Business context and reporting period
Alnylam Pharmaceuticals, Inc. filed this Form 10-K for the fiscal year ended December 31, 2015. It is a clinical-stage biopharmaceutical company developing RNA-interference (RNAi) medicines, with programs across Genetic Medicines, Cardio-Metabolic Diseases and Hepatic Infectious Diseases. It had no product sales; revenue came from collaborations. The filing also presents unaudited fourth-quarter 2015 results.
Financial performance and liquidity
| Metric (USD millions, except per-share data) | 2015 | 2014 |
|---|---|---|
| Collaboration revenue | 41.1 | 50.6 |
| Research and development expense | 276.5 | 190.2 |
| General and administrative expense | 60.6 | 44.5 |
| Total operating expenses | 337.1 | 455.5 |
| Operating loss | (296.0) | (405.0) |
| Net loss | (290.1) | (360.4) |
| Net loss per share, diluted | (3.45) | (4.85) |
| Cash used in operating activities | (189.1) | (165.6) |
Revenue fell 19% year over year, mainly as Monsanto and Takeda collaboration revenue recognition wound down; increased Sanofi Genzyme activity partly offset the decline. R&D rose 45%, reflecting pipeline advancement, clinical trials and manufacturing, while G&A rose 36%. The lower 2015 net loss versus 2014 largely reflects the absence of the 2014 $220.8 million Sirna in-process R&D charge; it does not indicate operating profitability. Operating margins are not a meaningful measure for this pre-commercial company.
At year-end, cash, cash equivalents and fixed-income marketable securities totaled $1.281 billion, excluding $51.4 million of Regulus equity securities; working capital was $1.043 billion and stockholders’ equity was $1.265 billion. Total liabilities were $121.8 million. No borrowings or debt balance is reported in the supplied balance-sheet data. Financing cash flow was $616.2 million, including $496.4 million net proceeds from a January 2015 public offering and $89.0 million from share issuances to Sanofi Genzyme. The company reported $68.3 million in deferred collaboration revenue and $150.2 million in purchase commitments. It had an accumulated deficit of $1.247 billion.
Fourth-quarter 2015 revenue was $7.6 million, operating expenses $100.1 million, and net loss $90.7 million, or $1.07 per diluted share. The filing does not provide a clear fourth-quarter cash-flow value.
Material developments, outlook and risks
- Pipeline and milestones: Patisiran’s APOLLO Phase 3 trial completed enrollment at 225 patients; results were expected in 2017 and, if positive, an NDA and European application were anticipated in late 2017. Revusiran Phase 3 results were expected in 2018. The company expected to begin two Phase 3 fitusiran trials in 2016. These are management expectations, not assured outcomes.
- Long-term guidance: Alnylam’s 2020 profile target was three marketed products and ten clinical programs, including four late-stage programs. Management expected R&D expense to increase significantly in 2016 and collaboration revenue to remain broadly consistent with 2015.
- Manufacturing investment: A February 2016 agreement to buy land in Norton, Massachusetts for approximately $8 million was subject to closing conditions. The company expected approximately $100 million of facility-related expenditures in 2016.
- Clinical and commercial uncertainty: All candidates remained investigational, and safety and efficacy had not been established by regulators. Development, approval, manufacturing scale-up, reimbursement, competition and future funding are material risks. Management expected continuing losses and relied on collaborations and potential future equity or debt financing.
- Trial safety and contingencies: Revusiran’s Phase 2 extension reported injection-site reactions and three discontinuations associated with localized reactions or rash; reported serious events were not deemed drug-related. A $5 million Arbutus milestone dispute remained in arbitration, with a decision expected in early 2016. The Dicerna trade-secret case was ongoing. Utah’s inventorship claims were dismissed with prejudice, while Alnylam appealed denial of its request for approximately $8 million in fees.
- Reporting and unusual items: The 2015 comprehensive loss included a $44.4 million unrealized loss on marketable securities, largely reflecting the decline in Regulus’s share value. The auditor gave an unqualified opinion on the financial statements and internal controls; management also reported effective internal controls.
Important facts for investors to verify
- Progress, timing and eventual results of APOLLO, ENDEAVOUR and fitusiran trials, including safety signals and regulatory plans.
- Actual operating cash burn, collaboration receipts and financing needs against the $1.281 billion year-end liquid-asset balance and expected 2016 spending.
- Timing, cost and execution of the Norton manufacturing project, including the expected $100 million 2016 expenditure.
- Whether Alnylam meets its 2020 pipeline and product targets, and the terms and revenue contribution of partner opt-ins and milestones.
- Outcomes of the Arbutus arbitration and Dicerna litigation, plus any other material intellectual-property challenges or liabilities.