Rise of Alnylam, ISIS Gives RNA Therapeutics Value

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RNA-based therapeutics have been picking up steam in recent months amid some very compelling clinical data. After shunning the industry for years, investors have started to embrace industry leaders like Alnylam Pharmaceuticals Inc. (NASDAQ:ALNY) and ISIS Pharmaceuticals Inc. (NASDAQ:ISIS), which are both trading up more than 200 percent over the past 52 weeks. Big pharma has even renewed its interest, as evidenced by Sanofi’s (EPA:SAN) recent $700 million investment in Alnylam.

In this article, we’ll take a look at investor expectations for RNA companies and where investors might find the best value.

High expectations for Alnylam and ISIS

Valuations in the RNA space have picked up along with investor interest. Alnylam trades with a P/S ratio of over 100x and ISIS trades with a P/S ratio of over 40x while both companies lose money on a net income basis. These valuations compare to a 9.7x industry average P/S multiple that is already lofty compared to the S&P 500′s 1.6x average. While rapid growth helps justify these multiples, the future is far from certain, and expectations are already very high over the next five years.

Looking at clinical pipelines, ISIS has a pipeline of 34 drugs and 58 clinical trials listed on ClinicalTrials.gov with nine that are actively recruiting. These numbers put it well ahead of Alnylam’s nine drug programs and 15 clinical trials with six that are actively recruiting. These programs have helped ISIS generate nearly $125 million and Alnylam generate nearly $45 million in TTM revenue as of February, yet both companies remain unprofitable on a net income basis.

With ISIS trading near $6 billion in value and Alnylam trading near $5 billion in value, investors are betting that these drug pipelines will be monetized in a big way. Alnylam, in particular, appears to be trading at a premium to ISIS given that ISIS has a much larger clinical program and more revenue. On a technical level, both companies could face some hurdles moving higher, given the propensity for investors to lock in profits rather than risk holding on for marginal additional gains.

RXi Offers a compelling alternative

RXi Pharmaceuticals Corp. (NASDAQ:RXII) is a relatively unknown company in the RNA space. After spinning off from Galena Biopharma (NASDAQ:GALE) in April 2012, the company traded on the OTC Markets for more than a year before up-listing to the NASDAQ exchange in February. Management also raised $16.4 million in March 2013 via a private placement led by OPKO Health Inc. (NYSE:OPKO) and the Frost Gamma Investments Trust, which is controlled by biotechnology investor Phillip Frost.

The company’s lead product candidate, RXI-109, is a self-delivering RNAi compound being developed to reduce dermal scarring following planned surgeries. RXI-109 reduces the expression of CTGF, a regulator of several biological pathways involved in fibrosis, including scar formation in the skin. In mid-2013, the company completed two Phase I studies that demonstrated safety and confirmed dose dependent silencing of mRNA of CTGF and reduced presence of CTGF protein in incisional wounds treated with RXI-109. The company began a Phase 2 study in November to evaluate efficacy.

As of third-quarter 2013, the company reported $15.8 million in cash, cash equivalents and short-term investments that should be sufficient to finance the rest of its Phase 2 trial. The results of that trial could provide a catalyst for a partnership deal or potentially M&A interest going forward. Favorable data could also confirm the effectiveness of its proprietary sd-rxRNA delivery platform, which could be used in other indications and de-risks its entire clinical development pipeline.

Despite RXi Pharmaceuticals’ strong clinical data to date, large end markets, and upcoming catalysts, the company “founded by one of the co-discoverers of RNAi” trades with a market capitalization of around $60 million. Investors have the opportunity to acquire shares of the company at a fraction of the price of larger competitors within the industry, like ISIS Pharmaceuticals and Alnylam Pharmaceuticals, even if the company’s clinical portfolio is younger and carries more risk.


ISIS Pharmaceuticals and Alnylam Pharmaceuticals have both experienced a sharp run-up as RNA-based therapeutics have re-emerged over the past couple of years. With both of these companies trading at lofty valuations, investors interested in the space may want to consider younger companies that have shown promising clinical data to date. RXi Pharmaceuticals is one of these companies that recently up-listed to the NASDAQ and offers several near-term catalysts stemming from its RXI-109.

Originally written for SECFilings.com, a leading provider of SEC filings, real-time alerts, and in-depth analysis with a team of experienced financial writers that cover quarterly/annual reports, insider trading/hedge fund activity, and IPOs, spinoffs, and other disclosures of interest identified from time to time within documents filed with U.S. regulatory agencies. SECFilings.com may be compensated for its services in the form of cash-based compensation or equity securities in the companies they write about or a combination of the two. For a full disclaimer, click here SECFilings.com/disclaimer.aspx.

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