Alnylam Pharmaceuticals, one of the bright lights on the Boston biotech scene, has suddenly found itself getting almost zero value for its technology on Wall Street.
It’s a shocking thing to say about the Cambridge, MA-based company (NASDAQ: [[ticker:ALNY]]), considered to be a leader in RNA interference technology. This, after all, is a hot field of science which has potential to silence disease-related genes that were previously inaccessible to conventional small molecule drugs and genetically engineered proteins. No drug that works this way has made it through the FDA approval process, but Alnylam has three programs in clinical trials, a massive roster of partnerships, a long list of scientific publications, and an enviable cash horde estimated to be worth $325 million heading into 2011.
Yet it’s clear that the early enthusiasm for RNAi and Alnylam has faded, and evidence can be seen each day in Alnylam’s plummeting stock. The company’s shares closed at $9.24 on Friday, giving it a market valuation of about $390 million. That might sound like a lot, but Alnylam expects to finish this year with $325 million in cash and investments. That means that all of Alnylam’s technology, patents, people, drug candidates, and future prospects are only being assigned a valuation of about $65 million. It’s a stunning fall for a company that not long ago had a market valuation of more than $1 billion, and that was worth more than $35 a share in July 2008.
Two things made shareholders scramble this fall. Back in September, a partnership between Novartis and Alnylam ended, and as a result, Alnylam cut about 25 to 30 percent of its workforce. Then, on November 17, Roche stunned the pharmaceutical industry when it said it was pulling out of RNAi altogether as part of a global restructuring effort. That meant it no longer had any use for its partnership with Alnylam. Roche essentially spent $500 million on the effort, and pulled the plug after three years.
Alnylam still has three RNAi drugs of its own moving through clinical trials for respiratory syncytial virus, liver cancer, and a rare condition called TTR amyloidosis. It still has alliances with companies like Takeda Pharmaceuticals, GlaxoSmithKline, Cubist Pharmaceuticals, and Medtronic. Simos Simeonidis, an analyst with Rodman & Renshaw, said the sell-off was an over-reaction and called Alnylam “a table-pounding buying opportunity in both the short and long term.”
I chatted with Alnylam CEO John Maraganore last week to get his view of what’s going on, both in terms of perception and reality. Here’s an edited transcript of the chat.
Xconomy: John, as I was getting ready for this call, I must say I was completely shocked. I don’t look at your stock every day, but it looks to me like your enterprise value is down to $60 million or $70 million. What’s going on?
John Maraganore: Yes. Obviously, there’s been a frenzy and a visceral reaction to the Roche news, which we don’t think reflects on RNA interference at all. Really, it’s all about Roche dealing with their near-term business needs. Roche’s decision was a restructuring of 5,000 people and $2.6 billion in future costs. They made a lot of cuts, not just RNAi. But all of a sudden, the whole restructuring of Roche became an RNAi story, which is insane. We feel better about the science and technology than ever. The change in the stock price brings a new opportunity for investors who hopefully will do very well in the future. We don’t have to raise capital now, so we’re just focused on what we have to do. It’s a clear over-reaction to the Roche news.
X: But John, was it a surprise when you got the word from Roche that they were pulling out of RNAi?
JM: It was a big surprise. We got the word the night before
