Can Alnylam Pharmaceuticals Stock Continue Its Run?


Despite a 53% rise since the March 23 lows of this year, at the current price of around $153 per share we believe Alnylam Pharmaceuticals (NASDAQ:ALNY) looks attractive and it can see significant upside from the current levels. Alnylam stock has rallied from $99 to $153 off its recent bottom compared to the S&P which moved 40%, with resumption of economic activities as lockdowns are gradually lifted. Alnylam stock is also up 109% from levels seen in late 2018.

Alnylam stock has fully recovered and it is well past the level it was at before the drop in February due to the coronavirus outbreak becoming a pandemic. Despite the healthy rise since the March 23 lows, we feel that the company’s stock still has potential given its Givlaari approval by the EU regulators. We discuss more in the sections below.

Some of this 109% rise since late 2018 is justified by the roughly 193% growth seen in Alnylam’s revenues from 2017 to 2019, which translated into a 170% surge in revenue per share (RPS). The sales are likely to trend higher over the coming years, and the stock could see a significant upside from the current levels in our view. Our dashboard, ‘What Factors Drove 109% Change in Alnylam Pharmaceuticals Stock between 2017 and now?‘, has the underlying numbers.

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So what’s the likely trigger and timing for further upside?

The global spread of coronavirus has resulted in fewer hospital visits and the postponement of elective surgeries, thereby impacting the pharmaceuticals businesses. That said, Alnylam’s stock price surge is due to company-specific factors. Firstly, the U.S. FDA in late 2018 approved Alnylam’s Onpattro, which is used for the treatment of polyneuropathy caused by hereditary transthyretin-mediated amyloidosis (hATTR). The drug garnered sales of $166 million in 2019, explaining the surge in 2019 total revenues for the company. Onpattro sales stood at $67 million in Q1 2020, and its peak sales are estimated to be north of $1 billion.

Secondly, the U.S. FDA approved Alnylam’s drug Givlaari, which is used for the treatment of a rare disease, acute hepatic porphyria, in 2019, and the drug garnered sales of $5 million in Q1 2020. Givlaari was also approved by the EU regulators in March 2020. The drug is priced at $39,000 per vial, translating into an average annual cost of $575,000 per patient, and its peak sales estimated to be north of $500 million. Finally, the company has more drugs, including Lumasiran and Vutrisiran, in its late stage pipeline, and if approved could add incremental revenues over the coming years.

We believe Alnylam’s Q2 results in August will confirm the surge in its revenue. That said, the ongoing Covid-19 pandemic is expected to have a hit on Alnylam’s business as well. The company lowered Onpattro revenue guidance by 5% to $285 million at the midpoint of the range provided. The average consensus revenue estimate currently stands at $490 million for 2020, reflecting a solid 122% surge from 2019. Given the high growth, the company’s PS ratio is also very high, though it has declined from 98x in 2018 to 57x by the end of 2019, and it will likely decline further to more reasonable levels over the coming years. That said, a decline in PS ratio will be more than offset by growth in RPS, given the expected surge in revenues, and thereby resulting in higher levels for ALNY stock.

Over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to boost market expectations. Following the Fed stimulus — which helped to set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view. With investors focusing their attention on 2021 results, the valuations become important in finding value. Though market sentiment can be fickle, and evidence of an uptick in new cases could spook investors once again.

While Alnylam looks like it can gain more, which S&P 500 component stocks have the best chance of outperforming the benchmark index? Our 5 In the S&P 500 That’ll Beat The Index: TWTR, ISRG, NFLX, NOW, V look promising.

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