Clinical Data Reaffirm That Lumasiran Will Almost Certainly Be Alnylam's Third Commercial Product

Summary

• Full results from the pivotal ILLUMINATE-A study support the efficacy of the drug in treating PH1, with meaningful improvements in urinary oxalate levels in the lumasiran group.
• There were hints of improved long-term outcomes, but the ILLUMINATE-A study was too short to expect significant clinical outcomes.
• Lumasiran will likely reach the market first, but Dicerna's nedosiran could be a very competitive product.
• Alnylam shares look undervalued below $150.

Alnylam (NASDAQ:ALNY) is well on its way to having its third commercial product before the end of 2020. A prior release of positive top-line data from the company's pivotal ILLUMINATE-A study of lumasiran already indicated approvable efficacy, but the full data presented on Sunday June 7 added some valuable context to what should be a worthwhile commercial opportunity for the company.

As I indicated in my last article on Alnylam, I still regard this stock as a long-term holding in my portfolio, but I wasn't as excited about the near-term price performance potential in early May. With the shares down about 10% since then, the opportunity is more interesting now, though I have some modest "strategic" concerns that the strong rally in biotech relative to the S&P could leave the sector more vulnerable to near-term profit-taking as investors regain confidence in a stronger/quicker post-Covid-19 economic recovery.

ILLUMINATE-A Casts Lumarsiran In A Favorable Light

Investors already knew that the ILLUMINATE-A study met the key endpoints that will serve as gating factors with the FDA (the PDUFA date is December 3, 2020). What Alnylam's Sunday update provided was more incremental data on other endpoints and safety.

ILLUMINATE-A was a small study (n=39), with two-to-one randomization between the drug and placebo, though the size of the study is not unusual relative to other rare/ultra-rare disease studies. Safety was not problematic; while injection site reactions were a common issue (about one-third of lumasiran patients), there were no serious or severe adverse events and the one drug discontinuation seems unrelated to the drug (fatigue and attention issues). With the exception of that one patient, all eligible patients rolled over into the open-label extension study.

Turning to efficacy, lumasiran showed a 65% mean reduction in 24-hour urinary oxalate versus baseline and a 53.5% reduction relative to placebo, with a mean-max reduction of 76%. The drug also showed a 62.5% reduction in the 24-hour urinary oxalate to creatinine ratio (about 52% versus placebo). In the lumasiran group, 84% of patients achieved normal or near-normal urinary oxalate levels, with 52% reaching normal levels, versus none in the placebo group.

One challenge with the ILLUMINATE-A study is that it wasn't really designed to evaluate long-term outcomes. While there are sound physiological reasons to assume that endpoints like urinary oxalate levels will correlate to improved long-term outcomes, those data are still not available. Lumasiran did not show meaningful separation from placebo with the eGFR endpoint (a measure of kidney function), but six months is likely too short of a time to see meaningful change. There was some improvement in nephrocalcinosis at six months (3 of 22 patients), with no improvements in the placebo group and one worsening.

Again, meaningful improvement in eGFR and/or nephrocalcinosis would have been an unexpected (and very positive) development, and the lack of such improvements should not be an impediment to approval or commercialization. If long-term (multiyear) follow-up results continue to show little-to-no improvement, that will be a different story.

A Value-Adding Drug, But Not A Home Run

I don't expect lumasiran to be a thesis-changing drug for Alnylam, and that has been my assumption for some time now. The targeted indication, primary hyperoxaluria type 1 (or PH1) is not particularly common with an estimated 3,000 to 5,000 patients in the U.S. and EU, at least half of whom are assumed to be currently undiagnosed. As will be the case with Alnylam's other approved drugs, patient identification will take time and this will be a commercial opportunity that builds over time (rather than exploding right off the bat).

It's also well worth noting again that Alnylam will likely not have this opportunity all to itself. Dicerna (DRNA) has developed a drug, nedosiran (or DCR-PHXC) that address a target further "upstream" from lumasiran's target (glycolate oxidase) and that should be able to address all three types of primary hyperoxaluria, including PH1.

Less is known about nedosiran in terms of clinical data, but prior results suggested similar efficacy in terms of reduced oxalate production, with more recent data points suggesting perhaps even better results in terms of the percentage of patients reaching normal/near-normal oxalate levels. Again, though, it is premature to make those comparisons given the relative paucity of data. While nedosiran has demonstrated no injection site reactions (a potentially significant positive), monthly administration could mitigate that advantage, as lumasiran is administered in three monthly loading doses followed by quarterly injections.

I've never modeled Alnylam's lumasiran with the assumption of 100% market share, or even 50% share. I have modeled Alnylam's long-term opportunity on the assumption of 35% share of addressable patients, and that assumption could certainly change as more data on nedosiran become available. While management has estimated that the PH1 market could be worth more than $500 million, I believe peak revenue could exceed $600 million and possibly even approach $800 million in a best-case scenario; the extent to which lumasiran has meaningful commercial opportunities outside the U.S./EU and the extent to which the condition is actually meaningfully under-diagnosed are key variables. The difference between my base-case and best-case scenarios works out to about $4/share, so again, this isn't really a thesis-changing opportunity, but still a very worthwhile one, as the incremental cost of commercialization should be pretty modest.

The Outlook

Given the prior release of top-line data, this fuller release doesn't really impact my model to a meaningful extent. I still believe fair value is in the mid-$150's, with the company's amyloidosis program (Onpattro and vutrisiran) making up close to half of the value. Phase III data on fitusiran from Sanofi (SNY) in early 2021 will be a significant value-driving event, and Alnylam has numerous other early-stage programs that could add value on positive data. Specific to lumasiran, I see this drug contributing roughly $14/share in value on a peak revenue estimate of a little more than $600 million.

The Bottom Line

FDA approval timelines may well be impacted by the ongoing Covid-19 outbreak, but with a December 3 PDUFA date, I do expect the FDA to approve lumasiran in 2020. Whether or not the FDA also approves Novartis's (NVS) inclisiran in 2020 (Alnylam discovered the drug and is entitled to royalties) is less certain to me, but the point stands that Alnylam has shown it can shepherd products from the lab to the market. With a deep pipeline and expanding delivery options due to improved chemistry, I believe Alnylam still has a bright future.

Analyst’s Disclosure: I am/we are long ALNY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.