Monday, January 14, 2013

Alnylam Sets Record With $125M Secondary Offering



The $125M stock offering just announced by Alnylam may well be the largest secondary offering in the history of RNAi Therapeutics.  Adding the two VC fundraisings by Gradalis and Solstice earlier this month, it brings the total investment in RNAi Therapeutics by private investors to $167M this January alone!  Compare this to the wide perception a little more than a year ago that RNAi Therapeutics was destined to die and the approx. $21, 57, 40, and 122M raised in 2009-2012 respectively (uptick obviously in 2012).

Thanks to the SNALP-enabled clinical trial results over the last year and the orphan drug tsunami to which RNAi technology, as a genetic one, lends itself particularly well, a few companies have dug their way out to take a deep breath of fresh capital.  

[Update January 16, 2013: Apparently due to strong investor demand, Alnylam announced on Jan15 that it sold 8 million shares at $20.13. Overalottment option of up to 1.2M also fully exercised. Net amount raised: $173M]

Business As Usual?

First of all, Alnylam did the right thing to raise capital when the share price is strong and investor confidence high.  The clinical results have surprised most to the upside, and who knows, the next results may be interpreted as not so exciting, the economy may throw a wrench in the works, etc.  And following the settlement with Tekmira which cost Alnylam $65M immediately and $10M in likely, near-term milestones plus the legal fees, its cash reserves have dwindled faster than the company may have liked ($225M year-end cash).

So as a company rapidly expanding its clinical pipeline to take advantage of the proven ability to knock down genes in the liver, the $125M will most likely be used to satisfy its large, recurring appetite for capital.  Even orphan drug development can get expensive when you adopt quite a few of them.  Thus, the $125M plus/minus to be raised will be good for a year’s worth of operating expenses.  Accordingly, Alnylam did its last offering a year ago.

Keeping a nice cash cushion is one of the smarter things that Alnylam has always done and stands in contrast to other companies’ hand-to-mouth existence, ultimately sustaining painful dilutions and making themselves vulnerable in the marketplace in general (I spare you giving you a rundown of the names).


A Shopping Spree?

Of course, the more fun thing would be to watch Alnylam go on a shopping spree.  While this may seem unwise assuming no other revenue to compensate for operating cash burn, Alnylam has been hitting on all cylinders in 2012 when it came to monetizing IP and marketing rights.  With ALN-PCS02 and ROW rights for Alnylam’s other 5x15TM programs, you would think that the track record will be maintained in 2013.

While some RNAi assets have gone up in value, most notably the valuations of Tekmira (~$70M market cap, $50M of which in cash) and Silence Therapeutics, with an ~$150M market cap (about $5M of which in cash), there is still quite a bit to be bought with even much less than $125M.

While it is still blowing my mind that Alnylam did not buy Tekmira 5 years ago, Tekmira, for various reasons, will not be on Alnylam’s shopping list if there was one. 

Considering that Alnylam is fully focused on the liver and has recently repeatedly stated that it considers RNAi delivery beyond the liver to be years away from clinical development, according to this logic there really only remains Arrowhead’s DPC technology which has sufficient maturity to fulfill Alnylam’s pipeline needs.  Indeed, the situation between the two companies is somewhat reminiscent to the one between Alnylam and Tekmira about 7 years ago:

Alnylam (GalNAc-siRNA) and Arrowhead (DPCs) compete with each other for subcutaneous delivery of RNAi triggers to the liver, yet Alnylam is looking under Arrowhead’s hood via its collaboration signed a year ago (SNALP-lipidoid analogy). 

If DPC proved to be safe and well tolerated, it would put Alnylam in a vulnerable position e.g. if Arrowhead, also in collaboration with a larger partner or following an acquisition, were to develop competing, best-in-class RNAi Therapeutics.  Does Merck ring a bell?  The situation may be amplified, if GalNAc-siRNAs were to struggle with potency as is the case for ALN-TTRsc with its projected 2.5mg/kg that will just squeeze into the magic 1ml injection volume.   Finally, gaining access to a more potent subQ technology may pay for itself in this case by increasing the value of the assets Alnylam is seeking to partner, including PCSK9.

Will they ever learn?

20 comments:

bioduediligence said...

I would be shocked if ALNY does any acquisitions. The capital raise was inevitable, and clearly validates those of us that have said no one is paying up for PCS anytime soon.

Kurt said...

Hi Dirk

So for you, ARWR is about 8.5$ worth? With all the platforms and programs, I think they are worth more. ARWR will be worth north of 500 millions in about 2 years. With all the retail-shareholders, it's not easy to buy ARWR. And the management want to fulfill there vision alone (with partners). What is good for ALNY is not good for ARWR. I think ARWR will get some upfront payments for collaborations soon. Even with some dilution, I like that they stay alone. Kurt

Kurt said...

And...

I think ARWR has a superiore technology with the DPCs, RNAi has a great future, why sell the company now for only 125 millions?

Anonymous said...

The question for RNAi investors is that if DPCs perform in the clinic as well as they have preclinically - why bother with SNALP? Intravenous vs subq administration isn't exactly a winning point of differentiation in SNALP's favor.

Dirk Haussecker said...

Well, I doubt Alnylam would spend all of the $125M for Arrowhead. Maybe $60M? They like to buy assets on the cheap, best if out of bankrupcty.

