Alnylam Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2016. Filed November 3, 2016. Alnylam is a clinical-stage RNA-interference therapeutics company; it reported no product sales, with revenue derived from collaborations.
Financial performance
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Collaboration revenue | $13.7m | $6.3m | $29.7m | $33.5m |
| Research and development | $97.9m | $68.6m | $277.4m | $193.7m |
| General and administrative | $22.4m | $16.0m | $61.5m | $43.4m |
| Total operating expenses | $120.3m | $84.7m | $338.9m | $237.0m |
| Operating loss | $(106.7)m | $(78.3)m | $(309.2)m | $(203.5)m |
| Net loss | $(104.1)m | $(76.8)m | $(297.2)m | $(199.4)m |
| Net loss per share | $(1.21) | $(0.91) | $(3.48) | $(2.38) |
- For Q3, revenue more than doubled, mainly from Sanofi Genzyme performance obligations and a non-recurring collaborator milestone. Nine-month revenue declined as Monsanto and Takeda revenue recognition ended in 2015.
- Operating expenses rose 42% in Q3 and 43% for the nine months, driven largely by pipeline clinical and manufacturing activity, increased headcount, and stock-based compensation. No operating margin is meaningful given the company’s operating losses and collaboration-based revenue.
- Nine-month operating cash flow was $(229.4)m, versus $(136.1)m a year earlier. Investing cash flow was $42.2m provided, including marketable-security maturities and sales; financing cash flow was $174.8m provided, including $150m of term-loan proceeds.
Financial position and liquidity
- At September 30, 2016, cash and cash equivalents were $168.5m; marketable securities were $870.6m; and restricted investments were $150.0m. Management reported $1.04bn of cash, cash equivalents and fixed-income marketable securities, excluding restricted investments and Regulus equity holdings.
- Total assets were $1.313bn, total liabilities $297.9m, and stockholders’ equity $1.015bn. Accumulated deficit was $1.544bn.
- Long-term debt was $150m, under term loans maturing in April 2021 at LIBOR plus 0.45%. The loans are secured by cash collateral equal to at least the outstanding principal; $150m was classified as restricted investments.
- Management said existing liquid resources and expected cash from current alliances should fund its Alnylam 2020 objectives for at least the next several years, but cautioned that funding needs could be higher or arise sooner than expected. The company expects continued significant losses.
Material developments, outlook and risks
- Revusiran discontinued after quarter-end: In October 2016, following the Phase 3 data monitoring committee’s recommendation to suspend dosing and an observed mortality imbalance versus placebo, Alnylam decided to discontinue development. The cause remained uncertain and a comprehensive data evaluation was underway. The company said the decision did not affect patisiran or other programs; the patisiran Phase 3 APOLLO monitoring committee recommended continuing without modification. The filing said the financial impact of discontinuation could not yet be reasonably estimated.
- Pipeline and target: Management reiterated its Alnylam 2020 goal of three marketed products and ten clinical programs, including four in late-stage development. Fitusiran Phase 3 studies were expected to start in early 2017. Patisiran Phase 3 results were expected in 2017. Other reported developments included positive interim or initial data for fitusiran, ALN-AS1, ALN-GO1 and ALN-AAT; a new ALN-AAT02 candidate was planned after transient liver-enzyme elevations at higher doses. These are company-reported clinical updates, not assurance of approval or commercial success.
- Near-term expense and revenue commentary: Alnylam expected Q4 2016 collaboration revenue to increase from Q3, primarily from Sanofi Genzyme reimbursements and a revised performance period after revusiran’s discontinuation, partly offset by the absence of the Q3 non-recurring milestone. R&D expense was expected to rise slightly; G&A was expected to remain relatively consistent.
- Investment in manufacturing: The company purchased land and began construction of a drug-substance facility in Norton, Massachusetts. It expected up to approximately $100m of facility capital expenditures in 2016; $44.7m of property and equipment purchases were reported for the first nine months.
- Key risks: Clinical and regulatory failure, including unresolved revusiran safety findings; dependence on collaborators and third-party manufacturers; execution, cost and timing risks for the new facility; need for future financing and possible dilution; competition, reimbursement and pricing uncertainty; and intellectual-property disputes. The Dicerna trade-secret case remained ongoing. In the Utah matter, inventorship and damages claims had been dismissed, but Alnylam’s appeal seeking approximately $8m in fees remained pending.
- A 50-basis-point immediate and uniform interest-rate increase was estimated to reduce the fair value of interest-sensitive investments by $2.6m. Management stated disclosure controls were effective as of September 30, 2016.
Important facts for investors to verify
- Subsequent clinical and regulatory updates on the revusiran data review, and whether the safety findings have implications for other programs.
- Actual timing and results of patisiran Phase 3 reporting and fitusiran Phase 3 initiation, versus management’s stated expectations.
- Quarterly cash burn, collaboration receipts, and whether liquidity remains consistent with management’s multi-year funding assessment.
- Facility construction spending, completion schedule, and the terms and cash-collateral requirements of the $150m loans.
- Progress and potential financial consequences of the Dicerna litigation and Utah fee appeal.