Surprises in the biopharma industry are probably biased toward bad news, but Alnylam Pharmaceuticals (ALNY 3.02%) bucked the trend on Nov. 20 by announcing that it earned marketing approval for a drug candidate only four months after submitting a new drug application (NDA) to the U.S. Food and Drug Administration (FDA). It typically takes six to 10 months -- or longer -- for a decision to be handed down.
Shares have risen rapidly as Wall Street analysts scramble to update their financial models for the business. The company thinks the drug, Givlaari (givosiran), a treatment for adults with a rare disease called acute hepatic porphyria (AHP), could capture most of the estimated $500 million market opportunity.
The approval gives Alnylam Pharmaceuticals two marketed products and confidence it can increase that to four by the end of 2020. It also suggests that the company's targeted delivery approach could overcome previously encountered obstacles for the technology platform.
Image source: Getty Images.
Is this a big moment for RNAi medicines?
Gilvaari is only the second drug based on RNA interference (RNAi) to earn FDA approval. The first was Onpattro (patisiran), also belonging to Alnylam Pharmaceuticals and approved 16 months ago.
But the latest approval is still an important milestone for both the company and the therapeutic technique. Why? Gilvaari is the first RNAi drug to utilize GalNAc-conjugation to earn marketing approval. What does that mean?
RNAi is a technique that can silence genes -- in this case, disease-driving genes. But the therapeutic payload has to be efficiently delivered to the correct cells. Past failures prompted Alnylam Therapeutics to pioneer the GalNAc-conjugating approach, which couples the gene-silencing payload to the sugar N-Acetylgalactosamine, or GalNAc. The sugar has a high affinity to certain receptors presented on the surface of liver cells, which is where the RNAi payload must end up anyway, making for a perfect pairing.
Gilvaari is the first drug product based on the targeted delivery approach to make its way from discovery efforts to preclinical proof-of-concept to clinical trials to marketing approval. It bodes wells for the future of RNAi therapies, which theoretically present several advantages over other medicines, including limited dosing requirements and relatively clean safety profiles. And since the liver is a therapeutically important organ, the technique's success could usher in a new era of precision genetic medicines for treating everything from rare diseases to cardiovascular diseases. It may even provide functional cures for chronic hepatitis B, which results in more human deaths each year than malaria.
That explains why news of Gilvaari's approval also pushed up shares of Arrowhead Pharmaceuticals and Dicerna Pharmaceuticals, two companies developing targeted RNAi drug candidates of their own based on similar chemistry to GalNAc. They've gained 72% and 46%, respectively, in November. But Alnylam Pharmaceuticals expects to deliver much more value to patients and shareholders sooner than its peers.
What's ahead for Alnylam Pharmaceuticals?
In the immediate future, investors can expect Alnylam Pharmaceuticals to ramp up sales of Onpattro and Givlaari. Analysts anticipate the former will achieve peak annual sales of around $1 billion, while the total market opportunity for the latter is about $500 million.
Investors don't have to wait long for additional catalysts. Alnylam Pharmaceuticals expects to have four products approved for use by the end of 2020 -- double its total at the end of 2019 -- and potentially more within the next two years. Here's how management expects that to play out:
|
Asset |
Indication |
Development Status |
Next Major Event |
|---|---|---|---|
|
Onpattro (patisiran) |
Polyneuropathy of hereditary transthyretin-mediated (hATTR) amyloidosis |
Approved in 2018 |
APOLLO-B phase 3 trial readout, continued global expansion |
|
Givlaari (givosiran) |
Acute hepatic porphyria (AHP) |
Approved in 2019 |
U.S. market launch, potential approvals in Europe and Brazil in 2020 |
|
Lumasiran |
Primary hyperoxaluria type 1 |
Phase 3 trials ongoing |
File NDA in early 2020, potential approval in late 2020 |
|
Vutrisiran |
ATTR amyloidosis |
Phase 3 trials enrolling |
Complete enrollment of first phase 3 trial in 2020, continue enrollment of second phase 3 trial in 2020 |
|
Inclisiran |
High cholesterol |
Phase 3 trials completed and ongoing |
The Medicines Company plans to file for regulatory approval in late 2019 |
Data source: Investor presentation.
That said, Alnylam Pharmaceuticals is still growing into its $13 billion market valuation, which is a little frothy relative to operations in the first nine months of 2019:
|
Metric |
First Nine Months 2019 |
First Nine Months 2018 |
Change (YOY) |
|---|---|---|---|
|
Revenue |
$110.6 million |
$0.5 million |
N/A |
|
Total costs and operating expenses |
$789.4 million |
$648.2 million |
22% |
|
Operating loss |
($641.4 million) |
($594.3 million) |
N/A |
|
Cash from operations |
($82.5 million) |
($412.2 million) |
N/A |
Data source: SEC filing. YOY = year over year.
While investors are enthusiastic about the company's progress and potential, the current market valuation certainly represents a premium. The RNAi pioneer trades at 77 times sales, which is expensive even in the context of a promising, high-growth pharmaceutical stock. Even if the business achieves peak annual sales for both of its currently approved products, the stock would be trading at roughly 10 times sales -- more reasonable, but also at a date much further in the future.
In other words, Alnylam Pharmaceuticals needs near-perfect execution just to live up to its current valuation, let alone earn a much higher market cap. That suggests that individual investors may want to exercise some caution when approaching this RNAi stock, although it's definitely one to watch closely in the next year -- especially if shares fall from current levels.
