Alnylam Pharmaceuticals, Inc.

Transcription

1 March 06, 2015 Alnylam Pharmaceuticals, Inc. (ALNY-NASDAQ) Outperform Current Recommendation Prior Recommendation Neutral Date of Last Change 03/06/2015 Current Price (01/08/15) $ Target Price $ SUMMARY Alnylam s fourth-quarter 2014 loss of $0.28 per share was narrower than the year-ago loss of $0.51 and also the Zacks Consensus Estimate of a loss of $0.66. Revenues jumped 121.4% to $24 million. We are encouraged by Alnylam s progress with its pipeline, especially the ATTR program. The company plans to have 3 drugs on the market by The company s collaborations with major pharmaceutical companies are also encouraging. With multiple data read-outs lined up, 2015 is expected to be data rich for the company. Positive outcomes from these events will further benefit the stock. In view of these positives we return to our Outperform recommendation on the stock. SUMMARY DATA 52-Week High $ Week Low $48.87 One-Year Return (%) Beta 1.66 Average Daily Volume (sh) 529,777 Shares Outstanding (mil) 84 Market Capitalization ($mil) $9,371 Short Interest Ratio (days) 4.18 Institutional Ownership (%) 70 Insider Ownership (%) 5 Annual Cash Dividend $0.00 Dividend Yield (%) Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%) using TTM EPS using 2015 Estimate using 2016 Estimate Zacks Rank *: Short Term 1 3 months outlook 2 - Buy * Definition / Disclosure on last page Risk Level * Above Average Type of Stock Large-Growth Industry Med-Biomed/Gene Zacks Industry Rank * 93 out of 267 ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) A 9 A 9 A 10 A 47 A A 7A 11A 24 A 51 A E 13 E 13 E 14E 60 E E Note: Quarterly nos. may not add up to annual nos. due to rounding off Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) $0.15 A -$0.29 A -$0.48 A -$0.53 A -$1.45 A $0.39 A -$0.63 A -$0.58 A -$0.28 A -$1.88 A $0.63 E -$0.64 E -$0.71 E -$0.75 E -$2.73 E $2.73 E Note: Quarterly nos. may not add up to annual nos. due to rounding off and other adjustments. Projected EPS Growth - Next 5 Years % 2015 Zacks Investment Research, All Rights reserved S. Riverside Plaza, Chicago IL 60606

