Novartis exercises right to purchase nearly $1 million in Alnylam stock

Action keeps Novartis' ownership level of Alnylam stock at 13.4 percent

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CAMBRIDGE, Mass.—April 26 saw Swiss pharma giant Novartis AG announce that it had decided to fully exercise its current right to purchase 55,223 unregistered shares of common stock in Alnylam Pharmaceuticals Inc., pursuant to the terms of the September 2005 investor rights agreement between Alnylam and Novartis. This after the  Cambridge, Mass.-based company's shares rose to 41.8 million on the market as of the end of January, up from 41.4 million shares at the same time last year.

The exercise of this right and election to purchase the maximum number of additional shares under the terms of the agreement keeps Novartis at its current ownership level of Alnylam common stock of 13.4 percent—and the company is allowed to own as much as 19.9 percent of Alnylam's outstanding shares if it wishes.

The price was $17.99 per share, equal to the average of the closing prices for Alnylam's common stock for the 20 trading-day period ending on March 30, 2010, and the purchase took place on April 23, resulting in a cash payment to Alnylam of $993,462.

"Since the formation of our landmark alliance in 2005, we have been very fortunate to have Novartis as a committed partner," says Dr. John Maraganore, CEO of Alnylam. "This is now the third year that Novartis has elected to fully exercise their right to purchase additional shares under the investor rights agreement, maintaining their current ownership percentage of Alnylam common stock."

Maraganore also notes that it was very recently, late last year, that Novartis also elected to extend its collaboration with Alnylam for a fifth and final planned year, through October 2010.

"Novartis was clearly a pioneer in recognizing the potential of RNAi therapeutics as a new class of medicines, and we are pleased with the continued progress in our alliance," Maraganore says.

The previous stock purchases by Novartis were in 2009 and 2008, at which time the company purchased 65,922 and 213,888 shares, respectively, of Alnylam's common stock at a purchase price of $17.50 and $25.29 per share, respectively.

While the cash is probably welcome at Alnylam, and the continued support of Novartis is as well, one might see something symbolic in the fact that Novartis is maintaining its percentage of stock ownership at a stable level, at roughly the same time that Zacks Investment Research maintained a neutral recommendation on Alnylam stock at about $18 per share.

As Zacks notes in a April 14 report note on Alnylam's, the company is aiming to broaden its scope by significantly expanding the range of tissues and cell types targeted by RNAi therapeutics, and Alnylam expects to have at least four RNAi therapeutics programs under clinical development by the end of 2010.

Zacks also acknowledges that the company has entered into collaborations and other deals with big pharmaceutical players other than Novartis—such as Biogen Idec, Takeda and Roche—to further develop and utilize its core technology.

"The partnerships with major players further validate the potential and viability of the RNAi approach," Zacks notes, adding that recently, Alnylam received a payment of $20 million from Takeda as part of the strategic alliance between them and concluding: "We believe Alnylam will continue to form new alliances with leading pharmaceutical and biotech companies in the future."

But Zacks also has said it is "disappointed" with what it sees as slow pipeline progress at Alnylam. "So far, the company has only one candidate in phase II studies, ALN-RSV01 for respiratory syncytial virus," Zacks notes. "This slow pipeline progress leads us to believe that the company is not using its resources efficiently. Furthermore, we are also concerned about the early stage of development."

The exercise of the stock purchase by Novartis does not result in any changes to existing product rights or confer any additional collaboration rights to Novartis beyond the terms of the original 2005 license and collaboration agreement.

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