Alnylam Pharmaceuticals, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; balance-sheet comparisons are to December 31, 2012. Alnylam is a clinical-stage biopharmaceutical company developing RNAi therapeutics. It reported no product-sales revenue; revenue was from research collaborators. Amounts below are in U.S. dollars, with financial-statement figures converted from thousands to millions.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 / prior date |
|---|---|---|
| Collaboration revenue | $18.6 million | $20.6 million |
| Research and development expense | $22.2 million | $21.1 million |
| General and administrative expense | $6.3 million | $10.4 million |
| Total operating expenses | $28.4 million | $31.5 million |
| Operating loss | $9.8 million | $10.9 million |
| Net loss | $9.0 million; $0.15 per share | $11.4 million; $0.25 per share |
| Net cash used in operating activities | $1.0 million | $30.2 million |
| Cash and cash equivalents | $97.8 million | $51.4 million |
| Cash, cash equivalents and fixed-income marketable securities | $400.8 million | $226.2 million |
Revenue fell about 9% year over year. Operating expenses fell about 10%, as lower G&A more than offset increased R&D. The operating loss was approximately 53% of revenue in Q1 2013, versus 53% in Q1 2012; gross margin is not presented. Operating cash use was low in part because deferred revenue increased $7.2 million. Investing activities used $130.8 million, primarily reflecting net purchases of fixed-income securities; financing provided $178.2 million, mainly from the January stock offering.
At March 31, total assets were $471.6 million and total liabilities were $160.0 million. Current assets were $240.1 million and current liabilities $49.8 million. Liabilities included $139.5 million of deferred revenue, current and noncurrent. The balance sheet does not report interest-bearing debt. Alnylam raised $173.6 million net by issuing 9.2 million shares in January; shares outstanding rose from 52.5 million at year-end to 62.1 million at quarter-end.
Changes, outlook and significant developments
- Revenue declined primarily because the Roche/Arrowhead collaboration’s remaining performance obligations had been completed in 2012. The decline was partly offset by $9.7 million of Cubist deferred revenue recognized after the parties terminated their agreement in February, and by revenue under newer collaborations.
- Management expected collaboration revenue to decrease for the rest of 2013, primarily because the remaining Cubist revenue was recognized in Q1. It expected R&D and G&A expenses to remain consistent for the remainder of 2013.
- Based on its operating plan, Alnylam expected cash, cash equivalents and fixed-income securities, together with cash expected from existing alliances, to fund planned operations through at least the end of 2016. The company also warned that actual needs depend on development costs, collaboration payments and other factors, and that additional funding may be needed.
- Alnylam reported five core programs in clinical or preclinical development. ALN-TTR02 was in Phase II; ALN-TTRsc began a Phase I trial in March 2013. Management planned to file an IND and begin a Phase I trial for ALN-AT3 during 2013, and expected to select an ALN-AS1 development candidate during 2013. The MDCO alliance granted worldwide PCSK9 program rights for a $25 million upfront payment and potential milestone payments of up to $180 million plus royalties.
- Alnylam reported an $8.9 million increase in the pre-tax unrealized gain on its Regulus investment during the quarter. A $0.6 million tax benefit was recorded under intraperiod tax allocation rules. The company carried its 17% Regulus holding as an available-for-sale security.
- The University of Utah litigation challenges inventorship of Tuschl patents and seeks unspecified damages and other relief. An appeal was pending; Alnylam recorded no loss estimate because likelihood and amount could not be reasonably determined.
- Management identified clinical and regulatory uncertainty, unproven RNAi technology and delivery, reliance on collaborators and contract manufacturers, intellectual-property challenges, and future financing needs as material risks. A 50-basis-point immediate and uniform interest-rate increase was estimated to reduce the portfolio’s net fair value by $1.6 million. No fixed-income impairment charges were recorded.
Important facts for investors to verify
- Whether collaboration revenue and cash receipts support the stated runway, particularly given management’s expectation of lower revenue after Q1.
- Progress, safety and timing of ALN-TTR02, ALN-TTRsc, ALN-AT3 and ALN-AS1, including the planned 2013 development milestones.
- Terms and execution of the MDCO collaboration, including development-cost responsibilities, future milestones and potential royalties.
- Potential consequences of the Utah inventorship litigation and other intellectual-property challenges; no litigation loss range was disclosed.
- Funding needs and dilution risk if development costs, collaboration receipts or financing availability differ from management’s assumptions.