2 OVERVIEW Alnylam Pharmaceuticals Inc. is a biopharmaceutical company developing novel therapeutics based on a biological pathway known as RNA (ribo nucleic acid) interference (RNAi). Alnylam Pharmaceuticals intends to focus on the development and commercialization of RNAi therapeutics across three strategic therapeutic areas (STArs) genetic medicines, cardio-metabolic disease and hepatic infectious disease. By adopting this strategy, the company aims to have several RNAi therapeutic programs in advanced clinical development by Alnylam s core product strategy, Alnylam 5x15, introduced in Jan 2011 aims at developing RNAi therapeutic products for the treatment of genetically defined diseases addressing major unmet medical needs. The company plans to achieve a profile with 3 drugs on the market and 10 RNAi therapeutic clinical programs, including 4 in late stages of development, across 3 STArs by the end of The major programs under development are patisiran (TTR-mediated amyloidosis in familial amyloidotic polyneuropathy patients, phase III), revusiran (familial amyloidotic cardiomyopathy, phase III), ALN- PCSsc (hypercholesterolemia, phase I), ALN-VSP (advanced solid tumors with liver involvement, phase I), ALN-AT3 (hemophilia, phase I) and ALN-CC5 (complement-mediated diseases, phase I/II). Alnylam also generates revenues from research collaborations, grants, and licensing of the RNAi technology outside its core focus area. Alnylam has formed major alliances with leading companies, such as, Sanofi, Novartis, Biogen Idec, Roche, Takeda, Kyowa Hakko Kirin, Cubist, Ascletis, The Medicines Company and Monsanto Company. Alnylam is trying to improve the manufacturing processes for vaccines using RNAi technology. This project is named VaxiRNA. Alnylam formed a VaxiRNA collaboration with GlaxoSmithKline, in Oct 2011, to produce vaccines. In Feb 2014, Sanofi purchased an approximately 12% stake of Alnylam for an investment of $700 million. In Jan 2014, the companies announced that they will expand their strategic agreement for the development and commercialization of candidates for the treatment of rare genetic diseases. As per the new agreement, Alnylam will retain most of the product rights in North America and Western Europe. Alnylam, founded in 2002, is headquartered in Cambridge, MA. REASONS TO BUY Alnylam s RNAi technology Holds Promise: Alnylam makes use of a potentially revolutionary RNAi technology, natural cellular process for selectively turning off the activity of genes, to build a pipeline to treat a wide array of diseases. In Jan 2011, Alnylam launched its Alnylam 5X15 strategy aimed at developing RNAi therapeutic products for the treatment of genetically defined diseases addressing major unmet medical needs. Alnylam expects to have 10 RNAi therapeutic clinical programs, including 4 in late stages of development, across 3 STArs by the end of The major programs under development are ALN-PCSsc, patisiran, ALN-AT3, revusiran and ALN-TMP. Deep Pipeline: Alnylam has several candidates in its pipeline with most of the candidates being developed for orphan diseases. We are particularly encouraged by the company s ATTR program. Patisiran, one of the most advanced candidates at Alnylam has progressed successfully so far. The candidate is being developed for the treatment of ATTR in patients suffering from familial amyloidotic polyneuropathy (FAP). In Oct 2014, the company revealed encouraging initial results from an ongoing phase II open-label extension study on the candidate. Alnylam is continuing with the two-year phase II open-label extension study on patisiran to evaluate the long-term safety and tolerability of patisiran. Alnylam is currently evaluating patisiran in the phase III APOLLO study in ATTR patients suffering from FAP. The orphan drug status granted to patisiran by the FDA ensures seven years of marketing Equity Research ALNY Page 2

3 exclusivity once the candidate is approved. The company plans to file for the candidate in 2017 depending on the successful completion of the APOLLO study. Revusiran, also being developed for the treatment of ATTR, is currently in the phase III ENDEAVOUR study. In earlier studies, the candidate was successful in robust, consistent, and statistically significant reduction in serum TTR protein levels of up to 94% in healthy volunteers. Apart from these candidates, the company has several early and mid-stage candidates in its pipeline. Successful development and commercialization of these candidates may turn the company to be profitable. Encouraging Collaborations: We are encouraged by the deal entered by the company with Sanofi in Jan As per the deal, Sanofi became a major Alnylam shareholder with a stake of approximately 12% for an investment of $700 million. Per the deal, Alnylam will retain most of the product rights in North America and Western Europe. The acquisition of Merck s wholly owned subsidiary Sirna Therapeutics, Inc. in Mar 2014 for $175 million in cash and equity is also encouraging. These deals will not only help Alnylam to generate revenues from royalties but will also take its RNAi technology outside its core focus area. We are also impressed by Alnylam s strategy of entering into collaborations or deals with other players like Novartis, Biogen Idec, Roche, Ascletis, Monsanto and Isis Pharmaceuticals to further develop and utilize its core technology. In Feb 2013, the company entered into an exclusive global alliance with The Medicines Company for the development and commercialization of Alnylam s ALN-PCS RNAi therapeutic program. To promote a broader use of the company s technology Alnylam is stepping beyond its primary focus area. RISKS RECENT NEWS No Approved Products: Alnylam currently does not have any approved product in its portfolio. Although the company has a robust pipeline, most of its candidates are in the early or mid-stages of development. The company has only a couple of late-stage candidates in its pipeline. Any hiccup in the development process of these candidates may weigh heavily on the stock. Pipeline Setbacks: In Sep 2012, Alnylam suffered a pipeline setback for its candidate ALN-RSV01. The candidate failed to achieve the primary endpoint in a phase IIb trial for the RSV indication. With several data read-outs to come in the coming quarters, a similar pipeline setback would weigh heavily on the stock. Alnylam Reports Narrower Loss in Q4, Focuses on Pipeline Alnylam Pharmaceuticals, Inc. s fourth-quarter 2014 loss of $0.28 per share was much narrower than the Zacks Consensus Estimate of a loss of $0.66 and the year-ago loss of $0.51 per share. Fourth-quarter revenues jumped 121.4% year over year to $24 million, beating the Zacks Consensus Estimate of $17 million. Alnylam s full-year loss widened to $1.88 per share from $1.45 per share in the prior year. However, it was narrower than the Zacks Consensus Estimate of a loss of $ revenues increased 7.2% to $50.6 million, beating the Zacks Consensus Estimate of $14 million. The Quarter in Detail Alnylam s revenues in the fourth quarter included $8.8 million and $6.9 million from its collaboration with Monsanto Co. and The Medicines Co., in addition to $2.8 million from other sources. Equity Research ALNY Page 3

