A Burnaby biotech company involved in gene-silencing technology is embroiled in a legal fight with a U.S. collaborator and several of its former employees.
It's a battle that one investor fears may make Tekmira Pharmaceuticals (TSX:TKM) vulnerable to a hostile takeover.
In March, Tekmira filed suit in Massachusetts Superior Court against Alnylam Pharmaceuticals Inc. (Nasdaq:ALNY) alleging "misappropriation" of its proprietary technology.
Last week, Tekmira followed up with a civil suit in BC Supreme Court against AlCana Technologies Inc. – a Vancouver splinter group formed by former Tekmira employees, who have been collaborating with Alnylam.
Tekmira alleges AlCana employees downloaded thousands of documents containing Tekmira's confidential information and trade secrets. Tekmira discovered the alleged document theft while producing documents for its case against Alnylam in the U.S.
Since filing its suit against Alnylam in March, Tekmira's stock has taken a beating. Its share price dropped to a 52-week low of $1.60 on November 1 compared with a 52-week high of $7.64 on January 20.
"Alnylam might try a hostile takeover, which, at these share prices, might be the wisest decision for Alnylam because the financial liability might be quite high, and the market cap of Tekmira is very depressed," said Dirk Haussecker, a Tekmira investor, adding that an agreement that prevents such a takeover expires in 2012.
Haussecker – who is an assistant professor at Dongguk University in Seoul, South Korea and writes a blog on RNAi technology – told Business in Vancouver he decided to invest in Tekmira three years ago because it had been doing such groundbreaking work in RNAi therapeutics.
Tekmira's delivery technology has in clinical trials been shown to be effective in reducing bad cholesterol, inhibiting tumour growth, treating hepatitis and "combating" the deadly Ebola virus.
The challenge for scientists has been delivering RNAi drugs to the appropriate areas of the body. Tekmira spent $200 million developing a delivery system – called SNALP – that transports siRNA drugs, a type of RNAi therapeutic, to specific areas of the body.
Tekmira's intellectual property woes underscore just how risky the biotech space can be.
Getting a new drug approved can cost hundreds of millions of dollars due to the high cost of clinical trials, often forcing smaller companies to collaborate with bigger ones.
Getting "upstream" patents for drugs or therapies that are still being developed can be costly and complex as well, creating vulnerability for smaller firms that have no patent protection.
"This case does highlight a wider issue about small businesses seeking to derive commercial success from biotechnology," said Graham Dutfield, a law professor at the University of Leeds and author of Intellectual Property Rights and the Life Science Industries: a Twentieth Century History.
"Most small biotech firms fail. Those that do stay in business almost never move far along the value chain from discovery of a therapeutic chemical and production system, all the way to the approval of new pharmaceutical products."
Although Tekmira and Alnylam signed agreements that spell out what ideas each company can and can't use, Tekmira claims Alnylam breached the agreements.
"Alnylam is falsely representing to current and potential industry partners that it invented, developed and owns formulation technology that it stole from Tekmira," Tekmira stated in its claim.
Tekmira has alleged that Alnylam is passing off a product called MC3 as its own, and has also shared its trade secrets with other companies, in violation of confidentiality agreements.
Alnylam counter-sued, claiming public statements Tekmira made when filing its claim in March were defamatory. But in September, the Massachusetts Superior Court ruled Tekmira had the legal right to communicate with its shareholders with respect to the lawsuit.
In its response to Tekmira's claim, Alnylam said it paid Tekmira $45 million for rights to use Tekmira's formulations.
"Alnylam obtained rights to Tekmira's technology not by stealing it, but pursuant to agreements that resulted in substantial benefit to Tekmira," Alnylam said in its response to Tekmira's claim.
Tekmira and Alnylam declined to comment on the case.
This is not Tekmira's first legal battle. The company was formed in 2008, when Inex Pharmaceuticals and Protiva Biotherapeutics merged, following a long contractual dispute. Both had collaboration agreements with Alnylam.
The merger failed to resolve the differences between the two teams of scientists, however, and Tekmira's management fired several Inex employees, according to court documents. The former employees then formed AlCana Technologies Inc., which worked with the University of British Columbia and struck new agreements with Alnylam. AlCana is also named in Tekmira's claim against Alnylam.
