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Alnylam Prices IPO at $10-$12 a Share; Proceeds Will Provide Needed Cash Infusion

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About two months after announcing that it is planning to go public (see RNAi News, 3/5/2004), Alnylam Pharmaceuticals has reported in a regulatory filing that it expects to float up to 5.75 million shares of its common stock on NASDAQ at a cost of between $10 and $12 per share.

According to an amended preliminary prospectus for Alnylam’s initial public offering, the company is planning to sell 5 million shares, raising $49.3 million in net proceeds based on a price of $11 per share on the stock. The underwriters of the offering — Banc of America Securities, Citigroup Global Markets, Piper Jaffray, and ThinkEquity Partners — have also been granted an over-allotment option to purchase an additional 750,000 shares, adding about $7.7 million to the IPO’s net proceeds, said Alnylam.

After the IPO, for which a date has not been set, Alnylam expects to have about 19.3 million shares outstanding.

In the regulatory filing, which is dated May 10, Alnylam stated that it expects to use between $15 million and $20 million from the IPO proceeds to fund its research into systemically delivered RNAi-based medicines, such as its treatments for liver diseases and, down the road, cancers and autoimmune disorders. Another $10 million to $15 million is expected to be used to support the company’s efforts to develop directly delivered RNAi drugs, including ones for age-related macular degeneration and Parkinson’s disease.

The remainder of the funds from the IPO, said Alnylam, will be used for acquisition, licensing, and legal purposes, as well as for working capital, capital expenditures, and general corporate purposes.

Jumping the Gun

Alnylam’s decision to go public before it has any products on the market or in the clinic, and with its core technology unproven in human subjects, has been viewed by some as premature.

Gert Caspritz, general partner at venture capital firm Techno Venture Management — which holds about 2.5 million shares of Alnylam rival Sirna Therapeutics — told RNAi News in March that he thinks the Alnylam IPO will be perceived as coming too early because “there is a consensus in the investment community that upside potential in therapeutic use of RNAi still has to be proven.”

However, Jim Barrett, general partner at venture capital firm New Enterprise Associates (which recently purchased a stake in Nucleonics), suggested that the very potential of RNAi might be enough to allow the financial community to look beyond the preclinical nature of the technology.

“Because the technology is viewed as potentially profoundly important, that may counterbalance that [Alnylam] is so very early-stage,” he told RNAi News.

But despite the hype surrounding RNAi, Barrett cautioned that investors shouldn’t expect a revival of the genomics revolution when “the market was so buoyant that you didn’t have to worry much on the downside [of a security] because there was always someone else in line ready to pay more.”

According to Barrett, “it’s a very deliberate and sober [financial] environment,” and investments in companies such as Alnylam are being considered ones that investors “might have to hold for awhile to let the story unfold.”

Regardless of whether Alnylam — which has been supporting itself primarily on the $54.9 million worth of securities it has privately placed — is getting ahead of itself with the IPO or not, a quick look at the company’s first-quarter financial results shows one thing for certain: A cash infusion is needed.

According to the preliminary prospectus, the 60-person company has generated only $134,000 in revenues the first quarter this year, primarily through its strategic alliance with Merck (see RNAi News, 9/12/2003). For the “foreseeable future,” Alnylam noted in the filing, “we expect our revenues to continue to be derived primarily from strategic alliances,” as well as from licensing programs.

Meanwhile, the company’s costs have surged, climbing to roughly $13.5 million in the first quarter this year from about $2.2 million in the same period 2003. About $10.4 million of the total first-quarter costs were related to research and development activities, including the $5 million license fee owed to Isis Pharmaceuticals as part of the companies’ recently announced exclusive partnership (see RNAi News, 3/19/2004). In the May 10 regulatory filing, Alnylam noted that $3 million of the fee to Isis was paid upfront and the remainder is due on Jan. 3, 2005.

Alnylam, which had a net loss of $13.6 million in the first quarter, reported having $21.6 million in cash and cash equivalents as of March 31.

Isis and InterfeRx

The amended preliminary prospectus for Alnylam’s IPO also included some new details about the company’s IP and technology arrangement with Isis, as well as its InterfeRx intellectual property outlicensing program.

In addition to the sharing of IP and a $10 million equity investment in Alnylam, the deal with Isis calls for each company to pay the other up to $3.4 million in milestones based on certain development and regulatory events, as well as royalties on the sale by one company of products incorporating the IP of the other.

According to the preliminary prospectus, the partnership also stipulates that Alnylam complete studies required for an investigational new drug application filing (or a similar foreign filing) for at least one product candidate incorporating Isis IP by Jan. 1, 2008. If this does not occur, Isis has the right to grant to third parties licenses to the IP that had been exclusive to Alnylam under the arrangement.

As for Alnylam’s own efforts to make its IP estate available to other drug developers for areas outside its strategic focus — and overcome impressions that it was looking to corner the market on RNAi IP — these have yet to bear any fruit.

The InterfeRx program — which Alnylam launched only after rival Sirna Therapeutics acquired a license to an RNAi-related patent application that had been controlled by Alnylam (see RNAi News, 12/19/2003) — has yet to produce any licensees, the preliminary prospectus states.

Officials from Alnylam were unavailable for comment as the company remains in a quiet period pending the IPO.

— DM

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