UPDATED: Novartis abandons its RNAi cast-offs from Alnylam in $35M fire sale to Arrowhead

While the industry was largely focused on the jaw-dropping sum being paid for Pharmacyclics ($PCYC) today, Arrowhead Research has come in to buy up Novartis' ($NVS) cast-off RNAi business for the bargain rate of $10 million in cash and $25 million in stock.

As Arrowhead notes, the deal gives it all of the Big Pharma's work in the field, where it devoted close to a decade of work.

Arrowhead acquires patents as well as intellectual property rights to Alnylam's RNAi tech, 30 gene targets Novartis has picked from its partnership and a pipeline with three candidates that had generated preclinical data. And it follows their 2011 deal to buy out Roche's spurned RNAi work, providing some added boasting rights to being a leader in the field.

"This is an important deal for us. Novartis has been working in the RNAi field for over a decade and their developments in proprietary oligonucleotide formatting and modifications are some of the best we've seen. We anticipate this acquisition will provide us with substantially expanded freedom to operate, proprietary technology that appears to enhance the activity of RNAi triggers, access to non-delivery Alnylam RNAi IP for 30 targets, and three programs that went through the rigorous Novartis vetting process," said Chris Anzalone, president and chief executive officer of Arrowhead, in a statement.

John Maraganore, the CEO at Alnylam and a fierce defender of its RNAi work, scoffed at Arrowhead's boasts about the deal--"phantasmagorical," he called it--and said the acquisition only reflects the little that Novartis was able to accomplish after years of research.

"I think the deal reflects the value of those assets," Maraganore tells FierceBiotech this morning. "What Novartis did was frankly pretty disappointing in terms of any advance in the field. It's exactly what you'd expect from not much."

Chris Anzalone, though, says that once Maraganore gets a chance to study the assets, he'll eventually come around to at least privately acknowledge the value.

"I don't think John has looked at them like we did," says the Arrowhead CEO in response. "Because we entered early (into buyout discussions), no one had a chance to. We were thrilled by them."

Anzalone explains that Arrowhead quietly paid $7 million for an option to acquire the assets some months ago, part of the $10 million cash price it revealed today. Getting 30 targets from a Big Pharma company like Novartis, which had continued to be devoted to the RNAi field right up until it bowed out last spring, is a major deal. And the IP part of the acquisition gives Arrowhead "a very large right-of-way" in pursuing new programs, including a "right-of-way around Alnylam's position."

Shares of Arrowhead surged 11% after the news hit today, but later settled in up about 3% in mid-morning trading.  

Back in 2005, Novartis paid $56.8 million upfront to get started with Alnylam ($ALNY) on RNAi at a time when hopes for the field burned bright. Another $700 million was put on the table in partnership cash. Novartis devoted dozens of investigators to the field and took 31 targets from its pact with Alnylam. But by last spring, the Big Pharma declared that RNAi was still beset by difficulties, prompting their decision to wind down the work being done by a team of 26 staffers.

"This decision was driven by ongoing challenges with formulation and delivery and the reality that the current range of medically relevant targets where siRNA may be used is quite narrow," Novartis said in a statement to FierceBiotech at the time. "In the future we will have a small group working in this field and look for partnering opportunities."

News of the retreat, which also followed big exits by Roche ($RHHBY) and Merck ($MRK) earlier, raised fresh doubts about Alnylam, even as Sanofi ($SNY) was settling in to its own big partnership with the Boston-based RNAi specialists.

- here's the release

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