4 Research and development (R&D) expenses increased 73% to $55.5 million. The increase was attributable to Alnylam s efforts to develop its pipeline R&D expenses are expected to increase significantly. General and administrative (G&A) expenses increased 70.2% year over year to $14.2 million, primarily due to an increase in non-cash stock-based compensation expense G&A expenses are expected to increase slightly. Pipeline Update During the fourth quarter, Alnylam launched the Alnylam 2020 program wherein it intends to achieve a profile with 3 drugs on the market and 10 RNAi therapeutic clinical programs, including 4 in late stages of development, across 3 strategic therapeutic areas (STArs) genetic medicines, cardio-metabolic disease and hepatic infectious disease by the end of Meanwhile, Alnylam has made considerable progress with its RNAi therapeutics pipeline. The company continues to enroll patients in a phase III study (APOLLO) on patisiran in transthyretin-mediated amyloidosis patients suffering from familial amyloidotic polyneuropathy. Positive results would allow the company to file for approval in Alnylam initiated a phase III study (ENDEAVOUR) on revusiran (familial amyloidotic cardiomyopathy) during the fourth quarter. Apart from these candidates, Alnylam also made substantial progress with early-stage pipeline candidates like ALN-AT3 (hemophilia and rare bleeding disorders), ALN-AS1 (hepatic porphyrias), ALN- PCSsc (hypercholesterolemia), ALN-CC5 (complement-mediated diseases) and ALN-HBV (hepatitis B virus infection) Guidance Alnylam expects to end 2015 with cash, cash equivalents and total marketable securities in excess of $1.2 billion. Our Take We are encouraged by Alnylam s progress with its RNAi therapeutics. With multiple data read-outs on pipeline candidates like revusiran (additional phase II study data expected in March) and patisiran (12- month phase II open-label extension study data expected in April), we expect investor focus to remain on pipeline updates from the company. Alnylam to Raise $450 Million Through Issuance of Shares- Jan 20, 2015 Alnylam Pharmaceuticals, Inc. announced the pricing of its underwritten public offering of common stock worth $450 million. The company is looking to issue approximately 4.74 million shares of its common stock at a price of $95 per share. The offering is expected to close on or about Jan 26, The company intends to use the net proceeds from this offering for general corporate purposes which include research and development expenses, clinical trial costs, potential acquisition of new businesses and technologies. In addition to this, the company plans to achieve its Alnylam 2020 profile with 3 drugs on the market and 10 RNAi therapeutic clinical programs, including 4 in late stages of development, across three Equity Research ALNY Page 4

