Alnylam Pharmaceuticals, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.
Business context
Alnylam is a commercial-stage RNAi therapeutics company. Its marketed products were ONPATTRO for hereditary transthyretin amyloidosis and GIVLAARI for acute hepatic porphyria. The company was advancing lumasiran toward regulatory approval, while partners advanced programs including inclisiran and fitusiran.
Key financial metrics
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Total revenue | $104.0 | $44.7 | $203.4 | $78.0 |
| Net product revenue | $77.5 | $38.2 | $149.5 | $64.5 |
| Collaboration revenue | $26.4 | $6.5 | $54.0 | $13.5 |
| Operating expenses | $302.8 | $281.0 | $612.5 | $503.1 |
| Operating loss | $(198.9) | $(236.3) | $(409.0) | $(425.1) |
| Net loss | $(179.2) | $(219.5) | $(361.5) | $(401.4) |
| Net loss per share | $(1.56) | $(2.02) | $(3.18) | $(3.75) |
| Operating cash flow | Not separately stated | Not separately stated | $(381.5) | $100.2 |
Q2 product revenue included $66.5 million from ONPATTRO and $11.0 million from GIVLAARI. For the first half, product revenue rose 132% year over year; total revenue rose 161%. Management attributed growth to ONPATTRO’s global expansion, GIVLAARI launches, and increased collaboration activity, particularly with Regeneron and Vir.
Operating expenses increased 8% in Q2 and 22% in the first half. First-half R&D expense was $324.6 million and SG&A was $254.7 million. Cost of goods sold was $19.9 million in Q2 and $33.2 million in the first half; the filing does not present a single overall gross-margin figure, and COGS also includes collaboration product-supply costs.
Q2 other income included $45.5 million of unrealized gains on marketable equity securities, partly offset by $27.2 million of interest expense on the royalty financing. First-half other income included $69.6 million of unrealized equity-security gains. These items contributed to net loss being narrower than operating loss.
Liquidity, financing and debt
At June 30, 2020, cash and cash equivalents were $580.8 million, marketable debt securities were $1,258.4 million, and marketable equity securities were $86.3 million. Together these totaled approximately $1.93 billion. Current assets were $2.16 billion and current liabilities were $384.3 million. Accumulated deficit was $4.09 billion.
Cash, cash equivalents and restricted cash increased by $33.7 million during the first half to $583.3 million. Operating cash outflow was $381.5 million and investing cash outflow was $327.5 million; financing provided $742.9 million, including $500.0 million from the royalty transaction and $99.5 million from a Blackstone equity placement. The year-over-year operating cash-flow comparison was affected by the $400.0 million Regeneron upfront payment received in 2019.
Blackstone paid $500.0 million for a share of inclisiran royalties and commercial milestones and is obligated to pay a further $500.0 million on September 30, 2021. Alnylam recorded a $1.014 billion royalty-sale liability at June 30, 2020 and recognized $27.2 million of interest expense; the initial estimated effective annual interest rate was 11%. If Blackstone has not received at least $1.0 billion in royalty payments by the end of 2029, its royalty share increases from 50% to 55% beginning in 2030.
A separate senior secured delayed-draw term loan facility provides for up to $700 million in three tranches. No amounts had been drawn at June 30, 2020; the first tranche was to be requested by year-end 2020. Later tranches are subject to conditions, including inclisiran U.S. approval and sale or specified product revenue thresholds. The facility includes a minimum quarterly liquidity covenant of $100 million, which Alnylam reported meeting at quarter-end. Management stated available liquidity, expected product and alliance receipts, and Blackstone financing should support its strategic plans for multiple years, while noting continuing operating losses.
Changes, outlook and material risks
- Product revenue more than doubled in Q2 year over year, while collaboration revenue grew substantially. Operating loss narrowed, but the company remained loss-making and used significant operating cash.
- Management expected 2020 product revenue and collaboration revenue to increase versus 2019, and expected combined R&D and SG&A expense to rise as pipeline development and global commercialization expanded. No specific revenue or expense guidance amounts are provided in the filing text.
- Lumasiran’s U.S. NDA received Priority Review with an FDA action date of December 3, 2020; its European application was validated. COVID-19 delayed APOLLO-B enrollment, shifting expected enrollment completion from late 2020 into 2021. Other clinical and regulatory timelines remained subject to disruption.
- COVID-19 risks included reduced U.S. patient demand and adherence, delayed rare-disease diagnosis and genetic testing, clinical-trial enrollment and site disruptions, possible regulatory-review delays, and manufacturing or supply-chain interruptions. The full effect was uncertain.
- Alnylam continued to expect annual operating losses for the foreseeable future. Commercial execution, reimbursement, competition, reliance on collaborators and concentrated manufacturing suppliers, clinical and regulatory outcomes, and the availability and terms of future financing remained material risks.
- Two securities matters remained pending: one complaint was dismissed without prejudice, with a motion to amend pending; a separate class action motion to dismiss was under advisement. Alnylam also disclosed an Ionis arbitration over alleged technology-access fees; a decision was expected in late 2020, and any potential liability was not clearly quantified.
Important facts for investors to verify
- Whether ONPATTRO and GIVLAARI sales, patient access and adherence recover or continue to grow amid COVID-19 effects.
- Whether lumasiran meets regulatory review milestones and whether clinical-trial disruptions affect other programs.
- The timing and conditions for Blackstone’s remaining $500 million payment and the actual cost and repayment profile of the royalty financing.
- Whether Alnylam draws the term-loan tranches and continues to meet the facility’s liquidity covenant.
- Developments in the securities litigation and Ionis arbitration, and any resulting financial exposure.