Seeking Alpha: Alnylam Pharmaceuticals Has Plenty On Its Plate

Investor sentiment, not to mention cash, has been draining out of the biotech sector since the spring of this year, leading to unimpressive performance for leading RNAi companies Alnylam Pharmaceuticals (NASDAQ:ALNY) and Isis Pharmaceuticals (NASDAQ:ISIS). I won't try to argue that valuations didn't get overheated when news broke that Alnylam and Sanofi (NYSE:SNY) agreed to a large-scale partnership, but the correction since then has gone too far. Interest (and potential competition) in RNAi is picking up again, but I believe Alnylam has more than enough in its own pipeline to remain an attractive story for some time to come.

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Alnylam Pharmaceuticals Has Plenty On Its Plate

Seeking Alpha: In A Shaky Biotech Market, Alnylam's Prospects Are Getting Stronger

Biotech investing is not where you go if you want an easy investing life, but the profits of patience and good stock selection can be significant. Investors are clearly nervous about biotech now, and there is a threat that sector-wide selling in these notoriously fickle stocks will put them in hibernation until the cycle turns around again.

Specific to Alnylam (ALNY), though, I would argue the company has never been stronger. The company is on pace to exceed its target of having five compounds in human studies by the end of 2015 ("5 x 15"), and a recent deal with Sanofi (SNY) gives Alnylam development funding, a motivated commercial partner, and the perception that it has been vetted by a large pharmaceutical company with a significant presence in rare diseases.

Alnylam is absolutely a risky pick, and investors should not ignore the risk that not only may the company's drugs fail in the clinic or in the marketplace, but that investors indiscriminately bailing out of the sector could weigh on the share price at times. On the flip side, I cannot ignore that Alnylam has multiple potential billion dollar-plus drugs in the clinic and a very strong R&D position in what could prove to be one of the next major therapeutic alternatives. With that, I see almost 50% upside in Alnylam shares today.

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In A Shaky Biotech Market, Alnylam's Prospects Are Getting Stronger

Seeking Alpha: Silence Therapeutics A Quieter Name In RNAi

By now most biotech investors know about RNAi companies like Alnylam Pharmaceuticals (ALNY) and Isis Pharmaceuticals (ISIS), and many probably know Tekmira (TKMR) and Arrowhead Research (ARWR) as well. Alnylam and Isis have excited investors with the potential multiple billion-dollar drugs in their pipeline, while Tekmira and Arrowhead have solid delivery technologies and emerging therapeutic pipelines.

If you'll pardon the obvious pun, it has been a lot quieter where London-based Silence Therapeutics (OTCPK:SLNCF) (SLN.L) is concerned. This small biotech is barely followed on the Street and isn't exceedingly liquid even on its home stock exchange (the LSE). Silence's corporate history is shakier than many others and the company does not have a particularly thick book of clinical data in humans, but what the company does have is a three-pronged delivery platform that could, like Arrowhead's delivery technology, open up a wider range of treatment targets for RNAi therapy.

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Silence Therapeutics A Quieter Name In RNAi

Seeking Alpha: Arrowhead Research - Ground-Floor Opportunity Or Biotech Bubble Baby?

Valuing a biotech, particularly one with no commercial products, is always going to be a controversial exercise. Having written on stocks for a public audience for over a decade (and for institutions before that), I'm still surprised at the number of people who will make comments like "that biotech has no earnings, it's worthless!"

It's an even more challenging exercise with a stock like Arrowhead Research (ARWR), though, as so much of the value of this company lies in its basic technology - technology that will really only show its worth over many years of clinical development work. It's dangerous to say that Arrowhead will be just like Alnylam Pharmaceuticals (ALNY) in a few years, so it deserves a similar valuation. I do believe that you can attribute almost half of the company's value today to its lead clinical compound and that leaves what I think is a pretty modest valuation for the company's overall technology platform.

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Arrowhead Research - Ground-Floor Opportunity Or Biotech Bubble Baby?

Seeking Alpha: Tekmira Rides A Big Day In RNAi

It was only the day after Christmas when I mentioned that Tekmira (TKMR) was a name that investors should think about investigating as a potentially cheaper play on RNA interference (RNAi) than better-known representatives of the class like Alnylam Pharmaceuticals (ALNY) and Isis Pharmaceuticals (ISIS). The stock had done pretty well since then (up about 20% in two weeks), but news of a deal with Monsanto (MON) gave another boost to the shares.

Now I'm starting to wonder if things are getting a little too crazy in RNAi-land. Alnylam was up very strongly on news of its partnership with Sanofi (SNY) and Tekmira too was up more than one-third in the peak of excitement over the Monsanto deal. Don't get me wrong, I think the Monsanto agreement is a nice feather in the company's cap and something that could become meaningful in a couple of years. I just think it's a little bold for the Street to factor in 50% of the deal value as more or less a given.

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Tekmira Rides A Big Day In RNAi

Seeking Alpha: Tekmira's Transition Worth Watching

RNA interference (RNAi) went through a painful stretch of doubt a few years back, but two of the sector's leaders, Alnylam (ALNY) and Isis Pharmaceuticals (ISIS) have come roaring back on the strength of both solid clinical data and a "risk on" bullish biotech market. Tekmira (TKMR), too, has come back into its own as a settlement with Alnylam has cleared away some legal and IP uncertainties and the company repositions itself as a product-focused biotech.

It's difficult to call any RNAi biotech cheap at this point, and I can't help but note that a great deal of valuation is being pinned to early-stage clinical programs, which history shows is often a very dangerous move. Even so, if investors consider what Tekmira could be in line to receive in the form of royalties and from its own pipeline, this shares could still offer some relative value.

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Tekmira's Transition Worth Watching

Seeking Alpha: Alnylam Looks Nearly Left For Dead

By no means is it easy to try to launch an entirely new class of pharmaceuticals, but that is essentially what Alnylam Pharmaceuticals (ALNY) has set out to do. Despite some encouraging (albeit very early) signs of success, investors have very much taken note of Big Pharma's increasing skepticism towards what this company is trying to do. Consequently, the stock trades for little more than the cash on its books despite a promising pipeline that is only getting started in human studies.

The Long March
Investors who have high hopes for Alnylam's RNA interference (RNAi) technology may want to take a page from the history books. Although Amgen (AMGN), Biogen Idec (BIIB), Johnson & Johnson (JNJ), and Roche (RHHBY.PK) have all had success with recombinant protein and monoclonal antibody drugs, the reality is that the science underpinning these drugs really started early in the 20th century and it took more than a decade for promising (and Nobel Prize-winning) research in the 1970's to actually result in approvable drugs.

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Alnylam Looks Nearly Left For Dead

Alynlam - News Sounds Bad, But I Don't Think It Is

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