5 strategic therapeutic areas (STArs) disease by the end of genetic medicines, cardio-metabolic disease and hepatic infectious We note that earlier in the month, Alnylam increased its cash guidance for 2014 to approximately $880 million (old guidance: more than $860 million). Moreover, the company expects to exceed its Alnylam 5x15 pipeline guidance (introduced in Jan 2011) 8 programs are in clinical development, including 2 in phase III, with 5 having achieved human proof-of-concept results. Alnylam-Isis Pharmaceuticals Ink New Agreement- Jan 9, 2015 Alnylam announced that it has inked a new agreement to extend its partnership with Isis Pharmaceuticals (originally inked in 2004). As per the new deal the companies will have exclusive RNA therapeutic license rights for two programs each under a cross-license of intellectual property (IP) on four diseases. The deal also includes a non-exclusive technology IP cross-license, as per which each company will have rights to certain of each other's technology advances for RNA therapeutics through April Alnylam Provides Pipeline Update, Growth Strategy- Dec 12, 2014 Alnylam Pharmaceuticals announced its pipeline growth strategy for the development and commercialization of RNAi therapeutics across three strategic therapeutic areas (STArs) genetic medicines, cardio-metabolic disease and hepatic infectious disease. Alnylam's genetic medicine STAr consists of a broad pipeline of RNAi therapeutics including patisiran (phase III - APOLLO) and revusiran (phase III - ENDEAVOUR), being developed for the treatment of transthyretin-mediated amyloidosis. Additionally, the company reported positive initial data from a phase I study on ALN-AT3 last week. The company is advancing ALN-AT3 for the treatment of hemophilia and rare bleeding disorders. Further, the company plans to initiate a phase I/II study on ALN-CC5 for paroxysmal nocturnal hemoglobinuria. Meanwhile, Alnylam intends to commercialize its genetic medicine products in the U.S. and EU, while Genzyme, a Sanofi company, will develop and commercialize these products in the rest of the world. In its cardio-metabolic disease STAr, Alnylam recently initiated a phase I study on ALN-PCSsc (RNAi therapeutic targeting PCSK9 for the treatment of hypercholesterolemia) with initial data expected in mid Alnylam has an agreement with The Medicines Company for ALN-PCSsc. Alnylam is also advancing other candidates including ALN-AC3 (hypertriglyceridemia), ALN-ANG (hypertriglyceridemia and mixed hyperlipidemia) and ALN-AGT (hypertensive disorders of pregnancy including preeclampsia) among others. Finally, Alnylam s hepatic infectious disease STAr includes ALN-HBV for the treatment of hepatitis B viral infection. The company intends to file an investigational new drug (IND) application or an IND equivalent in late Alnylam is looking for partnerships for programs in its cardio-metabolic disease and hepatic infectious disease STArs. At the same time it intends to retain significant product commercialization rights in the U.S. and EU. Equity Research ALNY Page 5

6 VALUATION Alnylam s fourth-quarter 2014 loss of $0.28 per share was narrower than the year-ago loss of $0.51 and also the Zacks Consensus Estimate of a loss of $0.66. Revenues jumped 121.4% to $24 million. We are encouraged by Alnylam s progress with its pipeline, especially the ATTR program. The company plans to have 3 drugs on the market by The company s collaborations with major pharmaceutical companies are also encouraging. With multiple data read-outs lined up, 2015 is expected to be data rich for the company. Positive outcomes from these events will further benefit the stock. In view of these positives we return to our Outperform recommendation on the stock. Alnylam s price target of $134 corresponds to a P/B multiple of Key Indicators Alnylam Pharmaceuticals, Inc. (ALNY) F1 F2 Est. 5-Yr EPS Gr% P/CF 5-Yr High 5-Yr Low Industry Average S&P Momenta Pharmaceuticals Inc. (MNTA) Biota Pharmaceuticals, Inc. (BOTA) Vanda Pharmaceuticals, Inc. (VNDA) OncoMed Pharmaceuticals, Inc. (OMED) TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow P/B Last Qtr. P/B 5-Yr High P/B 5-Yr Low ROE D/E Last Qtr. Div Yield Last Qtr. EV/EBITDA Alnylam Pharmaceuticals, Inc. (ALNY) Industry Average S&P Equity Research ALNY Page 6

7 Earnings Surprise and Estimate Revision History Equity Research ALNY Page 7

8 DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of ALNY. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1128 companies covered: Outperform %, Neutral %, Underperform 8.3%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 th group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively. Analyst Last Updated By Copy Editor Content Editor QCA Lead Analyst Reason for Update Neelakash Sarkar Neelakash Sarkar Pushpanjali Banerjee Lopamudra Biswas Arpita Dutt Lopamudra Biswas 3Q14 Equity Research ALNY Page 8