When it recently reported first-quarter results, Alnylam Pharmaceuticals (NASDAQ:ALNY) updated investors about its RNA interference (RNAi) pipeline. This quarter, its current lead RNAi candidate is advancing into a phase 2 trial designed to evaluate its safety and antiviral activity. A separate phase 1 inhalation trial with the drug candidate is still actively enrolling, with data from both trials expected in the second half of this year.

The drug, ALN-RSV01, is designed to treat respiratory syncytial virus (RSV) infection, a common cause of respiratory ailments in children. RSV is a huge market, dominated by MedImmune (NASDAQ:MEDI) and its blockbuster drug Synagis. Alnylam has the difficult task of beating out an entrenched competitor, but if it can do so, the rewards could be substantial.

Alnylam also recently expanded its pipeline with another development program involving ALN-VSP01, an RNAi therapeutic for the treatment of liver cancers (and possibly other solid tumors). The company expects to file an Investigational New Drug Application (IND) with the FDA for this program in 2008, in addition to its goal of filing two INDs this year from its previous development pipeline. Alnylam also announced positive early-stage developments in treatments for high cholesterol and the hereditary neurological disorder Huntington's disease, which is currently untreatable.

Financially, Alnylam ended the first quarter with more than $200 million in cash and investments, after reporting a net loss of $21.6 million on revenues of $7.2 million. While Alnylam's RNAi pipeline is still in its early stages, investors should keep an eye on the stock; its cutting-edge technology and ample liquidity make it a prime takeover candidate. Last October, Merck (NYSE:MRK) paid $1.1 billion to acquire early stage RNAi drug developer Sirna. To me, Alnylam seems destined for a similar fate, given the need for big pharma and larger biotech companies to fill their pipelines with both drug candidates and new drug discovery platforms such as RNAi.

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Fool contributor Mike Havrilla, R.Ph., B.S., Pharm.D., is a Rite Aid pharmacist who lives, writes, works, and enjoys running on the streets and trails in the small Pennsylvania town of Portage. He invites your comments and feedback. Mike does not have a position in any company mentioned in this article. The Fool has a disclosure policy.