Merck to pay $1.1 billion for a start-up

SAN FRANCISCO — Pharmaceutical company Merck & Co. said Monday that it had agreed to pay an eye-popping $1.1 billion to buy Sirna Therapeutics Inc., a tiny biotechnology firm developing drugs based on new technology at the heart of last month’s Nobel Prize for medicine award.

Merck’s $13-a-share offer for the San Francisco-based company is almost a 102% premium over Sirna’s closing stock price of $6.45, down 5 cents during regular trading. The bid was made public after the markets closed. Sirna’s stock surged 98% to $12.74 in after-hours trading. The stock’s 52-week high is $8.52, set in April.

Merck’s stock fell 45 cents to $45.64 during the regular session and remained unchanged in after-hours trading.

Sirna is developing drugs using so-called RNA interference technology.

There are at least half a dozen biotechnology companies developing drugs that silence genes by interfering with messenger RNA, a technique discovered by Nobel winners Andrew Z. Fire of Stanford University and Craig C. Mello at the University of Massachusetts. Eight U.S. and European patents are specifically related to the technology.

Analysts said the deal could spur other similar acquisitions of some of Sirna’s competitors that are racing to commercialize a discovery made only eight years ago -- a short time in the scientific world.

Normally skittish venture capitalists have invested hundreds of millions in the nascent technology, and now Merck has made its second, most substantive bet on RNA interference. The Whitehouse Station, N.J.-based company previously had invested in Alnylam Pharmaceuticals, a Sirna competitor.

The closest drug Sirna has near market is for the treatment of macular degeneration, a leading cause of blindness in the elderly. However, that drug is still at least two years from regulatory approval and probably further out because it will require the successful completion of at least two costly, time-consuming and large-scale human trials testing for safety and effectiveness.

“It’s kind of surprising and I don’t think anyone saw it coming,” Leerink Swann analyst William Tanner said.

“Big pharmaceutical companies tend to buy biotechnology companies with nearer-term prospects.”

But Tanner and other analysts said Sirna’s technology was promising, as evidenced by the Nobel award this year.

Drug makers and researchers have long sought to create drugs that target bad cells while leaving healthy ones alone, hoping to rely less on dangerous, blunt treatments such as chemotherapy. Many are betting RNA interference will be a powerful tool in customizing drugs.