Alnylam Pharmaceuticals, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statements are unaudited. Amounts below are in millions of dollars unless stated otherwise.
Business context
Alnylam is a commercial-stage biopharmaceutical company developing RNAi medicines. It reported sales from ONPATTRO, GIVLAARI, OXLUMO and newly launched AMVUTTRA; partner Novartis commercializes Leqvio. The company’s P5x25 strategy targets becoming a top-five biotech company by market capitalization by the end of 2025 and achieving a self-sustainable financial profile.
Financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $264.3 | $187.6 | $702.4 | $585.8 |
| Net product revenue | $232.3 | $167.0 | $632.7 | $463.6 |
| Collaboration revenue | $29.3 | $20.1 | $64.3 | $121.3 |
| Royalty revenue | $2.7 | $0.5 | $5.5 | $0.8 |
| Operating costs and expenses | $522.3 | $369.3 | $1,298.8 | $1,099.8 |
| Operating loss | $(258.0) | $(181.7) | $(596.5) | $(514.1) |
| Net loss | $(405.9) | $(204.5) | $(923.7) | $(594.4) |
| Basic and diluted loss per share | $(3.32) | $(1.72) | $(7.62) | $(5.04) |
Product revenue grew 39% in Q3 and 36% for the nine-month period. Q3 sales included $145.0 million from ONPATTRO, $25.2 million from AMVUTTRA, $45.7 million from GIVLAARI and $16.4 million from OXLUMO. Management attributed growth mainly to more patients receiving treatment, partly offset internationally by unfavorable foreign exchange.
Cost of goods sold was 15.7% of product revenue in Q3 and 14.9% for the nine-month period, versus 16.8% and 17.6%, respectively, in 2021. The filing attributes the lower percentages mainly to fully amortized intangible assets and lower royalties following expiration of third-party intellectual property.
Cash, liquidity and debt
- At September 30, cash and cash equivalents were $1,073.2 million; marketable debt securities were $1,169.1 million and marketable equity securities were $23.1 million. Combined, these totaled approximately $2,265.3 million.
- Current assets were $2,690.8 million and current liabilities were $772.8 million. Total assets were $3,535.3 million; total liabilities were $3,602.9 million, leaving stockholders’ deficit of $67.6 million. Accumulated deficit was $6,361.9 million.
- For the first nine months, operating cash use was $409.3 million, investing cash provided was $309.3 million and financing cash provided was $362.3 million. Cash, cash equivalents and restricted cash ended at $1,075.4 million.
- Alnylam issued $1.035 billion principal amount of 1.00% convertible notes due 2027 and spent $118.6 million on capped calls. It used approximately $762.1 million to repay and terminate its Blackstone term loan, including prepayment premiums. The notes’ September 30 carrying amount was $1,016.0 million.
- The liability from selling a portion of future Leqvio royalties stood at $1,267.7 million. This financing-related liability is distinct from the convertible notes.
Material changes and unusual items
- Q3 net loss nearly doubled year over year; nine-month net loss increased 55%. Higher operating expenses and other expense contributed to the deterioration.
- Research and development expense increased 26% in Q3 and 10% year to date. Selling, general and administrative expense rose 66% and 29%, respectively. Increases included higher headcount and stock-based compensation, including performance-based awards. Total stock-based compensation was $128.1 million in Q3 and $187.9 million for the nine months.
- Other expense included a $76.6 million loss on extinguishment of the term loan, a $70.8 million nine-month loss from remeasurement of the development derivative liability, and nine-month realized and unrealized losses of $40.1 million on marketable equity securities.
- Nine-month collaboration revenue fell 47%, principally because of lower and differently timed reimbursable activities under the Regeneron collaboration. Q3 collaboration revenue increased 45%.
Outlook, risks and contingencies
- Management expected 2022 product revenue to increase versus 2021, while collaboration and royalty revenue was expected to decrease, primarily because of Regeneron activity timing. Combined R&D and SG&A expenses were expected to increase as pipeline development, launches and commercial infrastructure expanded. The filing refers to 2022 guidance reductions announced in April and October but does not provide clear numerical guidance ranges in the supplied text.
- Management believed available cash, cash equivalents and marketable securities, together with expected product, alliance, milestone and Leqvio royalty receipts, would fund the current plan for at least 12 months from filing. The company continued to expect operating losses and stated that actual funding needs could be higher.
- Pipeline and regulatory developments included positive APOLLO-B Phase 3 results, with an ONPATTRO supplemental application planned for late 2022; HELIOS-B results remained expected in early 2024. Alnylam also reported positive Phase 2 cemdisiran results in IgA nephropathy and was working with Regeneron on Phase 3 plans.
- Key uncertainties include clinical-trial outcomes, regulatory approval and commercial uptake, reimbursement and pricing, reliance on collaborators and contract manufacturers, COVID-19 and geopolitical disruption, foreign exchange, and the company’s history of losses and funding needs.
- The company was cooperating with a U.S. Department of Justice investigation concerning ONPATTRO marketing and promotion. It said no loss had been determined probable or reasonably estimable. Patent-infringement suits against Pfizer/BioNTech and Moderna concerning mRNA vaccine lipid technology were pending; the filing disclosed 2024 trial dates.
- The filing identified debt-service, cash-settlement and potential dilution risks associated with convertible notes. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Updated 2022 product, collaboration and royalty revenue guidance, and the assumptions behind those ranges.
- Product sales growth and patient uptake, especially AMVUTTRA’s launch, alongside foreign-exchange effects and Leqvio royalties.
- Operating cash burn, expected runway and whether expense growth is consistent with the stated self-sustainability objective.
- Convertible-note conversion, redemption and settlement terms; capped-call coverage; and the remaining royalty-sale liability.
- Progress and regulatory outcomes for APOLLO-B, HELIOS-B, cemdisiran and other late-stage programs, as well as the status and potential exposure of the DOJ investigation and patent litigation.