NTLA - Alnylam Pharmaceuticals: A Good Buy Ahead Of Phase 3 Data For Vutrisiran

2023-10-13 18:11:38 ET

Summary

• We rate Alnylam Pharmaceuticals, Inc.'s common stock a Buy on the dip after the complete response letter, CRL for Patisiran.
• The investment thesis is based on the high probability of success for Vutrisiran, the company's next-generation inverse RNA or RNAi candidate, in treating cardiac amyloidosis in the upcoming Phase 3.
• My price target for Alnylam Pharmaceuticals, Inc. common stock is $300, representing a 76% upside based on the discounted cash flow valuation method.

We rate Alnylam Pharmaceuticals, Inc. ( ALNY ) a Buy on the dip after the complete response letter, CRL for Patisiran. The investment thesis is based on the high probability of success for Vutrisiran, the company's next-generation inverse RNA or RNAi candidate, in treating cardiac amyloidosis in the upcoming Phase 3 Helios-B trial in early 2024. My price target is $300 or 76% upside based on my enterprise discounted cash flow, DCF valuation method.

Detailed Investment Thesis

Background

Amyloidosis is a disease characterized by extracellular deposition of abnormal fibrils composed of a variety of proteins. The disease is diagnosed by a biopsy of affected tissue and Congo red staining, which shows apple-green birefringence on polarized light microscopy and is a hallmark of the disease. Various types of amyloidosis include light-chain amyloidosis (the most common type that results due to multiple myeloma), wild-type amyloidosis, AA amyloidosis, dialysis-related amyloidosis, and hereditary amyloidosis. The disease is usually diagnosed in the seventh decade of life. The organs affected by the tissue include the peripheral nerves, kidneys, heart, liver, and gastrointestinal tract. Involvement of the heart, kidneys, and autonomic nervous system is associated with a poor prognosis and high mortality. Its prevalence is estimated at 10-14 cases/million (50,000 hereditary ATTR patients and ~200,000-500,000 wild-type ATTR patients worldwide ). The global market size for ATTR amyloidosis is estimated at $11 billion/year in 2026.

This note will focus on cardiac amyloidosis, or Transthyretin amyloid cardiomyopathy, ATTR-CM. Patients present with heart failure and the condition is underdiagnosed. Recent advances have revolutionized the treatment landscape of this condition, for example, non-invasive imaging techniques like cardiac MRI (which avoids the need for invasive cardiac biopsy), increased surveillance of restrictive cardiomyopathy patients for HTTR-CM, and newer therapies. The treatment approach recommended by the American Heart Association, is shown in the figure below.

Pfizer's ( PFE ) drug Tafamidis, which is a TTR stabilizing drug, had over $2 billion in annual sales in 2021, and is estimated to reach $4 billion in 2029. Phase 3 data for the drug was published in the New England Journal of Medicine and showed a reduction in all-cause mortality and rate of cardiovascular hospitalizations compared to the placebo at 30 months of follow-up (p<0.001). Recently. Bridgebio's ( BBIO ) competing TTR stabilizing drug Acromadis showed a highly significant result in a Win ratio (composite of all-cause mortality, the frequency of cardiovascular mortality, change in serum pro-BNP, and change in the exercise capacity measured by the six-minute walk distance), p<0.0001, and showed a higher survival rate (81%) than that showed by Tafamidis (70.5%) at month 30. Novo (NVO) acquired Prothena for $1.2 billion for monoclonal antibody PRX004 targeting TTR-amyloidosis, which is planned to enter a Phase 2 trial.

Apart from these chronic therapies, therapies in development with curative potential include NTLA-2011, a CRISPR-Cas9 therapy from Intellia Therapeutics ( NTLA ) and Regeneron (RGN) (in early stage Phase 1 clinical trial), which is being developed in both wild-type and hereditary types. All patients showed >= 90% TTR reduction by day 28, which persisted at six months (93% reduction in serum TTR). Ionis Pharmaceuticals ( IONS ) Tegsedi, an mRNA silencer, is approved in ATTR-with polyneuropathy, ATTR-PN. However, it has a black warning and is not being developed in ATTR-CM. Alnylam's RNAi silencer drug Patisiran is approved for ATTR-PN in the U.S. and both ATTR-PN and ATT-CM in the E.U. It is given by iv infusion every three weeks in an infusion center and has side effects like respiratory infections and infusion site reactions. However, the company plans to shift focus to the next-generation RNA silencer Vutrisiran after the FDA declined to approve it in TTR-CM.

Vutrisiran has a time lead over rival curative potential therapies and has a high probability of success in the upcoming Helios-B trial in early 2024

Vutrisiran is the company's RNA silencer product candidate, which was given Fast Track designation by the FDA for treating hATTR-PN. It was approved by the FDA in this condition in April 2022 and had 2023 sales of $235 million. It has the advantage of being patient-friendly since it can be self-administered subcutaneously at home. The dosing regimen is also convenient (every three months). It also has a better safety profile than Patisiran. The U.S. new TTR Start forms have doubled since its launch, and the prescriber base has increased by 50%. The number of patients on Vutrisiran also increased by ~50% quarter over quarter.

In the Phase 1 study , Vutisiran showed potent and sustained TTR reduction in a dose-dependent manner (5-300 mg), with a mean maximum TTR reduction of 57-97%, which was maintained for >=90 days post-dose. The data is comparable to that for rival CRISPR therapy from Intellia.

