Novartis and Alnylam Pharmaceuticals said on Wednesday they would enter into a $700-million multiyear alliance to discover new gene therapies based on RNA interference (RNAi).

As part of the deal, the Basel, Switzerland-based drug maker will buy a 20 percent stake in the Cambridge, Massachusetts-based biotech company. Novartis will buy 4.2 million shares at $11.11 each and make an initial payment of about $56.8 million.

Alnylam may earn more than $700 million from the deal in payments and royalties.

During the term of the agreement, the collaboration will focus on the joint discovery of new therapeutics using RNAi across multiple disease areas in the Novartis research portfolio. “This collaboration underscores Novartis’ commitment to forging strategic alliances with partners at the forefront of scientific discovery,” said Dr. Mark Fishman, President of the Novartis Institutes for BioMedical Research. “RNAi holds great promise as a new therapeutic modality for treating many diseases.”

“This collaboration underscores Novartis’ commitment to forging strategic alliances with partners at the forefront of scientific discovery,” said Dr. Mark Fishman, President of the Novartis Institutes for BioMedical Research. “RNAi holds great promise as a new therapeutic modality for treating many diseases.”

Novartis and Alnylam will form a Scientific Strategy and Advisory Group to review the overall strategy for the relevant science and clinical applications of the collaboration.

The Advisory Group will be co-chaired by Dr. Fishman and Alnylam director Phillip A. Sharp, PhD, who is an Institute Professor at the Massachusetts Institute of Technology and a 1993 Nobel Laureate in Physiology or Medicine.Unique Position

Unique Position

“We believe that our technology is one of the most significant innovation-based drug discovery approaches available,” said John M. Maraganore, PhD, chief executive of Alnylam. “Our collaboration will utilize significant resources and capabilities to place Novartis and Alnylam in a unique position to build RNAi therapeutics as a major class of drugs in the biopharmaceutical industry.”The agreement is subject to customary regulatory approvals, including antitrust review under the Hart-Scott-Rodino Antitrust Improvements Act.Shares of Novartis were down $0.10 to $49.18, while shares of Alnylam skyrocketed $4.25 to $13.81 in recent trading.

RNAi therapeutics have the potential to treat human disease in a fundamentally new way by silencing disease-causing genes. Gene therapies have shown their effectiveness in some treatments and research (see New Info on Blindness Gene).

New Info on Blindness Gene

However, at least one analyst was cautious about the implications of the two companies’ collaboration.

“RNAi is currently a hot research area,” wrote Denise Anderson, a financial analyst at Kepler Equities in a research note quoted by Reuters. “The field is quite new, so its ultimate success at finding new drugs is still unknown.”