Dicerna Pharmaceuticals (DRNA) is up 18.6% at 3:31 p.m. EDT after announcing that it settled a trade secrets lawsuit with Alnylam Pharmaceuticals (ALNY -1.08%), which is up 1.3% itself.

Call it a win-win settlement.

So what

Both companies are developing RNA interference drugs that seek to knock down protein levels by targeting RNA, which is the intermediary between genes on DNA and the protein the genes encode for. Alnylam claimed that Dicerna was interfering with its trade secrets. Dicerna countered, claiming anti-competitive practices.

To end both sides of the lawsuit, Dicerna agreed to pay Alnylam an upfront fee of $2 million plus 983,208 shares of Dicerna common stock, which are now worth a little under $12 million thanks to today's jump in the price. Dicerna will also pay Alnylam another $13 million over the next four years. The timing of those additional payments will be determined by when Dicerna receives revenue from future partnerships it sets up for its GalXC technology.

Dicerna ended 2017 with just under $114 million, so the $2 million upfront fee won't be too bad. And linking the remaining payments to future partnerships will hopefully result in payments when the company has cash coming in. The extra shares will dilute current shareholders a little, but with around 25 million shares outstanding, it's a small price to pay for not having the lawsuit hanging over the company's head.

Outside of a courthouse

Image source: Getty Images.

Now what

Dicerna can now refocus on its pipeline, including its phase 1 drug DCR-PHXC, which treats primary hyperoxaluria, although it won't be able completely forget about its lawsuit sparing partner, because Alnylam also has a hyperoxaluria drug, lumasiran, which is ready to go into phase 3 development later this year.

Alnylam's longtime development partner, Sanofi (SNY -0.94%), recently passed on its option to license lumasiran, but it's hard to know if that's good or bad news for Dicerna. It could signal that Sanofi is worried that DCR-PHXC is superior, which would obviously be good news. Or Sanofi might think that primary hyperoxaluria isn't a disease worth pursuing, which would seem to be bad news. And of course, there are a lot of potentially neutral reasons for Sanofi to pass, including that it's just more interested in using the options from the development deal on other drugs Alnylam is developing.

Investors won't have to wait too long to get a first look at how DCR-PHXC stacks up to the competition; proof-of-concept data for DCR-PHXC is due in the second half of this year.