An even better outcome for investors like you may be for Alnylam to just buy out Arrowhead's RNAi assets so that ARWR could use the proceeds to develop all their other stuff that I cannot get excited about.

SNALP vs DPC. SubQ vs I.V. could be a disadvantage, but then again we know that SNALP can be very potent in the clinic and DPC is some ways from demonstrating that, esp. if HepB trial not in patients first.

I could also list many arguments for why i.v. is preferable, esp. in the age of the $200k per year orphan drugs. I haven't heard much people complain about the fact that Sarepta's DMD program uses weekly i.v. infusions.

Anonymous said...

Acquiring ARWR by ALNY might make sense on the business side, but it would be a shame on the science side. Competition is always a good thing.

Anonymous said...

I don't think Arrowhead management is interested at all in being acquired by any other company. Why get bought out for a 100% gain when your company may be worth 10,000% more 5-10 years from now?

sherk said...

I'd be very surprised if Alnylam is thinking about a buyout of ARWR. IMO, they're not going to raise $125M and blow a big chunk of it on a risky acquisition when they're going to need that capital to push ALN-TTR and ALN-AT3 through trials in the very near future. Not when they have reasonable alternatives to DPCs already/almost in the clinic.

All indications are that they are all-in on GalNAc. For instance, their newest and highest priority program after ALN-TTR and ALN-AT3 is ALN-AS1, another GalNAc conjugate. If they do any acquisitions, my bet is that it would be a smallish one, some private company that we haven't heard much about, and a more speculative technology that gives them something they don't yet have (maybe for extra-hepatic delivery). Near-term, it's all about LNPs and GalNAc.

Anonymous said...

I also don't think companies like Tekmira or Marina Biotech want to be acquired by any other company either. Why sell out now when your company will be worth significantly more 5 years from now?

Anonymous said...

Alnylam must have tried DPC during the whole dance with Roche and Mirus and decided it wasn't as good as SNALP/LNP or conjugates. I wouldn't be too bullish on ARWR and DPC.

kurt said...

I think ALNY is bullish on DPCs too!

Alnylam has granted Arrowhead a license under its intellectual property that enables the discovery, development, and commercialization of an RNAi therapeutic targeting the hepatitis B virus (HBV). Alnylam is eligible to receive from Arrowhead milestone payments and royalties on sales of product resulting from the license. In addition, Alnylam has received a license from Arrowhead to utilize their Dynamic Polyconjugate (DPC) delivery technology for an RNAi therapeutic product. Alnylam expects to deploy this technology for an undisclosed target in its "Alnylam 5x15" pipeline which is focused on genetically defined targets and diseases. Arrowhead is eligible to receive from Alnylam milestone payments and royalties on sales of product resulting from the license. No additional financial details were disclosed.

"We view Arrowhead's DPC technology as a promising emerging delivery approach, with the potential to complement our existing delivery platform which currently includes lipid nanoparticles and our siRNA conjugate platform," said Laurence Reid, Ph.D., Senior Vice President and Chief Business Officer of Alnylam.

Steve_382 said...

Dirk, what do think the chances are that Tekmira uses it's recently filed F-10 and raises more cash from a public offering?

Dirk Haussecker said...

Steve, you always raise when it is opportune in this business. Right now though, Tekmira is not in a rush and they should have some partnership opportunities first to extend runway. I view Tekmira as the RNAi company with the lowest investment risk right now, though maybe not with as much near-term upside (and downside) as Arrowhead.

There is some risk to Alnylam though when they put everything subQ on the GalNAc card. ALN-TTRsc is borderline potency and I'm not sure how to explain the apparently increased potency in the other programs. Maybe oligo chemistry, we'll see when the patent apps come out.

Anonymous said...

Dirk,

What do you think about Sangamo? Wouldn't that be a better investment than RNAi? It can make several of the Alnylam's monogenic disease targets obsolete.

Kurt said...

Dirk

I think Roche (8.4% holder of ARWR)has something against a takeover from ALNY. And the mgmt has the right to issue 5 millions preferred shares «poison pill».

Anonymous said...

Roche doesn't like holding ARWR shares

Anonymous said...

Does anyone have any idea who Marina Biotech is partnering with?????? I've heard it's gonna be big?

Nick said...

partner? or license? you mean, other than this (http://www.contractpharma.com/contents/view_breaking-news/2012-11-29/tekmira-licenses-marina-biotechs-rnai-technology/)?

Anonymous said...

Arrowhead public offering:

http://www.pharmalive.com/News/Index.cfm?articleid=875797

Anonymous said...

Any thoughts on Biopath?

By Dirk Haussecker. All rights reserved.

Disclaimer: This blog is not intended for distribution to or use by any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the author or any of his collaborators and contributors to any registration or licensing requirement within such jurisdiction. This blog expresses only my opinions, they may be flawed and are for entertainment purposes only. Opinions expressed are a direct result of information which may or may not be accurate, and I do not assume any responsibility for material errors or to provide updates should circumstances change. Opinions expressed in this blog may have been disseminated before to others. This blog should not be taken as investment, legal or tax advice. The investments referred to herein may not be suitable for you. Investments particularly in the field of RNAi Therapeutics and biotechnology carry a high risk of total loss. You, the reader must make your own investment decisions in consultation with your professional advisors in light of your specific circumstances. I reserve the right to buy, sell, or short any security including those that may or may not be discussed on my blog.