Where Will Alnylam Pharmaceuticals Stock Be In 2023?

Alnylam Pharmaceuticals (NASDAQ:ALNY), a relatively smaller pharmaceutical company with a market capitalization of $16 billion, has seen its stock rise by 17% this year. The stock now trades at over 33x projected 2020 revenues, despite the fact that the company is likely to post another loss this year. Does this make the stock expensive? Probably not, considering that revenues could grow over 3x by 2023, with Net Income turning positive. We believe the stock could gain over 50% to north of $200 levels over the next 3 years.  Here’s how this is possible.

For more details on Alnylam’s historical performance, see our interactive dashboard what drove Alnylam stock up 7% Since The End Of 2017

Alnylam’s Revenues could grow by over 3x from average consensus levels of around $470 million in 2020 to over $1.6 billion by 2023, representing a growth rate of roughly 52% per year (for context annual growth was about 85% between 2017 and 2019). There are multiple trends that support this continued growth. Firstly, the U.S. FDA in late 2018 approved Alnylam’s Onpattro, which is used for the treatment of polyneuropathy caused by hereditary transthyretin-mediated amyloidosis (hATTR). The drug garnered sales of $166 million in 2019, explaining the surge in 2019 total revenues for the company. Onpattro sales grew 2x to $133 million in the first half of 2020, and its peak sales are estimated to be north of $1 billion. Secondly, the U.S. FDA approved Alnylam’s drug Givlaari, which is used for the treatment of a rare disease, acute hepatic porphyria, in 2019, and the drug garnered sales of $16 million in the first half of 2020. Givlaari was also approved by the EU regulators in March 2020. The drug is priced at $39,000 per vial, translating into an average annual cost of $575,000 per patient, and its peak sales are estimated to be north of $500 million. Finally, the company has more drugs, including Lumasiran and Vutrisiran, in its late stage pipeline, and if approved could add incremental revenues over the coming years.

While Alnylam will post a loss this year, the company could turn around operations in 2022-23, as the company’s past investments in R&D and product development start paying off. While other prominent pharmaceutical companies such as Amgen, posted margins of more than 35% over the last few years (Non-GAAP Net Income, or profits after all expenses and taxes, calculated as a percent of revenues), Alnylam is a high growth company, and it could see gradual growth in margins. However, it’s probably reasonable to assume that as Alnylam’s business gains scale, it can boost margins to about 25% in 2023. Considering our revenue projections of roughly $1.6 billion and 25% margins, $400 million in Net Income is likely possible by 2023.

Now if Alnylam’s Revenues grow 3x, the P/S multiple will shrink to 10x from its current level, assuming the stock price stays the same, correct? But that’s what Alnylam investors are betting will not happen! If Revenues expand 3x over the next few years, instead of the P/S shrinking from around 33x presently to about 10x, a scenario where the P/S metric falls more modestly, perhaps to about 15x, looks more likely. For context, the broader pharmaceuticals (biotechnology) sector traded at a forward P/S multiple of about 7x, and more prominent companies, such as Amgen trade in line with the industry average, while high growth companies, such as Illumina, among others, trade in the range of 10x to 15x. One might assume that Alnylam will trade slightly ahead of these companies considering that it’s likely earlier in the growth cycle. This would make growth in Alnylam’s stock price by about 50% a real possibility in the next three years, taking its market cap to over $24 billion. This would translate into a P/E multiple of about 60x based on our projected 2023 earnings for the company.