Alnylam Pharmaceuticals Inc (ALNY) 2006 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss the third quarter 2006 financial results.

[OPERATOR INSTRUCTIONS]

I would now like to hand the call over to Alnylam.

Good afternoon. This is Cynthia Clayton, director of investor relations and corporate communications at Alnylam. With me today from Alnylam are John Maraganore, chief executive officer, Barry Greene, chief operating officer, Vin Miles, senior vice president business development, Akshay Vaishnaw, vice president clinical research, and Patty Allen, vice president finance.

During today's call John will provide a brief overview of recent highlights, Patty will review our financials, Akshay will then provide an R&D update, Barry will provide an update on our business execution efforts and review our 2006 milestones, and we will then open the call for your questions.

Various statements we make concerning our future expectations, plans and prospects, including, without limitation, statements related to our product goals and business goals for 2006 and projections for the amount and sufficiency of cash, cash equivalents and marketable securities constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including risks related to our approach to discovery and development of novel drugs, which is unproven and may never lead to marketable products, obtaining, maintaining and protecting intellectual property utilized by our products, our ability to enforce our patents against infringers and to defend our patent portfolio against challenges from third parties, our ability to obtain additional funding to support our business activities, our dependence on third parties for development, manufacture, marketing, sales and distribution of our products, the successful development of products, all of which are in early stages of development, obtaining regulatory approval for products, competition from others using technology similar to ours and other developing products for similar uses, our dependence on collaborators and our short operating history, as well as those risks more fully discussed in the risk factor section of our most recent report on Form 10-Q on file with the Securities and Exchange Commission. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We do not assume any obligation to update any forward-looking statements.

I will now turn the call over to John.

Thanks, Cynthia, and welcome, everyone, to Alnylam's third quarter 2006 earnings call.

As I think all of you would agree, this is an extremely exciting time for the field of RNAi. Over the last few weeks we saw the Nobel Prize awarded to Doctors Andrew Fire and Craig Mello for their discovery of RNA interference and we're very proud that the Karolinska Institute referred directly to Alnylam's scientific work published earlier this year in Nature as one of the rationales for the early award of this most distinguished prize.

Just this week we saw yet further validation of the pharmaceutical industry's deep interest in RNAi as a new class of drugs with Merck's over $1 billion acquisition of a competitor RNAi therapeutics company. From our perspective, we believe that the value created by building a whole new class of innovative medicines greatly exceeds this value.

Accordingly, our focus remains on our mission of building a major biopharmaceutical company where we lead the translation of RNAi into a robust drug discovery platform to treat disease in a fundamentally new way. We've built a deep pipeline of innovative RNAi therapeutics with both un-partnered and partnered programs and we have exclusive rights to the intellectual property needed to commercialize RNAi therapeutics.

The third quarter was truly a standout quarter for Alnylam. We reported progress with our clinical scientific and business initiatives and from a financial perspective we recorded our most significant quarter to date for revenues. At Alnylam this quarter we continue to make important strides with our R&D programs. We advanced our lead clinical development program by initiating a Phase 1 inhalation trial for ALN-RSV01 last month. We are very excited about the potential of RNAi therapeutics for the treatment of RSV infection and the significant opportunity for the underserved patient population that has the potential to address. It is also an un-partnered program where we retain all of the value.

In addition to the RSV program, we have a robust preclinical pipeline that continues to produce compelling and encouraging in vivo results across various therapeutic areas reflecting the power and broad applicability of the RNAi platform. We also accomplished several key business milestones this quarter, which demonstrate the growing interest in RNAi as a breakthrough product platform and Alnylam's position as the partner of choice in developing RNAi therapeutics.

We formed a collaboration with Biogen Idec, strengthened our relationship with Merck, secured significant government funding through our Alnylam biodefense initiative and continued to monetize our leading intellectual property estate. Importantly, we achieved these milestones and supported progress with our programs wile maintaining a solid financial profile and tracking with our financial guidance for the year.

The successful execution of our business strategy has supported continued growth in our collaborative revenue, building a solid financial basis to support our development efforts. In fact, to date we have now received over $120 million in funding from these partnerships, which has provided us with the resources to advance our R&D efforts.

