Alnylam Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Business context and period. The unaudited report covers the three months ended March 31, 2022. Alnylam is a commercial-stage RNAi therapeutics company with three products it sells—ONPATTRO, GIVLAARI and OXLUMO—and a fourth approved product, Leqvio, commercialized by Novartis. The company reported five late-stage investigational programs and continued to pursue its Alnylam P5x25 strategy: becoming a top-five biotech company by market capitalization by the end of 2025.
Financial performance and liquidity
Amounts below are in millions, except per-share data.
| Metric | Q1 2022 | Q1 2021 or comparator |
|---|---|---|
| Total revenue | $213.3 | $177.6; up 20% |
| Net product revenue | $186.9 | $135.8; up 38% |
| Collaboration revenue | $25.9 | $41.8; down 38% |
| Royalty revenue | $0.4 | None reported |
| Operating costs and expenses | $360.0 | $363.8; down 1% |
| Loss from operations | $(146.7) | $(186.3); narrowed 21% |
| Net loss | $(240.3) | $(200.3); widened 20% |
| Net loss per share, basic and diluted | $(2.00) | $(1.71) |
| Net cash used in operating activities | $(171.2) | $(235.7) |
Product revenue rose across all three marketed products: ONPATTRO $137.0 million (+34%), GIVLAARI $35.3 million (+43%) and OXLUMO $14.6 million (+59%). Management attributed growth to more patients receiving treatment, partly offset by unfavorable foreign exchange effects on international sales. Cost of goods sold was 12.6% of product revenue, versus 17.0% a year earlier; the filing attributes the decrease primarily to lower third-party royalties and intangible amortization.
Research and development expense fell 9% to $169.9 million, mainly from lower clinical manufacturing activity and stock-based compensation. Selling, general and administrative expense increased 5% to $154.5 million, including higher legal, charitable and other growth-related costs. Other expense was $92.6 million, compared with $13.0 million of expense in Q1 2021; the change primarily reflected $31.2 million of realized and unrealized losses on marketable equity securities, versus $47.0 million of gains in the prior-year quarter.
At March 31, cash and cash equivalents were $534.1 million, marketable debt securities $1,673.5 million and marketable equity securities $32.0 million—about $2.24 billion in cash, cash equivalents and marketable securities combined. Cash, cash equivalents and restricted cash totaled $536.3 million, down $285.9 million from the start of the quarter. Investing cash outflow was $147.4 million, mainly reflecting purchases of marketable securities. The company used $171.2 million in operating cash, compared with $235.7 million in Q1 2021; management cited stronger product-sales receipts and lower working-capital cash payments.
Long-term debt was $676.7 million at quarter-end; the company had drawn $700 million under its term-loan facility, which matures in December 2027 and carried an 8% interest rate. The balance-sheet liability for the sale of future royalties was $1.216 billion. Stockholders’ equity was $401.2 million, down from $588.2 million at December 31, 2021. Alnylam said it was in compliance with its debt covenants, including a minimum $100 million quarterly liquidity requirement.
Material changes, outlook and commentary
- Collaboration revenue decreased $15.9 million, primarily because of reduced manufacturing activity under the Regeneron collaboration; Novartis collaboration revenue increased.
- Management expected 2022 net product revenue to increase from 2021, while also disclosing that in April 2022 it lowered its 2022 combined net product revenue guidance range. The revised range is not provided in the supplied filing text.
- Management expected combined R&D and SG&A expenses to rise in 2022 as the company advances its pipeline, prepares regulatory submissions and expands commercial and compliance infrastructure. It noted that spending may vary with manufacturing, trial enrollment and regulatory review.
- The company believed available cash, cash equivalents and marketable securities, together with expected product and alliance receipts, would fund its current operating plan for at least 12 months from the filing date. It cautioned that additional funding could be needed sooner if circumstances change.
- The FDA extended the vutrisiran NDA review timeline to July 14, 2022, to review information about a new secondary packaging and labeling facility; the company said no additional clinical data had been requested. The FDA accepted the OXLUMO supplemental application for advanced PH1, with an October 6, 2022 action date.
- The company reported positive 18-month HELIOS-A secondary endpoints and updated safety data for vutrisiran. It also said Ukraine-related disruption, together with COVID-19 impacts, led it to expect completion of enrollment in the KARDIA-1 zilebesiran Phase 2 study in mid-2023.
Risks, contingencies and unusual items
- The company has a history of losses and an accumulated deficit of $5.68 billion. Continued losses, development spending and the ability to achieve commercialization and self-sustainability remain significant uncertainties.
- A U.S. Department of Justice investigation into ONPATTRO marketing and promotion remained ongoing. The company was cooperating; it stated that a loss was not determined to be probable or reasonably estimable.
- In March 2022, Alnylam sued Pfizer and Moderna over alleged infringement of a patent covering biodegradable cationic lipids used in their COVID-19 vaccines. It seeks damages, not injunctive relief.
- A securities class-action settlement received final court approval in April 2022, after quarter-end.
- Leqvio royalties are partly committed to Blackstone under a royalty-sale arrangement. Lower-than-expected Leqvio sales could affect retained royalties, the related liability and interest expense. The royalty-sale liability’s estimated effective annual interest rate was 9% at March 31, 2022.
- Funding from Blackstone Life Sciences for vutrisiran and zilebesiran carries contingent future royalty or fixed-payment obligations; the associated development derivative liability was $105.2 million at quarter-end, including a $13.8 million remeasurement loss for the quarter.
- Other key exposures include clinical and regulatory setbacks, manufacturing and supply constraints, pricing and reimbursement pressure, reliance on collaborators and third parties, COVID-19 effects, and geopolitical disruption in Ukraine.
Important facts for investors to verify
- Review the full April 2022 revision to 2022 combined net product revenue guidance; the revised numerical range is not clear in the supplied filing text.
- Track product-level sales, patient growth, foreign exchange effects and Novartis’s Leqvio launch, reimbursement and royalty performance.
- Confirm the outcome and timing of the vutrisiran FDA review, including the packaging-facility issue, and the OXLUMO advanced-PH1 review.
- Monitor operating cash use, available liquidity, debt covenant headroom and the assumptions behind the Blackstone royalty liability and derivative valuations.
- Follow developments in the DOJ investigation and the Pfizer and Moderna patent litigation, including any potential financial or operational consequences.