Is Alnylam a Good Investment?

Companies in the orphan drug space can experience an exponential increase in their stock price as positive news about any development-stage drug comes out. There are a lot of companies working on therapies to fight rare diseases – one example is Alnylam Pharmaceuticals (NASDAQ: ALNY  ) , which is focused on developing RNA-based therapies. Over the past 12 months, the stock has gained about 250% due to positive news about the company's pipeline. However, most of these drugs are at the early stages, and once the company furthers their development, we may see further upward movement in the stock price.

Pipeline
The star product in Alnylam's pipeline is ALN-TTR, a drug intended to treat TTR amyloidosis (ATTR) -- a mutation in genes that affects the important organs and tissues of the body, including nervous and cardiac tissue. The company recently announced phase 1 trial results, which were hugely impressive. The drug offers the potential to switch off the mutated TTR gene implicated in ATTR. In fact, administering Alynlam's subcutaneous therapy in the study reduced TTR protein levels by up to 94%. Furthermore, the safety profile of the drug was very impressive.

At the moment, phase 2 trials are ongoing for the drug, and the study is at an advanced stage. There is a significant unmet medical need present; as a result, the drug is expected to be a game changer if the trials give the desired results. There are two types of the disorder: familial amyloidotic polyneuropathy, or FAP, and familial amyloidotic cardiomyopathy, or FAC. FAP affects about 10,000 people worldwide and about 40,000 people globally currently have FAC. At the moment, the only early stage treatments for FAP are liver transplant and Pfizer's drug tafamidis, which is approved in Europe. If the drug receives FDA approval, the company plans to market it in the North and South America, Europe, and the rest of the world. However, the company has formed an exclusive alliance with Sanofi to advance the program in Japanese and broader Asian markets.

The other drugs in the pipeline are in early stages of development or in phase 1 of clinical trials. The company plans to have five RN- based programs in clinical development, including advanced stages (details of the program can be seen here).

Overall financial condition
Alnylam's revenues come mainly from intellectual property and partnerships. However, these partnerships are dwindling (the company lost two partnerships), which can cause a slowdown in pipeline development. The company's cash flows are negative, and if the partnerships continue to go away, the company might see a cash flow issue. However, Alnylam has very low long-term debt, and it can certainly tap the debt market and meet the cash flow needs.

Other orphan drug considerations
When it comes to orphan drugs, it is very difficult to ignore Questcor (NASDAQ: QCOR  ) , which has been beating analyst expectations for the past 11 quarters. Questcor stock usually moves up after an earnings announcement; its next earnings date is Oct. 28. I expect the company to beat analyst estimates again as the sales for Acthar (its only drug) are rising, and Questcor has successfully launched the drug in the rheumatology segment; previously, the sales were mainly coming from multiple sclerosis and nephrotic syndrome. The drug can be prescribed for 19 conditions, and there is still a lot of room available to increase the penetration of the drug in these areas.

Another BioPharma player that is working on an orphan drug is Sarepta Therapeutics (NASDAQ: SRPT  ) . The company is working on a drug for Duchenne muscular dystrophy, a rare disease in young boys. If the company is able to get approval from the FDA, then Sarepta will have an extremely attractive drug, which the company will be selling for $150,000-$200,000. As a result, revenues of Sarepta will go through the roof -- and its stock price could follow suit. I suggest you look closer at Sarepta as there is need for the treatment and the drug is likely to be approved.

Final take
Alnylam has an attractive pipeline, and most of those drugs will address a significant unmet medical need. The prospects for the company are bright, and if the drug gets FDA approval, it should bring in substantial revenues. Although the stock has more than tripled in value over the past 12 months, I believe the business prospects of the company can take the stock price further up in the future.

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