Alnylam’s Strategy Is Getting Bigger. Time to Buy?

After earning its fifth new drug approval in four short years, you might expect Alnylam (NASDAQ: ALNY) to take a moment to rest on its laurels. Those of you who know the company a little better won’t be surprised to learn that it just did the opposite. Instead of taking a break, the company outlined a plan to take a more aggressive approach to the development of new blockbuster drugs.

For two decades, Alnylam’s focus has been developing small strands of RNA that interfere with the production of troublesome proteins implicated in rare diseases. Recently, the company unveiled a surprising new finding that could lead to the development of new drugs aimed at roughly one-fifth of adults worldwide.

An exciting new anti-obesity target 

In a recent scientific paper, Alnylam and collaborators leveraged genetic-sequencing data from more than 360,000 people participating in the UK Biobank. Investigators unearthed a connection between a rare mutation in a gene called INHBE and lower levels of abdominal fat.

While it clearly impacts the deposition of abdominal fat, INHBE mainly operates in the liver. This makes it a great target for Alnylam because the liver is also where the drugs that you swallow or inject spend a lot of time. This allows a relatively small dosage to have an outsized effect. For example, just 25 milligrams of the company’s most recently approved treatment, called Amvuttra, effectively knocks down the production of a troublesome protein called transthyretin for three months at a time.

A smooth path forward

Viruses have been using RNA strands to hijack cellular machinery since life began, and our immune systems still go berserk when they spot strands of RNA in our bloodstream. This is partly why Alnylam’s wholly owned therapies have only been approved to treat very small populations afflicted with severe, life-threatening conditions. If you’re worried that the FDA won’t allow the company’s small-interfering RNA drugs to make a leap to larger populations, though, consider Leqvio.

Last December, following years of delays, the FDA approved Novartis(NYSE: NVS) Leqvio to treat people with stubbornly high cholesterol. Leqvio is a small-interfering RNA drug that was discovered by Alnylam for a company that Novartis later acquired. The important thing to note here is that the FDA approved Leqvio even though the annual dosage is more than five times the size of Alnylam’s latest treatment, Amvuttra.

Alnylam has been getting better and better at knocking down the production of targeted proteins with increasingly smaller dosages. If the FDA is willing to green-light an early-generation, RNA-based treatment for high cholesterol, a next-generation RNA-based treatment for obesity probably has a good shot at approval too.   

A larger opportunity

Wegovy is an increasingly popular anti-obesity treatment from Novo Nordisk (NYSE: NVO) that earned FDA approval last June. Demand for the weekly, weight-reducing injection is so strong that sales will likely pass $1 billion this year.

Wegovy is the first new drug the FDA has approved for weight reduction since 2014, but it isn’t exactly new. It works along the same lines as diabetes drugs that have been around since 2005. If Alnylam gets lucky with the first-ever drug aimed at the INHBE gene, it could make the rocket ship ride that Wegovy’s on right now seem downright ordinary.

On its own, Alnylam’s foray into the anti-obesity field doesn’t make the stock a buy. We can’t assume the fledgling program has a significant value until we see some clinical data regarding INHBE inhibition. That said, this is a terrific biotech stock to buy now. With six marketed products that hit the market in four short years, the company’s set up for a growth explosion. A mass-market blockbuster could be icing on the cake.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alnylam Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

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