Alnylam Green Shoots After Corporate Restructuring

The latest quarter must have been the best quarterly performance by Alnylam in the last 3 years. After going through a rough patch that culminated in Novartis not adopting a widely expected $100M platform license with the attendant lay-off of a third of its staff, the results and also tone of the conference call struck me as if the company had re-discovered its old enthusiasm for RNAi Therapeutics drug development and is intensely focused on creating value by providing additional clinical proof-of-concept data over the coming months.

There is reason to be cautiously optimistic about the upcoming clinical data. For one, dose escalation for the liver cancer candidate ALN-VSP02 seems to have progressed beyond the magic 1mg/kg mark and is still ongoing! First generation or not, the fact that patients have now received and tolerated this kind of dosage, and on a repeat basis, is major de-risking for all of Alnylam’s, but also Tekmira’s pipeline candidates which involve LNP delivery (almost all of them). Similarly encouraging, ALN-TTR01 dosing is also ongoing and with 3 centers in Europe recruiting now, results may not be that far off (28 patients anticipated in this phase I study).

Although the first generation LNPs appear to be well tolerated, Alnylam seems to be even more excited about a potential quantum leap in LNP delivery: LNPs containing the next-generation MC3 lipid which not only silence in the unprecedented single micro-gram per kg range for gene targets in the liver, but also appear to be very well tolerated in animals. The MC3 lipids are derived from the DLin-KC2-DMA ionizable lipids developed by Tekmira, results from which were published earlier this year in Nature Biotech.

Besides the science, financials seem to be in better-than-expected shape, and I believe is what underlies today’s jump in share price (you can assume that the stock market wouldn't pay much attention to MC3). With over $370M cash/equivalents on the balance sheet, Alnylam is poised to close the year with well over the previously guided $325M cash/equivalents. Having slashed the work force, albeit probably at considerable personal cost, thus buys the company strategically valuable breathing room. In addition, there were a number of positive one-offs this quarter, including $2M for the successful award of 8 federal grants, a Quark milestone, and increased activities related to Novartis finalizing its 31 target picks. And with Novartis' relationship with Alnylam settled now, it should become easier to talk to other companies about partnerships and further add to the strong financial position.

Alnylam and Medtronic also stand to receive very significant funding from the Huntington’s Disease Foundation (CHDI), likely totaling over $10M, some of which has already been earned (agreement is retro-active). Somewhat dampening the excitement around that program was news that ALN-HTT is now a 2012 goal for entering the clinic, while LNP-delivered ALN-TTR02 and PCSK9 (both probably MC3) are poised to be the Company’s 2011 new clinical candidates.

An interesting tidbit on PCSK9 is that, faced with numerous competition from mainly monoclonal antibody candidates against the same target, some of which have already entered the clinic, it appears to be now Alnylam’s strategy to emphasize the fact that with RNAi you down-regulate both intra- and extracellular PCSK9 levels, which therefore is closest to recapitulating human genetics which has been driving the adoption of PCSK9 as a drug target for hypercholesterolemia in the first place. A good argument indeed.

Overall, my most important take-home was that this seems to be a re-energized company, and with some of the right clinical news, there may soon be a second honeymoon between Alnylam and its shareholders (of whom I’m btw not one of…yet).