It took two solid decades for Alnylam (NASDAQ:ALNY) to carry its first new drug candidate across the finish line, but investors didn't need to wait long for the next one. The FDA approved the company's second drug just 16 months later, and the pace will probably accelerate. 

Interfering with the production of troublesome proteins is working for patients with gene-driven disorders. Can shares of Alnylam work for your portfolio?

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Reasons to buy Alnylam

Last year, Onpattro earned approval to treat patients with progressive nerve damage caused by plaques made of transthyretin (TTR) fragments. In the third quarter this year, sales of the monthly infusion reached $46.1 million, which was 21% more than sales in the second quarter. 

In November, the FDA announced the approval of Alnylam's second drug, an injection for patients with acute hepatic porphyria called Givlaari. In early 2020, the FDA could begin reviewing an application for this company's third new drug, a treatment for primary hyperoxaluria called lumisiran.

Years ago, The Medicines Company (NASDAQ:MDCO) licensed inclisiran from Alnylam while it was still in early-stage development. Before the end of 2019, The Medicines Company expects to submit an application for inclisiran, a treatment for patients with life-threatening cholesterol levels. In return, Alnylam's entitled to a royalty percentage in the low to high teens.

In early 2020, Alnylam could be ready to submit an application for lumisiran to the FDA. This is an experimental treatment for primary hyperoxaluria patients that's in a pivotal study at the moment. If the results fall in line with those we saw in a midstage clinical trials, Alnylam will probably be able to submit an application for lumasiran in early 2020.

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Reasons to remain cautious

Since its inception in 1998, Alnylam's accumulated a $2.84 billion deficit, and it's still bleeding money. At the end of September, there was $1.7 billion in cash and securities on Alnylam's balance sheet, but the company also lost $609 million during the first nine months of 2019. Without any room for error, Alnylam's $11.9 billion market cap could tumble next year if Onpattro and Givlaari aren't as successful in the commercial stage as they were in clinical trials.

Running RNA interference (RNAi) patterns to develop new drugs is a strategy that works for more biotechs than you can count on both hands. Alnylam's firmly in the lead, but it's not alone. For example, Arrowhead Pharmaceuticals (NASDAQ:ARWR) and Alnylam are both developing RNAi drugs to treat liver disease caused by an alpha-1 antitrypsin (AAT) deficiency, and hepatitis B virus (HBV).

Arrowhead hasn't carried a new drug across the finish line yet, but its AAT candidate, called ARO-AAT, is a bit further along the development timeline than Alnylam's. Last year, Johnson & Johnson (NYSE:JNJ) licensed Arrowhead's HBV program for $250 million up front and appears determined to guide it through late-stage trials as quickly as possible.

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In the numbers

Alnylam's market cap has swollen to $11.9 billion, which is more than 60 times this year's expected product sales. Since shares of commercial-stage biotechs generally trade at mid-single-digit multiples of total annual revenue, the stock could plummet if investors' forward outlook sours.

Although Alnylam's sitting on a tall perch nobody wants to see their investment fall from, there's a pretty good chance that the company will exceed expectations. Depending on who you ask, Alnylam's first two drugs Onpattro and Givlaari could generate combined sales that reach between $1 billion and $2.5 billion at their peak. 

The next Alnylam drug to earn approval will probably be inclisiran, and it will have all the resources necessary for a successful drug launch. That's because Novartis (NYSE:NVS), one of the world's largest pharmaceutical companies, recently agreed to acquire The Medicines Company for $9.7 billion.

In November, Alnylam began a pivotal study with vutisiran, an experimental treatment similar to Onpattro, but aimed at patients with progressive heart damage caused by TTR amyloidosis. Although frequently misdiagnosed, TTR-driven cardiomyopathy is several times more common than Onpattro's indication. 

A buy now

Alnylam shares aren't cheap, but two drugs on the market now plus a handful in late-stage clinical trials will give investors plenty of chances to realize market-beating gains over the long run. Despite the recent run-up, this is still a great biotech stock to buy right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.