We also do have a few updates and announcements that I'd like to highlight today. First, we announced that our timing for filing an IND for our flu program, ALN-FLU01, will shift into 2007 from our original goal of as early as the end of 2006. This timeline change is needed for us to finalize formulations for optimal in vivo delivery. We are committed to advancing this very important program forward and also working closely with Novartis, who are our partners in this program, to move the right product into clinical studies.

While this program is fully funded by Novartis and public sector support from the NIH and the Defense Department, we no longer expect to receive additional funding from HHS this year but may seek funding in 2007 with further congressional appropriations in the government's flu plan. Of course, due to our Novartis collaboration on flu, this has no impact on execution or funding of our program.

Second, we were very pleased to announce today that we have initiated a new co-development and co-promotion program with our partner Merck. This is a new co-development and co-promotion program under our revised Merck collaboration agreement that we signed back in July. The target will remain undisclosed at the present time, but it is an existing disease gene that was discovered by Merck scientists where we will use Alnylam's systemic RNAi technologies similar to that reported in Nature earlier this year.

Merck has also selected two additional targets where they are licensed under our intellectual property and where we are eligible to receive R&D funding, milestones and royalties. As for our collaboration with Merck and in light of recent events, senior management at Merck have assured us of their commitment to our partnership.

Let me also comment on some recent organizational changes. In September we announced the transition plan in our business development team. After more than three years with Alnylam and a very long career in biotech, in fact close to 30 years, Vin Miles has decided to pursue other interests. As many of you know, our business development team here at Alnylam has had a stellar track record of execution and we would like to thank Vin for all of his efforts on behalf of the company.

He will remain with us fulltime until the end of this year and then work through a transition period while we identify a replacement. During that time, Barry Greene will expand his active involvement in and assume responsibility for our business development efforts. We wish Vin all the best in his future endeavors.

I'd like to now turn the call over to patty for a review of our financials. Patty?

Thanks, John, and good afternoon, everyone.

From a financial perspective, we continued and, in fact, increased the momentum we saw in the first two quarters with significant revenue coning from our value creating partnerships with pharma and our InterfeRx reagent licensees. The details for the quarter are included in the release so I would like to call out a few financial highlights from Q3.

We ended the quarter with $120.3 million in cash, cash equivalents and marketable securities, reflecting a third quarter net cash burn of $3 million, reflecting significant cash revenues less our cash operating expenses. We have seen a steady increase in revenues each quarter this year and we are pleased to report that for the first nine months of 2006 we have recorded $20 million in collaborative revenues, exceeding our 2006 goals of greater than $15 million in alliance-based funding. Revenues in the third quarter were $8.2 million, up from $6 million in revenues recorded in the second quarter and significantly higher than the $1.4 million in revenue we recorded in Q3 of last year.

Let me break down the revenue composition for the third quarter. We earned $6.5 million in expense reimbursement, milestones and our amortization revenues related to our two collaborations with Novartis, $5.5 million from the main alliance with Novartis and $1 million from our flu alliance. In addition, we began to realize significant revenues from our licensing initiatives, with $1.2 million in revenues from our new InterfeRx licenses with [Quark] and [Quando] and our existing InterfeRx license with Nastech Pharmaceuticals, as well as a ramp-up in reagent service license revenues as we continue to license RIP to the reagent service providers. Revenues also included amortization revenues of upfront fees from our alliance with Merck.

I do want to note that we expect there will be variability in revenues from quarter to quarter as we achieve milestones and as projects evolve. We do, however, expect to have a solid revenue base in Q4 from our alliances with Novartis, Biogen Idec, Merck, the government funding of our Ebola program, our InterfeRx reagent license, in addition to other new business development initiatives we may achieve.

Let me now turn to expenses. We reported $12.8 million in R&D expenses for the third quarter, which included $900,000 of stock-based compensation expense, numbers comparable to second quarter levels. Included in R&D expenses for Q3 were costs for our RSV program related to the start of the Phase 1 inhalation trial in October as well as costs relating to preparing for the experimental infection study. In addition, we accelerated our collaboration with Inex Pharmaceuticals during the third quarter and made payments to Inex, which totaled approximately $2 million.

Our G&A expenses have also remained fairly consistent over the course of 2006. For the third quarter we reported $4 million in G&A expenses, which included $800,000 in stock-based compensation expense, as compared to $4.4 million in G&A expenses in Q2 of 2006. While we are managing G&A very tightly and holding expenses steady, variability will occur based on the business activities in any given quarter.

