Sept. 7 (Bloomberg) -- Alnylam Pharmaceuticals Inc. and Isis Pharmaceuticals Inc. formed a venture uniting Nobel Prize winners David Baltimore and Phillip Sharp to create drugs from a newly discovered class of genetic material.

The venture, Regulus Therapeutics LLC, will have exclusive licenses from Alnylam and Isis for technology focused on so- called microRNAs. These molecules regulate networks of genes that may be involved in diseases including cancer, viral infections and metabolic disorder, the companies said today in a statement. Regulus also will be given patents.

Sharp helped found Alnylam, based in Cambridge, Massachusetts, in 2002 to probe similar genetic material, called small interfering RNAs, that affect individual genes rather than networks. Both stem from a push by scientists to make drugs by using gene-blocking techniques discovered a decade ago.

``MicroRNA is one of the most exciting and strategically important frontiers in gene therapy,'' said Ding Ding, a Maxim Group analyst in New York who rates Alnylam shares ``buy'' and doesn't own them, in a telephone interview. ``The venture is private, but as they move toward testing drugs in the clinic, the value contribution for shareholders could be significant.''

Regulus will use drugs developed by Isis to block microRNA targets that the companies both hold rights to, such as one called MIR122, which is involved in liver disease, Ding said. MIR122 blockers might be among the first to advance to clinical testing, said Ding, who doesn't rate Isis shares.

`Restrictive Safety Issues'

Splitting the microRNA business off will enable Regulus to focus on molecules that have a different structure and mechanism of action than the small interfering RNA Alnylam works with, said John Maraganore, Alnylam's chief executive officer. MicroRNAs are still relatively new, and since they affect groups of genes, ``there might be more restrictive safety issues that have to be considered,'' he said in a telephone interview.

Alnylam rose $1.12, or 4.3 percent, to $26.97 at 4 p.m. New York time in Nasdaq Stock Market composite trading. The company has gained 94 percent in 12 months. Isis, unchanged at $12.74, has risen 72 percent in 12 months.

Nobel Prizes

Baltimore, 69, won his Nobel for the discovery of reverse transcriptase, an enzyme that helps viruses such as HIV incorporate their genetic material into cellular DNA. He will sit on the Regulus board and be chairman of the venture's scientific advisory panel.

``The emerging biology of microRNAs points to a completely new understanding of cellular mechanisms for regulation of gene expression,'' said Baltimore, winner of the 1975 Nobel prize in physiology or medicine, in a company statement. ``MicroRNAs represent previously unexplored disease targets where pharmacological approaches could lead to the emergence of novel therapies for many human disorders.''

Baltimore resigned his post as president of Rockefeller University in 1991 after the leader of a study he coauthored was accused of fabricating data. Baltimore was never charged with misconduct, and his colleague was exonerated by a government investigation, according to the U.S. National Institutes of Health's Web site.

He stepped down last year as president of the California Institute of Technology in Pasadena, a position he had held since 1997, and remains a professor there. He became president of the Washington-based American Association for the Advancement of Science, the world's largest scientific society, in February.

`Wise Man'

Baltimore has investigated microRNAs in his own laboratory, said Alnylam's Maraganore, who will be on Regulus's board.

``He's a very wise man and probably one of the top 10 biologists in the world,'' Maraganore said. ``At the same time, he's someone who understands the science of business and the business of science.''

Sharp, Alnylam's chairman, won the Nobel prize in physiology or medicine 1993 for discovering how cells splice together genes to make proteins. His company will invest $10 million in the venture. After that, Alnylam and Carlsbad, California-based Isis will share funding of Regulus, the companies said.

Other companies investigating microRNAs include Rosetta Genomics Ltd., based in Rehovot, Israel.

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net.

Last Updated: September 7, 2007 16:34 EDT