Loss Narrows at Alnylam

Zacks

Alnylam Pharmaceuticals Inc.’s (NasdaqGS:ALNY - News) second quarter 2011 loss of 33 cents per share was narrower than the Zacks Consensus Estimate of a loss of 37 cents per share and the year-ago loss of 35 cents per share. Lower operating expenses led to the narrower loss despite lukewarm revenues in the quarter.

Revenues for the reported quarter fell 22.6% from the prior year to $20.6 million. Revenues were however, slightly above the Zacks Consensus Estimate of $20 million.

Quarterly Details

Revenues in the quarter were inclusive of $14 million from the company’s alliance with Roche (Other OTC:RHHBY.PK - News), $5.5 million from Alnylam‘s partnership with Takeda Pharmaceuticals, in addition to $1.1 million of expense reimbursement, amortization revenues and license fees from Cubist Pharmaceuticals (NasdaqGS:CBST - News), Novartis (NYSE:NVS - News), Biogen Idec (NasdaqGS:BIIB - News) and other sources.

Research and development (R&D) costs declined approximately 10% to $25.3 million. The lower R&D was primarily due to reduced spending on pre-clinical costs concerning the ALN-TTR and ALN-VSP programs.

General and administrative (G&A) expenses in the reported quarter fell about 16.8% to $8.4 million. The decrease in the G&A spend resulted from lower professional service fees mainly for legal activities.

2011 Guidance

Alnylam expects to exit 2011 with a cash balance of more than $250 million, lower than the prior expectation of more than $275 million due to increased investment on pipeline development.

Pipeline Update

Alnylam’s core product strategy, introduced in January 2011, is Alnylam 5x15, which aims at developing RNAi therapeutic products for the treatment of genetically defined diseases addressing major unmet medical needs. Alnylam is also developing other products through existing or future partnerships.

Alnylam expects to present data from an early stage study of ALN-TTR01 (a systemically delivered RNAi therapeutic that employs a first-generation LNP formulation), to treat transthyretin (:TTR) mediated amyloidosis, in the fourth quarter of the year.

Data was earlier expected to be released in the third quarter. For ALN-TTR02 (a second generation delivery formulation), Alnylam plans to file an Investigational New Drug (NYSE:IND - News) application in the second half of 2011.

Alnylam filed a Clinical Trial Application (:CTA) in the UK for its ALN-PCS program for hypercholesterolemia, in the second quarter, which upon clearance will allow the initiation of an early stage trial.

Among the partner based programs, Alnylam announced that it has completed an early stage clinical study of ALN-VSP to treat advanced solid tumors with liver involvement. In June 2011, Alnylam presented data from the trial at the American Society of Clinical Oncology (Other OTC:ASCO.PK - News) meeting, which showed that ALN-VSP was generally well tolerated and demonstrated evidence of anti-tumor activity in heavily pre-treated patients with advanced cancer.

Our Recommendation

We currently have a Neutral recommendation on Alnylam. The stock carries a Zacks #3 Rank (“Hold”) in the short term. We are pleased with the company’s “5x15” initiative and the progress of the company’s pipeline. Alnylam’s balance sheet is also very strong. We, however, await further visibility on the progress of the pipeline as well as Alnylam’s ability to enter large partnerships.

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