Alnylam Pharmaceuticals, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; balance-sheet figures are as of March 31, 2015, compared with December 31, 2014. Financial statement amounts below are in millions of dollars unless noted. Alnylam is a clinical-stage RNAi therapeutics company with no product sales; revenue is primarily from collaborations.
Key financial results
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Collaborator revenue | $18.5 | $8.3 |
| Research and development expense | $58.0 | $43.8 |
| General and administrative expense | $12.7 | $8.9 |
| Total operating expenses | $70.8 | $277.3 |
| Operating loss | $(52.2) | $(269.1) |
| Net loss | $(50.8) | $(250.9) |
| Net loss per share, basic and diluted | $(0.62) | $(3.70) |
| Operating cash flow | $(26.3) | $(41.7) |
Revenue increased 124% year over year. R&D expense rose 33%, chiefly with higher clinical trial, manufacturing, external-service and staffing costs. G&A expense rose 43%, including higher professional-services and compensation costs. The sharp year-over-year reduction in operating expenses and net loss largely reflects the absence of the $224.7 million Sirna in-process R&D charge recorded in Q1 2014; it does not indicate a move to profitability. Gross or operating margins are not meaningful indicators for this development-stage business.
Financial position and liquidity
- Cash and cash equivalents were $306.6 million; marketable securities totaled $1,144.2 million, including $99.9 million of Regulus equity securities. Cash, cash equivalents and fixed-income marketable securities were approximately $1.45 billion, excluding Regulus, versus $881.9 million at year-end 2014.
- Total assets were $1.629 billion; total liabilities were $132.3 million; stockholders’ equity was $1.497 billion. The filing reports no debt balance.
- Cash and cash equivalents increased $231.4 million during the quarter. Financing provided $599.0 million, principally from the $496.4 million net public-offering proceeds and $89.0 million of Genzyme share purchases. Investing used $341.3 million, mainly for marketable-security purchases.
- Accumulated deficit was $1.007 billion. Deferred revenue was $60.7 million at quarter-end.
Material changes and business developments
- Revenue growth reflected Monsanto performance obligations, MDCO and Genzyme activity, and non-recurring milestones from other sources. Revenue by collaborator included Monsanto $5.6 million, Takeda $5.5 million, MDCO $2.0 million and Genzyme $1.8 million.
- Management expects collaborator revenue to decrease during the rest of 2015, primarily because Monsanto obligations were completed in February and Takeda revenue amortization is expected to end in May; Genzyme development-cost reimbursements are expected to partly offset the decline.
- In January, Alnylam sold 5.45 million shares at $95 per share, receiving $496.4 million net. Genzyme separately purchased shares for $89.0 million, maintaining ownership of approximately 12%.
- Pipeline updates included continued enrollment in Phase 3 studies of patisiran and revusiran, early positive ALN-AT3 Phase 1 findings from a small number of subjects, initiation of an ALN-CC5 Phase 1/2 trial, and advancement of ALN-PCSsc in Phase 1.
Outlook, risks and unusual items
- Alnylam 2020 objective: Management aims to have three marketed products and ten clinical programs, including four in late-stage development, by the end of 2020. This is a target, not a guarantee or specific near-term financial forecast.
- Management expects R&D expense to increase during the remainder of 2015 as programs advance; quarterly G&A expense is expected to remain consistent with Q1. The company expects significant losses for the foreseeable future.
- Management stated that available cash, cash equivalents, fixed-income securities and anticipated alliance cash flows should support its Alnylam 2020 objective under its current operating plan. Funding needs remain uncertain; additional financing may be required and may dilute shareholders or require rights concessions.
- Clinical, regulatory, manufacturing, intellectual-property and collaborator risks are significant. RNAi therapeutics remain unapproved, and clinical results may not predict later outcomes. The filing notes potential adverse events in prior studies and the possibility of trial delays or failure.
- In April 2015, Alnylam signed a 15-year lease for approximately 295,000 square feet at 675 West Kendall Street, with expected first-year annual rent of $19.8 million when rent begins, currently anticipated in 2019. May 2015 leases at 101 Main Street add approximately 72,000 square feet. Together, the leases increase operating lease obligations through 2034 by approximately $409 million from the amount previously reported.
- In the University of Utah litigation, sole-inventorship claims were dismissed with prejudice; joint-inventorship and state-law damages claims remained pending. Alnylam sought summary judgment, with a ruling expected in Q3 2015; trial was scheduled for November 2, 2015. The company did not estimate a possible loss because of uncertainty.
- A separate Tekmira arbitration concerned a disputed $5.0 million milestone; Alnylam expected a hearing in May 2015. The filing also describes interest-rate exposure: an immediate, uniform 50-basis-point increase was estimated to reduce portfolio fair value by $5.1 million.
Important facts for investors to verify
- Progress, enrollment and safety results in the patisiran and revusiran Phase 3 trials, and whether early ALN-AT3 results are confirmed in larger studies.
- Actual cash burn, collaboration receipts and revenue trends against management’s expected 2015 revenue decline and R&D growth.
- Whether the cash runway continues to support the stated 2020 objective, and the potential dilution or strategic costs of future financing.
- Implementation and total costs of the new leases, and developments in the Utah litigation and Tekmira arbitration.
- Genzyme’s future program options, cost-sharing and milestone activity, and the impact of collaborator performance on Alnylam’s development plans.