Alnylam Pharmaceuticals, Inc. — FY 2011 Form 10-K
Reporting period: Year ended December 31, 2011. The filing also reports unaudited fourth-quarter results. Unless stated otherwise, financial figures are in U.S. dollars.
Business context
Alnylam is a development-stage biopharmaceutical company focused on RNA interference (RNAi) therapeutics. It had no product sales and depended on collaboration, license and government-contract revenue. Its “Alnylam 5x15” strategy targeted five programs in clinical development by the end of 2015. In January 2012, the company shifted resources toward ALN-TTR and ALN-APC, while seeking partners to advance other programs.
Financial performance and position
| Metric | FY 2011 | FY 2010 |
|---|---|---|
| Collaboration revenue | $82.8 million | $100.0 million |
| Research and development expense | $99.3 million | $106.4 million |
| General and administrative expense | $38.3 million | $37.7 million |
| Operating loss | $54.8 million | $44.1 million |
| Net loss | $57.6 million | $43.5 million |
| Basic and diluted loss per share | $1.36 | $1.04 |
| Cash used in operating activities | $87.1 million | $84.3 million |
| Cash, cash equivalents and marketable securities at year-end | $260.8 million | $349.9 million |
| Working capital at year-end | $71.0 million | $152.1 million |
| Notes payable at year-end | None | None |
Revenue fell about 17% year over year, while net loss increased about 32%. Operating expenses declined 5%, mainly as lower external R&D costs more than offset increased clinical-trial and manufacturing expense. The company reported a $0.6 million impairment charge on its Tekmira equity investment. No cash dividends were paid or expected.
Fourth-quarter 2011 revenue was $20.5 million, operating expenses were $34.0 million, and net loss was $14.3 million, or $0.33 per share. Revenue was heavily concentrated: Roche/Arrowhead accounted for 68% and Takeda 27% of FY 2011 collaboration revenue. Year-end deferred revenue was $140.9 million, including $62.4 million current and $78.5 million long-term.
Pipeline, developments and outlook
- ALN-TTR: Preliminary Phase I results for ALN-TTR01 showed a statistically significant mean 41% reduction in serum TTR at the highest dose; no serious drug-related adverse events were reported. The company planned to start a Phase I study of second-generation ALN-TTR02 in the first half of 2012.
- ALN-PCS: Preliminary Phase I results showed up to 66% PCSK9 silencing and a statistically significant mean 39% LDL-cholesterol reduction at the highest reported dose. The trial was ongoing; Alnylam planned to seek a partner before Phase II.
- Other programs: ALN-APC was preclinical. ALN-HPN and ALN-TMP were also preclinical, with partnering planned before clinical trials. ALN-RSV01 Phase IIb results were expected in mid-2012. ALN-VSP completed Phase I; a patient death was considered possibly related to study drug, while other patients had prolonged stable disease or tumor response. The company planned to partner ALN-VSP before Phase II.
- Restructuring: The January 2012 workforce reduction was approximately 33%, to about 115 employees. Management expected approximately $20 million in 2012 operating-expense savings and about $4 million in one-time charges, mostly in Q1 2012.
- Cash outlook: Management believed existing cash, investments and expected cash from current alliances would fund planned operations through at least the end of 2013. This outlook depended on the operating plan and collaboration receipts; additional financing could be needed sooner.
Risks, contingencies and unusual items
- The company had an accumulated deficit of $401.0 million, expected continued operating losses, and had not demonstrated that RNAi candidates could be commercialized. Clinical, regulatory, delivery and manufacturing outcomes remained uncertain.
- Revenue depended substantially on a small number of collaborators. Revenue from the Roche/Arrowhead agreement was expected to decline to $37.3 million in 2012 as remaining performance obligations were completed.
- Alnylam and Tekmira were involved in material litigation. Tekmira sought, among other relief, damages and termination of licenses or transfer of intellectual property, including rights relating to MC3. Alnylam said loss was more than remote but less than probable and that it could not estimate a loss range; no loss estimate was recorded. Alnylam separately sued Tekmira for patent infringement in January 2012.
- The University of Utah challenged inventorship of Tuschl patents; the litigation remained unresolved. Patent oppositions and other intellectual-property challenges could affect the company’s ability to develop or commercialize products.
- Alnylam guaranteed half of certain Regulus loans; its disclosed exposure to Regulus debt, including accrued interest, was $5.5 million at year-end. Regulus was accounted for under the equity method and Alnylam’s investment carrying value was $0.6 million.
- Contractual cash obligations totaled $54.3 million at year-end, including $27.4 million of operating leases, $12.7 million of purchase commitments and $14.2 million of technology-license commitments. Management and the auditor reported effective internal control over financial reporting.
Most important facts for investors to verify
- Whether ALN-TTR02, ALN-PCS and ALN-RSV01 meet the company’s stated clinical milestones, and how safety findings evolve.
- Whether the Tekmira and Utah disputes affect delivery-platform access, patent rights, collaboration economics or create material cash liabilities.
- Whether collaboration revenue, especially from Roche/Arrowhead and Takeda, can be replaced as existing obligations wind down—and whether planned partnerships are secured.
- Whether the restructuring achieves the anticipated savings without disrupting research, staffing or development programs.
- Whether cash burn and operating requirements remain consistent with management’s stated funding runway through at least year-end 2013.