The Drug Works, but Is It Worth Proceeding?


Alnylam Pharmaceuticals (NAS: ALNY) plans to do something with ALN-RSV01, which treats respiratory syncytial virus (RSV) infection in lung transplant patients; it just doesn't know what. As CEO John Maraganore explained on the conference call, "To be clear, we could decide to continue development of ALN-RSV01 toward regulatory approval or alternatively we could decide to terminate all further development efforts."

Talk about extremes. To make the decision, Alnylam needs to talk to regulatory authorities in the U.S. and EU about its latest data.

Alnylam ran a phase 2b trial on lung transplant patients infected with RSV that can lead to bronchiolitis obliterans syndrome, or BOS, which restricts the airway and increases the mortality rate in transplant patients. In patients with confirmed RSV infections, ALN-RSV01 decreased the rate of BOS by 55%, but just barely missed being statistically significant. Unfortunately one patient died of an unrelated cancer, which is treated as a BOS event even though the patient didn't have BOS the last time they were observed by trial investigators. That one patient would have pushed the trial into statistical significance.

This is only a phase 2 trial, so close enough really is good enough. Even using the tougher criteria, which the FDA would likely require, the trial would be statistically significant with a 55% reduction in BOS if the company just enrolled more patients.

So why is Alnylam considering putting the drug on the shelf? It's all about return on investment. There are only 500 to 1,000 at-risk lung transplant patients per year in the U.S. and Europe, although there are other immune-compromised patients that might be appropriate for the drug.

With a limited potential return, how much Alnylam has to invest -- the size and scope of the phase 3 program -- will likely determine whether the program moves on, especially since the biotech has limited resources and a pipeline of promising drugs to fund. This trial took a couple of years to complete and a phase 3 trial would likely need to be even larger.

Cubist Pharmaceuticals (NAS: CBST) has an option to opt into the development of ALN-RSV01, which would reduce Alnylam's costs and push the drug forward. Alternatively, Cubist might pass, which could allow Alnylam to out-license the drug to some other deep-pocketed pharma looking for a low-risk, low-reward play. Pfizer (NYS: PFE) is increasingly interested in orphan drugs, as is Sanofi (NYS: SNY) through its purchase of Genzyme, and either company could be a good potential partner.

Stay tuned: Alnylam plans to let investors know its plans for ALN-RSV01 in the second half of the year.

While you're waiting, take a look at what Fool analysts believe is the next rule-breaking multibagger. Get the free report by clicking here.

At the time thisarticle was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Pfizer. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.