Novartis finds a deal around town

Global drug maker Novartis AG yesterday signed a broad-ranging research deal with Cambridge biotechnology firm Alnylam, buying about 20 percent of the company and agreeing to pay up to $700 million to develop drugs based on Alnylam's techniques for shutting down harmful genes.

The move marks the biggest pharmaceutical company deal to date for a new technology called RNA interference, or RNAi, which many researchers believe could allow them to attack diseases that have resisted drug treatments.

It also is a result of the disputed decision by the Swiss giant Novartis to move its worldwide research headquarters to Cambridge, hoping to take advantage of the biomedical research cluster around the Massachusetts Institute of Technology and Harvard University.

Novartis will pay $56.8 million for Alnylam stock and begin a three-year research collaboration to use its RNAi patents and expertise. The final value of the deal will depend on their joint success in developing and selling drugs.

The news sent Alnylam shares soaring yesterday, closing at $13.75, up nearly 44 percent.

Details of the collaboration haven't been worked out, according to Novartis research chief Mark Fishman and Alnylam chief executive John Maraganore, but it will be directed by a committee run by Fishman and MIT professor Phillip Sharp, a Nobel-winning biologist who cofounded Alnylam and serves as a scientific adviser.

The deal's roots lay partly in the long personal relationship between Sharp and Fishman, a top heart specialist who left Massachusetts General Hospital in 2002 to run Novartis's research division. The two have known each other for 20 years, and used to meet over lunch at MIT to talk neuroscience.

''Very few people in the work know more about RNA than Phil Sharp," Fishman said yesterday.

Although no drugs have been produced using RNAi, it was named the ''breakthrough of the year" by Science magazine in 2002 and has attracted increasing attention from drug companies scrambling to fill their product pipelines by developing new drugs.

Researchers have shown they can create short strands of a long, twisted molecule called RNA -- which normally carries messages from genes that instruct cells to manufacture proteins -- and use those snippets instead to ''silence" the genes. Most human diseases are caused at some level by harmful proteins inside the body, and RNA interference would stop the body from making those proteins.

By investing in Alnylam, Novartis is betting that RNAi will allow it to overcome a key hurdle of traditional drug development: Although scientists and drug companies understand the ''pathways," or molecular processes, that cause many diseases, they have not been able to design a traditional pill to interrupt those processes.

Fishman said RNAi could also potentially speed up the creation of drugs. If the gene that makes the damaging protein can be located, scientists can custom-build a short strand of RNA to block it, and they can accomplish that ''in an afternoon," Fishman said. ''You can cut three to five years of chemistry out of the deal."

MIT's Sharp, who also cofounded the biotech giant Biogen nearly 30 years ago, said there are still challenges in getting a complicated molecule like RNA to do its work inside a cell, but that even the promise of it happening was ''revolutionary."

Sharp said he is amazed that the concept has gone ''from doing something in your lab with a team of people to putting an organization together to getting an agreement of this nature."

''Man, I'm 60. You don't get any better than this," he added.

Fishman said Novartis was attracted to the deal not only by Alnylam's expertise in engineering RNAi and turning it into useful drugs, but because of its strong portfolio of patents and intellectual property.

Since being founded by Sharp and other scientists, Alnylam -- named for a star in Orion's belt -- has either licensed or bought many of the patents that govern RNAi research.

''We believe that no one can develop and commercialize RNAi products without going through Alnylam," said Alnylam's Maraganore.

Industry analysts said the deal represented an industry vote of confidence in RNAi. Shares of Sirna Therapeutics, a rival RNAi company in Colorado that is testing an RNAi drug for an eye disease, also gained yesterday on the expectation the San Francisco firm could sign a similar agreement.

Stephen Heuser can be reached at sheuser@globe.com.