Sanofi Moves into MicroRNA, Signs Preclinical Platform Deal with Regulus

With $25 million upfront, $10 million in equity and hundreds of millions of dollars in possible milestones, Sanofi makes a significant early bet on the latest RNA-based therapeutic class to emerge.

French drug giant Sanofi-Aventis has forged a development agreement potentially worth more than $750 million with microRNA-focused developer Regulus Therapeutics of Carlsbad, Calif., in one of the most significant tie-ups the nascent field has seen.

Though not as hefty as the early platform deals struck last decade by Alnylam Pharmaceuticals, one of Regulus's two parent companies, the Sanofi deal brings both significant cash and technological validation to Regulus, which like most of its microRNA peers has yet to advance a program into the clinic (Also see "Novartis Opens Door to Broad Dealmaking in RNAi" - Scrip, 1 Oct, 2005.).

Sanofi will pay $25 million upfront, and payments based on preclinical, clinical and commercial milestones could total much more. The two companies will collaborate on up to four targets over a three-year period, beginning with therapies that target fibrosis, including Regulus's lead program that goes after microRNA-21, which has been linked to a number of diseases and is the subject of patent gamesmanship. Sanofi also holds a three-year option to pay Regulus $50 million and expand the deal into a broader technology alliance in which Regulus would retain some development and commercial rights, an ambitious goal for a preclinical company.

Sanofi will also make a $10 million equity investment in Regulus, which is majority-owned by publicly traded RNA-interference pioneer Alnylam Pharmaceuticals and Isis Pharmaceuticals. "Today's news provides dilution-friendly funding to Regulus that ensures outstanding ownership levels to both Alnylam and Isis shareholders," said Alnylam CEO John Maraganore on a conference call Tuesday.

The equity deal will come at a valuation not yet determined by all the parties, but Regulus CEO Kleanthis Xanthopoulos said it would provide Sanofi "a small percentage" of ownership.

Founded in 2007 as a joint venture between Alnylam and Isis, Regulus converted to a C-corporation early in 2009. The new capital structure allowed more investor types to take stakes in the startup, although its two parent companies boxed out other investors by providing all $20 million of its Series A round in March 2009 (Also see "Regulus Is On The Launch “Platform” With $20M Series A Financing" - Pink Sheet, 4 Mar, 2009.).

Sanofi is the second major pharmaceutical company to partner with Regulus to develop therapies. GlaxoSmithKline and Regulus launched an alliance in 2008 to create microRNA-based therapies for immunological and inflammatory diseases. GSK paid $20 million up front to work with Regulus on four disease targets, with a total potential value of $600 million. The two collaborators announced a second deal in February that centered on Regulus's most advanced program, a potential microRNA treatment for hepatitis C and related indications (Also see "GSK Doubles Up With Regulus, Signing New Collaboration For HCV Therapeutics" - Pink Sheet, 25 Feb, 2010.). GSK also has a convertible note, which it has not yet exercised, to purchase equity in Regulus.

MicroRNAs are short strands of ribonucleic acid molecules that regulate gene expression by binding to target messenger RNA transcripts but do not encode proteins themselves. Developers hope that disruption of a single microRNA, which can regulate multiple messenger RNAs, can interfere with disease pathways. The hypothesis has faced relatively little pressure; nearly all microRNA-based therapies have yet to reach the clinic.

Fibrosis Comes First

Regulus and Sanofi will first pursue microRNA applications to combat fibrosis, although it has other programs in oncology, cardiovascular and metabolic diseases.

Sanofi could exercise its future options in any of those areas, Xanthopoulos said. He noted as well that Sanofi now has rights to less than 20 percent of Regulus's portfolio of microRNA strands, although the future options in the deal could give it access to more.

The deal between Sanofi and Regulus represents the largest yet for a microRNA company in terms of total size including future payments. The milestone payments will be split roughly in thirds among preclinical, clinical and commercial phases, Xanthopoulos said.

GSK also has a development agreement with Danish startup Santaris Pharma worth up to $148 million plus royalties, reached in 2007, the same year Santaris raised 20.4 million Euro (US $30 million) in a Series C funding.

The Regulus deal is Sanofi's first foray into microRNA, although it partnered with startup Traversa Therapeutics of La Jolla, Calif., for access to its small interfering RNA (siRNA) delivery technology in March.

Regulus returned $1.8 million to each Alnylam and Isis, about 15 percent of the upfront payment. Xanthopoulos explained that the payment compensated them for patent sublicenses, and that each will claim a similar share of future milestone payments from the Sanofi deal.

In a conference call, Xanthopoulos said Regulus has "several years" of financial runway, with the $20 million Series A round and upfront payments from its partnerships with GSK and Sanofi as well as the impending equity payment, all of which total $70 million. -- Paul Bonanos ([email protected])