ALNY’s 2Q Loss Down on Lower Costs

Alnylam Pharmaceuticals Inc.’s (ALNY - Analyst Report) second-quarter net loss of 35 cents per share was 20 cents below the loss per share in the second quarter of 2009. The Zacks Consensus Estimate indicated a loss of 30 cents per share for the reported quarter. The narrower year-over-year loss in the second quarter of 2010 was primarily attributable to the lower spend on research and development during the quarter.
 
Revenues for the reported quarter climbed 8% to $26.6 million slightly above the Zacks Consensus Revenue Estimate of $26 million.
 
Revenues were inclusive of $14 million from the company’s alliance with Roche HLDG LTD(RHHBY), $5.5 million from Alnylam‘s partnership with Takeda Pharmaceuticals, $1.9 million in revenues from license fee from Regulus Therapeutics Inc. pertaining to the partnership with Sanofi-Aventis (SNY - Analyst Report), in addition to $5.2 million of expense reimbursement and amortization revenues from Novartis AG (NVS - Snapshot Report), the National Institutes of Health, Cubist Pharmaceuticals Inc. (CBST - Snapshot Report) and Biogen Idec Inc. (BIIB - Analyst Report) among others.
 
Research and development (R&D) costs fell approximately 27.2% year over year to $28.1 million. The reduction was primarily on account of the $11 million payment of license fees in the prior year quarter pertaining to the alliance with Isis Pharmaceuticals (ISIS - Analyst Report). The decrease was partially mitigated by a rise in costs associated with the increased R&D headcount.
 
General and administrative (G&A) expenses in the reported quarter increased approximately 20.2% year over year to $10.1 million. The increase in G&A spend was primarily driven by higher professional service fees mainly for legal activities.
 
Interest income at Alnylam fell drastically to $0.6 million for the second quarter of 2010 from $1.5 million in the year-ago quarter. The reduction was primarily attributable to the significantly lower average interest rates coupled with lower average cash, cash equivalents and marketable securities balances in the reported quarter.
 
Alnylam exited the quarter with approximately $396.9 million in cash, cash equivalents and marketable securities and no debt, thereby providing the flexibility to the company to invest in its pipeline and other avenues. Alnylam expects to end 2010 with a cash balance in excess of $325 million. The projection does not include the potential adoption license payment from Novartis.
 
Our Recommendation

Alnylam is a Zacks #3 Rank ('Hold') stock, which indicates that it is expected to perform in line with the overall US equity market over the next 1-3 months. Our long-term "Neutral" stance on the Alnylam indicates that the stock is expected to replicate its short-term performance, but over 6+ months.
 
The lack of earnings estimates revisions by the analysts covering the stock implies the lack of directional pressure on the company. This justifies our short-term and long-term stance on Alnylam.

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