ALNY - Alnylam Pharmaceuticals: Strong Growth And RNAi Breakthrough

2023-06-06 05:52:09 ET

Summary

• Alnylam Pharmaceuticals reports a 48% increase in net product revenue in Q1 2023, driven by the launch of Amvuttra and increased patients on Givlaari and Oxlumo therapies.
• The company's collaboration with Regeneron Pharmaceuticals on the ALN-APP program shows promising interim results for an RNAi-based treatment for Alzheimer's disease and cerebral amyloid angiopathy.
• Despite increased operating losses, Alnylam presents a compelling long-term investment opportunity for risk-tolerant investors due to strong revenue growth, a healthy cash position, and a promising pipeline.

Introduction

Alnylam Pharmaceuticals ( ALNY ), established in 2002, is a global biopharmaceutical company dedicated to creating innovative therapeutics via RNA interference (RNAi). With a commitment to sustainable innovation and patient impact, Alnylam focuses on discovering, developing, and commercializing RNAi therapeutics through strong intellectual property, strategic alliances, licensing revenues, and independent or partnered global commercialization. Their Alnylam P5x25 strategy, initiated in 2021, aims to transition the company into a top-tier biotech entity by 2025. As of 2023, they have five marketed products, including Onpattro, Amvuttra, Givlaari, and Oxlumo, and several late-stage investigational programs.

Q1 2023 Financials

For the first quarter ending March 31, 2023, Alnylam reported a net product revenue of $276.3 million, marking a 48% increase from 2022, primarily due to the launch of Amvuttra and increased patients on Givlaari and Oxlumo therapies. Collaboration revenues also increased by 41%, primarily due to increased activity with Regeneron. However, operating losses widened to $149.8 million, up from $146.7 million in 2022. The cost of goods sold and R&D expenses also rose, primarily due to increased royalties and headcount. The company's cash, cash equivalents, and marketable securities stood at $2.07 billion, down from $2.19 billion at the end of 2022.

As of the latest reporting , Alnylam has a market capitalization of $24.12 billion, and holds total debt of $1.32 billion. The company also reported cash holdings of $2.07 billion, leading to an enterprise value of $23.37 billion.

Q1 2023 Earnings Call Review

In the recent earnings call , Alnylam's management expressed their satisfaction with the company's strong start to 2023, underlined by the continued growth of their product Amvuttra. The first quarter saw a 48% increase in total product sales compared to the same period in 2022.

Management was also enthusiastic about the progress of their pipeline, notably the positive interim results from the Phase 1 study of ALN-APP, an investigational RNAi therapeutic in development for the treatment of Alzheimer's disease and cerebral amyloid angiopathy.

There are several upcoming milestones that highlight the depth of the company's pipeline, including the presentation of 18-month results from the APOLLO-B Phase 3 study of patisiran and top-line results from the KARDIA-1 Phase 2 study of zilebesiran for the treatment of hypertension, which are expected in mid 2023.

Management underscored three key drivers for Alnylam's growth over the next few years. The first is the expansion of the TTR franchise (that is, their treatments for transthyretin-mediated amyloidosis), the second is their expansion beyond rare diseases to more common disease areas, and the third is the sustainable innovation engine which can drive further pipeline expansion beyond 2025.

The company remains committed to their Alnylam P5x25 goals, intending to become a top tier biotech that delivers exceptional financial results while developing and commercializing transformative medicines for rare diseases. The launch of Amvuttra was particularly highlighted for its significant impact on the expansion of the TTR franchise, reflected in the robust 75% year-over-year quarterly growth in the US.

Promising Results for ALN-APP: RNAi Treatment for Alzheimer's

Alnylam and Regeneron ( REGN ) announced encouraging interim results from their ongoing Phase 1 study of ALN-APP, a drug candidate using RNAi (RNA interference) technology. This investigational therapeutic is designed to target the amyloid precursor protein [APP], which plays a key role in Alzheimer's disease and cerebral amyloid angiopathy [CAA].

In this study, twenty patients with early-onset Alzheimer's disease received single doses of ALN-APP via intrathecal injection. The administration of the drug has been well tolerated by patients, with all recorded adverse events being mild or moderate in severity. Early data suggests no concerning changes in cerebrospinal fluid indicators, such as white blood cells and protein, when compared to placebo.

