Here's Why Arbutus Biopharma Corp. Stock Soared Today

What happened

Shares of Arbutus Biopharma Corp. (NASDAQ: ABUS) rode some mighty coattails today. This morning, Alnylam Pharmaceuticals, Inc. (NASDAQ: ALNY) announced highly positive data for a candidate that employs delivery technology it licensed from Arbutus. The surprisingly positive results raised hopes for future royalties and lifted the stock 20.7% higher to end Wednesday's session.

So what 

Alnylam suffered some safety-related setbacks that forced it to shutter a program with a drug similar to the candidate that succeeded today, patisiran. The familial amyloid polyneuropathy candidate uses Arbutus' lipid nanoparticle delivery technology to enter cells. If approved, Arbutus will be entitled to a single-digit royalty percentage on sales of the drug.

While few doubted patisiran's ability to reduce nerve damage, its safety profile was concerning. When they lifted the lid off the results, there were more side effects in the placebo group.

Now what

Alnylam intends to file a new drug application for patisiran before the end of the year and could begin generating sales as early as next summer. Annual patisiran sales are expected to top out around $700 million if approved.

A single-digit royalty percentage probably isn't going to bring Arbutus to profitability, but it would go a long way to fund development of hepatitis B antiviral candidates currently in mid-stage clinical trials. In the first half of the year, the company recorded $1.3 million in revenue, while operations chewed through $39.1 million. At this pace, checks from Alnylam probably won't be able to close the gap before the company needs to raise more capital. The cash balance on the balance sheet at the end of June totaled $115.6 million.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alnylam Pharmaceuticals. The Motley Fool has a disclosure policy.