Alnylam Pharmaceuticals, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Alnylam is a clinical-stage biopharmaceutical company developing RNA interference (RNAi) medicines. It had no product-sales revenue; reported revenue came from collaborators. Amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 or comparison |
|---|---|---|
| Collaborator revenue | $19.0 million | $7.3 million; up $11.6 million |
| Research and development expense | $87.0 million | $96.3 million |
| General and administrative expense | $38.5 million | $21.1 million |
| Total operating expenses | $125.5 million | $117.4 million |
| Operating loss | $106.5 million | $110.0 million |
| Net loss | $107.3 million | $103.0 million |
| Basic and diluted loss per share | $1.25 | $1.21 |
| Net cash used in operating activities | $100.3 million | $83.6 million |
| Capital spending on property and equipment | $36.2 million | $2.8 million |
Collaborator revenue was $12.3 million from Sanofi Genzyme and $6.4 million from The Medicines Company (MDCO). The filing does not report a conventional profit margin; the company remained loss-making, with operating expenses substantially exceeding revenue.
At March 31, cash and cash equivalents were $171.1 million, current and long-term marketable securities were $641.1 million, and total assets were $1.134 billion. Management cited $812.2 million of cash, cash equivalents and fixed-income marketable securities, excluding $150.0 million of restricted investments and the Regulus equity investment. Long-term debt was $150.0 million, secured by cash collateral equal to the outstanding principal. Current liabilities were $95.8 million and total liabilities were $303.0 million. Accumulated deficit was $1.764 billion.
Changes versus the prior comparable period
- Revenue increased 158%, primarily from reimbursable development activities under Sanofi Genzyme and MDCO collaborations.
- R&D expense declined 10%, mainly due to lower stock-based compensation, external services and clinical-trial costs, including the discontinuation of revusiran; increased manufacturing costs partly offset the decreases.
- G&A expense rose 82%, principally reflecting commercial and medical-affairs hiring ahead of a potential product launch.
- Net loss widened by $4.3 million despite a narrower operating loss, partly because other expense was $0.8 million versus other income of $7.1 million in Q1 2016. Prior-year other income included a realized gain on Regulus shares; Q1 2017 included a realized loss.
- Cash and cash equivalents fell $22.5 million during the quarter. Investing cash flow included $36.2 million of property and equipment purchases, primarily for the Norton manufacturing facility.
Outlook, commentary and risks
- Alnylam’s Alnylam 2020 goal was three marketed products and ten clinical programs, including four late-stage programs, by the end of 2020. Management said available funds and expected alliance cash would support the strategy for at least the next several years; the financial-statement liquidity note more conservatively states at least the next 12 months from filing. Funding adequacy depends on operating plans and alliance cash generation.
- Management expected collaborator revenue to increase quarterly through the remainder of 2017, mainly from Sanofi Genzyme reimbursements and potential milestones. Milestones depend on clinical progress and are not assured.
- Management expected R&D expense to remain relatively consistent with Q1 levels during the rest of 2017, while G&A expense was expected to increase with commercial infrastructure development.
- Top-line results from the patisiran APOLLO Phase 3 study were expected in mid-2017. Assuming positive results, the company planned to submit its first NDA and MAA by year-end 2017. Fitusiran and givosiran were expected to advance into Phase 3 during 2017.
- Revusiran development was discontinued in October 2016 following a safety review and an imbalance in mortality versus placebo; the company said its evaluation remained ongoing. The APOLLO monitoring committee recommended continuing the patisiran trial without modification.
- Key risks include clinical and regulatory failure, safety findings, reliance on collaborators and third-party manufacturers, manufacturing-facility execution, future financing needs, reimbursement and pricing uncertainty, and intellectual-property disputes. The company noted that additional equity financing could dilute shareholders.
- The Norton drug-substance facility was under construction; $88.6 million of property, plant and equipment at quarter-end related to the facility and associated costs. A 50-basis-point immediate, uniform interest-rate increase was estimated to reduce the fair value of interest-sensitive financial instruments by $2.2 million.
- The University of Utah litigation was concluded; the Federal Circuit denied Alnylam’s appeal for recovery of approximately $8.0 million in legal costs, and Alnylam said it would not appeal further. Alnylam’s trade-secret lawsuit against Dicerna remained in discovery, with fact discovery then expected to close in June 2017.
Important facts for investors to verify
- Whether patisiran’s APOLLO results supported the anticipated year-end regulatory filings, and what safety and efficacy findings were disclosed.
- Progress and financing needs for the 2020 strategy, including the distinction between the filing’s 12-month liquidity statement and its “at least the next several years” outlook.
- Actual collaborator reimbursements and milestone receipts, and the extent to which revenue depends on Sanofi Genzyme and MDCO.
- Clinical safety developments following revusiran’s discontinuation, and whether the ongoing evaluation affected other RNAi programs.
- Construction and qualification timing, total cost and commercial readiness of the Norton facility, as well as the cash collateral and terms associated with the $150.0 million loans.
- Resolution and potential financial effects of the Dicerna litigation and other intellectual-property or product-liability matters.