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Falling Stars? Woody Allen & Alnylam Pharmaceuticals

Published: Wednesday, 20 Aug 2008 | 12:17 PM ET

Text Size

By: Mike Huckman
Reporter

Woody Allen
CNBC.com
Woody Allen

(Updated: Please see end of article.)

A cleverly titled research note always grabs my attention out of the dozens that clutter my inbox every morning. So, I couldn't pass up this one on Alnylam Pharmaceuticals with the sub-head, "Eighty Percent of Success is Showing Up --Woody Allen."

Until the bearish call this morning, shares of Alnylam [ALNY Loading... () ] were trading around $33 a share.

But Leerink Swann, which specializes in biopharma/healthcare equities research, is initiating coverage of the stock today with an "Underperform" rating saying it should soon be worth less than half its value today. The analyst, Jonas Alsenas, a veterinarian, is setting a 2009 price target of $14-$16.

I can't find a second reference to the Woody Allen quote in the nearly 20-page coverage initiation note, so I'm assuming Alsenas' intention is the somewhat obvious application of it to ALNY, based on the tone of his call.

(Alnilam, with an i not a y, by the way, is the center star in Orion's belt.)

Since I first did a story on ALNY and the Nobel Prize-winning RNAi technology back in early 2005, the stock is up 360 percent.

And since late 2006, when Merck [MRK Loading... () ] took out another RNAi company, Sirna Therapeutics, for what Leerink calls "an astounding $1.1 billion," ALNY shares have climbed nearly 90 percent. When I did that first piece, the combined market caps of the three RNAi players was less than $300 million. Today, ALNY is worth $1.3 billion.

(The third company, CytRx [CYTR Loading... () ], is still a penny stock with a market value of less than $50 million.)

While investors have been crossing their fingers that Alnylam could also grab the 100 percent premium that MRK ponied up for Sirna, the company has instead been busy striking partnership deals with the likes of GlaxoSmithKline [GSK Loading... () ], Novartis [NVS Loading... () ], Biogen-Idec [BIIB Loading... () ] and Medtronic [MDT Loading... () ], just to name a few.

But Alsenas explains away what many others see as pipeline-validating agreements with this interesting take on things: "The pharmaceutical industry is often swept by new technology fads. They are caused by sincere enthusiasm, fears of being left behind, and desperation to fill chronically depleted development pipelines, in our view."

Many analysts and experts believe RNAi could become the basis of future breakthrough drugs. But Leerink Swann thinks RNAi is more of "a drug development tool that we feel is more suited for research purposes than the development of therapeutics." Because of that, Alsenas is telling clients, "We do not believe Alynlam will successfully develop a product for many years, if ever."

Maybe he thinks the odds are better that Woody Allen will sooner have another box-office hit.

Update: I just got this email reply from Jonas Alsenas to my request to explain his reference to the Woody Allen quote: "The primary problem as we see it with the technology is that these RNAi molecules can't be delivered reliably to tissues, hence they don't 'show up' and can't be a 'success'." So, my assumption about his intention was a little off.

Questions? Comments?