Alnylam Pharmaceuticals, Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017. Unaudited results; amounts below are in U.S. dollars. Alnylam is a clinical-stage RNAi therapeutics company and reported collaboration revenue, not product sales.
Key financial metrics
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Collaboration revenue | $17.1 million | $13.7 million | $52.0 million | $29.7 million |
| Research and development expense | $95.3 million | $97.9 million | $272.9 million | $277.4 million |
| General and administrative expense | $47.6 million | $22.4 million | $131.9 million | $61.5 million |
| Total operating expenses | $142.9 million | $120.3 million | $404.8 million | $338.9 million |
| Loss from operations | $(125.8) million | $(106.7) million | $(352.8) million | $(309.2) million |
| Net loss | $(122.9) million | $(104.1) million | $(348.6) million | $(297.2) million |
| Net loss per share, basic and diluted | $(1.34) | $(1.21) | $(3.93) | $(3.48) |
| Operating cash used | — | — | $(279.7) million | $(229.4) million |
For the quarter, revenue increased about 25%, while operating expenses rose about 19% and net loss widened about 18% year over year. For the nine months, revenue increased about 75%, operating expenses rose about 19%, and net loss widened about 17%. No product gross margin is reported because the company had no product sales.
At September 30, 2017, cash and cash equivalents were $202.0 million; marketable securities totaled $797.8 million, including $746.2 million current and $51.5 million noncurrent. Together, cash and fixed-income marketable securities were approximately $999.8 million, excluding $150.0 million of restricted investments securing debt. Total assets were $1.36 billion, total liabilities $299.4 million, and stockholders’ equity $1.06 billion. Long-term debt was $150.0 million, due in 2021; it bears interest at LIBOR plus 0.45% and is fully cash-collateralized.
Nine-month investing cash outflow was $129.8 million, including $83.5 million for property and equipment, primarily the Norton manufacturing facility. Financing provided $417.9 million, principally from a $355.2 million net public offering, $21.4 million from Sanofi Genzyme, and $41.6 million from equity exercises and employee plans. Cash and cash equivalents increased $8.4 million to $202.0 million.
Revenue and material changes
- Sanofi Genzyme generated $14.6 million of Q3 revenue and $41.3 million for the nine months, compared with $7.4 million and $17.2 million, respectively, in 2016. The increase primarily reflected development services for opted-in programs. MDCO revenue was $2.3 million for Q3 and $10.1 million year to date.
- G&A expense rose sharply, primarily from increased commercial and medical affairs staffing and higher stock-based compensation as Alnylam prepared for a potential product launch. R&D expense was slightly lower, mainly reflecting reduced costs following revusiran’s discontinuation, partly offset by increased compensation and stock-based compensation.
- Stock-based compensation was $65.7 million for the nine months. The company attributed higher expense in part to performance-based awards becoming probable after positive patisiran Phase 3 topline results.
- The May 2017 equity offering and concurrent Sanofi Genzyme private placement raised approximately $376.5 million in total net proceeds. Shares outstanding increased to 92.4 million at September 30, from 85.9 million at year-end 2016.
Outlook, programs and risks
- Management said available cash, cash equivalents and fixed-income securities, together with expected alliance cash, should fund the Alnylam 2020 strategy for at least the next few years; the liquidity note more conservatively states at least the next 12 months. Significant ongoing losses and cash needs are expected.
- Management expected Q4 collaboration revenue to increase, including a $20 million MDCO milestone following initiation of its inclisiran Phase 3 study in early November. A $25 million Sanofi Genzyme fitusiran milestone depends on resumption of ATLAS dosing; management anticipated it could be earned in early 2018 if regulatory alignment and dosing resumption occur.
- Alnylam’s stated Alnylam 2020 goal was three marketed products and ten clinical programs, including four late-stage programs, by the end of 2020. This is a company goal, not assured guidance. Management expected Q4 R&D expense to increase and G&A expense to rise slightly.
- After the quarter, the company reported positive complete APOLLO Phase 3 results for patisiran and planned to submit an NDA by year-end 2017 and an MAA shortly thereafter. These are post-quarter developments and the planned submissions and approvals remain uncertain.
- Fitusiran dosing was suspended in all ongoing studies in September after a fatal thrombotic serious adverse event. Resumption depends on regulatory discussions and a risk mitigation strategy. This is a material safety and execution risk.
- Other principal risks include clinical and regulatory uncertainty, manufacturing scale-up and supply constraints, reliance on collaborators, future financing and dilution needs, reimbursement and commercialization challenges, and protection or enforcement of intellectual property.
- Silence Therapeutics sought a declaration that its European patent could support product-specific supplementary protection certificates for several candidates; Alnylam and MDCO affiliates challenged jurisdiction and separately sought patent revocation and non-infringement declarations. Alnylam also faces Dicerna counterclaims and a separate antitrust suit while pursuing its own trade-secret case. Outcomes are uncertain; the filing does not quantify potential exposure.
- Management reported no material recognized subsequent events, while identifying the Silence litigation as a nonrecognized subsequent event. The filing also describes a prospective adjustment to the fitusiran revenue-recognition performance period after the dosing suspension.
Important facts for investors to verify
- Regulatory progress and full safety data for patisiran, including the timing and outcome of NDA and MAA review.
- Fitusiran study status, regulatory agreement, risk controls and implications of the fatal thrombotic event for enrollment and milestone timing.
- Actual cash burn, collaboration receipts and runway relative to management’s differing 12-month and “next few years” liquidity statements.
- Progress, cost and timing of the Norton manufacturing facility and the company’s ability to secure reliable clinical and commercial supply.
- Developments and potential costs or business consequences in the Silence and Dicerna litigation.