(Corrects spelling of Alnylam in the headline and the sixth and eight paragraph)
Oct 18 (Reuters) - Drug developer Alnylam Pharmaceuticals Inc said on Wednesday it would scrap its hepatitis B (HBV) drug development and instead work with Vir Biotechnology on a new treatment for the disease.
The company's shares rose as much as 8 percent in light trading but pared gains to trade at $120 before the bell.
The partnership with Vir includes development of drugs for four other infectious diseases using RNAi technology, which aims to silence targeted genes to curb the production of disease-causing proteins and have limited side-effects.
Under the deal, the drug developer would receive an undisclosed upfront payment and more than $1 billion in potential milestone payments among other things.
"Any concerns surrounding the discontinuation of the (HBV) program should, for the most part, be quelled by the simultaneous execution of a potentially lucrative licensing agreement," Leerink analyst Paul Matteis said.
Alnylam's deal to out-license the program is an evidence that the company is focusing on its assets targeting rare diseases, Matteis added.
San Francisco, California based Vir Biotechnology develops treatments for serious infectious diseases.
Last month, Alnylam said its RNAi-based drug succeeded a key study to treat a rare genetic disease, validating the new treatment and bringing it closer to the market. (Reporting by Divya Grover in Bengaluru; Editing by Anil D'Silva)