Alnylam soars on RNAi success as Phase 3 patisiran study hits all goals; market overreacts as pipeline unproven and competition lurks.

Hans / Pixabay

The News:

Alnylam Pharmaceuticals Inc.’s (Cambridge MA) RNAi-based drug that targets a rare genetic disease cleared a key study, in a breakthrough for the new class of medicines that works by blocking disease-causing proteins.

Alnylam’s patisiran belongs to a class of drugs that uses the Nobel-prize winning RNA interference (RNAi) mechanism to manipulate ribonucleic acid, which interferes with or “silences” targeted genes, and stops the formation of proteins that can cause diseases. Patisiran was being evaluated in a late-stage study against a placebo for the treatment of patients with hereditary ATTR (hATTR) amyloidosis with polyneuropathy, according to Reuters.

About 50,000 people worldwide are affected by hATTR amyloidosis, Alnylam said. Polyneuropathy, a symptom of the disease, is the simultaneous malfunction of many peripheral nerves in the body resulting in tingling, numbness and kidney dysfunction.

Leerink analyst Paul Matteis said the results were a “big win” for Alnylam and RNAi as they validated the platform, noting that the safety data looked clean and sufficient to conquer any concerns. The drugmaker said it would file a marketing application for patisiran in late 2017 and expects to launch the drug by mid-2018.

Alnylam, which has been weighed down in the past by drug-safety concerns, said it plans to initiate a program targeting cardiomyopathy–another symptom of the disease–alongside polyneuropathy in a late-stage study next year. Analysts also noted additional cardiac data could help increase the potential eligible population for the drug.

In early September, Alnylam stopped giving doses of its fitusiran drug for a rare bleeding disorder to patients enrolled in clinical studies after the death of a patient. Last year, Alnylam stopped developing an RNAi drug to treat hereditary amyloidosis with cardiomyopathy, due to patient fatalities. Last week, however, shares closed up 49% at $113.80.

Steve’s Take:

Accentuate the positive.

That’s what drug developers of all shapes and sizes know is key to success, and for some, like Alnylam, survival. After all, behind it’s good news with patisiran, there’s serious potential competition from Ionis Pharmaceuticals Inc. (Carlsbad CA), which is already using its inotersen to treat patients with FAP. (Familial amyloid polyneuropathy (FAP) is one of three distinct, different types of ATTR amyloidosis.) Safety will also play a key role in whether patisiran will be approved by the FDA.

Further, Alnylam only provided the top-line results of the study. It will disclose the actual magnitude of the drug’s benefit when it presents the full data at a medical meeting in November.

Finally, Alnylam may need to raise additional capital should it receive FDA approval in order to commercialize patisiran effectively. That will dilute shareholders. And analysts just aren’t as keen on Alnylam’s prospects as investors, who went on a buying binge last week following news of the patisiran success in Phase 3.

Don’t get me wrong. It was very good news. But this company, with no drug on the market yet and just one probably nearing FDA approval, has a market cap just north of $10 billion. That’s right, technically, it’s a large-cap.

But let’s delve into what happened last week and where this name may be headed in the near term.

Max Nisen at Bloomberg says, “drug-trial disclosures are too often about trying to put a positive spin on a failure. It’s a rarer and happier occasion when a company can barely contain its excitement when describing a result.”

Still, this is an extra-big deal for Alnylam; it’s the first final-stage success for a drug-development approach, called RNAi, on which the firm has worked for 15 years. Patisiran will likely get FDA approval next year.

But Nisen says rightly that “a 42% share-price jump [last] Wednesday for a company that was already worth nearly $7 billion suggests investors have caught a case of platform fever — they’re betting on unbridled success for both this medicine and much of the rest of Alnylam’s pipeline. One excellent result doesn’t guarantee future success, or that the safety issues that have plagued Alnylam won’t rear their head again.”

Ponying up for a company with a drug-development platform can make sense, Nisen notes:

“While one-drug companies have an upper limit on their success, the sky’s the limit for those with mastery of a disease area or drugmaking approach.”

Alnylam hopes to follow that script, namely, to have numerous meds on the market and a big RNAi pipeline in their wake.

But it’s still possible other drugs in Alnylam’s pipeline won’t equal patisiran’s safety and efficacy. And it may be some time before Alnylam can repeat this success and justify the “platform premium” investors must now pay for its shares.

And again, there’s also the fact that Alnylam will need to spend a lot of money to market patisiran while continuing to fund its extensive and expensive R&D efforts.

Nomura Instinet analyst Christopher Marai warned in a research note last week that patisiran’s sales growth may be slow and that Alnylam’s cash burn may increase as it launches the medicine. Alnylam is still burning a lot of cash, and it will be some time before its new drug helps turn that around.

What do the analysts think?

As of Sep 22, 2017, the consensus forecast among 20 analysts covering Alnylam Pharmaceuticals advises that the company will Outperform the market. This has been the consensus forecast since the sentiment of investment analysts improved on Jun 10, 2009. The previous consensus forecast advised investors to Hold their position.

1-year price change: +57%

Share price forecast

The 17 analysts offering 12-month price targets for Alnylam have a median target of $117.00, with a high estimate of $146.00 and a low estimate of $56.00. The median estimate represents a 0% increase from the last price of $117.04.

Competitor-in-the-wings, Ionis Pharmaceuticals, is already using its inotersen to treat patients with FAP and reported its positive Phase 3 data in patients with FAP several months ago.

Steve's Take: With @Alnylam there is too much risk and not nearly enough incentive to buy Click To Tweet

Depending upon what track Ionis takes, inotersen could end up being approved by the FDA before patisiran. That means that inotersen might have a few months head start in the marketplace. Important to be first, as always in the pharma game.

Considering it has a beta just south of 3.0 (i.e., lots of volatility) and with analysts saying the median 12-month price target for Alnylam is slightly lower than its current price, that’s just too much risk and not nearly enough incentive to buy this name.

Steve Walker has no position in any stocks mentioned. MedContent Inc. has no position in any stocks mentioned. MondayMorning.com has a disclosure policy.