Alnylam Pharmaceuticals Heading Toward A Key Trial Read-Out (NASDAQ:ALNY)

Any day now Alnylam Pharmaceuticals (NASDAQ:ALNY) investors will get a key piece of information – the efficacy of its key drug Onpattro in the treatment of hereditary ATTR amyloidosis (or hATTR) characterized by cardiomyopathy (or hATTR-CM). Success in the APOLLO-B study could more than quadruple sales of this drug, not to mention presage successful outcomes for the HELIOS-B study of follow-on compound Amvuttra (vutrisiran), while failure would represent a significant risk to the share price and future value of the ATTR franchise.

The data that management have presented over the years suggest that Onpattro should hit the mark in APOLLO-B, but there’s a reason that the FDA and clinicians insist on clinical trials and prior signals of efficacy and post-hoc analyses aren’t substitutes for a positive statistically-significant outcome. I believe that Alnylam shares are meaningfully undervalued below $200/share, but investors buying in ahead of the APOLLO-B data must appreciate the risk of a sharp correction if the study results don’t live up to expectations.

An Answer Is Coming Soon…

Alnylam has presented a steady stream of data for years now suggesting that Onpattro is efficacious in slowing (if not stopping) the progression of hATTR-CM, but none of that is a substitute for a controlled clinical study. That’s what APOLLO-B is, a 360-patient study of hereditary and wild-type ATTR patients with cardiomyopathy that will show whether Onpattro is effective in improving 6-minute walk test results and other metrics like CV mortality and hospitalization (though the study is not powered for statistical significance on mortality or hospitalizations).

Prior studies of Onpattro have shown improvements in walk tests, longitudinal strain, LV wall thickness, mortality, hospitalizations and NT-proBNP (a hormone that can indicate heart failure). Results on par with prior studies would be sufficient to support approval in hATTR-CM (and wtATTR-CM), and would make Onpattro a meaningful competitor with Pfizer’s (PFE) tafamidis, the only drug currently approved for hATTR-CM and one that has been annualizing at around $2B/year in revenue.

I have seen nothing in the data that suggests the APOLLO-B study will fail, but there is a reason why the word “surprise” often pops up in discussions of clinical trial results. While Alnylam has built a strong track record with biomarker-driven studies that have fueled a much better-than-average rate of success in clinical trials, the failure of BridgeBio’s (BBIO) stabilizer acoramidis to hit its mark for the 6-minute walk test is a reminder that success can’t just be assumed.

Specific to APOLLO-B, I could see deviations in baseline heart failure severity (especially healthier patients in the placebo group) and/or trial conduct (how the 6-minute walk tests are administered) as potential drivers of a failure. The BridgeBio ATTRibute-CM study had 16% of patients enrolled with Class 3 heart failure versus 32% in the ATTR-ACT study of tafamidis, and that may well have explained at least some of the trial miss.

Assuming that the APOLLO-B study is successful, I expect Alnylam to move quickly, and given the lack of treatment options for hATTR-CM (tafamidis is a stabilizer, but almost half of patients progress while on the drug), I believe the FDA will be incentivized to move quickly on the approval process – something I believe could drive a 2023 approval.

… But The Answer May Not Be Clear

The best outcome I see for Alnylam is that APOLLO-B shows a clearly positive outcome with the walk test and clearly positive trends with hospitalizations/mortality and biomarkers. With this outcome, the drug would certainly be approvable and likely quite successful commercially.

If APOLLO-B hits the mark with the walk test but the secondary endpoints aren’t as positive, I still expect the drug to get approval, but clinical uptake could be slower, with clinicians waiting for additional long-term data on CV outcomes.

A successful walk test result and negative secondary outcomes wouldn’t go over well with the market, as I expect there would be considerable doubt as to the clinical utility of the drug, particularly given the cost. This would be a salvageable outcome if the CV data improve over time, but it would be bad for the share price in the short term. Likewise, a negative walk test outcome and positive trends with secondary outcomes would be problematic – the FDA could still conceivably approve it, but it would be a harder case to make.

The worst outcome, of course, would be failure on all relative metrics. In that scenario, I would expect a lot of doubt about the quality/prospects of Amvuttra (HELIOS-B), and I would expect the shares to fall to $100 or below, at least in the short term.

Were the results from the APOLLO-B to be equivocal (or a failure), I would think this might put more pressure on management to do an interim analysis of the HELIOS-B study ahead of the early ’24 planned read-out.

Cemdisiran May Have Something To Offer

A modest positive since my last update was the news of a successful Phase II study of cemdisiran in IgA nephropathy. Although Alnylam has partnered with Regeneron (REGN) to develop cemdisiran in various nephropathies (as mono and combo-therapy), expectations have been low since the drug flamed out as a potential rival to AstraZeneca’s (AZN) Soliris in paroxysmal nocturnal hemoglobinuria.

A Phase II proof-of-concept study showed a 37% placebo-adjusted mean reduction in the 24-hour ratio of urine protein to creatinine, and the companies are moving forward with a Phase III program. This could be a $1B-plus opportunity, but there are multiple rivals including Calliditas (CALT), Travere (TVTX), Novartis (NVS), and Chinook (KDNY) that are further along with compounds for this indication.

Still, looking at the 29% placebo-adjusted reduction in urine protein to creatinine for Calliditas’ Tarpeyo, Alnylam could be competitive, though Travere’s sparsentan showed a nearly 50% reduction versus 15% in the control group (which were treated with irbesartan). Cross-trial comparisons are always tricky (and often misleading), but my main point here is that cemdisiran is promising enough to merit further clinical research, though it’s not a big contributor to my fair value.

The Outlook

Alnylam’s ATTR program (both Onpattro and Amvuttra) drives about half of my fair value estimate (over $97/share), and that is predicated on clinical and commercial success for both compounds in both ATTR-PN and ATTR-CM. Relative to my own model, a failure in the APOLLO-B study would be a significant near-term setback, but one that success in the HELIOS-B study would overcome. If, however, Alnylam’s approach to ATTR-CM is fundamentally and critically flawed, there is significant downside risk.

The biggest change in my fair value from my last update is simply the passage of time – as programs get closer to peak revenue, their value increases. As I said, I derive about $97/share of value from the ATTR program, with close to $20/share from inclisiran (marketed by Novartis), $14.50 from fitusiran (under development at Sanofi (SNY), $29 from Givlaari (assuming future peak sales over $850M), $18 from Oxlumo (assuming peak sales of over $600M), and close to $19 from zilebesiran in hypertension. Other smaller programs drive the final number over $200.

The Bottom Line

While I think Onpattro will eventually show itself to be effective in treating ATTR-CM, I do see risks to the APOLLO-B study read-out and, further along, the HELIOS-B program as well. I don’t think the Street is currently expecting an all-around “win”, so there is some upside, but I do think the immediate post-APOLLO-B data risk/reward is close to balanced given the downside risk if Onpattro flames out in the ATTR-CM indication. I still believe this is a top-tier biotech for long-term investors, but investors considered the shares today should be aware of the risk of an adverse or “messy” outcome from the APOLLO-B study.