Alnylam Pharmaceuticals Inc (ALNY) 2008 Q2 法說會逐字稿

Welcome to the Alnylam Pharmaceuticals conference call to discuss second quarter 2008 financial results. There will be a question and answer session to follow. Please be advised that this call is being taped at Alnylam's request. I would now like to turn the call over to Alnylam.

Good afternoon. I'm Cynthia Clayton, Director of Investor Relations and Corporate Communications.With me today from Alnylam are: John Maraganore, our Chief Executive Officer, Barry Greene, our President and Chief Operating Officer, Akshay Vaishnaw, Vice President of Clinical Research, Patty Allen, Vice President of Finance, and Jason Rhodes, Vice President of Business Development. In addition, Kleanthis Xanthopoulos of Regulus Therapeutics is also on the call and will be available for Q&A. During today's call, John will go over the highlights of the quarter. Akshay will provide an R&D summary. Patty will review our officials and guidance. Jason will review our business highlights for the quarter. Barry will summarize our IP activity and our progress against goals, and we will then open the call for you questions.

Before we begin, I would like to remind you that this call will contain remarks concerning Alnylam's future expectations, plans and prospects, which constitutes forward-looking statements for 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 those discussed in our most recently quarterly or annual report on file with the SEC. In addition, any forward-looking statements represent our views only as of the date of this recording, and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update any such statements. I will now turn the call over to John.

Hey, thanks, Cynthia, Welcome and thank you for joining us. We're thrilled to be here today to highlight our accomplishments for the second quarter of 2008; and as far as the year goes, so far it's been a very exciting seven months. RNA interference continues to be recognized as a transformative breakthrough for new innovative medicines, and Alnylam is leading the way across the key value drivers of scientific leadership, product pipe line, intellectual property and business execution. The entire pharma industry recognizes the importance of this technology and Alnylam's leadership in the field positions us extremely well in the near term and for the long term. The most important element of our business plan remains the execution on our discovery efforts through our RNAi platform that fuels a robust pipeline of clinical and ultimately marketed products. Q2 was an important quarter for pipeline progress, highlighted by initiation of a phase II clinical study for a lead program, ALN-RSV01in infected RSV lung transplant patients. We were also pleased to announce today we will be advancing ALN-VSP as our lead IND candidate for 2008 with our status being on track to fulfilling this goal by the end of this year.

In other activities, our scientific leadership continues with the publication of a number of important papers, notably our nature biotechnology paper with the MIT group and additional important papers expected to come in the very near term. Further we're quite excited to have consolidated intellectual property in the emerging field of RNA activation or RNAA as this could be an important new platform for the future. As you will hear momentarily, many other accomplishments on our scientific and development efforts were also achieved this past quarter. Also during the second quarter, we conclusively achieved our entire business goals for 2008, with the completion of new alliances with Takeda, Kyowa Hakko and through our joint venture Regulus with GSK. Alnylam now has major partnerships with some of the strongest and most innovation-minded health care companies in the world, a list that also includes Medtronic, Novartis, Roche and Biogen Idec.

These activities have resulted in a tremendously strong cash position , and we now expect to end the year with about $.5 billion in cash. This is an unusually strong position during this time of broader economic uncertainty, as we are spared any need to raise funds in the capital markets, either now now or in the foreseeable future. Further, in light of this position and as the leader in the RNAi field we are presented with many investment opportunities from companies either in need of RIP, expertise or funding. In this regard, we aim to stay very focused on RNAi and the broader world of noncoding RNAs since we, frankly, can't imagine anything more important to invest in. Further we plan on staying extremely disciplined on opportunities that meet our scientific standards of excellence.

