Alnylam Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2015. Unaudited results are presented against the comparable 2014 periods. Alnylam is a clinical-stage RNAi biopharmaceutical company; it reported no product sales and relies primarily on collaboration revenue.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Collaboration revenue | $6.3 million | $11.0 million | $33.5 million | $26.5 million |
| Research and development | $68.6 million | $46.3 million | $193.7 million | $134.7 million |
| General and administrative | $16.0 million | $9.9 million | $43.4 million | $30.3 million |
| Operating loss | $(78.3) million | $(45.2) million | $(203.5) million | $(359.3) million |
| Net loss | $(76.8) million | $(44.0) million | $(199.4) million | $(339.0) million |
| Net loss per share, diluted | $(0.91) | $(0.58) | $(2.38) | $(4.62) |
Q3 collaboration revenue fell about 42%, principally because Monsanto and Takeda revenue recognition had ended; nine-month revenue rose about 26%, mainly from Genzyme and The Medicines Company activity. Q3 R&D rose 48%, reflecting clinical and manufacturing work, external services, and higher staffing. The nine-month operating-loss comparison is affected by a $220.8 million Sirna in-process R&D charge in 2014; excluding that unusual item, 2015 expenses and losses increased as development spending expanded. The filing does not present a conventional positive operating margin; revenue is small relative to research spending.
Liquidity and cash flow: At September 30, 2015, cash and cash equivalents were $149.2 million and marketable securities were $1,187.1 million, including $38.6 million of Regulus equity securities. Cash, cash equivalents and fixed-income marketable securities totaled approximately $1.34 billion, excluding Regulus. Current assets were $1,041.8 million and current liabilities $57.1 million. Total liabilities were $114.5 million; no borrowings or debt are reported in the supplied filing text. For the first nine months, operating cash use was $136.1 million, investing cash use $399.6 million, and financing cash provided $609.7 million; cash increased $74.0 million to $149.2 million.
Financing included $496.4 million net proceeds from a January public offering and $89.0 million from Genzyme share purchases. Accumulated deficit was $1.16 billion. Unrealized losses on marketable securities contributed to comprehensive loss of $255.3 million for the nine-month period. The company reported no impairment charges on fixed-income securities.
Business developments, outlook and risks
- Strategic objective: Alnylam’s “Alnylam 2020” goal is three marketed products and ten clinical programs, including four late-stage programs, by the end of 2020. Management expects collaboration revenue to remain consistent in Q4 2015 versus Q3, R&D expense to increase, and G&A expense to remain consistent.
- Pipeline: Patisiran Phase 3 APOLLO enrollment was expected to complete within three to four months; if positive, the company expected an NDA submission in 2017. Revusiran was also in Phase 3. Other reported developments included Genzyme’s September 2015 opt-in to ALN-AT3, with cost-sharing expected to begin in January 2016, and advancement of ALN-CC5, ALN-AS1, ALN-AAT and ALN-PCSsc. Clinical findings cited in the filing were preliminary and do not assure success or approval.
- Funding outlook: Management believed existing cash, cash equivalents, fixed-income securities and expected alliance cash flows would support the Alnylam 2020 plan. The company also said it expects significant losses and cash requirements for the foreseeable future; additional financing may be needed, may not be available on acceptable terms, and could dilute shareholders or require rights concessions.
- Commitments: New Cambridge facility leases increased expected lease obligations through 2034 by $409.3 million. Updated future minimum lease payments totaled $459.5 million, including $383.2 million after 2019. The 675 West Kendall Street lease covers approximately 295,000 square feet, with rent expected to begin around February 2019 and a 15-year term.
- Legal matters: The court granted summary judgment for Alnylam in the University of Utah Tuschl-patent inventorship case; Utah appealed. Alnylam sought approximately $8 million in fees, but recovery was uncertain. Alnylam’s trade-secret suit against Dicerna remained pending. The company also disclosed an unresolved $5 million milestone arbitration with Arbutus, with a decision expected in Q4 2015.
- Principal risks: RNAi technology and delivery remain clinically unproven; trials can fail, be delayed, or reveal safety issues; regulatory approval and commercial acceptance are uncertain. The company depends on collaborators, contract manufacturers and third-party trial providers, and faces intellectual-property disputes, funding needs, competition, and pricing and reimbursement risks. A 50-basis-point immediate interest-rate increase was estimated to reduce portfolio fair value by $3.8 million; the company did not hedge this exposure.
Most important facts for investors to verify
- Whether APOLLO enrollment, Phase 3 timelines and the anticipated 2017 patisiran NDA remain achievable, and whether subsequent data support those expectations.
- Whether the cash runway and collaboration receipts are sufficient for the 2020 plan as R&D spending and lease commitments rise.
- How much future revenue depends on Genzyme, The Medicines Company and other partners, including milestone timing and conditions.
- The outcome of Utah’s appeal, the Dicerna litigation and the Arbutus arbitration, including potential costs or recoveries.
- Whether the reported pipeline progress translates into safe, effective, approvable products and whether manufacturing capacity can support later-stage trials and commercialization.