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.

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