While we've completed our 2008 business goals and while we don't need more cash from new business alliances, we are hardly stopping any of our additional partnership discussions. In fact, we will continue to form significant new partnerships ranging from major platform alliances like, the Takeda and Roche, product alliances, and like Medtronic and Kyowa and alliances with our microRNA company Regulus as we recently did with GSK. We also believe that there are opportunities to start new businesses, as we did with Regulus about a year ago. In short, the hunger for our innovation is stronger than ever, and the opportunities for our technology are surprisingly broader than even we ever expected.

To that end and do provide an update on ongoing business efforts, we now expect an additional two or more major new alliances over the next six to 18 months, and this should serve as new guidance for our efforts through the end of 2009. On the people side, we continue to build a leadership team at both Alnylam and Regulus. In the case of the latter we announced the addition of Dr. Garry Menzel as Executive Vice President Corporate Development and Finance. As many of you know Gary was a leading banker at Goldman and then Credit Suisse, and his involvement with Regulus should be nothing short of a resounding endorsement of our efforts to build a great company that we believe will benefit Alnylam shareholders significantly.

Finally I would like to address our recent decision to withdraw our participation at an upcoming bank sponsored investor conference. As I think we've demonstrated we are committed to talking to all of our investors and sharing our progress at different venues, be they investor conferences or peer-reviewed scientific meetings. This commitment requires that we prioritize where and how we deploy our leadership or scientific teams in a manner consistent with our overall business interests. In the case of our decision to withdraw that from that meeting, there's nothing more to it than that. Now, with that as some key introductory remarks, I'd like to pass it over to Akshay Vaishnaw for his update on our R&D and scientific leadership efforts.

Thanks, John. Q2 was clearly an important quarter with the advancement of ALN-RSV01, a lead RNAi candidate for RSV infection. We initiated and are actively enrolling patients in a double-blind randomized placebo controlled phase II study to assess the safety and tolerability of ALN-RSV01 in adult lung transplant in patients naturally infected with RSV. The trial will be the first to evaluate the safety and tolerability of ALN-RSV01 in a naturally acquired RSV lower respiratory tract infection, and we hope to obtain signals for anti-viral activity of our drug from that study. RSV infection in lung transplant patients represents a significant unmet medical need. The condition is associated with significant morbidity, for example, rates of acute and chronic lung rejection following RSV infection are reported as high as 15% to 30%. We're pleased with the enrollment in this study, but now have 10 participating centers in both hemispheres, we expect to provide more specific guidance on completion date and timing for date availability on our next quarterly conference call, but we 're encouraged by our progress thus far. This trial follows the important positive clinical results we announced in the beginning of the year with, with the internodal form of ALN-RSV01 used in the Gemini phase II experimental infection trial. where we demonstrated human proof of concept in adult volunteers. In addition we continue to have good discussions with the FDA about the start of our pediatric phase II trial. We're not encouraged about our path forward with kids.

In addition to RSV, we're advancing the pipeline to file a decision for RND for ALN-VSP, an RNAi therapeutic for the treatment of liver cancer and that will occur this calendar year. ALN-VSP is now our most advanced [histemically] delivering RNAi therapeutic, it comprising two RNAs in a lipid nanoparticle formulation. These two RNAs target distinct genes in the growth and development of tumors. It is the kinesin spindle protein or KSP and vascular endothelial growth factor or VEGF. Preclinical phase with ALN-VSP as compared to auto control nonspecific RSNA amounts to a liver cancer, demonstrating significant dose dependent silencing of both KSP and VEGF derived from the human tumor, evidence of tumor to (inaudible) KSP silencing, which is documented histologically, reduction in overall tumor growth as measured by quantification of the tumor specific gene, and marked reduction in the size of liver tumors in VSP treated animals as observed by gross pathology. This is a very exciting approach for RNAi and oncology, an approach we think is actually only the beginning for RNAi oncologic indications. We as look forward to filing the RND for ALN-VSP this year and exploring the activity in the clinical setting.

