010 at 12:00 pm
`
`To me this looks like begining of the end for Merck’s siRNA
`efforts. When Merck brought in this technology, lot of people
`said “wow”. Many people who spent several years in medicinal
`chemistry had a serious doubts then and justifiably “cellular
`delivery” was a key issue. In fact I reckon that delivery is still a
`“achillis heel” for this technology. siRNA is a good tool and
`complementary to validate the target (other than gene KO) and
`that pretty much sums it up.
`
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