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Alnylam's Q2 Loss Wider-than-Expected, Pipeline in Focus

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Alnylam Pharmaceuticals Inc. (ALNY) which is actively developing its pipeline, reported second-quarter results last week and also provided an update on its pipeline. Alnylam’s second quarter 2014 loss of 63 cents per share was wider than the Zacks Consensus Estimate of a loss of 54 cents as well as the year-ago loss of 29 cents per share. Results were hurt by higher expenses.

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Revenues declined 16% from the year-ago quarter to $7.3 million. The top line also lagged the Zacks Consensus Estimate of $9 million. Lower than expected revenues also contributed to the wider than expected loss.

The Quarter in Detail

Alnylam’s revenues in the second quarter included $5.5 million from its collaboration with Takeda Pharmaceutical Company Limited (TKPYY), in addition to $1.8 million from its alliance with a couple of other companies.

Research and development (R&D) expenses were up 84.5% to $44.7 million primarily due to investments related to pipeline development.

General and administrative (G&A) expenses increased approximately 99.1% year over year to $11.5 million driven by higher non-cash stock-based compensation expense.

Pipeline Update

Alnylam has made significant progress with its pipeline so far. The company is evaluating patisiran in the phase III APOLLO study in transthyretin-mediated amyloidosis (:ATTR) patients suffering from familial amyloidotic polyneuropathy (FAP.TO). Patisiran has orphan drug status in the EU and the U.S. for the treatment of FAP. Patisiran also enjoys Fast Track designation in the U.S. for this indication. Results from this study are expected in about two to three years from now. The company intends to file for its approval in 2017.

Additionally, ALN-TTRsc is in a phase II study in patients suffering from familial amyloidotic cardiomyopathy or senile systemic amyloidosis. Alnylam plans to advance the candidate in a phase III study by the end of 2014 presuming positive results from the phase II study.

Apart from these candidates, Alnylam also has ALN-AT3 (hemophilia), ALN-AS1 (hepatic porphyrias), ALN-PCSsc (hypercholesterolemia), ALN-CC5 (complement-mediated diseases) and ALN-HBV (hepatitis B virus infection) in its pipeline.

In Aug 2014, ALN-AT3 received orphan drug status in the EU for the treatment of hemophilia A and hemophilia B. Initial data from the phase I study on ALN-AT3 are expected later this year.

2014 Outlook Maintained

Alnylam expects its R&D expenses to increase in the second half of 2014 due to the advancement of some of its candidates in the late stage of development. G&A expenses (excluding non-cash stock-based compensation expense) are expected to remain consistent with first-half levels through the next half of the year.

Alnylam continues to expect to end 2014 with cash, cash equivalents and total marketable securities in excess of $825 million.

Our Take

We are pleased with Alnylam’s efforts to develop its pipeline. With data read-outs expected in the coming months, we expect the second half of 2014 to be data rich for the company. We expect investor focus to remain on pipeline updates from the company.

Alnylam carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the biotech sector are Actelion Ltd. (ALIOF) and Gilead Sciences Inc. (GILD). Both hold a Zacks Rank #1 (Strong Buy).

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