Our net loss for the quarter on a GAAP basis were $7.4 million, or $0.23 per share, which included $1.7 million, or $0.05 per share, of stock-based compensation expense. This compared to a $10.7 million net loss, or $0.51 per share, for the same quarter last year, which included $2.2 million, or $0.11 per share, of stock-based compensation expense. The decrease in the net loss is primarily attributable to the significant and sustainable revenues we are realizing from our collaborative arrangements, primarily from Novartis, partially offset by an increase in R&D expenses as we have advanced our pipeline and increased R&D headcount to support our programs.

Overall, we are in a strong position to achieve our financial objectives through the year while continuing to execute on our scientific, clinical and business goals for 2006. We have already exceeded our goal of alliance-based funding of greater than $15 million for 2006 and we are well positioned to meet our guidance of year-end cash in excess of $115 million.

I will now turn the call over to Akshay, who will review our clinical and preclinical programs.

Thank you, Patty.

As all of you know, job one at Alnylam is our effort to advance our portfolio of partnered and proprietary programs. I'd like to now provide you with an overview of some key portfolio developments in recent months, beginning with an update on our RSV program.

Based on the encouraging safety data we announced for our two Phase 1 intranasal studies, we've continued to advance our clinical program, ALN-RSV01. We recently initiated a Phase 1 trial with an inhaled formulation. This study builds on our prior trials but now with a nebulized formulation of ALN-RSV01, which is designed to deliver the RNAi therapeutic directly to the lungs, this being the expected route of administration for the treatment of RSV in naturally infected patients.

Models of this nebulized formulation predict that it can be delivered to the alveoli and the small airways of the human lung. A Phase 1 trial is a randomized double blind placebo controlled study in healthy adult volunteers that will assess the safety, tolerability and pharmacokinetics of nebulized ALN-RSV01. We're expecting to enroll 80 subjects in two trial segments. The first segment will evaluate single offending doses while the second segment of the study will evaluate multiple offending doses of ALN-RSV01.

Data from this study are expected in the first half of 2007 and these results, combined with the results from our Phase 1 intranasal studies, will provide us with safety data from approximately 118 healthy volunteers, representing one of the most [expensive] human clinical experiences within RNAi therapeutics. We are very excited about ALN-RSV01 and accordingly have implemented a comprehensive development program. Later this year we plan to initiate an experimental infection study with the intranasal formulation of ALN-RSV01 in healthy adult volunteers and we're moving forward with plans to initiate a Phase 2 trial in naturally infected patients in 2007.

Now, turning to the flu program, as John mentioned, we're advancing the development of ALN-FLU01 by focusing on optimizing formulations for in vivo delivery. As reported previously, ALN-FLU01 is comprised of two separate siRNA that target two distinct genes in the influenza genome. Based on this strategy, our drug can target more than 99.99% of all known flu strains, including those of avian origins, such as H5N1, and with extremely high probability would be expected to work on a future emergent H5N1 strain that could cause an influenza pandemic.

ALN-FLU01 has shown very encouraging activity towards human clinical isolates of the H5N1 virus and we're working with our colleagues at Novartis to finalize formulation for optimal in vivo delivery.

In addition to our RSV in flu, we continue to make very solid progress with our robust pipeline of preclinical programs, demonstrating accumulating evidence of in vivo efficacy across multiple disease models. Last month Alnylam scientists and collaborators provided an update on our newer programs at the Society for Neuroscience Annual Meeting, including Huntington's disease update, neuropathic pain and Parkinson's disease data.

The key takeaway from this meeting was that the data demonstrated that our RNAi therapeutics can be administered in vitro and in vivo in animal models in neurologic disease to achieve highly selective and therapeutic silencing of disease causing genes. Recently at the Oligonucleotide Therapeutic Society Meeting we provided an update on our PCSK9 program for hypercholesterolemia, reflecting the rapid progress we are making in enabling the systemic delivery of RNAi therapeutics.

Specifically, we reported that our RNAi therapeutics designed to target PCSK9 when delivered systemically can silence the PCSK9 gene in mice as measured by reduction in hepatic mRNA levels. The more gene silencing of the PCSK9 mRNA results in meaningful reductions in cholesterol levels, yielding the first in vivo evidence that pharmacologic targeting of PCSK9 can result in a potential therapeutic benefit. These data build on our landmark data published in Nature earlier in the year and advances our efforts to bring forward systemic RNAi therapeutics.

