I think the folks at Alnylam (Nasdaq: ALNY) might want to take a lesson in press release-writing from some of their more promotional peers. Why do I say this? Because even I had to double-check my notes to make sure that the news ALNY announced was nothing out of the ordinary.
Alnylam announced what is tantamount to the end of the first stage of its relationship with Novartis (NYSE: NVS). The deal with Novartis covered 30 targets, with an option for up to 10 more. Novartis has chosen to take 31 targets - so, perhaps not as good as it could have been, but not bad. The company has, to my knowledge, not really outlined how the up-to-$75 million in milestones was going to work - whether it was based on the 30 (and any of the 10 would in fact be "bonus") or whether it was based on all 40. So I'm not sure if there's any incremental upside to Novartis taking the one extra target.
As part of the end of this phase of the relationship, ALNY is also doing a sizable headcount reduction. This is where people new to the story might not appreciate that this isn't as bad as it sounds. The people that ALNY will be cutting were basically being subsidized by NVS (at a guaranteed rate) to work on this project, so with this phase of the deal over, there is no near-term economic reason for keeping them.
I do wonder, though, whether ALNY is making a mistake. First, there have got to be ample targets for research and with over $300M in cash, ALNY isn't hurting for cash. Moreover, let's be honest - firings are bad for morale even if they are expected and understood. Also, while there is no shortage of PhDs in the biological sciences, the company already has an idea of what these people can do. So, you can look at this as a sign that ALNY management is very cost-conscious and pragmatic, or perhaps a bit cheap. I'll go with Door #1 for now.
ALNY is still at a ridiculously early stage and fills a slot in my portfolio that I call "I hate casino gambling, so I will buy some crazy-ass ridiculously risky stock and see what happens". Hardly a ringing endorsement, I realize, but I do think ALNY has very exciting potential and could be a leader in a potentially huge field. We'll see.
By the way, for anyone else interested in crazy-risky (but crazy-promising) stocks, ALNY is a good candidate. RNAi could be a huge move forward in pharmaceuticals. And along with ALNY, maybe take a look at Marina Biotech (Nasdaq: MRNA), or Tekmira (RXi Pharmaceuticals (Nasdaq: RXII could also be in the discussion as well....).
Disclosure - I own shares of Alnylam
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