Alnylam Pharmaceuticals, Inc. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017. Unaudited financial statements; dollar figures below are in millions unless stated otherwise. Alnylam is a clinical-stage RNA interference therapeutics company and had no product sales; revenue was from collaborators.
Financial performance
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Collaboration revenue | $15.9 | $8.7 | $34.9 | $16.1 |
| Research and development expense | $90.6 | $83.2 | $177.6 | $179.4 |
| General and administrative expense | $45.8 | $18.0 | $84.3 | $39.1 |
| Total operating expenses | $136.4 | $101.2 | $261.9 | $218.5 |
| Operating loss | $(120.5) | $(92.5) | $(227.0) | $(202.5) |
| Net loss | $(118.4) | $(90.1) | $(225.7) | $(193.1) |
| Net loss per share, basic and diluted | $(1.34) | $(1.05) | $(2.59) | $(2.26) |
Profitability and margins remained negative: collaboration income did not cover operating costs. Q2 revenue rose 83% year over year, while net loss widened 31%; for the first half, revenue more than doubled and net loss widened 17%. Q2 operating expense growth was driven particularly by higher G&A, including commercial and medical-affairs staffing, professional services, and stock-based compensation. First-half R&D expense was broadly flat as higher manufacturing costs were offset by lower external services expense.
Cash flow, balance sheet, and liquidity
- Cash and cash equivalents were $408.7 million at June 30, 2017, compared with $193.6 million at year-end 2016. Cash plus marketable securities totaled approximately $1.10 billion, excluding $150.0 million of restricted investments pledged as loan collateral.
- First-half operating cash use was $181.4 million, versus $153.8 million in 2016. Investing activities provided $7.4 million; capital expenditures were $57.8 million, primarily for the Norton manufacturing facility. Financing activities provided $389.0 million.
- The May public offering raised $355.2 million net from 5.0 million shares; Sanofi Genzyme separately purchased 297,501 shares for $21.4 million. The share count increased to 91.7 million at June 30 from 85.9 million at December 31, 2016.
- Total assets were $1.434 billion and total liabilities $311.3 million. Long-term debt was $150.0 million, due in April 2021, with interest at LIBOR plus 0.45%. The debt is secured by cash collateral of at least the outstanding principal amount, reported as $150.0 million in restricted investments.
- Management said existing cash, cash equivalents and fixed-income securities, together with expected alliance cash, should fund the Alnylam 2020 strategy for at least the next few years; the financial-statement liquidity note states funding sufficiency for at least 12 months from filing. The company expects continued operating losses and may need additional funding.
Business developments, outlook, and risks
- The company’s Alnylam 2020 goal was three marketed products and ten clinical programs, including four late-stage programs, by the end of 2020. Patisiran was the most advanced candidate: management expected APOLLO Phase 3 top-line data in mid-2017 and, if positive, planned NDA and MAA submissions by year-end 2017 and shortly thereafter, respectively.
- Fitusiran’s ATLAS Phase 3 program began in July 2017. Management expected a $25 million Sanofi Genzyme milestone upon dosing the first patient. Givosiran was expected to enter Phase 3 in late 2017, subject to alignment with regulators; the FDA granted it Breakthrough Therapy designation in May. MDCO planned to begin a Phase 3 inclisiran study in late 2017.
- Management expected collaboration revenue to increase in the second half of 2017, principally from Sanofi Genzyme reimbursements and possible milestones from Sanofi Genzyme and MDCO. Milestone timing depends on clinical progress. R&D and G&A expenses were expected to rise in the second half as programs advance and commercial infrastructure expands.
- Revusiran development was discontinued in October 2016 after safety concerns, including an imbalance in mortality and worsening peripheral neuropathy versus placebo. The filing says the company reported its comprehensive evaluation on August 9, 2017, but does not provide the evaluation’s detailed results in this text. The APOLLO monitoring committee had recommended continuing patisiran without modification.
- Key risks include clinical and regulatory failure, uncertain safety and efficacy of a new therapeutic approach, manufacturing capacity and supply constraints, dependence on collaborators and contractors, future financing needs and potential dilution, reimbursement and market acceptance, and intellectual-property disputes.
- Dicerna’s state-court trade-secret case includes counterclaims; the trial was scheduled for April 2018. Dicerna filed a separate federal antitrust complaint on August 8, 2017. Alnylam said it believed the claims were without merit and intended to defend itself. These outcomes are uncertain.
Most important facts for investors to verify
- Actual APOLLO Phase 3 results and whether patisiran met the conditions for the planned regulatory filings.
- Fitusiran Phase 3 execution, safety findings, and receipt and timing of the expected milestone and cost reimbursements.
- Givosiran’s regulatory alignment and Phase 3 start, and MDCO’s inclisiran trial progress.
- Cash burn, manufacturing-facility spending, and whether liquidity continues to support the stated development plan without further financing.
- Developments in the Dicerna litigation and any material impact from the revusiran safety evaluation.