Alnylam Pharmaceuticals, Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing also reports fourth-quarter results. Alnylam is a commercial-stage biopharmaceutical company developing RNA interference (RNAi) medicines. ONPATTRO and GIVLAARI were its two approved products at year-end.
Financial performance and liquidity
| Metric | FY2019 | FY2018 | Change / context |
|---|---|---|---|
| Total revenue | $219.8 million | $74.9 million | Up 193% |
| Net product revenue | $166.5 million | $12.5 million | ONPATTRO expansion; GIVLAARI launched in December |
| Revenue from collaborators | $53.2 million | $62.4 million | Down 15% |
| Operating expenses | $1,159.2 million | $889.6 million | Up 30% |
| Operating loss | $(939.4) million | $(814.7) million | Loss widened |
| Net loss | $(886.1) million | $(761.5) million | Loss widened; diluted loss per share was $8.11 versus $7.57 |
| Operating cash flow | $(278.4) million | $(562.6) million | Improved mainly from collaboration-related deferred revenue |
- Fourth-quarter 2019 revenue was $71.7 million, operating expenses were $369.8 million, and net loss was $276.2 million, or $2.47 per share.
- Reported 2019 cost of goods sold was $25.1 million against $166.5 million of product revenue. This implies a high reported product gross margin, but it is not necessarily representative of ongoing economics: some sales drew on inventory whose manufacturing costs had previously been expensed as R&D.
- Cash, cash equivalents and marketable debt and equity securities totaled $1.536 billion at year-end, compared with $1.084 billion in 2018. Restricted investments of $14.8 million were additional. Working capital was $1.363 billion.
- Cash from financing was $823.2 million, including $400.0 million from Regeneron’s stock purchase and $381.9 million net proceeds from a public offering. Investing activities used $417.7 million, including substantial securities purchases and $140.2 million of property and equipment purchases.
- Alnylam repaid its $30 million term loan in September 2019 and reported no long-term debt at year-end. Operating lease liabilities were $303.8 million; undiscounted future lease payments totaled $532.7 million.
Material changes and business developments
- ONPATTRO net revenue reached $166.4 million in 2019, and the company reported more than 750 patients treated worldwide since launch. GIVLAARI received FDA approval in November and launched in the U.S. in December.
- Collaborator revenue fell mainly because of lower reimbursable activity under the Sanofi Genzyme collaboration; Regeneron revenue began following a new collaboration.
- Research and development expense rose 30% to $655.1 million; selling, general and administrative expense rose 25% to $479.0 million, reflecting pipeline advancement, hiring, commercial expansion and product launches.
- Regeneron invested $400 million for common stock and made a $400 million upfront collaboration payment. Alnylam reported a $555.1 million Regeneron collaboration transaction price at year-end, with substantial amounts remaining deferred and to be recognized as obligations are performed.
- Positive topline Phase 3 results for lumasiran were reported in December 2019; a rolling FDA NDA submission began in January 2020. Inclisiran’s partner reported positive Phase 3 results and filed regulatory applications; Novartis completed its acquisition of that partner, The Medicines Company, in January 2020.
Outlook, commentary and key risks
- Management expected 2020 product revenue to increase as ONPATTRO and GIVLAARI added patients and entered additional markets, subject to regulatory approvals. The filing does not provide a specific revenue target.
- Management expected 2020 R&D and SG&A expense to increase as the pipeline advances and global commercial infrastructure expands. It described 2019 as likely the peak net-loss year, but still expected operating losses for the foreseeable future.
- Based on its operating plan, the company believed available investments, expected product sales and existing alliances would fund its strategic goals for at least 12 months from the filing date. This outlook depends on sales, collaboration receipts, development costs and other assumptions; additional financing may be needed sooner than expected.
- Key execution risks include clinical-trial and regulatory uncertainty, safety findings, commercial uptake and reimbursement, competition, and dependence on collaborators and third-party manufacturers. Agilent was the sole active pharmaceutical ingredient supplier for ONPATTRO and GIVLAARI; Alnylam also relied on limited CMO capacity.
- Unusual and notable items include the $11.3 million fair-value gain on Vir shares, a $9.4 million gain from remeasurement of the Regeneron equity issuance obligation, and $37.0 million of R&D license fees, including fees associated with collaboration arrangements.
- Pending securities class actions allege misstatements concerning patisiran/ONPATTRO; the company disputes the claims. An Ionis arbitration over alleged technology-access fees was pending, with a hearing scheduled for the first half of 2020. The filing states outcomes are uncertain.
- The auditor issued an unqualified opinion on the financial statements and internal control. The Regeneron collaboration’s allocation of transaction price to obligations was identified as a critical audit matter because it required significant estimates and judgment.
Important facts for investors to verify
- Whether ONPATTRO and newly launched GIVLAARI can sustain patient growth, revenue, access and reimbursement in existing and new markets.
- Whether reported product margins remain comparable as zero-cost inventory is depleted and manufacturing costs are recognized in cost of goods sold.
- Progress, safety and regulatory timing for lumasiran, vutrisiran, patisiran for cardiomyopathy, fitusiran and partnered programs, including inclisiran.
- Cash burn excluding the timing benefit of Regeneron deferred revenue, and the effect of rising R&D, commercial, manufacturing and lease commitments on liquidity.
- Developments in the securities litigation and Ionis arbitration, as well as manufacturing continuity and intellectual-property challenges.