Alnylam's Biggest Opportunities

Shares of Alnylam Pharmaceuticals (NASDAQ: ALNY), a biotech company developing a new class of medications based on RNAi technology, have soared 250% since the start of 2013. Why are investors so excited about this company and its technology?

Researchers are increasingly identifying our genes as the root cause of disease. Certain genes can be identified as causing diseases in the human body, but traditional medicine had no way to suppress them. Then in 2006, two scientists shared the Nobel Prize for developing RNA interference, or RNAi, technology, which can suppress disease-causing genes in the human body. Alnylam is harvesting this technology to develop a new class of human therapeutic products for rare diseases. This pioneering new approach to medicine is of huge interest to biotech investors.

The company currently focuses on three indications: ATTR -- a rare liver disease -- hemophilia, and porphyria. It expects to have five RNAi therapeutic programs in clinical development, including late stages, by 2015. These indications, especially ATTR, are important not only because of their market potential but also because the therapy being developed uses the novel RNAi therapy, which if successful can have long-standing implications for further research. 

Commercial opportunity in ATTR
About 50,000 patients worldwide suffer from ATTR. The disease has two forms, commonly called FAP and FAC. Approximately 10,000 people are affected by FAP, and FAC affects around 40,000 people worldwide. Most patients die from ATTR at the age of 40-60 with nerve and heart muscle disorders.

Currently, treatments for ATTR are limited to liver transplants or Vyndaqel from Pfizer  (NYSE: PFE  ) . This will be an opportunity for Alnylam to offer its novel RNAi therapeutic platform. The company is developing ALN-TTR in collaboration with Genzyme, a subsidiary of Sanofi  (NYSE: SNY  ) , with an upfront payment of $22.5 million and nearly $50 million in milestones. ALN-TTR02 recently received orphan drug status in the U.S. and the EU and will start phase 3 study by late 2013. ALN-TTRsc will complete phase 2 study by late 2013 and start phase 3 study by 2014. ATTR has a high death rate, and there are hardly any therapies. Moreover, Alnylam has shown positive phase 2 results of ALN-TTR02 in ATTR patients. Given these two facts, it seems possible that Alnylam could get fast review status in the development process. The FDA is generally willing to do these for therapies addressing a major unmet need.

Genzyme is a good partner because it has an established track record in collaborative research. The company partners with others in getting approval for enzyme-replacement therapy and gene therapy treatments and investigates how cancer treatment can help multiple sclerosis patients. Genzyme developed products in partnership with development-stage companies for many indications. It aims to strengthen its product portfolio through collaboration. On approval of Alnylam's RNAi therapeutics, Genzyme will benefit due to the licensing agreement to develop and market the product in Japan and Asia Pacific regions.

On the other hand, Pfizer's Vyndaqel is the first drug used for treatment of FAP, one of two forms of ATTR. The product is approved only in Europe. Prior to Vyndaqel, liver transplantation was the only treatment option for FAP, and few patients could afford this expensive and difficult process. Vyndaqel has first-mover advantage and expects significant growth in coming periods. It will be a significant part of Pfizer's expected total revenues of $50.8 billion-$52.8 billion and adjusted diluted earnings per share of $2.10-$2.20 in 2013.

Strong alliance is the backbone
Alnylam has strong alliances with large drug manufacturing companies to support their clinical programs. This includes platform alliances with RocheTakeda, and Monsanto; drug development alliances with Novartis and Iris; and product alliances with Genzyme, CubistMedtronic, and The Medicines Company.

Performance potential
Alnylam expects revenues from research collaborations. In the recent quarter, the company reported revenues of $8.7 million, which included $5.5 million from Takeda, $1.4 million from Monsanto, and $1.8 million from The Medicines Company. On June 30, 2013, its cash balance was $379.5 million. Given that the company spent around $25 million in the last quarter for R&D, one assumes that they have enough cash to withstand a normal cash burn rate.

Way ahead
Alnylam has a novel therapeutic platform to develop products that have significant prospect for orphan diseases. Strong partnering with leading drug manufacturers will create upside potential for the company, given its price to book value of about 13. Alnylam continues to maintain a solid balance sheet and expects cash of more than $320 million by the year end to advance its RNAi therapeutics clinical trials.

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  • Report this Comment On October 02, 2013, at 7:32 AM, jawscclaws wrote:

    I thoroughly enjoyed your article abot ALNY, but tend to think that the better investor bet is with ISIS, short term, mid-term and long term! They parallell one another in so many ways, yet, ALNY has more favor with Wall Street Analysts. ISIS's antisense platform is in my opinion the better bet here, especially with more to offer in the pipeline, collaborative engagements and revenue avaialble for sustaining the R & D necessary to propel developments forward.

    I believe that ISIS is the mirror image of ALNY, but with so much more to offer, yet ISIS's share price is approximately half of ALNY, but not for long.

    Many happy returns to all!

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