Alnylam’s strategy is expanding. Time to buy?

After getting its fifth new drug approval in four short years, you might expect Alnylam (ALNY -1.03%) take a moment to rest on one’s laurels. Those of you who know the company a little better won’t be surprised to learn that it did the opposite. Instead of pausing, the company outlined a plan to take a more aggressive approach to developing blockbuster new drugs.

For two decades, Alnylam has focused on developing small strands of RNA that interfere with the production of troublesome proteins implicated in rare diseases. Recently, the company unveiled a startling new discovery that could lead to the development of new drugs for around one-fifth of adults worldwide.

An exciting new target against obesity

In a recent scientific paper, Alnylam and collaborators leveraged genetic sequence data from over 360,000 people participating in the UK Biobank. Researchers have found a link between a rare mutation in a gene called INHBE and lower levels of abdominal fat.

Although it clearly has an impact on the deposition of abdominal fat, INHBE acts mainly in the liver. This makes it an ideal target for Alnylam, as the liver is also where the drugs you swallow or inject spend a lot of time. This allows a relatively low dosage to have an outsized effect. For example, just 25 milligrams of the company’s most recently approved treatment, called Amvuttra, effectively reduces the production of a troublesome protein called transthyretin for three months at a time.

A smooth way forward

Viruses have used strands of RNA to hijack cellular machinery since the beginning of life, and our immune systems always go crazy when they spot strands of RNA in our bloodstream. This is partly why Alnylam’s 100% owned therapies have only been approved to treat very small populations with serious and life-threatening diseases. If you’re worried the FDA won’t allow the company’s small RNA interference drugs to make the leap to larger populations, consider Leqvio.

Last December, after years of delay, the FDA approved Novartis‘ (NVS -1.64%) Leqvio to treat people with stubbornly high cholesterol. Leqvio is a small RNA interference drug that was discovered by Alnylam for a company that Novartis later acquired. The important thing to note here is that the FDA has approved Leqvio even though the annual dose is more than five times that of Alnylam’s latest treatment, Amvuttra.

Alnylam is getting better and better at reducing targeted protein production with smaller and smaller doses. If the FDA is ready to greenlight a first-generation RNA-based treatment for high cholesterol, a next-generation RNA-based treatment for obesity likely also has a good chance of being approved. .

A greater opportunity

Wegovy is an increasingly popular anti-obesity treatment from Novo Nordisk (NVO -0.28%) which obtained FDA approval last June. Demand for the weekly weight loss injection is so strong that sales will likely top $1 billion this year.

Wegovy is the first new drug the FDA has approved for weight reduction since 2014, but it’s not really new. It works along the same lines as diabetes drugs that have been around since 2005. If Alnylam is lucky with the first-ever drug for the INHBE gene, it could make the rocket ride that Wegovy is currently on quite ordinary.

Alnylam’s foray into the fight against obesity alone doesn’t make the stock a buy. We cannot assume that the nascent program has significant value until we see clinical data regarding INHBE inhibition. That said, this is a great biotech stock to buy now. With six commercialized products hitting the market in four short years, the company is poised for a burst of growth. A mainstream blockbuster could be the icing on the cake.