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Is Alnylam Pharmaceuticals, Inc. a Buy?

By Keith Speights - Feb 26, 2018 at 7:32AM

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The biotech should receive more good news in 2018. But will it be good enough to justify Alnylam's steep valuation?

There weren't too many hotter biotechs in 2017 than Alnylam Pharmaceuticals, Inc. (ALNY 1.65%). Alnylam stock skyrocketed 249% last year, thanks to a string of positive developments.

But is Alnylam a smart pick for investors now, or has the stock nearly reached its max? Here are the arguments for and against buying the biotech.

Scientist holding beaker in front of face

Image source: Getty Images.

The case for Alnylam

If you're looking for the best reason to buy Alnylam, the company's lead drug, patisiran, is definitely it. The U.S. Food and Drug Administration expects to make an approval decision on patisiran in treating hereditary ATTR (hATTR) amyloidosis by Aug. 11. Potential European approval for the drug might not be too far past the FDA's date. 

Of course, the key question for Alnylam relates to whether patisiran will win regulatory approval. While anything can happen, I think the chances for patisiran look quite good. Alnylam and partner Sanofi (SNY 1.96%) reported overwhelmingly positive results from a late-stage study. Patients taking patisiran experienced a 34.0 mean point difference compared with patients on placebo on a key score measuring neuropathy impairment. The safety profile for Alnylam's drug also appeared to be good overall.

If approved, patisiran should have significant market potential. Some analysts project peak annual sales for the drug of $1.5 billion, with super-optimistic analysts thinking the total could be as high as $2.9 billion. And that's even with the prospects that rival Ionis Pharmaceuticals (IONS 2.81%) wins FDA approval for its hATTR drug inotersen in July.

As promising as patisiran is, though, it's not the only reason for investors to like Alnylam. The biotech expects to announce results from a late-stage study of givosiran in treating acute hepatic porphyrias by the middle of this year. If those results are positive, Alnylam plans to file for accelerated regulatory approval in the U.S. by late 2018. Although givosiran isn't likely to be a blockbuster like patisiran, the drug could pull in $350 million or so at its peak.

And Alnylam also has other irons in the fire that are in advanced stages of development. The biotech plans to initiate a pivotal late-stage study for ALN-TTRsc02 in treating ATTR amyloidosis in late 2018. Sanofi is testing fitisiran in a late-stage study targeting treatment of hemophilia. The Medicines Company is evaluating inclisiran in late-stage studies for treating hypercholesterolemia. Alnylam stands to receive royalties on sales of fitisiran and inclisiran if the drugs win approval.

The case against Alnylam

Why shouldn't investors buy Alnylam? I'd say there are three primary reasons. 

One reason to stay away from Alnylam stock is that the potential for success for patisiran is already largely baked into the share price. Alnylam's market cap currently stands north of $12 billion. There's no question that investors are betting heavily on approval and significant commercial success for patisiran.

Another reason against buying Alnylam is that the success for patisiran might not be as big as some expect. It's possible that more patients prefer Ionis' inotersen, which is an injection, rather than patisiran, which requires infusion every three weeks. This assumes, of course, that both Alnylam and Ionis win approval for their respective drugs.

The third reason not to buy Alnylam stock could be the most compelling. After the stock's huge gains, there isn't nearly as much room to move higher. Investors should be able to find other stocks with strong growth prospects at a more attractive valuation than Alnylam. 

To buy or not to buy

Both arguments for and against buying Alnylam have their merits. In my view, patisiran should win regulatory approval and enjoy a successful commercial launch. On the other hand, it's clear to me that expected success for the drug already is factored into Alnylam's share price.

I'm not convinced, though, that Ionis will beat Alnylam in the marketplace. I suspect that Patisiran's efficacy and safety will give it a competitive advantage. 

So is Alnylam a buy? My vote is a qualified "yes." I don't look for Alnylam's gains in 2018 to be anything close to what the stock achieved last year. However, I nonetheless think this should be a pretty good year for the biotech. On the other hand, even though I think Alnylam is a buy, there are even better stocks for investors to consider.

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Stocks Mentioned

Alnylam Pharmaceuticals, Inc. Stock Quote
Alnylam Pharmaceuticals, Inc.
ALNY
$148.25 (1.65%) $2.40
Sanofi Stock Quote
Sanofi
SNY
$51.01 (1.96%) $0.98
Ionis Pharmaceuticals, Inc. Stock Quote
Ionis Pharmaceuticals, Inc.
IONS
$38.06 (2.81%) $1.04
The Medicines Company Stock Quote
The Medicines Company
MDCO

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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