We continue to make progress also with our other pipeline programs including our CF program, our new program with Biogen Idec targeting the JC virus, our micro RNA research efforts on antagomirs and we look forward to providing you with updates on these programs in the near future, including our upcoming R&D Day in December.

Let me turn the discussion over to Barry, who will now review recent business execution highlights. Barry?

Thanks, Akshay.

We reported a number of accomplishments with the execution of our business and intellectual property strategy in recent months and I'd like to spend some time today briefly discussing several key highlights.

First, in September we announced an important new alliance with Biogen Idec to develop RNAi therapeutics for the treatment of PML by targeting JC virus. The strategic importance of this alliance demonstrates Biogen Idec's commitment to understanding PML and developing potential drugs for its treatment and it also builds on Alnylam's capabilities in CNS delivery and antiviral applications. Certainly, it's hard to imagine conventional drug approaches that could reasonably target the JC virus and, accordingly, this effort reinforces the high level of interest in RNAi therapeutics as a fundamentally new way to treat disease.

The alliance will provide Alnylam with significant funding, including an upfront payment of $5 million, R&D funding and significant milestone payments for preclinical and clinical development. Importantly, the alliance structure reflects the unique circumstances associated with the potential therapy for PML with substantial payments related to product use. Assuming successful development and utilization of any products resulting from the collaboration, Alnylam would receive more than $51 million in milestone payments and substantial undisclosed royalties and utilization fees, in addition to the upfront payment and R&D funding.

Our alliance with Biogen Idec is our sixth major alliance transaction to date, building on partnerships formed with Merck, Medtronic and Novartis, and is the industry's first RNAi therapeutic alliance with a top tier biotech company.

Another key highlight for the quarter was the expansion of our Alnylam biodefense initiative, our effort to build a robust platform in developing RNAi therapeutics targeting natural or manmade threats to our domestic and overseas populations. We believe the funding for this effort will strengthen our RNAi platform's capabilities and its applications in traditional clinical indications while creating future for near term commercial opportunities through government stockpiling.

In the past few months we've announced several commitments from the U.S. government under this initiative, totaling nearly $25 million to advance our flu and other biodefense efforts. This is comprised of $23 million in funding to develop RNAi therapeutics targeting the Ebola virus, a $590,000 SBIR grant from the National Institute of Allergy and Infectious Diseases to advance the development of RNAi therapeutics for pandemic flu, and Department of Defense appropriations in 2007 in the amount of $1.1 million dedicated to our ongoing development of RNAi therapeutics.

We've also continued to enable the field of RNAi therapeutics and monetize our IP estate through our InterfeRx program. During this quarter we granted a license to [Colando] to develop RNAi therapeutics directed towards an oncology target and two licenses to Quark for RNAi therapeutic programs in AMD and renal failure. Of note, shortly after we granted Quark the two InterfeRx licenses, the company licensed its AMD RNAi therapeutic program to Pfizer. We believe that the timing of our Quark InterfeRx agreement reflects both Quark and Pfizer's belief in the value of Alnylam intellectual property.

On the IP front, we reported further strengthening of our IP estate with the U.S. issuance of the second patent from the Tuschl II patent series, which is licensed exclusively by Alnylam. The 196 patent broadly covers methods of making siRNA's and includes broad claims covering the use of chemical modifications with no limitations that may be needed to introduce drug-like properties into siRNAs for therapeutic development.

We are also pleased today to report additional developments with our intellectual property worldwide. The New Zealand patent office is granting claims corresponding to the Tuschl II 196 patent I just mentioned and the Tuschl II 704 patent that was granted in the U.S. earlier this year. Lastly, the U.S. patent Office has issued two additional patents, which are licensed to Alnylam through our 2004 Isis agreement, which covers certain chemical modifications of oligonucleotides that may be required for developing RNAi therapeutics.

In summary, it's been an extremely productive quarter at Alnylam and we look forward to building on this momentum in the coming quarters.

Let me close with a review of our 2006 goals. In terms of our clinical development goals, we expect to initiate an experimental infection study for ALN-RSV01 by the end of this year. We also remain on track to announce our next development program by the end of the year, which will be an Alnylam proprietary program.

For flu, we now expect that we will file an IND for pandemic flu in 2007 and we'll give further details on timing when we provide our full update of product goals for 2007.

