Alnylam Pharmaceuticals, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Unaudited results; dollar amounts below are in millions unless otherwise noted.
Business context
Alnylam is a commercial-stage biopharmaceutical company developing RNAi medicines. ONPATTRO (patisiran), its first approved product, was launched in the U.S. and internationally. The company is advancing late-stage programs including givosiran, lumasiran and vutrisiran; partner-led programs include inclisiran and fitusiran.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Total revenue | $70.1 | $2.1 | $148.1 | $53.9 |
| Product revenue | $46.1 | $0.5 | $110.6 | $0.5 |
| Collaborator revenue | $24.0 | $1.6 | $37.5 | $53.4 |
| Operating expenses | $286.4 | $256.6 | $789.4 | $648.2 |
| Operating loss | $(216.3) | $(254.6) | $(641.4) | $(594.3) |
| Net loss | $(208.5) | $(245.3) | $(609.9) | $(550.1) |
| Net loss per share, diluted | $(1.92) | $(2.43) | $(5.63) | $(5.48) |
- Revenue and costs: Q3 product revenue was $33.6 million in the U.S. and $12.5 million internationally. Q3 cost of goods sold was $5.2 million; the filing cautions that it reflects only part of ONPATTRO manufacturing costs and royalties, including sales of zero-cost inventory. No representative product margin is stated.
- Cash flow: Nine-month operating cash use was $82.4 million, versus $412.2 million in 2018; investing cash use was $196.8 million, versus $24.0 million of cash provided; financing provided $782.8 million, versus $60.1 million. Cash, cash equivalents and restricted cash ended at $925.8 million.
- Liquidity: Cash, cash equivalents and marketable debt securities totaled approximately $1.72 billion at September 30, 2019, up from approximately $1.08 billion at year-end 2018. Current assets were $1.90 billion and current liabilities $352.9 million. Management’s MD&A says resources are expected to support the Alnylam 2020 strategy for multiple years; the liquidity note states at least 12 months from filing.
- Debt and obligations: The $30.0 million term loan was repaid in September 2019, leaving no long-term debt reported. Operating lease liabilities were $304.6 million, including $28.2 million current; undiscounted future lease payments were $536.3 million.
- Balance sheet: Total assets were $2.54 billion, total liabilities $934.5 million, and stockholders’ equity $1.61 billion. Accumulated deficit was $3.45 billion. Common shares outstanding rose to 111.3 million from 101.2 million at December 31, 2018.
Material changes versus prior comparable periods
- Q3 revenue rose sharply as ONPATTRO sales expanded and Regeneron collaboration revenue began. Nine-month product revenue reached $110.6 million versus $0.5 million a year earlier, while collaborator revenue fell 30%, mainly due to lower reimbursable activity with Sanofi Genzyme and Vir.
- Operating expenses increased 12% in Q3 and 22% for the nine-month period. Higher R&D reflected clinical and manufacturing work, staffing, facilities and Regeneron-related license fees; higher SG&A reflected commercial expansion and preparation for potential launches. Lower stock-based compensation partly offset these increases.
- Nine-month net loss widened by $59.9 million, although Q3 net loss narrowed by $36.7 million year over year. Interest income increased; 2018 included a $20.6 million litigation-settlement gain, while 2019 included a $9.4 million gain from remeasuring the Regeneron share-issuance obligation.
- Financing included $381.9 million net proceeds from a January public offering and $400 million from Regeneron’s May purchase of Alnylam shares. Separately, Regeneron paid a $400 million collaboration upfront payment, largely recorded as deferred revenue rather than immediate revenue.
- Adoption of the lease accounting standard in January 2019 added approximately $290 million of lease liabilities and $230 million of right-of-use assets at adoption; comparative periods were not restated.
Outlook, commentary and risks
- Management expected ONPATTRO product revenue and cost of goods sold to increase during the remainder of 2019, with continued geographic expansion. It also expected R&D and SG&A expenses to rise as pipeline work, global commercialization and preparation for potential givosiran launch continued. The filing provides no numerical revenue or expense guidance in the supplied text.
- Givosiran’s NDA received FDA Priority Review, with a PDUFA action date of February 4, 2020; its European application was validated and granted accelerated assessment. Management reported plans to initiate the HELIOS-B vutrisiran Phase 3 study in late 2019 and expected lumasiran Phase 3 results by year-end 2019.
- The Regeneron collaboration covers eye, CNS and selected liver targets, with plans for up to 30 targets during an initial five-year research term. Alnylam may receive additional development milestones, research funding, royalties or shared program economics, but such future amounts are uncertain and dependent on development and commercial success.
- Key risks include continued operating losses and execution of commercialization, clinical and regulatory plans; product safety and efficacy; manufacturing capacity and reliance on limited suppliers; reimbursement and pricing pressure; collaboration performance and termination; and patent disputes and other litigation.
- Two securities class actions were pending, alleging misleading statements related to ONPATTRO safety/efficacy and APOLLO trial results; Alnylam said it believed the claims were without merit and intended to defend them. An Ionis arbitration concerning alleged technology-access fees was in discovery, with a hearing scheduled for the first half of 2020; Alnylam disputed that additional fees were owed.
Important facts for investors to verify
- Subsequent ONPATTRO sales, geographic launches, payer coverage and realized product economics, including the effect of zero-cost inventory on reported cost of goods sold.
- Regulatory outcomes and launch timing for givosiran, plus clinical progress and results for lumasiran, vutrisiran and partner-led programs.
- Cash burn excluding the substantial Regeneron deferred-revenue contribution, and whether the stated multi-year funding runway remains supported by updated operating plans.
- Regeneron collaboration revenue recognition, remaining performance obligations, potential milestones and the implications of its termination and equity-related rights.
- Developments in the securities lawsuits and Ionis arbitration, and any resulting financial exposure or operational impact.