Alnylam Pharmaceuticals, Inc. — FY 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. The filing was signed February 15, 2018. Alnylam was a clinical-stage biopharmaceutical company developing RNA interference (RNAi) medicines; it had no approved products or product-sale revenue during 2017.
Financial results and liquidity
| Metric | 2017 | 2016 |
|---|---|---|
| Collaboration revenue | $89.9 million | $47.2 million |
| Research and development expense | $390.6 million | $382.4 million |
| General and administrative expense | $199.4 million | $89.4 million |
| Total operating expenses | $590.0 million | $471.7 million |
| Operating loss | $500.1 million | $424.6 million |
| Net loss | $490.9 million | $410.1 million |
| Basic and diluted loss per share | $5.42 | $4.79 |
| Cash used in operating activities | $382.8 million | $307.7 million |
- Collaboration revenue rose approximately 91%, primarily from Sanofi Genzyme activity and a $20 million milestone from The Medicines Company (MDCO) after inclisiran’s pivotal study began. Sanofi Genzyme and MDCO contributed 61% and 34% of 2017 collaboration revenue, respectively.
- Operating expenses increased approximately 25%; G&A more than doubled as the company expanded commercial and medical-affairs capabilities. R&D increased modestly.
- There was no product gross margin to report because the company had not yet generated product sales.
- At year-end, cash, cash equivalents and fixed-income marketable securities totaled $1.705 billion, excluding $30 million of restricted investments. Working capital was $1.620 billion; total assets were $1.995 billion.
- Long-term debt was $30 million, secured by cash collateral and due in April 2021. The company repaid $120 million of its other term loan in December 2017.
- Financing activities provided $1.125 billion, principally from May and November public offerings that generated approximately $1.14 billion net. Capital spending was $104.2 million, mainly for the planned drug-substance manufacturing facility.
- Fourth-quarter 2017 revenue was $37.9 million, operating expenses $185.2 million and net loss $142.2 million, or $1.48 per share.
Business developments and comparison with prior year
- Patisiran met the primary and all secondary endpoints in the 225-patient APOLLO Phase 3 trial for hereditary transthyretin-mediated amyloidosis (hATTR). At 18 months, mean mNIS+7 improved 6.0 points with patisiran versus a 28.0-point worsening with placebo. The company filed its first NDA and MAA in December 2017.
- Givosiran’s ENVISION Phase 3 study began in November 2017; management anticipated interim data in mid-2018 and, subject to positive results and regulatory review, a possible NDA filing around year-end 2018.
- Fitusiran Phase 3 dosing was suspended after a fatal thrombotic event in a Phase 2 extension study. The FDA lifted its clinical hold in December 2017 after agreement on risk-mitigation measures; Phase 2 dosing resumed, with Phase 3 dosing expected in early 2018.
- Inclisiran Phase 2 results showed sustained LDL-C reductions exceeding 50%; MDCO began a broad Phase 3 program. Alnylam earned a $20 million development milestone in 2017.
- Revenue increased substantially year over year, but the net loss widened by approximately 20%, reflecting higher spending, especially commercial-readiness and administrative costs. Operating cash use also increased.
Outlook, management commentary and risks
- Management targeted three marketed products and ten clinical programs, including four late-stage programs, by the end of 2020. It expected patisiran launches and initial product revenue in 2018 if regulatory approval was obtained; the FDA accepted the NDA for priority review in February 2018, with an August 11, 2018 action date. The EMA had accepted the MAA for review.
- Management expected R&D and G&A expenses to rise significantly in 2018 as clinical programs advanced and global commercial operations expanded. It believed existing resources and expected collaboration cash flows would support the strategy for at least the next few years, while cautioning that funding needs could change.
- A January 2018 Sanofi Genzyme amendment, pending customary clearances, gave Alnylam global development and commercialization rights for TTR products, including patisiran, and Sanofi Genzyme global rights for fitusiran. Alnylam expected to fund fitusiran during transition up to a $50 million cap; Sanofi Genzyme would then fund it. Alnylam would be eligible for a $50 million fitusiran milestone after first Phase 3 patient dosing and royalties if products are commercialized.
- Material risks include clinical and regulatory failure, uncertain RNAi safety and efficacy, commercialization and reimbursement challenges, dependence on third-party manufacturers and collaborators, intellectual-property disputes, and continued operating losses. The filing reports that revusiran development had been discontinued after a mortality imbalance whose cause remained inconclusive.
- Pending disputes included Silence Therapeutics litigation concerning patent/SPC rights, with trial set for December 2018, and Dicerna trade-secret and antitrust litigation. The filing does not quantify a probable loss for these matters.
- The 2017 financial statements were audited without a modified opinion; management and the auditor reported effective internal control over financial reporting. A new revenue-recognition standard adopted January 1, 2018 was expected to reduce deferred revenue by $68.3 million with a corresponding opening accumulated-deficit adjustment, without a cash-flow effect.
Investor verification priorities
- Check the FDA and EMA outcomes, timing, labeling and any post-approval requirements for patisiran, and whether launch and revenue assumptions were achieved.
- Verify subsequent clinical results and safety developments for givosiran and fitusiran, especially the thrombotic-event risk controls and trial status.
- Review the final Sanofi Genzyme transaction terms, closing and transition costs, milestone conditions, royalty economics and resulting control of each program.
- Track cash burn, commercial-launch spending, manufacturing-facility investment, remaining debt and the company’s stated liquidity runway.
- Assess the progress and financial exposure of the Silence and Dicerna disputes, and the effects of the 2018 revenue-recognition transition.