On the business side, we have already exceeded our goal of receiving greater than $15 million in alliance-based funding in 2006 and expect solid revenues in the fourth quarter. We will continue to strengthen our intellectual property position by obtaining patent issuances and grants in major markets to leverage and monetize this IP estate through additional InterfeRx and reagent licenses. And finally, we are on track in 2006 with a strong balance sheet and end the year with greater than $115 million in cash.

Finally, we continue to have very productive discussions with pharma and biotech companies for new potential partnership opportunities. Indeed, the interest in RNAi therapeutics and Alnylam's leadership in science, capabilities and intellectual property has never been stronger. As John stated earlier, we believe there's very significant value in building RNAi as a whole new drug class and our partnership discussions will remain focused on this objective as we build a leading pipeline of both partnered and un-partnered RNAi therapeutics. These are certainly exciting times.

In closing, we hope to see all of you at our R&D Day on December 5th in New York City.

At this time, we'd like to open the call up for questions as I turn the call back to the operator. [Jen], please open the line for questions.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

Your first question comes from [David Whiskey] with Bank of America Securities.

Hey, Dave.

[inaudible] on behalf of Dave.

Oh, hi.

Who is it?

It's [Will Sargent].

Hey, Will, how are you?

Good. How are you guys?

Good.

I was wondering if you could give us a little bit more color at this point around the experimental trial around what it might look like and when we might get some data points from that trial?

Great, Will. Let me turn -- let me turn that over to Akshay, who is obviously in the driver's seat on that effort.

Thanks, John. So the experimental infection study I think is a wonderfully exciting opportunity to demonstrate proof of concept of ALN-RSV01 in man. And essentially the study involves establishing a batch of RSV virus that we've grown up as an effective inoculant to cause an infection in man and then in that context evaluate the efficacy and safety of ALN-RSV01. And we're well on track to getting going with that study later this year and we hope to report findings in -- later in next year and I'm sure we'll be announcing the timeframe appropriately.

Any idea about number of patients or any more color around the patient population?

Well, the study is done in healthy adult volunteers, so that's well established in the literature and it's the most appropriate way to move forward. And as to the size of the study and so forth, I think it's still premature to get into all of that. But I think it's a very manageable and exciting study and hopefully we'll get an exciting proof of concept data.

And we'll certainly provide further updates on that study plan at the upcoming Analyst Day.

Great, thanks. Congratulations on a great quarter.

Thanks, Will.

Your next question comes from Mike King with Rodman & Renshaw.

Good afternoon, guys. Thanks for taking the call. A couple of things. I just wonder, can you clarify for us in terms of the relationship with Merck, how's the IP going to work and the progress that they make on compounds that they work on with you guys? How are they going to separate that from the work that they're doing from the competitor that you spoke of?

Well, they've acquired -- obviously they're planning on acquiring, pending the close, Sirna and whatever activities occurred at Sirna would be now Merck activities. That said, Merck is -- in the current agreement is only licensed with Alnylam intellectual property on nine therapeutic targets in addition to one additional co-development program that we have with them on spinal cord injury. So the landscape of where they have today intellectual property is defined effectively on 10 target genes, 10 disease genes. And...

Target genes, not the category?

No. No, these are -- all of our agreements are based on specific genes, specific target genes.

Right. And are you comfortable that they are able to separate church and state or is that no longer necessary?

It's sort of not even an issue anymore. I mean it's -- effectively they've acquired a capability and I presume will internalize that at Merck and it would just be like it was before, working with a group of scientists at Merck who also have some capabilities themselves. But they're licensed on exactly 10 programs and that's it.

Can you remind us if your agreement with them speaks to the possibility of Merck acquiring a capability such as Sirna's and whether the Alnylam programs are required to be run [inaudible] with whatever internal Merck programs might exist or be developed?

I'm not sure I can really comment on that, Mike, in the sense that there's no -- certainly nothing in our agreement nor is it standard in any of these type of collaboration agreements as it relates to that type of specific consequence. But again, they're licensed by Alnylam intellectual property, which they've of course acknowledged their need to have on these 10 programs.

Okay. So is it fair to say, then, that if they should develop another target area, whatever that might be, that in your opinion they would need to come to you for freedom to operate?

Well, it's our perspective and opinion that, and I think one that's been validated across multiple different dimensions, that anybody commercializing any RNAi therapeutic needs access or will need access to Alnylam IP. Barry, you want to comment further?

