Alnylam Lays Down a Sacrifice Bunt

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Did Alnylam (Nasdaq: ALNY) and Cubist Pharmaceuticals (Nasdaq: CBST) hit a home run with their respiratory syncytial virus (RSV) infection treatment ALN-RSV01 yesterday? Nope, but it was a productive out.

Like a batter making a sacrifice bunt, the clinical trial took one for the team and moved the program along. The primary endpoint for the phase 2 trial was safety, and the drug met that goal without any major problems. Getting the drug through the safety portion of the clinical-trial marathon is a big deal since RNAi drugs are fairly new, and ALN-RSV01, or a similar drug, is likely to eventually be used in premature infants. Proving that the drug is safe in lung transplant patients -- who obviously aren't at the peak of health -- is a big step.

Investors seem to have been looking for more as Alnylam's stock ended the day down 8% yesterday, and at one point, it was down as much as 11%. There was a secondary efficacy endpoint, but with only 24 patients in the study, it's very difficult to match up the placebo and drug groups so that they have the same characteristics. Without evenly matched groups, comparing how well the drug worked relative to placebo is nearly useless. In order to see a clear efficacy signal in this trial, it would have needed to work so well that it hit one into the second deck.

Of course, maybe investors were just taking profits yesterday. And who could blame them? Alnylam is up 38% over the last three months even after yesterday's drop.

With a market cap topping $850 million and ALN-RSV01 being the drug furthest along its own pipeline, Alnylam still looks overpriced to me. Sure, there's plenty of potential for the drug -- AstraZeneca's (NYSE: AZN) prophylactic RSV treatment, Synagis, had sales of $1.2 billion last year -- and Alnylam has plenty of ringing endorsements from partners such as Biogen Idec (Nasdaq: BIIB), Medtronic (NYSE: MDT), Novartis (NYSE: NVS), and Merck (NYSE: MRK). But RNAi is still an unproven technology, and there's plenty of chances for it to strike out.

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