Alnylam Pharmaceuticals Inc. became the latest public biotech company after pricing its initial public offering Friday.

But like the 11 other IPO entrants in the sector this year, its stock sold below its projected range and had a lackluster first day on the market. The Cambridge, Mass.-based company, which is working to develop therapeutics based on RNA interference (RNAi), raised $30 million through the sale of 5 million common shares at $6 apiece. Alnylam originally forecast a per-share price range of $10 to $12, projecting an $86.25 million take.

Its shares (NASDAQ:ALNY) traded up a penny on their first day on the market, closing at $6.01. The day's range reached a high of $6.47 on volume of about 785,000.

That performance didn't surprise one outside observer, who sees many recent biotech IPOs as being prematurely pushed by the companies' financial backers.

"Because of the nature of the source of the funding of these companies, which is venture, the cost of capital is so expensive in this business space that people want to get paid back," Stephen Porter, founder and CEO of privately held VDDI Pharmaceuticals Inc., told BioWorld Today. "And the way they get paid back is through an acquisition or IPO."

Porter's Nashville, Tenn.-based company operates by in-licensing early stage products for infectious disease, oncology and cardiovascular disease and plans to eventually out-license later-stage development and commercialization activities. Much of its funding to date has been through private and government backing, Porter said, and he expects Project BioShield to further supplement financing needs down the road. More immediately though, he said VDDI is on the cusp of raising more private financing to push its late-stage cardiovascular candidate to its next hurdle.

Primarily backed by venture capitalists, Alnylam has tapped public funding much more quickly. Founded in 2002, its pricing marks the 16th biotech IPO in the U.S. this year. A day earlier, two other biotech companies priced lower-than-expected IPOs - Critical Therapeutics Inc. and Acadia Pharmaceuticals Inc. (See BioWorld Today, May 28, 2004.)

Company officials could not comment on the news, as they remain in an SEC-imposed quiet period. But in its prospectus filed two months ago, Alnylam said it would use funds to further develop its RNAi capabilities and select product candidates. (See BioWorld Today, March 2, 2004.)

Its development plans feature two RNAi applications - its Direct RNAi therapeutics program is being developed for products to be administered directly to disease sites, while its Systemic RNAi therapeutics program will be developed down the road for products that travel through the bloodstream to reach sites of disease.

The company initially is focused on Direct RNAi therapeutics directed to age-related macular degeneration and Parkinson's disease, and Alnylam expects to begin a clinical trial of its lead macular degeneration product candidate next year. Its Systemic RNAi therapeutics program might be applied to metabolic, viral and autoimmune diseases, as well as cancer.

Last summer, the company closed its last private round of financing after raising $24.6 million concurrent with a merger with Ribopharma AG, of Kulmbach, Germany. At the time, the combined company reported more than $40 million in cash. In total, Alnylam has raised more than $50 million through private investments. (See BioWorld Today, July 8, 2003.)

"Ten years ago, a VC time frame for a return on investment was seven to nine years," Porter said. "Now they're being forced to look at returns on investment in two years, which for God's sake is a bank. It's a whole different environment out there."

In the fall, Alnylam entered the industry's first RNAi-based collaboration with a large pharmaceutical partner. Merck & Co. Inc., of Whitehouse Station, N.J., is providing validated drug targets, against which Alnylam is developing RNAi compounds and working to advance them through preclinical development. Merck made an up-front payment and was due to make annual cash payments to Alnylam, in which it also made an equity investment. (See BioWorld Today, Sept. 10, 2003.)

In connection with the IPO, Alnylam also granted the underwriters a 30-day, 750,000-share overallotment option. New York-based Banc of America Securities LLC is acting as the sole bookrunner and lead manager, with co-management from Citigroup Global Markets Inc., Piper Jaffray & Co. and ThinkEquity Partners LLC, all of New York.

Eighteen biotech companies remain in line to price their IPOs.