The Zacks Analyst Blog Highlights: Yum Brands, McDonalds, Burger King, Alnylam Pharmaceuticals and Medicines Co.

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Oct 09, 2013, 09:30 ET

CHICAGO, Oct. 9, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Yum Brands (NYSE:YUM-Free Report), McDonalds (NYSE:MCD-Free Report), Burger King (NYSE:BKW-Free Report), Alnylam Pharmaceuticals Inc. (Nasdaq:ALNY-Free Report) and The Medicines Co. (Nasdaq:MDCO-Free Report).

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Here are highlights from Tuesday's Analyst Blog:

YUM's China Plan Looking Deep Fried

Yum Brands (NYSE:YUM-Free Report) posted misses of both the top and bottom line today. Earnings per share (EPS) was expected to be $0.93, but came in at $0.85, and revenues were expected to be $3.54 billion, but posted $3.47 billion. Zacks models showed a large decline in analysts' revisions over the past 60 days, and a potential negative earnings surprise. Unfortunately, both came true.

This company produces more than half of their profits from China, and sales in China declined 11% for the quarter. This is the most crippling news, more damaging than the top and bottom line numbers. 57% of all operating profits are derived from emerging markets and most importantly China. KFC is the most advertised, and most recognized restaurant brand in China, and YUM has spent a large amount of money on advertising in this country. Moreover, China was supposed to be the great growth driver through 2015, for the company. China was planning on expansion plans of more than 20 new city clusters, trade zones, and transportation hubs. And YUM was planning on purchasing many spots in these new cities. But given the consistent decline of sales in China, YUM might want to reconsider their massive expansion plans in that country.

To further put pressure on YUM's management team, analysts are expecting at least modest growth from their direct competitors, McDonalds (NYSE:MCD-Free Report), and Burger King (NYSE:BKW-Free Report). Another potential long term negative is the Avian Flu epidemic in China, which is causing potential customers to stay away from restaurants (impacting both MCD, and BKW, but not as severely as it is impacting KFC). It will be interesting to see if the decline in sales was solely due to the Avian Flu epidemic, or if it was a function of customers taste.

This is the first negative earnings surprise by YUM Brands in over four quarters, but the negative fourth quarter outlook will have analysts revising their expectations within the next few days. Zacks will have a detailed article out tomorrow.

Pipeline Update at Alnylam

Alnylam Pharmaceuticals Inc. (Nasdaq:ALNY-Free Report) is a biopharmaceutical company developing novel therapeutics based on a biological pathway known as RNA (ribo nucleic acid) interference (RNAi). Alnylam is developing several candidates using this technology for the treatment of multiple diseases.

ALN-PCS, a systemically administered RNAi therapeutic, is one of the important candidates at Alnylam being developed for the treatment of hypercholesterolemia. Positive results from a phase I study on ALN-PCS were published in The Lancet. The study evaluated a single dose of the candidate without concomitant lipid-lowering agents such as statins.

Results from the study revealed that a rapid, dose-dependent reduction in plasma PCSK9 of up to 84% from baseline was observed in patients in the ALN-PCS arm compared to placebo. Moreover, serum levels of low-density lipoprotein cholesterol (LDL-C) were reduced by up to 57% from baseline in these patients compared to placebo. Results also revealed that the candidate was generally safe and well tolerated in this phase I study.

We remind investors that Alnylam had formed a global alliance with The Medicines Co. (Nasdaq:MDCO-Free Report) for the development and commercialization of the ALN-PCS RNAi program earlier this year. As per the terms of the agreement Alnylam is eligible to receive up to $180 million on the achievement of development and commercial milestones apart from an upfront cash payment of $25 million. The company could also receive scaled double-digit royalties from The Medicines Company on global sales of ALN-PCS products commercialized under this agreement.

Alnylam, along with The Medicines Company, is currently advancing the development of another RNAi therapeutic candidate targeting PCSK9, ALN-PCSsc. In preclinical studies, administration of ALN-PCSsc resulted in more than 80% reduction in plasma PCSK9 with more than 50% reduction in LDL-C. Alnylam intends to nominate a development candidate for ALN-PCSsc by year end.

We are encouraged by the pipeline progress at Alnylam. However, most of the candidates at the company's pipeline are in the early or middle stages of development. We expect investor focus to remain on Alnylam's pipeline going forward.

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