Roche Holding AG has signed a deal worth up to $1-billion (U.S.) with Alnylam Pharmaceuticals Inc., giving it access to the U.S. firm's skills in the new science of silencing genes to fight disease.
Shares in Alnylam surged 55 per cent to $23.50 in early Nasdaq trade on the news.
The agreement is the largest drug discovery partnership to date in the field of RNA interference, or RNAi, which involves blocking disease-causing proteins.
Stock in CytRx Corp. and Isis Pharmaceuticals Inc., biotech companies working in related areas, rose by 12 and 7 per cent respectively.
Roche will pay Alnylam $331-million upfront in a cash and equity investment, which will include Roche taking a stake of 1.975 million Alnylam shares at $21.50 each, or just under 5 per cent of Alnylam's outstanding common stock, the two firms said on Monday.
Denise Anderson, an analyst with Kepler Equities, said cash-rich Roche was paying a high price, given that the drug research is still early-stage and the market capitalisation of Alnylam was less than $600-million at Friday's close.
The deal makes Basel-based Roche a co-investor in Alnylam with cross-town rival Novartis AG, which bought a 19.9 per cent stake in 2005 for $11.11 a share.
For its investment Roche gets a non-exclusive licence for Alnylam's technology platform. The alliance will initially focus on oncology, respiratory diseases, metabolic diseases and certain liver diseases.
Roche will also acquire Alnylam's European research site at Kulmbach, Germany, which will become the Swiss group's Center of Excellence for RNAi therapeutics discovery.
The agreement could be worth more than $1-billion, depending on future product milestone payments and field expansion payments. This excludes potential royalties on future sales of commercial products.
Despite the scale of the Roche deal, Alnylam's chief operating officer Barry Greene said there was still room for more tie-ups. "We are having discussions at high levels with a variety of different companies," he told Reuters in a telephone interview.
RNA interference, or RNAi, is one of the hottest areas of biotechnology research at present and has attracted investment from a range of major drugmakers.
Last Friday Anglo-Swedish group AstraZeneca Plc signed a smaller RNAi deal, worth up to $400-million, with Britain's Silence Therapeutics Plc.
RNAi was the basis for last year's Nobel Prize in medicine and is seen as having the potential to produce promising treatments for diseases including cancer, blindness and AIDS.
It is based on manipulating ribonucleic acid - the genetic messenger of a cell - to interfere with or "silence" targeted genes in order to prevent the formation of proteins that can cause diseases.
Merck & Co. Inc. ignited interest in RNAi last October when it agreed to pay $1.1-billion for U.S.-based Sirna Therapeutics Inc. Since then other companies, including Pfizer Inc., have struck a series of RNAi product development deals.
Lee Babiss, Roche's head of global pharma research, told reporters that the first products entering clinical trials from the Roche-Alnylam alliance were likely to be tested in humans within two years.
Initial disease targets are expected to be chronic obstructive pulmonary diseases (COPD) and asthma, type 2 diabetes and liver metastasis in colorectal cancer, he added.
Commercially available products are still years away but Mr. Babiss said one of the attractions of RNAi was that medicines might be developed faster than with conventional drug discovery.
"We feel this is a very, very good investment," Mr. Babiss said. "This should greatly complement our approaches of using small molecules and monoclonal antibodies and peptides."
Roche certificates, its most commonly traded form of equity, were up 0.3 per cent at 219.60 Swiss francs by 2:30 p.m. GMT in a little changed European pharmaceuticals sector.