RNA drug development area is hitting up. One of our speculative RNA play ALNY has hit a major deal with major German pharmaceutical company Roche. According to the press release, Roche is paying 331 million in cash for ALNY to develop drug based on its RNA interference technology. Also Roche is taking major equity stake, paying $21.50 for ALNY's near 2 million shares. ALNY is currently trading at slightly above $15 so this deal represents 40% premium to the current share price. ALNY has slightly more than 37 million shares outstanding so Roche stake will be roughly more than 5% of the total shares. In addition, ALNY's market cap stands at 570 mil so this deal roughly valued at 1 billion is huge indeed. This deal clearly again validates RNA technology in developing next generation drugs and big pharmas are seeing definite interest in this field. I expect ALNY to trade up on this news. I believe that companies in the area will not be left alone and big pharmas are likely to acquire several of these companies at a hefty premium. I would not surprised ALNY doubles from here. Just above $15 presents outstanding entry point. However, do remember this is a speculative play. The company currently does not generate positive cash flow nor positive net income on GAAP basis.
ALNY has probably the best IP portfolio in RNA technology area. Merck took out Sirna at more than 70% premium to its share. With Roche paying hefty cash to develop drug, I would not be surprised if Roche acquires this company if the company is able to meet drug development milestones that are yet known to investors' communities.
ISIS, another our speculative biotech play based on RNA antisense technology is other company that is going to attract big pharma interest. While big biotech companies has been struggling of late due to increased safety requirement by FDA for drug approval and medicare reimbursement concern, small biotechs are receiving more investors' attention. For this reason, I want you guys to stay the course with ALNY and ISIS. If you don't have any exposure, it would not be a bad idea to expose small percentage of your investment portfolio to ALNY and ISIS.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
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