Alnylam Pharmaceuticals, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; unaudited. Alnylam is a commercial-stage RNAi biopharmaceutical company, with ONPATTRO and GIVLAARI marketed and a pipeline of partnered and wholly owned candidates.
Financial performance
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Total revenue | $99.5 million | $33.3 million | +199% |
| Net product revenue | $71.9 million | $26.3 million | +174% |
| Collaboration revenue | $27.5 million | $7.0 million | +293% |
| Operating expenses | $309.6 million | $222.1 million | +39% |
| Operating loss | $(210.2) million | $(188.8) million | Loss increased $21.4 million |
| Net loss | $(182.2) million | $(181.9) million | Nearly unchanged |
| Basic and diluted loss per share | $(1.62) | $(1.73) | Improved |
| Cash used in operations | $(246.2) million | $(188.5) million | Use increased $57.7 million |
ONPATTRO generated $66.7 million in product revenue; GIVLAARI, launched in late 2019, generated $5.3 million. Product revenue grew with ONPATTRO’s global expansion and GIVLAARI sales. Collaboration revenue growth was driven primarily by Regeneron. The reported cost of goods sold was $13.3 million, or about 18% of product revenue; management cautioned that zero-cost inventory affects this ratio, so it should not be treated as a normalized product gross margin. Operating and net losses remained substantial.
Balance sheet and liquidity
- At March 31, 2020, cash and cash equivalents were $467.8 million; marketable debt securities were $836.3 million and marketable equity securities were $38.1 million. Together these totaled approximately $1.34 billion, down from approximately $1.54 billion at December 31, 2019.
- Total assets were $2.28 billion and total liabilities were $929.9 million. Current assets were $1.58 billion versus current liabilities of $338.8 million.
- The filing reports no conventional borrowings on the March 31 balance sheet. Liabilities include operating leases and deferred revenue. Cash, cash equivalents and restricted cash totaled $470.4 million at quarter-end.
- Investing activities provided $113.7 million, mainly reflecting net sales and maturities of marketable securities; financing activities provided $53.9 million, principally from stock-option exercises. Q1 2019 financing included $381.9 million of public-offering proceeds.
Material developments, outlook and risks
- COVID-19: Management expected product revenue to decline in Q2 2020 compared with Q1, citing pandemic-related disruption. The filing identified possible impacts on diagnoses, treatment initiation, sales, trial enrollment, regulatory review and supply. It specifically warned ONPATTRO revenue could potentially decline about 10% in Q2 and could be below its original 2020 forecast. Management nevertheless expected full-year 2020 product revenue to increase versus 2019, assuming continued patient additions and launches in additional markets.
- Spending and losses: Management expected R&D and SG&A expenses combined to increase in 2020 versus 2019 as pipeline development, regulatory work and commercial infrastructure expanded. The company expected annual operating losses to continue for the foreseeable future, while describing 2019 as its likely peak net-loss year.
- Pipeline: Lumasiran NDA and MAA submissions were made in April 2020; the company reported the FDA accepted the NDA and the EMA granted accelerated assessment. COVID-19-related enrollment delays shifted expected APOLLO-B completion from late 2020 into 2021. Other disclosed milestones included expected ILLUMINATE-B results in mid-2020, HELIOS-A results in early 2021 and fitusiran topline results in the first half of 2021.
- Blackstone financing, after quarter-end: On April 10, 2020, Alnylam entered a strategic financing collaboration described as providing up to $2.0 billion: $1.0 billion in committed payments for 50% of inclisiran royalties and 75% of commercial milestones; up to $750 million in a first-lien senior secured delayed-draw term loan; up to $150 million for development of vutrisiran and ALN-AGT, subject to a definitive agreement; and a $100 million common-stock purchase. These amounts are not all equivalent to cash received at signing. The loan is subject to conditions, covenants and a minimum quarterly liquidity requirement of $100 million; the filing notes later tranches may not be funded if conditions are unmet.
- Other contingencies: A securities class action concerning ONPATTRO-related statements was dismissed without prejudice in March 2020; the plaintiff sought permission to amend. A separate securities suit concerning the 2017 offering remained pending. Alnylam said it believed the allegations were without merit. The risk factors also describe an Ionis arbitration over alleged technology-access fees; the amount and outcome were uncertain.
- Liquidity view: Management believed existing cash and investments, expected product and alliance receipts, and funding available under the Blackstone collaboration would support strategic goals for multiple years. This is a forward-looking assessment dependent on sales, milestones, financing availability and development outcomes.
Most important facts for investors to verify
- Whether COVID-19 produced the anticipated Q2 sales decline and affected full-year product revenue, patient access or supply.
- Actual cash burn and changes in cash and marketable securities, alongside growth in operating expenses.
- Blackstone funding actually drawn or received, applicable conditions and covenants, debt costs, and the effect of selling part of the inclisiran royalty stream.
- Regulatory and trial progress for lumasiran and other late-stage programs, including pandemic-related delays.
- Product-level sales trends, market access and reimbursement, and how depletion of zero-cost inventory changes reported product margins.
- Developments in the securities litigation and Ionis arbitration, as well as any resulting financial exposure.