Look at the comments on past Alnylam (NASDAQ:ALNY) articles, and you'll see a vocal cadre of readers who have an otherwise admirable commitment to the notion that Alnylam is going to stumble at some point and not get up … and yet, the company keeps on executing past those worries. While there were some "doom and gloom" comments about how hard COVID-19 would hit the company's lead drug Onpattro, and there certainly has been an impact, the company has been able to manage through that challenge and modestly beat expectations while hitting an all-time high a few weeks ago.
Alnylam will have a lot going over the next 12 or so months, with two expected approvals, and significant clinical data on multiple drugs/indications. I still calculate a near-term fair value of around $150/share, but data updates on vutrisiran, fitusiran, lumasiran, and cemdisiran could all build further value. With that, I still believe this is a good longer-term holding in the biotech space.
COVID-19 Has An Impact, But The Worst Should Be Over
The ongoing pandemic did hit Alnylam's Onpattro business in the second quarter, but not quite to the extent previously feared, as revenue beat expectations by more than 5%. Sales rose 74% year over year, but did fall slightly on a sequential basis as U.S. sales fell 13%, with 16% growth outside the U.S. partly offsetting that. U.S. sales were hit by a combination of weaker patient adherence (4% of the 13%), an inventory reduction (8%), and a small change in gross/net, while OUS sales were driven by growth in markets like Japan.
A shift to in-home infusions has been a key to preserving Onpattro performance. From less than 10% earlier this year, in-home treatment in the U.S. among Onpattro patients has grown to more than 25% and is over 40% in Europe. While COVID-19 remains a significant issue, many healthcare facilities are relaxing some of their restrictions, and I expect growth to start reaccelerating in the second half.
Givlaari has also maintained a solid launch trajectory despite the COVID-19 challenges, with sales growing over 100% qoq and beating expectations by 33%.
Alnylam exited the quarter with $1.95B in cash, which should be more than enough to get to positive free cash flow while still investing in a very deep pipeline of early-stage assets.
Shepherding A Deep Pipeline
Looking at the pipeline update, there weren't really any major surprises. Maybe the biggest incremental update was that Alnylam's partner Regeneron (REGN) opted in on ALN-AAP, a CNS RNAi candidate for hereditary cerebral amyloid angiopathy and early-onset familial Alzheimer's. Management is currently planning to file an IND in mid-2021.
As far as the pipeline goes, though, Alnylam will see significant updates on multiple projects over the next 12 months, and these updates could shift meaningful per-share value.
Management expects the APOLLO-B label extension study of Onpattro in cardiomyopathy to complete enrollment in 2021, with top-line data likely in 2022. Enrollment is complete in the HELIOS-A study of vutrisiran (a next-gen successor to Onpattro) in polyneuropathy, and data should be available in early 2021, while the HELIOS-B (for patients with cardiomyopathy) continues.
Lumasiran should be approved in the U.S. and Europe before year-end (a December 3 PDUFA date), but ILLUMINATE-B data in pediatric patients are due soon, with ILLUMINATE-C data in patients with more impaired renal function are expected in 2021; both studies offer label/market-expansion opportunities.
Sanofi (SNY) should produce top-line data in early 2021 from its ATLAS clinical studies of fitusiran in hemophilia (Type A/B, with and without inhibitors). Alnylam is entitled to a 15% to 30% tiered royalty, and data thus far have been encouraging, but a clean safety profile will be essential (particularly with thrombotic events). Sanofi offered Phase II OLE data back in late June, and in a multiyear study with a median drug exposure of 2.6 years, the drug showed a 75% reduction in anti-thrombin from baseline and an average annual bleed rate of 0.84 (1.01 in non-inhibitor patients, 0.44 in inhibitor patients).
That bleed rate is very competitive with Roche's (OTCQX:RHHBY) Hemlibra, which has a reported on-label ABR of 2.6 and is also dosed by monthly injection. Gene therapy will certainly be a competitive challenge, but BioMarin's (BMRN) Roctavian data showed some interesting trends, including an increase in ABR from Year 2 to Year 4 of 0.2 to 1.3 (after a sharp drop from the initial 16.3), and the impact on Factor VIII seems to weaken with time, raising questions as to whether the therapy will have to be "topped up" over time.
Alnylam also confirmed that Phase II data on cemdisiran in IgA nephropathy should be available in 2021, and the company is also pursuing a combo study with Regeneron's pozelimab in paroxysmal nocturnal hemoglobinuria (or PNH).
Among early-stage candidates, management intends to report additional Phase I data on ALN-AGT (hypertension) in the second half of the year, and recently filed a CTA for a Phase I study in the U.K. of its NASH candidate ALN-HSD. Last and not least, a candidate was selected in the company's COVID-19 partnership with Vir (VIR), with an IND filing before year-end. While this drug may well be too late in arriving to have a meaningful impact on the COVID-19 pandemic, it could still offer some invaluable safety data and proof of concept for RNAi lung delivery.
The Outlook
In addition to the normal pipeline updates, Alnylam announced that its long-time President Barry Greene is leaving the company. CEO John Maraganore has spoken glowingly of Greene on multiple occasions, and it will be a loss for the company, but one that I think the company can manage.
I haven't made any major changes to my model with these updates, though I'll admit to being tempted to upgrade some of my assumptions on fitusiran after the June OLE data discussion. The company's ATTR program (Onpattro and vutrisiran) remains the primary source of value at over $70, but it's now less than half of the total value I see here, with inclisiran, fitusiran, and Givlaari all contributing more than $15/share in value each, and lumasiran close behind. ALN-AGT is a potentially high-value drug on the basis of the large addressable market, but I want to see more data.
The Bottom Line
Alnylam shares shot up above my near-term fair value a few weeks ago, but have since retreated back below. While I don't think the shares are remarkably undervalued, I do see a lot of opportunities for the company to build value with positive data updates, and I continue to regard this as a long-term holding.
