Alnylam Pharmaceuticals, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Alnylam is a commercial-stage RNA interference therapeutics company. ONPATTRO, its first approved product, was launched in the U.S. and Europe in 2018.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Total revenue | $33.3 million | $21.9 million |
| ONPATTRO product revenue | $26.3 million | None |
| Revenue from collaborators | $7.0 million | $21.9 million |
| Research and development expense | $129.1 million | $96.9 million |
| Selling, general and administrative expense | $89.6 million | $72.4 million |
| Operating loss | $188.8 million | $147.4 million |
| Net loss | $181.9 million | $141.2 million |
| Basic and diluted loss per share | $1.73 | $1.41 |
| Net cash used in operating activities | $188.5 million | $155.7 million |
| Capital expenditures | $44.0 million | $21.3 million |
Revenue rose 52%, as ONPATTRO sales more than offset a 68% decline in collaborator revenue, primarily reflecting lower reimbursable activity under the Sanofi Genzyme collaboration. Operating expenses increased 31%; R&D growth included license fees tied to givosiran milestones, higher compensation and facilities costs, while SG&A growth reflected commercial expansion and launch support.
Reported cost of goods sold was $3.3 million. Management cautioned that it reflected only part of ONPATTRO manufacturing costs and royalties; the company expected to continue selling zero-cost inventory for 12–15 months. It estimated cost of goods sold would be in the mid-to-high teens as a percentage of net product revenue after that inventory is used.
At March 31, cash and cash equivalents were $725.0 million and marketable debt securities were $519.6 million, or approximately $1.24 billion combined. Cash, cash equivalents and restricted cash totaled $727.7 million. The company had $30.0 million of long-term debt, secured by matching cash collateral, and $299.3 million of operating lease liabilities. Total assets were $2.01 billion; accumulated deficit was $3.02 billion. The January stock offering raised $381.9 million net through issuance of 5.0 million shares.
Investing activities provided $102.7 million net, largely reflecting marketable-security transactions; financing activities provided $390.9 million, mainly from the stock offering. Management said existing liquidity, expected product sales and alliance cash flows were sufficient to advance its Alnylam 2020 strategy for multiple years, including anticipated Regeneron proceeds. Separately, the liquidity note states that resources at quarter-end and expected cash flows would cover at least the next 12 months.
Outlook, developments and risks
- Management expected ONPATTRO revenue to increase during 2019 with a full year of sales and additional geographic launches. It expected R&D and SG&A expenses to increase as pipeline development, hiring and global commercialization continued. No specific full-year revenue or expense guidance was provided in the filing text.
- In April 2019, Alnylam reported positive complete Phase 3 ENVISION results for givosiran and planned NDA and MAA submissions in mid-2019. It also expected lumasiran Phase 3 results by year-end 2019 and planned further vutrisiran studies; these are forward-looking plans, not Q1 results.
- On April 8, 2019, Alnylam and Regeneron announced a collaboration covering eye, CNS and select liver targets. Regeneron agreed to a $400 million upfront payment and up to $200 million in early-development milestones. A separate $400 million stock purchase for approximately 4.44 million shares was subject to closing conditions, which the company expected to satisfy in Q2. These amounts were not Q1 cash receipts.
- Alnylam amended its Sanofi Genzyme collaboration in April, ending the research and option phase; key fitusiran terms remained unchanged. Alnylam agreed to fund an undisclosed rare-disease asset through IND-enabling studies before transferring it to Sanofi Genzyme.
- Key risks include sustained operating losses and cash burn; successful commercialization, pricing and reimbursement of ONPATTRO; clinical, regulatory and safety setbacks; dependence on collaborators, third-party manufacturers and limited suppliers; and intellectual-property disputes. The filing describes a securities class action alleging misleading statements about ONPATTRO, which Alnylam intends to defend, and an Ionis arbitration over claimed technology access fees. Outcomes and potential liabilities were uncertain.
- Management identified no impairment charges on marketable debt securities in the quarter. A 50-basis-point immediate interest-rate increase was estimated to reduce fair value of interest-sensitive investments by $0.9 million; the company did not hedge this exposure.
Most important facts for investors to verify
- Whether ONPATTRO sales and access expand as expected, and how pricing, reimbursement and competition affect uptake.
- Whether givosiran submissions and other pipeline milestones meet the stated timelines, and whether clinical safety and efficacy support approval.
- Whether the Regeneron collaboration and stock purchase closed, and the timing and terms of resulting cash flows and share dilution.
- How operating cash use and expenses evolve, particularly as zero-cost inventory is exhausted and manufacturing and commercial investment continue.
- Developments and potential financial exposure in the Ionis arbitration and securities litigation.