Alnylam Pharmaceuticals, Inc.: The Best Performing Biotechs of 2013

With the Nasdaq Biotechnology Index up 65% since the start of the year, it's clear that the biotech sector performed extraordinarily well in 2013-but which stocks were the biggest winners? In this series, I review the 15 biggest movers in the biotechnology sector this year. Several small-cap and mid-cap biotech companies posted returns of 200% or more through the middle of December this year, and here's what you need to know about them.

Let's start with number 15 on the list, Alnylam Pharmaceuticals, (NASDAQ: ALNY  ) , which posted a 226% gain through the middle of December. This company operates in the hot area of RNA interference, or RNAi. The company's drugs for lucrative orphan diseases spawned a partnership with drug giant Sanofi SA  (NYSE: SNY  )  that hopes to eventually win away sales from other specialty drug makers including Alexion Pharmaceuticals, (NASDAQ: ALXN  ) .

Treating genetic mutation

Alnylam is working on five core RNAi programs addressing amyloid diseases, hemophilia, acute intermittent porphyria, hypercholesterolemia and alpha-1 antitrypsin deficiency.

Of the five, the furthest along is Alnylam's TTR program, which uses nanoparticle technology to treat diseases caused by mutations of the TTR gene, which can result in a life threatening build up of protein in organs like the liver and heart.

In November, the company announced data from a phase 2 trial showing ALN-TTR02, also known as patisiran, reduced serum TTR levels up to 96% in patients with familial amyloidotic polyneuropathy, or FAP.  On the heels of that data, Alnylam is moving the drug into phase 3 trials, which lands the company a $7 million milestone payment from Sanofi's Genzyme unit. That payment is part of an agreement Sanofi made in 2012 that includes an upfront $22.5 million for rights to the TTR program in Asia.

If those late stage trials are successful, the drug would compete against Pfizer's (NYSE: PFE  )  Vyndaqel, which won EU approval for early stage cases of FAP in November, 2011.   However, Pfizer failed to win support for the drug from the FDA in 2012.

Sanofi's deal also includes ALN-TTRsc, a drug Alnylam is moving into phase 2 for the treatment familial amyloidotic cardiomyopathy, or FAC, and senile systemic amyloidosis, or SSA.  Alnylam expects it will be able to report data from that study late in 2014.

Needing wins

Alnylam is well capitalized, but not nearly as well capitalized as it was just a few years ago.  Despite dilutive equity offerings, the company is sitting on less than $200 million in cash and equivalents exiting September, roughly half its levels from 2008.

ALNY Cash and ST Investments (Quarterly) Chart

ALNY Cash and ST Investments (Quarterly) data by YCharts

Because of this cash burn, the company needs to advance more of its pre-clinical drugs into human trials.

To that end, Alnylam announced in December its ALN-AT3 for the treatment of hemophilia will be entering phase 1 early next year. 

A bit further out, the company hopes to enter phase 1 for ALN-CC5, a drug targeting complement-mediated diseases in hematology including PNH, atypical hemolytic uremic syndrome, or aHUS, and neuromyelitis optica.  Alnylam hopes to advance that drug into a phase 1 trial in 2015.  

If successful, that would pit it against Alexion Pharmaceuticals, a company building a successful business around its PNH and aHUS drug Soliris.  Soliris, which carries a $400,000 price tag,  helped lift Alexion's sales 36% to $400 million in the third quarter. 

Fool-worthy final thoughts

Alnylam's most advanced drugs are still a couple years away, suggesting the company remains a high risk story suitable only for the most risk tolerant investor.  However, more than 10,000 people are diagnosed with FAP and another 40,000 have FAC globally. That suggests the primary targets of Alnylam's mid to late stage TTR program offer opportunity, especially if Sanofi's Genzyme is able to leverage its experience to usher them successfully through trials.

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