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 5x15^TM 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?