Tiny Tekmira Lands $65M Settlement Plus $10M in Near-Term Milestone Payments from Alnylam

Tue Nov 13, 2012 7:45am EST

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On the eve of their transformational legal trial, emerging developer Tekmira Pharmaceuticals Corporation (Nasdaq:TKMR) (TSX:TKM) announced after the market close on Monday that they had settled all litigation matters between the firm and Alnylam Pharmaceuticals, Inc. (NASDAQ: ALNY) - whose shares dropped -4.23% After Hours to $15.44 on the news.

Tekmira, which closed Monday's session with a $70M market cap will receive $65 million within 10 days and is eligible to receive $10 million in near-term milestone payments expected to be received in 2013.

For the speculators who were betting on a positive outcome for the pending trial, the impact should be understandibly positive.

Tekmira is now funded with over $4.00 per share in cash alone thanks to their friends at Alnylam. Perhaps more importantly, observers who know the sector argue that the key settlement now positions Tekmira as the undisputed leading delivery owner of RNA interference (RNAi) therapeutics and enables them to soon to have the largest RNAi drug opportunity.

"The settlement and restructuring announced yesterday gives us, and the entire RNAi field, clarity around the intellectual property that protects our lipid nanoparticle (LNP) technology. Building upon our strong balance sheet and accomplishments to date, we are confident that we can continue to create significant, sustainable value for our shareholders. With our cash runway now extending into 2015, we are excited about our plans to aggressively advance multiple products into human clinical trials," said Dr. Mark J. Murray, Tekmira's President and CEO.

Alnylam apparently now admits that Tekmira owns LNP, the undisputed leading delivery, the only delivery in the clinic, but it also facilitates Alnylam to can go back to a $1 billion dollar market cap which is mostly derived from their positive data from TTR02, which the street estimates a successful drug would do $2 billion in revenue.

Meanwhile Tekmira now has 13 non-exclusive licenses to develop and commercialize RNAi therapeutics based on Alnylam's leading payload technology.  While platform companies are a more sensible business, less risk with short term revenue, Wall Street loves the blue sky of a successful muti billion dollar drug.  This is part of the reason that ALNY tacked on $500M of market cap when reporting recent interim phase 2 data.

In addition to the settlement news, two huge drivers for TKMR's stock are immediate partnering deals and TKMR moving into a phase 2 in Oncology.  If ALNY can tack on $500M for an orphan drug TKMR should tack on a significantly greater amount, making it at minimum a $35.00 stock. 

Granted, it will take a bit of time for this discovery to take hold with smart money and institutional buyers. Tekmira goes to Phase II Clinical trials next year.  While we wait, it is anticipated that partnering deals of great significance will take place. 

Even before ALNY reported their positive clinical data, there is little doubt that companies began to line up to deals with TKMR-- the go-to RNAi delivery company.  It's logical that given the circumstances, the leading health care companies and their business development experts no longer have to spend costly time and energy with their legal departments.  Now that ALNY has reported "earth shattering" data, Big Pharma partners should begin clawing at Tekmira's door with fatter terms and offers of their own..

Consider that ALNY added $500M to their market cap for a phase one treatment for TTR mediated amyloidosis. What might the market do over Tekmira's PLK 1 causing tumor cell death?  Last August the company reported interim positive results, but the knockout is scheduled to come soon when the final Phase I data is unveiled.  The interim data from that study certainly points toward game-changing recognition for Tekmira.

Frankly, it now appears that the greatest risk to Tekmira is a take out. We point to acquisition deals like Merck's billion-dollar deal for Sirna which took place longl before the RNAi space was de-risked.  It's hard to imagine that the market will let Tekmira's stock languish. TKMR shares are suddenly a bargain under $10.00


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