I think, Mike, an important context here, just to remind you and others, is that we had two different agreements with Merck and at Merck's request, because we were making portfolio decisions that were not moving Merck programs together, in the old agreement we had to agree to a target and Alnylam only could move it forward. At Merck's request, we restructured the alliance to allow them to move programs further forward because they were very committed to RNAi therapeutics, certainly a recognition of the value of our intellectual property and the recognition that we have that allows them to move programs forward.

Okay, great. Thanks. I'll get back in queue.

Okay. Thanks, Mike.

Your next question is from [Avneesh Dulanki] with Bear Stearns.

Good evening, everyone. Just...

Hi, Avneesh.

Hi. Just wanted to get back to the experimental infection study. Without getting into any of your specific trial design plans, can you comment on whether there exist any standard protocols for these types of trials, such as when does therapy begin with the experimental agent, after initial infection or after the onset of symptoms?

Well, there's certainly no published protocols or literature out there as to how an experimental agent would be evaluated in the context of infection. But more importantly, what does exist is exactly how the model is set up and there's extensive literature on that. A number of academic groups beginning in 1962 have shown over and over again that one can manufacture the virus and reliably infect healthy adult volunteers. So that's really what we're building on and that's why we feel excited and confident that we can accomplish the study.

And just to add to that, Avneesh, obviously, as you probably know, the absence of any existing treatments for RSV really underscores the reason there have been no published studies with RSV treatments in these experimental infection models. That said, there certainly is a rich literature of testing antivirals for both influenza and rhinoviral infection in adult volunteer studies which have looked at the issues related to dosing prior to infection as well as dosing after infection as well.

Right, and it's fair to say that our approach won't be dramatically different so there is an [inaudible].

And do you also anticipate on waiting for the data from this experimental study before pursuing the naturally infected trial?

No. Our plans are to proceed in parallel with the efforts. Obviously we're doing the experimental infection study with the intranasal formulation of ALN-RSV01, which has already been evaluated for safety, and the previously conducted Phase 1 trials and then we'll be using a nebulized formulation of ALN-RSV01 to initiate the Phase 2 nationally infected study that again we have planned for the first half of next year.

Great. Thank you.

Your next question comes from Ding Ding with Maxim Group.

Great. Thank you for taking my call.

Hi, Ding Ding.

Hi. Congratulations for a very busy and productive quarter.

Thank you. Thank you.

If I may, I just wanted to ask a philosophical question, if I may.

That's exciting.

Following the recent Merck acquisition of Sirna, where do you see the kind of opportunity or/and challenge you face going forward strategically given the changing competitive landscape?

Well, I think that we've always believed in the significant leadership that we've established scientifically from a pipeline standpoint and also from a business standpoint on IP and so forth. And we believe now that the differentiators of Alnylam have gotten clearer because the only reasonable competitor out there has now been removed from the landscape, assuming the close occurs in the first quarter as has been projected.

So I think it's really become a much more interesting opportunity by far insofar as we are really uniquely out there in terms of our capabilities, our IP and our execution track record. So I think it's an exciting time for us and, at the same time, the level of interest in RNAi therapeutics from the pharmaceutical industry has never ever been stronger.

And that is going to provide Alnylam with some very significant opportunities for how we can build our business again with the absolute focus on building significant value out of this creation of a whole new class of drugs, a value that in our estimation and our perspective far exceeds the acquisition value that was reported earlier this week. That's the philosophical answer. We believe that the landscape has gotten much more attractive for our company.

Great. If we just look at your current pipeline, there are quite a few indications that you're working on that are certainly large unmet medical needs, including Parkinson's, Huntington's disease, and all those represent potentially very high commercial potential but at the same time they're also very tough indications. So I just wanted to get a sense of what are your thoughts on what's the shortest clinical path to get your drug to the market? Obviously that takes time and tremendous resources, if you could just comment on that in the context of your current and future partnerships in sharing the cost and risks, that will be really helpful.

Sure, Ding Ding. I'll do it in very general terms because I think it's premature to comment on specifics. But the -- as you know, we have a broad pipeline with our two most advanced programs being RSV and flu. And in our pipeline, if you look at timelines as progressing forward, one of the attractive features have been both the flu and Ebola efforts because they do represent opportunities for potential accelerated approval timelines that are consistent with the use of these types of agents under stockpiling type situations.

