Alnylam Pharmaceuticals, Inc. — FY 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual report, not a quarterly filing. Alnylam is a clinical-stage biopharmaceutical company developing RNA-interference (RNAi) therapeutics; it had no product sales and relied on collaboration revenue and financing.
Financial performance and liquidity
| Metric | FY 2013 | FY 2012 | Change |
|---|---|---|---|
| Collaboration revenue | $47.2 million | $66.7 million | Down 29% |
| Research and development expense | $113.0 million | $86.6 million | Up 30% |
| Total operating expenses | $140.1 million | $196.2 million | Down 29% |
| Operating loss | $92.9 million | $129.5 million | Loss narrowed |
| Net loss | $89.2 million | $106.0 million | Loss narrowed |
| Net loss per share, basic and diluted | $1.45 | $2.11 | Loss per share narrowed |
| Cash, cash equivalents and marketable securities | $350.5 million | $226.2 million | Up 55% |
| Working capital | $200.2 million | $77.2 million | Up |
- Net cash used in operating activities was $68.7 million, versus $115.6 million in 2012. Cash and cash equivalents at year-end were $53.2 million; marketable securities were $297.3 million. The company also held $45.5 million of Regulus equity securities.
- Total assets were $420.5 million, total liabilities $150.2 million, and stockholders’ equity $270.3 million. The balance sheet presents no debt balance; liabilities include $126.1 million of deferred collaboration revenue.
- The filing gives no gross or operating margin as a key performance measure. Operating loss was approximately 197% of collaboration revenue; net loss approximately 189%.
- Alnylam raised $173.6 million net through a January 2013 stock offering. The cash increase therefore reflects financing as well as operations, not operating cash generation.
Business progress and material changes
- Patisiran advanced to Phase 3 for familial amyloidotic polyneuropathy (FAP). In a 29-patient Phase 2 study, the company reported mean serum transthyretin knockdown of 83.8% and 86.7% at nadir after the first and second doses at the selected regimen. These are biomarker results, not evidence of clinical benefit.
- ALN-TTRsc produced substantial TTR knockdown in a Phase 1 study and entered a pilot Phase 2 study for cardiac amyloidosis. ALN-AT3 began Phase 1 in January 2014. Other programs were at preclinical or earlier stages.
- Revenue fell primarily because Roche/Arrowhead collaboration revenue ended after performance obligations were completed in 2012. The 2013 decline was partly offset by recognition of $9.7 million of deferred Cubist revenue following termination of that collaboration, and by revenue from Monsanto and The Medicines Company (MDCO).
- R&D spending rose with clinical-trial and manufacturing costs, particularly for patisiran, ALN-TTRsc and ALN-AT3. Management expected R&D expense to increase significantly in 2014.
- Operating expenses in 2012 included a $65.0 million Tekmira restructuring charge; its absence in 2013 was a major reason total expenses declined. 2013 also included $11.0 million in patisiran milestones earned under the prior Genzyme agreement.
Outlook, agreements and risks
- Management targeted six to seven genetic-medicine candidates in clinical development by end-2015, including at least two in Phase 3 and five to six with human proof of concept. These are goals, not assured outcomes.
- In January 2014, Alnylam agreed to a Genzyme collaboration and a related $700 million stock purchase, expected to close in the first quarter of 2014 subject to conditions. Genzyme was to receive regional rights principally outside North America and Western Europe; Alnylam retained those territories, with specified co-development or global rights and milestone and royalty terms. The cash had not yet closed as of the filing date. Management said existing resources, anticipated alliance cash and the expected Genzyme proceeds should fund planned operations through launch of a first commercial product.
- Alnylam also agreed to acquire Sirna from Merck for $25 million cash and 2,520,044 Alnylam shares, plus potential milestones and royalties. Closing was expected in Q1 2014; this was not a completed acquisition at the filing date.
- Management expected 2014 collaboration revenue to decrease on a comparative basis, particularly because Cubist revenue ended. Profitability remained distant: the company reported a $596.2 million accumulated deficit, expected further losses, and had no approved products.
- Key risks include clinical failure or adverse effects, regulatory delay, uncertain RNAi delivery and commercial acceptance, reliance on collaborators and third-party manufacturers, funding and dilution risk, reimbursement and pricing pressure, and substantial patent challenges. The University of Utah litigation challenged inventorship of Tuschl patents; the company had not recorded a loss estimate. It also disputed a $5 million Tekmira milestone in binding arbitration.
- Other watch items include concentration of collaboration revenue (Takeda supplied 47% of 2013 revenue), no second source for patisiran formulated bulk drug product, and approximately $98.6 million of contractual cash obligations at year-end.
Most important facts to verify
- Whether the Genzyme stock purchase actually closed, when the $700 million was received, and the final collaboration rights and cost-sharing terms.
- Clinical-trial enrollment, safety, durability and clinical outcomes for patisiran and other lead programs; biomarker knockdown alone does not establish efficacy.
- Actual cash burn and runway after planned 2014 pipeline investment, Sirna acquisition costs and any Genzyme proceeds.
- Progress and resolution of the Utah patent litigation and Tekmira arbitration, including any financial or intellectual-property impact.
- Future partner revenue and milestone timing, especially given the decline in 2013 collaboration revenue and Takeda’s large revenue contribution.