Summary
Alnylam has more than enough cash to commercialize patisiran and advance its pipeline of drugs through pivotal studies, including an interim look at givosiran’s Phase III study in mid-2018.
There is some headline risk for Alnylam in 2018, including a rival approach to amyloidosis and likely negative clinical data on a pipeline drug.
Alnylam shares appear undervalued today, with several value-creating clinical events on tap for 2018 and 2019.
By any reasonable set of standards, 2017 was a successful year for Alnylam(ALNY), as this biotech reported excellent data from the pivotal study of its lead drug patisiran and advanced other compounds further into development as well. This year will bring a new set of challenges, including the commercialization of patisiran and its transition to a product revenue-generating biotech company. Although I believe patisiran’s strong data will lead to it claiming the lion’s share of its market, commercialization offers a different set of challenges. What’s more, while Alnylam should be looking at multiple commercializations in the next few years, recharging the pipeline may start to become a bigger talking point later this year.
I continue to believe that Alnylam is risky but attractively-priced. Patisiran makes up over 60% of my fair value estimate on the shares, but there are opportunities for additional clinical data on/from givosiran and lumasiran to add more value over the next 12 months.
Only One Real Surprise In The Q4 Report
For pre-product revenue biotechs, earnings reports can often be ho-hum affairs, with not much to follow other than the company’s cash position and a pro forma update on the pipeline (most of which has typically already been disclosed and discussed). Such was the case for Alnylam, but for one exception that I’ll get to in a moment.
The company ended with $1.7 billion in cash and expects to end the year with $1 billion. Not only will Alnylam continue to spend considerable sums on R&D but the company is also spending to build its commercialization infrastructure for patisiran (and later, hopefully, other drugs like givosiran). Alnylam looks to be fine from a cash perspective; the company can likely make it to positive FCF from here, but I wouldn’t be shocked if the company sought to raise cash again on sufficiently positive clinical or regulatory news (in biotech, it’s almost always better to raise money on good news rather than wait until you really need it).
