Alnylam Pharmaceuticals, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited consolidated financial statements; filed November 2, 2023. Alnylam is a commercial-stage RNAi therapeutics company with four products it commercializes and a fifth, Leqvio, commercialized by Novartis.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $750.5 million | $264.3 million | $1,388.6 million | $702.4 million |
| Net product revenue | $313.2 million | $232.3 million | $895.2 million | $632.7 million |
| Collaboration revenue | $427.5 million | $29.3 million | $469.8 million | $64.3 million |
| Operating income (loss) | $213.9 million | $(258.0) million | $(165.8) million | $(596.5) million |
| Net income (loss) | $147.8 million | $(405.9) million | $(302.4) million | $(923.7) million |
| Diluted EPS | $1.15 | $(3.32) | $(2.43) | $(7.62) |
- Revenue mix and product trends: Q3 product revenue rose 35% year over year. AMVUTTRA revenue was $148.7 million, up from $25.2 million, while ONPATTRO revenue fell 44% to $81.6 million, primarily as patients switched to AMVUTTRA. GIVLAARI revenue was $54.1 million and OXLUMO revenue was $28.7 million.
- Margins and costs: Q3 operating income was 28.5% of revenue; nine-month operating results remained negative. Cost of goods sold was 25.4% of product revenue in Q3 versus 15.7% a year earlier. The increase primarily reflected an ONPATTRO inventory impairment related to the anticipated cardiomyopathy indication.
- Cash flow: Operations provided $134.0 million in the first nine months, versus $409.3 million used in the prior-year period. Management attributed the improvement mainly to Roche’s $310 million upfront payment and stronger product receipts. Investing used $95.7 million; financing provided $132.9 million. Cash, cash equivalents and restricted cash at period-end were $1.035 billion.
- Liquidity and debt: Cash and cash equivalents were $1.033 billion; marketable debt securities $1.363 billion; and marketable equity securities $10.4 million. Current assets were $2.985 billion and current liabilities $949.8 million. Convertible debt carrying value was $1.020 billion, with $1.04 billion principal due 2027. The liability for sold future royalties was $1.355 billion. Stockholders’ deficit was $165.9 million; accumulated deficit was $6.872 billion.
Material changes and unusual items
- Q3 collaboration revenue included $310.0 million recognized when Roche received zilebesiran licenses and a $65.0 million cumulative catch-up adjustment related to a $100 million Regeneron milestone for ALN-APP. The Roche transaction accounted for most of the sharp year-over-year revenue increase; these amounts should not be assumed to recur at the same level.
- Net product revenue growth reflected AMVUTTRA’s launch and uptake, partly offset by declining ONPATTRO sales. GIVLAARI and OXLUMO also grew.
- Q3 2022 included a $76.6 million loss on extinguishment of debt; no such charge was recorded in 2023. Lower interest expense and higher interest income also reduced year-over-year total other expense.
- Other expense included a $31.2 million Q3 increase in the fair value of the development derivative liability; the nine-month change was $67.9 million. The liability was $293.5 million at September 30.
- In September 2023, positive topline KARDIA-1 Phase 2 results for zilebesiran triggered an $84.5 million payment obligation to Blackstone Life Sciences over four years.
Outlook, management commentary and risks
- Management expected product revenue and collaboration and royalty revenue to increase during the remainder of 2023 compared with 2022. It also expected combined R&D and SG&A expenses to increase as pipeline development and global commercial infrastructure expand. Expense levels may vary with trial enrollment, manufacturing, regulatory reviews and stock-based compensation.
- Management said available cash, cash equivalents and marketable securities, together with anticipated product and alliance cash generation, should fund the operating plan for at least 12 months from the filing date. The company’s P5x25 strategy targets a top-tier biotech and self-sustainable financial profile by the end of 2025; management’s expectation of avoiding future equity financing is subject to execution and business risks.
- Post-quarter regulatory development: On October 6, 2023, the FDA issued a complete response letter for patisiran’s supplemental application for ATTR cardiomyopathy, stating clinical meaningfulness had not been established. The letter identified no safety, study-conduct, quality or manufacturing issues. This followed the FDA advisory committee’s 9–3 vote that benefits outweighed risks. The filing says the outcome could affect revenue expectations and notes ONPATTRO inventory impairment associated with the indication.
- Key business risks include clinical or regulatory setbacks, competition, pricing and reimbursement pressure, dependence on collaborators and contract manufacturers, and the possibility that commercial growth or alliance receipts fall short of expectations. Alnylam reported ongoing patent litigation against Pfizer/BioNTech and Moderna; litigation outcomes and timing remain uncertain.
Important facts for investors to verify
- Whether product revenue growth—particularly AMVUTTRA growth—can offset continuing ONPATTRO declines and the related inventory and cost effects.
- How the patisiran CRL affects future regulatory plans, commercial expectations and inventory charges; also track the HELIOS-B program for vutrisiran and anticipated KARDIA-2 results.
- How much collaboration revenue and cash generation is recurring versus milestone- or license-transfer-related, and whether Roche and Regeneron programs advance as planned.
- Whether operating cash generation can support the stated 2025 self-sustainability ambition given expected spending, the $1.04 billion convertible notes and royalty-sale obligations.
- Developments in the Pfizer/BioNTech and Moderna patent cases and the potential effects of Leqvio sales on royalties, including payments owed to Blackstone.