Narrow-Moat Alnylam's Strong Commercial Launches Drive Growth; Pipeline Makes Progress

Equity Analyst

Rachel Elfman

Alnylam Pharmaceuticals is a pioneer in designing therapeutics based on RNA interference, or RNAi, a mechanism that occurs naturally in cells and silences overexpressed genes, which often cause protein misfolding and/or protein accumulation. Alnylam seeks to capitalize on the therapeutic potential of RNAi by creating small interfering RNA, or siRNA, that can treat diseases at the genetic level. When siRNA reaches its intended target, it can silence the gene that it contains code for, making it a potentially game-changing technology for difficult- to-treat diseases caused by genetic mutations.

After over a decade of research, Onpattro, the first RNAi therapy, was approved in 2018 for polyneuropathy in hereditary ATTR amyloidosis. This positioned Alnylam as a leader among RNA-based biotech companies. With the potential for label expansions into cardiomyopathy and wild-type ATTR amyloidosis, we believe Alnylam has a large opportunity in ATTR amyloidosis with Onpattro and next-generation Amvuttra. 

We believe Alnylam is one of only a few biotechnology companies with a systematic methodology for identifying targets and developing drug candidates. The firm currently has four marketed products and several late-stage candidates in its pipeline. In addition to Onpattro's 2018 approval, Alnylam received approval in 2019 for Givlaari for acute hepatic porphyria, or AHP. In 2020, Oxlumo was approved for the treatment of primary hyperoxaluria type 1 in all age groups. In June 2022, Alnylam received FDA approval for Amvuttra for the treatment of ATTR amyloidosis with polyneuropathy. In December 2021, Leqvio received approval for high cholesterol, which was developed with Alnylam's partner Novartis under a license and collaboration agreement.

Alnylam competes with a few biotech companies that focus on RNA-based therapies, including Ionis, which received approval of Tegsedi for polyneuropathy in hATTR amyloidosis in 2018 about two months after Alnylam. Onpattro's safety profile is much more attractive since Tegsedi comes with a black-box warning as it has severe safety risks, but we expect both companies to produce next-generation candidates that could look more competitive.

Business Strategy & Outlook

We assign Alnylam a narrow moat rating based on the intangible assets from its RNA interference, or RNAi, technology and lengthy patents. Alnylam's proprietary technology specializes in RNAi, which uses small interfering RNA to silence malfunctioning genes. Its technology has led to a new class of therapies, which are prime for targeting rare diseases and other disorders caused by genetic mutations. Alnylam's RNAi technology platform has produced four marketed products since 2018 along with a growing and diverse pipeline, which support the company’s intangible assets and narrow economic moat. In addition, Alnylam has lengthy patents for its drugs extending well past our explicit forecast period to 2035. We think it is highly likely that Alnylam will see returns above its cost of capital by 2031, and we model ROICs of nearly 38% in that year versus a 9% WACC. Even in our bear-case scenario, which is marked by a forecast diminished patient share, the failure of some drug candidates, and lower operating margins, we see ROICs steadily improving to 28% by 2030.

Onpattro (patisiran) was approved in 2018 for polyneuropathy in hereditary ATTR amyloidosis, a rare, progressive disease characterized by the abnormal buildup of amyloid deposits in the body’s organs and tissues. Alnylam has a dominant position within the hATTR amyloidosis market, and it has been able to build upon its RNAi expertise to create a highly effective drug. One of Alnylam's primary competitors, Ionis Pharmaceuticals, competes in this space with its own RNA-based technology platform. Ionis' drug, Tegsedi (inotersen), was approved in late 2018 for polyneuropathy, about two months after the approval of Alnylam's Onpattro in the same indication. However, Tegsedi's efficacy comes with several severe side effects, and the label includes a black-box warning for thrombocytopenia and glomerulonephritis, which can be life-threatening and may result in dialysis-dependent renal failure. As a result, Ionis’ Tegsedi requires testing prior to treatment and frequent monitoring during treatment. Tegsedi is administered subcutaneously once weekly, but the black-box warning requires frequent blood and urine monitoring. In comparison, Alnylam’s Onpattro is administered every three weeks by intravenous infusion. The poor safety profile of Ionis’ Tegsedi has not made it competitive in polyneuropathy when matched with Onpattro’s much better safety profile and strong commercial success. We believe this illustrates the competitive edge of Alnylam's RNAi platform over Ionis' Tegsedi. However, Ionis is testing next-generation versions of Tegsedi that could improve upon this profile.

