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Revenues Decline at Alnylam

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Alnylam Pharmaceuticals Inc.’s (ALNY - Free Report) third quarter 2012 net loss of 38 cents per share was wider than the year-ago loss and the Zacks Consensus Estimate of a loss of 31 cents per share each. Lower revenues resulted in a wider loss during the quarter.

Revenues in the reported quarter decreased 19.4% to $16.8 million. Revenues narrowly missed the Zacks Consensus Estimate of $17 million.

Quarter in Detail

Revenues included $9.3 million from the company’s alliance with Roche Holdings Ltd. (RHHBY - Free Report) , $5.5 million from its partnership with Takeda Pharmaceuticals , in addition to $2.0 million of expense reimbursement and amortization revenues from Cubist Pharmaceuticals Inc. , among others.

Research and development (R&D) expenses fell approximately 9% to $22.1 million. The reduction was primarily due to lower costs incurred on the ALN-RSV and ALN-VSP programs. The company expects R&D expenses for the fourth quarter to remain in line with the third.

General and administrative (G&A) expenses in the reported quarter increased approximately 43.1% year over year to $12.8 million. The increase in G&A expenses was primarily attributable to the hike in consulting and professional services related to the company’s business and legal activities. The company expects G&A expenses to remain at this level in the final quarter of 2012. Interest income remained flat at $0.3 million for the third quarter of 2012.

2012 Cash Balance Projection

Alnylam now expects to end 2012 with cash, cash equivalents and total marketable securities in excess of $280 million (previous expectation: excess of $250 million).

Gross Proceeds from Regulus IPO

Regulus Therapeutics Inc., founded by Alnylam and Isis Pharmaceuticals, Inc. , recently raised $80.9 million in gross proceeds relating to its Initial Public Offering (IPO) and other financial transactions. Notably, in October this year, the company closed its IPO.

The gross proceedings include $50.9 million from the sale of common stock in the IPO, $25.0 million from the sale of common stock in a private placement to AstraZeneca (AZN - Free Report) and $5.0 million from the sale of a convertible note to Biogen Idec (BIIB - Free Report) in August this year.

In September 2007, Alnylam and Isis Pharma joined forces to establish Regulus, a company focused on microRNA (mRNA) therapeutics. In October 2010, Sanofi (SNY - Free Report) made an equity investment in the company. As of June 30, 2012, Regulus was jointly owned by Alnylam (45%), Isis Pharma (46%) and Sanofi (9%).

Regulus is evaluating microRNA therapeutics in several areas including oncology, fibrosis, hepatitis C virus infection, multiple sclerosis and atherosclerosis. The company has collaborated with several companies including GlaxoSmithKline plc (GSK - Free Report) , Sanofi, AstraZeneca and Biogen for microRNA therapeutics.

Our Recommendation

We are encouraged by impressive phase I results demonstrated by Alnylam’s candidate ALN-TTR02, which was presented during the quarter. The candidate is being developed for the treatment of TTR-mediated amyloidosis (ATTR). Patient enrollment for the phase II study on ALN-TTR02 is currently under way and the trial is expected to be completed in mid 2013.

We believe that investor focus will remain on Alnylam’s pipeline going forward. We currently have a Neutral recommendation on Alnylam. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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