Reason behind CRL for Patisiran

In the Phase 3 APOLLO-B trial , Patisiran achieved the improvement in exercise capacity endpoint (p=0.016); however, the composite of all-cause mortality, frequency of cardiovascular events, and change in exercise capacity was not achieved. This could be explained by the fact that the study was underpowered and the treatment duration was short (18 months vs. 30 months in Tafamidis and Acromidis Phase 3 trials) to show a significant benefit in all-cause mortality.

FDA denied its approval this week due to questions over clinical benefit and poor safety profile (high incidence of infusion reactions). The company has decided to shift its focus to Vutrisiran due to its better safety profile and more convenient s/c every three months administration.

Vitusiran: previous clinical data and design of the ongoing pivotal Helios-B trial.

The Helios-A trial , with a small study size of 164 patients, showed that Vutrisiran was well-tolerated and had an acceptable safety profile.

The ongoing Phase 3 Helios-B study will study Vutrisiran for up to 36 months of follow-up in 655 patients with ATTR amyloidosis (wild-type or any other mutation) and cardiomyopathy and NYHA class <=III (mild to moderate disease). The comparator is a placebo. The drug will be administered s/c every three months. The primary endpoint is a composite outcome of all-cause mortality and recurrent cardiovascular events. The secondary endpoints include exercise capacity, echocardiography parameters, all-cause mortality, serum pro-BNP, etc. The patient enrollment is completed, and topline data at 30 months of follow-up is expected in early 2024.

I assign a higher probability of success to the Phase 3 Helios-B trial due to:

• A higher number of study subjects (655 vs. 343 in Apollo-B), making it adequately powered.
• A longer duration of treatment of 30 months, similar to that in the Tafimidis and Acromidis pivotal trials.
• Better safety profile due to subcutaneous administration (no infusion reactions like Patisiran).

Another shot at the goal with next-generation ALN-TTRsc04.

In addition, the company have another shot at the goal with ALN-TTRsc04, a 3rd generation RNA silencer product candidate that uses the company's IKARIA technology and has the potential for >90% reduction in serum TTR. It is in Phase 1 trial and is planned for once a year convenient dosing.

Other parts of the pipeline

Fully owned products include Givlaari (givosiran) which is approved for the treatment of acute hepatic porphrias, and Oxlumo (lumasiran) which is approved for treating primary hyperoxaluria type 1.

Partnerships include: Roche ($2.8 billion deal for zilebesiran for hypertension), Regeneron ( REGN ) ($1 billion deal in ocular and central nervous system diseases), Blackstone ( BX ) ($2 billion deal in hypercholesterolemia), and Novartis ( NVS ) (end-stage liver disease indication),

Experienced management

CEO Greenstreet has over 25 years of experience in the pharmaceutical industry and served as the company's Chief Operating Officer previously. She served as Senior Vice President and Head of Medicines Development at Pfizer ((PFE)) and Senior Vice President/Chief of Strategy for R&D at Glaxosmithkline ( GSK ). Chief Medical Officer Garg has over 15 years of industry experience and served as Vice President, Global Research-Immunoscience at Bristol Myers Squibb ( BMY ). Chief Financial Officer Poulton served as CFO at Shire Plc. Chief Commercial Officer Tanguler served as Senior Vice President and Head of Alexion U.S.

The stock is undervalued

Balance sheet

The company is well capitalized and cash reserves are estimated at ~$2 billion. The cash reserves are adequate for the next 12 months at $500 million operating cash use rate in the last 12 months. Long-term debt is $2.3 billion, but the company has enough revenue (estimated at $1.2 billion this year) to pay ~2% annual interest (which is estimated at $~120 million/year).

Income Statement

Revenue growth is ~40% annually.

Valuation

Using the enterprise discounted cash flow, or DCF, method, my estimate for peak risk-adjusted sales is $4.5 billion in 2032 at patent expiration. These calculations are based on the following inputs:

- Vutrisiran approval in 2025 (probability of 90%), peak market share of 30% and peak sales of $2.1 billion in 2032.

- Acute hepatic porphyria U.S. prevalence of 10,000 (source: Orphanet). Primary hyperoxaluria type 1 U.S. prevalence of 660 (Orphanet). Peak market share of 50% in 2032 ($2 billion in risk-adjusted 232 revenue)

- Royalties and collaborations peak revenue of $413 million in 20232.

- Input price of $370K/patient/year (74% of the average wholesale price of $500K, average for the industry per Pharmagellen guide).

- Weighted average cost of capital of 10% and 8% after 2028 when Vutrisiran sales reach maturation.

Link to the DCF Model .

I have not included ALN-KHK in treating type 2 diabetes (company-owned program), another large market, which would add to further upside.

Near-term catalysts

• Early 2024: Phase 3 Helios-B data for Vutrisiran in treating TTR-CM.
• Early 2024: Phase 1/2 data for ALN-APP in treating Alzheimer's disease (cerebral amyloid angiopathy).
• Mid-2024: Phase 2 data for Zilebesiran in treating hypertension.
• Late 2024: Phase 1 data for ALN-TTRsc04 in treating ATTR-amyloidosis.
• Late 2024: Phase 1 data for ALN-KHK in treating type 2 diabetes.

Rating Buy with a price target of $300 (76% upside).

Disclaimer

Risks in this investment include underwhelming data, unexpected side effects, unfavorable FDA decision, etc., which may cause the stock price to fall.

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