Alnylam Pharmaceuticals, Inc. — Q1 2014 Form 10-Q
Reporting period: Three months ended March 31, 2014. Alnylam is a clinical-stage biopharmaceutical company developing RNA interference (RNAi) therapeutics; it had no product sales and remained dependent on collaboration revenue and financing.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data.
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Collaboration revenue | $8.3 | $18.6; down 56% |
| Research and development expense | $43.8 | $22.2 |
| In-process R&D expense | $224.7 | None |
| General and administrative expense | $8.9 | $6.3 |
| Operating loss | $(269.1) | $(9.8) |
| Net loss | $(250.9) | $(9.0) |
| Basic and diluted loss per share | $(3.70) | $(0.15) |
| Net cash used in operating activities | $(41.7) | $(1.0) |
- At quarter-end, cash and cash equivalents were $350.6 million and marketable securities totaled $649.9 million, including fixed-income securities. Together, cash, cash equivalents and fixed-income securities were approximately $1.00 billion, excluding the $55.5 million Regulus equity investment.
- Total assets were $1.08 billion, total liabilities $125.3 million, and stockholders’ equity $955.0 million. The filing reports no debt balance.
- Financing provided $718.9 million net cash, primarily from Genzyme share purchases. Investing used $379.8 million, mainly for net purchases of marketable securities and the $25.0 million Sirna cash payment.
- Operating cash use rose year over year; the 2014 net loss included the largely noncash Sirna acquisition charge. The filing does not provide a meaningful operating margin measure for this development-stage business.
Material changes and notable transactions
- Revenue declined mainly because Q1 2013 included $9.7 million of deferred Cubist revenue recognized after termination of that agreement. Q1 2014 revenue included $5.5 million from Takeda, $1.4 million from Monsanto and $1.3 million from The Medicines Company.
- Alnylam recorded $224.7 million of in-process R&D expense for acquiring Sirna assets from Merck: $25.0 million cash, shares issued valued at $174.3 million, and a $25.4 million liability for additional shares to be issued after technology transfer.
- The Genzyme collaboration became effective in February. Genzyme paid $700.0 million for shares at closing and a further $23.0 million for additional shares in March, bringing reported Q1 proceeds from common-stock issuance to Genzyme to $723.0 million. Alnylam issued 8.77 million shares at closing and 344,448 additional shares; Genzyme held approximately 12% of the company.
- Under the collaboration, Alnylam retains product rights in North America and Western Europe, while Genzyme receives opt-in rights and rights in other territories for qualifying genetic-medicine programs. Genzyme opted in to patisiran and ALN-TTRsc; future milestones and royalties depend on development and commercial outcomes.
Outlook, management commentary and risks
- Management expected existing cash, cash equivalents and fixed-income securities to fund planned operations through the launch of the first commercial product. It also expected significant losses to continue and noted that additional funding could be needed sooner than planned.
- Management expected R&D expense to rise quarterly through the rest of 2014, excluding a one-time first-quarter license fee related to Genzyme; G&A expense was expected to remain broadly consistent with Q1.
- Pipeline plans included patisiran in Phase 3, ALN-TTRsc in Phase 2, and ALN-AT3 in Phase 1. The company planned to initiate an ALN-TTRsc Phase 3 trial by year-end 2014 and anticipated two IND filings in late 2014 and one in early 2015. These are management expectations, not assurances.
- After quarter-end, the company reported preliminary patisiran extension-study results: sustained TTR knockdown of approximately 80% through up to day 168, with repeat dosing described as well tolerated. These were preliminary findings, not final trial results.
- Key risks include clinical and regulatory failure, uncertain safety or efficacy of RNAi and delivery technologies, dependence on collaborators and third-party manufacturers, future financing and shareholder dilution, competition, and intellectual-property disputes.
- University of Utah litigation challenges inventorship of Tuschl patents and seeks unspecified damages and other relief. Alnylam said it was defending the case; no loss estimate was recorded because the likelihood and amount were uncertain.
- The Cambridge lease was extended through September 2021, increasing lease obligations by $37.8 million. Management estimated that an immediate, uniform 50-basis-point interest-rate increase would reduce the fair value of interest-sensitive investments by $3.5 million.
Most important facts for investors to verify
- Whether Genzyme collaboration terms, opt-in decisions, cost sharing, milestones and royalties translate into future development funding and revenue.
- Progress and safety data for patisiran, ALN-TTRsc and ALN-AT3, as well as the timing and outcomes of planned trials and IND filings.
- Cash burn, collaboration receipts and the assumptions behind management’s stated funding runway through first product launch.
- The final Sirna share issuance and any resulting adjustment to the acquisition charge, plus any later milestone or royalty obligations to Merck.
- Developments in the University of Utah litigation and other intellectual-property matters, including the Tekmira milestone arbitration disclosed in the filing.