ALNYLAM PHARMACEUTICALS, INC. quarterly report, Q2 FY2023

Business context and reporting period

Alnylam Pharmaceuticals, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2023. The company develops and commercializes RNAi therapeutics. It had four marketed products generating its own product revenue—ONPATTRO, AMVUTTRA, GIVLAARI and OXLUMO—and its partner Novartis commercializes Leqvio.

Financial performance and position

• Q2 total revenue rose 42%; first-half revenue rose 46%. Product revenue rose 43% and 45%, respectively.
• Q2 cost of goods sold was 24.6% of product revenue, versus 15.9% a year earlier; first-half figures were 20.1% and 14.4%. The filing attributes the increase primarily to ONPATTRO manufacturing-commitment cancellations and inventory adjustments, and higher AMVUTTRA royalties.
• First-half operating cash use was $225.5 million, compared with $294.0 million in 2022. Investing activities used $84.9 million; financing activities provided $99.8 million. Cash, cash equivalents and restricted cash ended the period at $660.0 million.
• At June 30, cash and cash equivalents were $657.8 million, marketable debt securities $1.372 billion and marketable equity securities $27.3 million—about $2.06 billion combined. Current assets were $2.524 billion and current liabilities $788.6 million.
• Convertible debt was $1.019 billion carrying value, with $1.04 billion principal due 2027 and a 1% coupon. The liability for sold future royalties was $1.332 billion; this is a royalty-financing obligation, not the convertible notes.
• Total liabilities were $3.811 billion, exceeding total assets of $3.402 billion; stockholders’ deficit was $408.1 million. Accumulated deficit was $7.019 billion.

Material changes versus prior comparable periods

• AMVUTTRA generated $132.1 million of Q2 product revenue, compared with none in Q2 2022, following its 2022 launch. ONPATTRO revenue fell 40% to $91.5 million as patients switched to AMVUTTRA. GIVLAARI rose 28% to $57.9 million and OXLUMO rose 62% to $24.2 million.
• Operating expenses rose 32% in Q2 and 31% in the first half, led by higher R&D and selling, general and administrative costs. Stock-based compensation was $115.7 million in the first half, up from $59.8 million.
• Despite the higher operating loss, first-half net loss improved by $67.6 million year over year. Lower interest expense, higher interest income and smaller marketable-equity-security losses partly offset increased operating costs.
• First-half operating cash use declined, which management attributed primarily to stronger cash receipts from increased product sales.

Outlook, commentary and risks

• Management expects 2023 product revenue to increase versus 2022 as patient numbers grow and products launch in additional markets, assuming regulatory approvals. It also expects R&D plus SG&A expenses and cost of goods sold to increase. The filing provides no clear numerical 2023 guidance ranges in the supplied text.
• Management believes cash, cash equivalents and marketable securities, together with expected product-sale and alliance receipts, will fund the current operating plan for at least 12 months from the filing date. It also says the company expects continued losses and is pursuing a self-sustainable profile by the end of 2025; these are management expectations, not assurances.
• On July 21, 2023, after quarter-end, Alnylam entered a zilebesiran collaboration with Roche. The agreement provides for a $310 million upfront payment and up to $2.50 billion in contingent milestones; development costs and U.S. profits and losses are shared under specified terms.
• The FDA scheduled a September 13, 2023 advisory committee meeting on ONPATTRO for ATTR cardiomyopathy, with an October 8, 2023 action date. Approval and commercial opportunity remain uncertain. The company also cited clinical-development, regulatory, manufacturing and supply, reimbursement, competition, collaboration, intellectual-property and financing risks.
• Alnylam is seeking damages in patent-infringement litigation against Pfizer/BioNTech and Moderna involving mRNA-vaccine lipid patents; trial dates for previously filed cases are in November 2024. The filing does not report a clear potential recovery value. Separately, on August 1, 2023, the U.S. Attorney’s Office informed the company it planned to close its investigation into ONPATTRO marketing and promotion.

Important facts for investors to verify

• Whether AMVUTTRA growth offsets continuing ONPATTRO declines, and how product mix affects gross margin and inventory charges.
• Progress and outcome of the ONPATTRO cardiomyopathy FDA review and the HELIOS-B and zilebesiran clinical programs.
• Actual cash use, product and alliance receipts, and whether management’s stated liquidity horizon and self-sustainability objectives remain achievable.
• Roche agreement payment timing, cost-sharing obligations and milestone conditions; do not treat contingent milestones as assured revenue.
• Developments in Leqvio royalties and the Blackstone royalty liability, convertible-note obligations, and the Pfizer/BioNTech and Moderna litigation.