Alnylam PharmaceuticalsALNY

Alnylam reported second-quarter revenue of $1.29 billion, which was slightly below the $1.32 billion analysts expected. While total product sales grew 74 percent compared to last year, the company lowered its full-year sales forecast for its TTR medicines, which treat a specific type of heart and nerve damage. The new range is $4.2 billion to $4.5 billion, down from the previous $4.4 billion to $4.7 billion.

This forecast cut is the main reason the stock fell. For a company whose value depends on taking over a large market for heart conditions, any sign of slowing momentum is a concern. However, the business is still growing rapidly and reached a milestone of over $1 billion in quarterly product sales for the first time, showing that its technology is successfully reaching a large number of patients.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

Key highlights

• Core heart franchise growing: Total revenue for the heart and nerve franchise grew 89% to $1.03 billion compared to last year, driven by strong patient demand for the flagship drug Amvuttra. This drug alone brought in $1.01 billion this quarter, more than doubling its sales from a year ago as it expands into a wider market for heart disease.
• Revenue outlook lowered: Management lowered its full year sales guidance for the heart and nerve franchise to a range of $4.2 billion to $4.5 billion, down from the previous $4.4 billion to $4.7 billion. This change happened because the company saw a surge of early demand from waiting patients start to level off, suggesting future growth will come at a more moderate pace.
• Operating margin turning positive: The company reached a 17.9% operating margin, a measure of profit left after paying for business costs, which is a major shift from a loss a year ago. Total revenue grew 67% to $1.29 billion, which allowed the business to outpace its spending on research and marketing.
• Novartis partnership driving cash: Royalty revenue rose 79% to $71.7 million, powered by higher sales of the cholesterol drug Leqvio by partner Novartis. These royalties are high profit income that helps the company fund its own expensive clinical trials for new medicines.
• Innovation spending remains high: Research and development costs rose 28% to $413.1 million as the company ran large late stage trials for its next generation heart and blood pressure drugs. While expensive, this spending fell to 32% of total revenue compared to 42% a year ago, showing the business is becoming more efficient as it scales up.

Our take: This was a mixed quarter. While the company hit a major milestone by turning an operating profit and seeing 89% growth in its core heart franchise, the cut to full year sales guidance is a real disappointment. It suggests the easiest phase of growth is over, but the long term case remains strong as the company moves toward becoming a self funding biotech giant.