Alnylam Pharmaceuticals TOP PICK BUY


Price (6-Jan)

Initiation of Coverage
Validated delivery technology sets stage for
unprecedented pipeline advancement; top pick,
BUY, $160 price target
We are initiating coverage of Alnylam Pharmaceuticals with a BUY rating and a $160
price target. Alnylam is a platform-technology drug development company with a rapidly
expanding pipeline of innovative, siRNA, gene-silencing therapeutics, focused on three
disease areas: rare genetic, cardio-metabolic, and hepatic infectious. We believe recent
clinical validation of the company’s proprietary, best-in-class, siRNA drug delivery
technology (ESC-GalNAc) primes the company for unprecedented pipeline expansion.
As the broad early pipeline (12+ pre-clinical products) advances into mid-stage human
clinical trials, we expect the Street to ascribe increasing value to the development
portfolio and drive shares substantially higher. In 2015, we expect shares to be driven by
clinical data flow on multiple products and potential new partnership deals.
• ESC-GalNAc is Holy Grail: siRNA drug delivery has posed a long-standing challenge
for companies in the space, and sub-optimal delivery technologies have impeded
drug development. We believe Alnylam’s ESC-GalNac delivery technology is poised to
shatter this barrier and, like the breaking of a dam, will allow for unrivaled pipeline
advancement in coming years.
• ALN-AT3 data clinically validates ESC-GalNAc: Recent ALN-AT3 results provided
human clinical validation for ESC-GalNAc, which has broad implications for the early
pipeline, in our view. All of Alnylam’s early pipeline candidates use this best-in-class
• Preclinical pipeline worth $25, by our estimates: We believe ESC-GalNac clinical
validation allows for value to be ascribed to Alnylam’s early-stage pipeline products. We
determine a YE15 value of $25/share based on a probability-adjusted discounted EPS
• Abundant clinical catalysts in 2015:

We expect 2015 to be a seminal year for
Alnylam, with clinical results anticipated for five different products. P2 OLE data for
both patisiran (mid-15) and revusiran (2H15) will be central, in our view, with potential
read-through to both ongoing P3s. In addition, we expect mid-15 P1 results for ALNAT3,
ALN-PCSsc, and ALN-CC5 to further validate the Alnylam pipeline and siRNA
• Potential partnership opportunities:

In 2014, Alnylam signed a broad partnership
agreement with Genzyme in the rare genetic disease space. In 2015, we would not be
surprised to see additional partnership deals in the cardio-metabolic and/or hepatic
infectious disease areas.
• Valuation/risks:

We justify a 12-month price target of $160 using sum of the parts: a
probability-adjusted DCF for the advanced pipeline of $135, and a probability-adjusted discounted EPS for the early pipeline of $25. Risks include clinical, regulatory, and competitive.

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