And I think the best example of that in our industry would probably be what HGS has done with their anthrax program. And that does represent a potential faster track to an approval. That is one of the reasons we're pursuing those programs in addition to the fact obviously that we've received significant funding for hose programs already. So those do represent, we think, potential nearer term opportunities to advance these programs to approval stages and ultimately to commercialization, which would be done through stockpiling. But again, that precedent is now well established out there in our industry and I think it represents an attractive precedent.

If you look at the other programs, it's a broad range of programs covering diseases that range from obviously RSV infection, Huntington's, cystic fibrosis, and each of those have independent timelines, dependent upon the disease, for how one would conduct clinical trials and advance these programs safely and effectively to approval stages. And again, it'd be too premature to comment on specific timelines there.

Great. Lastly, if I could just ask a more technical question on the delivery technology, it sounds like you guys are experimenting with a new lipid nanoparticle formulation from MIT where the target is PCSK9. Can you just comment on the -- what advantage or differentiation factors this technology is compared to the [inaudible] that you used previously?

Well, I think that one of the approaches that we developed at Alnylam, and I think have been very much in the lead on, is a multi-pronged approach to solving and addressing delivery. And we have been successful in building what I refer to internally as version 1.0 and version 2.0 technologies that range from conjugation technologies such as those described in our Nature paper published in 2004, liposomal technologies that we did collaboratively with [Prochiva], and in a business relationship with Inex using those company's liposomal formulations such as that which we published in Nature this year, in 2006.

And also in a collaboration with MIT we've had very encouraging data that we're presenting, including data presented at the Oligonucleotide Therapeutic Society Meeting earlier this -- I guess last month as it relates to the technology that we have involved with [Bob Langer's] group at MIT, which is very promising indeed. And then finally, we also have licensed technology from the Center for Blood Research together with [Judy Lieberman]. It's a very exciting delivery technology applied to use of antibodies, and we also have some peptide technology that we're excited about internally.

So it is really a toolkit approach that is applied on a program-by-program basis for addressing delivery in a program specific manner and it's been something that we're quite proud of. I think you'll see continued publications by Alnylam across multiple different technologies as it relates to delivery and it's really through the publication of this work and peer review mechanisms that you'll be able to see the specific attributes of each of these different technologies.

But it is a matrix and it is a broad-based effort at the company and it's an industry-leading effort. Nobody comes even close to the breadth and significant level of investment we're making in delivery at Alnylam.

Great. Thank you for taking my questions.

Thank you.

Ladies and gentlemen, we have time for one more question. Your question comes from Mike King with Rodman & Renshaw.

Hey, Mike.

Sorry, I had the phone muted. Sorry about that. Thank you for taking the follow-up. Can you be more specific about what things are being done for ALN-FLU01? Thought you were saying you were pushing it out to '07 to finalize the formulation, but is there anything specifically -- ?

Well, we're looking -- yes, so, Mike, flu has a broader range of cell type infectivity in the lung as compared to, for example, RSV. And so we're finalizing and optimizing with different formulations across the toolkit that I just described to finalize those formulations in advance of the scale-up for initiating IND studies. So we're really at that stage. We're encouraged about the program. It's an exciting program. We have the commitment from Novartis on the [separate and the significant way] and we think it's a very important program as well. So stay tuned on the timing, but just shifting from the goal that we had set forth as early as the end of '06 into 2007 at this point.

Okay. And just a follow-up, is there any difference in the -- for the viral swarm with RSV versus flu and accordingly, would there be any difference in the amount of oligo that would need to be delivered to the lung [inaudible - microphone inaccessible]?

Well, I think there are differences, but at least in our -- based on the data that we have been looking at, again, the key thing is we will be publishing these types of data in the near future. Our estimations or beliefs are that reasonably similar ranges of doses will be used for both.

Okay, great. Thanks.

Okay, good.

So I guess that was the last question, so I want to thank everybody for joining us today. We really have had an outstanding quarter and it's really been a remarkable year so far and the events over the last several weeks are just to us very, very exciting indeed. We're extremely proud of the progress we've made in translating RNAi into a broad pipeline of potential therapeutic candidates and in building a business to support and advance our development efforts.

So we look forward to updating you in future calls and hopefully many of you will join us in December in New York City for R&D Day. Thank you very much.

Ladies and gentlemen, we thank you for your participation in today's call. This concludes the presentation and you may now disconnect. Have a great day.