Alnylam's other main competitor in ATTR amyloidosis is Pfizer’s Vyndaqel/Vyndamax (tafamidis), a small molecule that stabilizes the misfolded protein that causes the disease. Vyndaqel is currently approved in amyloidosis with cardiomyopathy, while Alnylam's Onpattro and Ionis' Tegsedi are approved in polyneuropathy. Many ATTR amyloidosis patients may have both cardiomyopathy and polyneuropathy, and both are commonly mis- or underdiagnosed. Given this dynamic, we believe that the first competitor to gain approval in both cardiomyopathy and polyneuropathy in both hereditary and wild-type ATTR amyloidosis (with solid efficacy and minimal side effects) has the best chance to garner patient share. 

Alnylam received FDA approval in 2022 for next-generation Amvuttra (vutrisiran) in ATTR amyloidosis with polyneuropathy and is also investigating vutrisiran in cardiomyopathy. Approval in cardiomyopathy would significantly increase the company's market opportunity in ATTR amyloidosis. Alnylam stands to compete with next-generation Amvuttra, which would be a quarterly subcutaneous injection as opposed to Onpattro's intravenous injection every three weeks.

Regeneron and Intellia Therapeutics are co-developing an ATTR drug using CRISPR-Cas9 gene editing components and presented data in June 2021 on their phase 1 study. An impressive 87% mean reduction in TTR at a high dose was reported; however, the data is very limited as this study only included six patients for just 28 days of assessment. However, key questions remain around the safety and long-term impact of gene-editing. A substantial amount of data involving hundreds of patients over extended periods of time will be needed to demonstrate the safety of gene-editing for ATTR amyloidosis. Alnylam already has a dominant position within the ATTR amyloidosis market, and we anticipate it will continue to have several years of further expansion into the market with the recent approval of Amvuttra.

Givlaari (givosiran) received FDA approval in November 2019 for the treatment of adults with acute hepatic porphyria, or AHP. AHP is a family of rare, genetic diseases associated with distinct enzyme defects in the heme biosynthesis pathway in the liver. Givlaari has also received approval in the EU and in several other countries, including Brazil, Canada, and Japan. AHP is a rare indication with a high unmet need, which allows for strong pricing power. At launch, Givlaari’s average net cost per patient was over $440,000. AHP is characterized by attacks of pain and paralysis, and the symptoms can often to lead to misdiagnoses of other more common conditions such as viral gastroenteritis, irritable bowel syndrome, and appendicitis. Alnylam has a US gastrointestinal diseases education and promotional agreement to help raise awareness about AHP. Likewise, the company has also engaged with patient groups and communities. We expect diagnosis rates to improve with time, providing a tailwind for Givlaari's market penetration. 

In November 2020, Alnylam received approval for Oxlumo (lumasiran) in the US and EU for the treatment of primary hyperoxaluria type 1. Primary hyperoxaluria, or PH, is a group of rare genetic metabolic disorders that are characterized by the accumulation of oxalate in the kidneys and other organ systems of the body, which can result in kidney and liver failure. Alnylam has been expanding its global commercialization of Oxlumo with a launch underway in Germany, temporary authorization for use allowed in France, and marketing authorization approval in Brazil. Alnylam has pending regulatory filings for Oxlumo in other countries as well. 

Alnylam also has several partnered programs, where it would receive royalties or a share of the profits if the drug candidate is approved. Leqvio (inclisiran), partnered with Novartis and Blackstone, seeks to target hypercholesterolemia, or high cholesterol through a twice-yearly dosing by subcutaneous injection. Leqvio received EU approval in December 2020, and it received FDA approval in December 2021. It is estimated that 40% of adults worldwide have high LDL cholesterol and 80% of high-risk patients do not achieve recommended LDL targets despite the use of statins. In its clinical development program, Leqvio provided an effective and maintained LDL cholesterol reduction of up to 52% in patients with elevated LDL, despite maximally tolerated statin therapy. We believe Leqvio’s efficacy looks competitive against statins, Amgen’s Repatha, and Regeneron and Sanofi’s Praluent. Repatha and Praluent use PCSK9 inhibitors, and while Leqvio also targets PCSK9 through RNAi, it offers the convenience of only a twice-a-year subcutaneous dose. In comparison, the recommended dosing for Repatha and Praluent is every two weeks or monthly subcutaneously. Alnylam is eligible to receive royalties up to 20% on Leqvio’s sales. Other partnered programs include fitusiran for hemophilia (phase 3; partnered with Sanofi), cemdisiran for IgA nephropathy, a complement-mediated disease (phase 2; partnered with Regeneron), and ALN-HBV02 for hepatitis B (partnered with VIR).

Narrow

Economic Moat

Alnylam Pharmaceuticals

Alnylam Pharmaceuticals, Inc. is a global commercial-stage biopharmaceutical company, which engages in the discovery, development and commercialization of RNAi therapeutics. Its products include ONPATTRO, GIVLAARI, and OXLUMO. The company was founded by Noble Laureate, David Bartel, Thomas Tuschl, Phillip Zamore, Paul R. Schimmel, and Phillip A. Sharp on June 14, 2002 and is headquartered in Cambridge, MA.

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