Alnylam Pharmaceuticals, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. Amounts are in U.S. dollars; financial statement amounts below are in millions except per-share data. Alnylam is a clinical-stage biopharmaceutical company developing RNA interference (RNAi) medicines. At the reporting date, it had no marketed products and relied on collaboration revenue.
Financial results and liquidity
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Collaboration revenue | $29.9 | $15.9 | $51.8 | $34.9 |
| Research and development expense | $137.6 | $90.6 | $234.4 | $177.6 |
| General and administrative expense | $84.7 | $45.8 | $157.1 | $84.3 |
| Operating loss | $(192.4) | $(120.5) | $(339.8) | $(227.0) |
| Net loss | $(163.6) | $(118.4) | $(304.8) | $(225.7) |
| Loss per share, basic and diluted | $(1.63) | $(1.34) | $(3.04) | $(2.59) |
- Collaboration revenue was the company’s reported revenue; no product-sales revenue was reported. Operating expenses substantially exceeded revenue, so conventional profit margins are not meaningful.
- Revenue comparisons are materially affected by adoption of the new revenue standard on January 1, 2018. The standard reduced opening deferred revenue by $68.2 million, with a corresponding adjustment to accumulated deficit. For the six months, revenue under the prior standard would have been $101.2 million rather than $51.8 million; the filing also reports prior-standard Q2 revenue of $46.2 million versus $29.9 million as reported.
- Q2 other income included a $20.6 million Dicerna litigation-settlement gain. It comprised $2.0 million cash, Dicerna shares valued at $10.0 million, and the discounted value of a future $13.0 million payment. The gain reduced the reported net loss but was not recurring operating revenue.
- Cash used in operating activities was $258.4 million for the six months, versus $181.4 million in 2017. Capital expenditures were $44.0 million. Cash, cash equivalents and restricted cash ended at $363.4 million.
- At June 30, cash and cash equivalents plus marketable debt securities totaled approximately $1.436 billion, excluding $44.8 million of restricted investments. Total assets were $1.789 billion; stockholders’ equity was $1.621 billion; accumulated deficit was $2.384 billion.
- Long-term debt was $30.0 million, due in April 2021 and secured by cash collateral equal to the outstanding principal. The filing describes the borrowing rate as LIBOR plus 0.45%.
Material changes and management outlook
- Year-over-year operating expenses rose sharply, reflecting pipeline and late-stage manufacturing investment, increased headcount, regulatory work, and commercial and medical-affairs build-out ahead of possible launches.
- Management expected R&D and G&A expenses to increase in the second half of 2018 compared with the second half of 2017. It expected collaboration revenue to decrease significantly in that period, partly because fitusiran transition work was expected to be substantially complete in Q3 and because of a prior-year MDCO milestone.
- Management stated that existing cash, cash equivalents and marketable debt securities, together with expected alliance cash, were sufficient to advance its Alnylam 2020 strategy for at least 12 months from the filing; elsewhere it said current resources were expected to support that strategy for at least the next few years. Both statements depend on its operating plan and assumptions. The company anticipated continued losses and noted that additional financing might be needed.
- Alnylam’s Alnylam 2020 goal was three marketed products and ten clinical programs, including four late-stage programs, across at least three therapeutic areas by the end of 2020. Patisiran was under U.S. FDA priority review with an August 11, 2018 action date; the EU CHMP had issued a positive opinion, with an EC decision expected in September. If approved, management said launch and product revenue could begin in 2018.
- Other disclosed milestones included expected givosiran interim Phase 3 results by the end of September 2018, with a possible year-end NDA submission contingent on positive results and acceptable safety; a lumasiran Phase 3 start targeted for mid-2018; and an ALN-TTRsc02 Phase 3 start targeted for late 2018. Cemdisiran Phase 2 data timing moved to 2019 due to slower enrollment.
Key risks, contingencies and unusual items
- Clinical, regulatory, safety, manufacturing, commercialization, reimbursement and funding risks are significant. The filing highlights prior revusiran discontinuation after a mortality imbalance and fitusiran’s 2017 dosing suspension following a fatal thrombotic event; fitusiran dosing resumed under a risk-mitigation strategy.
- Silence Therapeutics litigation and patent challenges remained ongoing, including claims concerning patisiran. Alnylam disputed the claims and said it intended to defend its products. The filing also disclosed a dispute with Ionis over whether technology-access fees were owed following the Sanofi Genzyme restructuring; Alnylam disputed that additional fees were due.
- The January 2018 Sanofi Genzyme restructuring gave Alnylam global TTR product rights, including patisiran, while Sanofi Genzyme received global fitusiran rights. Alnylam was to fund TTR development and commercialization; fitusiran costs were to be funded by Alnylam during transition up to a $50 million cap, after which Sanofi Genzyme would fund them.
- The Dicerna settlement resolved litigation between the companies for $25.0 million of aggregate consideration and imposed certain activity restrictions; it did not grant either party an intellectual-property license or include an admission of liability.
Important facts for investors to verify
- FDA and EC decisions on patisiran, and any launch timing, label, safety requirements and commercial uptake.
- Clinical readouts, enrollment progress and safety developments for givosiran, lumasiran, ALN-TTRsc02, fitusiran and other programs.
- Cash burn, collaboration receipts, deferred-revenue recognition effects and whether funding needs or spending plans change.
- Progress and cost of manufacturing and commercial infrastructure, including the Norton facility and third-party supply arrangements.
- Outcomes of the Silence patent proceedings and the Ionis fee dispute, including any financial or development impact.