Crucially, the treatment led to a dose-dependent, rapid, and sustained reduction in levels of soluble APP? (sAPP?) and APP? (sAPP?), both of which are biomarkers indicating engagement of the target, APP. Reductions of these biomarkers reached up to 84% and 90% respectively, with median reductions of over 70% sustained for at least three months at the highest tested dose.

This is the first demonstration of gene silencing by RNAi therapeutics in the human brain using Alnylam's proprietary C16 platform. The findings represent a significant milestone not only for Alnylam and Regeneron, but for the broader field of RNAi-based therapeutics, as they provide evidence of efficacy in the central nervous system.

My Analysis & Recommendation

In conclusion, Alnylam has shown promising progress in the first quarter of 2023, manifesting robust growth in product revenues and progress in the pipeline, notably the ALN-APP program. Despite expanding operating losses due to rising R&D expenses and royalties, the solid revenue growth and a substantial cash position provide a strong financial underpinning.

Their collaboration with Regeneron on the ALN-APP program is an exciting development, signaling a groundbreaking entry of RNAi therapeutics into central nervous system treatment. This could potentially be a game-changer, given the considerable unmet medical needs in conditions such as Alzheimer's disease and cerebral amyloid angiopathy. The promising interim results from the Phase 1 trial of ALN-APP are a testament to the therapeutic potential of this approach.

While Alnylam's progress towards becoming a top-tier biotech entity by 2025 via the Alnylam P5x25 strategy is laudable, investors should not overlook the associated risks. The company's future hinges on its ability to continue bringing novel therapeutics to market and navigate the complex regulatory landscape that biotech companies operate within. The substantial increase in R&D expenses also underscores the financial risks involved in the sector, given the high cost of failure and lengthy development timelines.

From an investment perspective, Alnylam offers an attractive, long-term investment proposition for investors willing to accept higher risk, as it boasts robust revenue growth, a strong cash reserve, and a promising drug development pipeline. As a front-runner in the burgeoning field of RNAi-based therapeutics, with a successful track record of bringing drug candidates to market, Alnylam merits serious consideration for inclusion in any portfolio centered on biotechnology (recommended 'Buy'). Nevertheless, the rising operating losses emphasize the speculative nature of this investment, necessitating that potential investors prudently weigh the prospective gains against the innate risks associated with the biotech sector. Prospective investors would be well advised to keep a keen eye on forthcoming key events, specifically the Phase 3 clinical trial results of patisiran and Phase 2 clinical trial results of zilebesiran. These trials serve as significant indicators for assessing Alnylam's future trajectory.

Risks to Thesis

When the facts change, I change my mind

Here are some potential risks that might impact my 'Buy' recommendation for Alnylam:

1. Drug Development Risks: The biotechnology industry involves substantial risk as drug development is a highly complex and lengthy process. There is no guarantee that drugs under development, including the promising ALN-APP, will receive regulatory approval. Failed clinical trials or regulatory rejections could lead to significant financial losses.

2. Market Adoption: Even if a drug is approved, there's no guarantee it will gain substantial market adoption or generate expected sales. Factors like pricing, insurance coverage, competition from other drugs, and physician/patient acceptance play a critical role.

3. Patent Protection and Intellectual Property: Biotech firms rely heavily on patents to protect their innovative drugs. If patent protection is inadequate or if patents are challenged, invalidated, or circumvented, the firm could face increased competition, which could impact profitability.

4. Financial Sustainability: While Alnylam has a significant cash position as of Q1 2023, the operating losses have increased, driven by higher R&D expenses and royalties. If these losses continue to widen, and if revenues don't grow as expected, the company's financial sustainability could be at risk.

5. Regulatory and Legal Risks: Changes in health care laws, regulatory standards, or potential legal issues could affect Alnylam's ability to operate profitably.

6. Macro-Economic Risks: Broader market downturns, changes in interest rates, or economic conditions can influence the stock market and individual stock prices, including Alnylam's.

7. Partnership Risks: The company's collaborations with other entities, such as Regeneron, could pose risks if disagreements arise or if a partner fails to fulfill their obligations.

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