We'd also like to report progress with our earlier pipeline programs , ALN-PCS and ALN-HTT. ALN-PCS and RNAi therapeutic targeting [KSP9] for the treatment of hypercholesterolemia continues to advance in preclinical studies toward a potential IND in 2009. ALN-HTT and RNAi therapeutic targeting the Huntington gene for treatment of Huntington's disease continues to advance in preclinical studies. ALN-HTT is in development together with Medtronic. Earlier in our discovery pipeline and related to our defense efforts, we were pleased to today announce continued commitments for federal fundings in these efforts. The funding not only supports advancement of specific RNAi therapeutic products for certain hemorrhagic viruses that are believed to represent the bioterrorism risk, but also provides expense reimbursement for the advancement of new deliverable technologies applicable to these and, in fact, broader Alnylam product interest.

Beyond these programs that are specifically commented are, we also have a large per of additional discovery programs both alone or with our pharmaceutical partners, and what you can expect to see in the months to come is a greater sense for how this pipeline will mature into what we believe could be the most significant and exciting pipelines of innovative medicines across the entire biopharmaceutical industry. Scientific leadership remains an important objective for R&D activities.

As part of our efforts there, we continue to demonstrate scientific leadership through publication and presentation of peer-reviewed research, including new in vivo research invalidating the mammalian host gene involved in malaria infection and the antipiracy efficacy of RNAi therapeutics, data which was published in an article in cell, host and micro, the discovery of lipidoids bodies, a novel bio material approach for the delivery of RNAi therapeutics published in biotechnology as part of a collaboration with scientists MIT, and finally new research related to defining (inaudible) properties mechanisms for SRNAs and methods of screen four and eliminate these properties and defining drug-like properties of SRNAs for therapeutic applications and this data was published in the journal of (inaudible) research . So at this mid point of the year our scientists have published five peer reviewed papers. We're thus tracking well towards our goal of 10 or more peer reviewed papers in 2008, and we're confident about meeting , if not actually exceeding this goal .

In closing I'd like to comment on two other highlights for the recent period that in my mind is of particular mention. First related to the completion of the Tekmira [Protiva] merger in Q2 , we were very pleased during the first half to have completed an expanded agreement with the combined company, which is now called Tekmira. Most importantly, we're now working very closely with the strength in Tekmira that results from the merger. As part of our relationship, we also have the option to codevelop and cocommercialize Tekmira's PLK program being developed for the treatment of certain cancers. Tekmira has recently guided that they expect the program to be in phase I in 2009. The target in this program, unlike kinase I is one of the industry's most exciting oncology targets and has proven to undrugable with small molecule approaches . So this could be a very promising approach.

Secondly, we're also very excited by recent accomplishments where we've expanded out scientific leadership in the RNA therapeutics in the emerging biological field of RNA activation, otherwise known as RNAA. RNAA technology has the potential for the activation of gene expression with applications in certain genetic diseases and cancer. This is an emerging biology and an area of very active research in a number of academic labs. In this biology, double stranded RNAs called anti-gene RNAs or AG RNAs, that are designed to be complementary of certain chromosomal DNA, have been found to significantly and productively activate description of DNA to RNA by nearly tenfold. This can be used to activate gene expression in pharmacologically relevant in contrast to RNA interference where we silence gene expression. Our IP consolidation in the RNAA area was conclusive and includes the completion of exclusive license agreements with the University of Texas southwestern medical center, University of California San Francisco , and the (inaudible) of biological studies.

Further, we'll be collaborating closely with Dr. David Cory at USW and also with Dr. Channing Lee at UCF in this field. While there's more to be done here, RNAA technology could represent a new product platform in our efforts to advance new innovative methods to patients. We look forward to seeing how this progress in the future. With that

Thanks, Akshay. Good afternoon, everyone. In the second quarter we achieved our highest quarterly revenues in the history of the company, $23.8 million over a two and a half fold increase over the same quarter last year. In aggregate, the strategic alliances we have formed with Novartis, Roche, Takeda, Biogen Idec, Kyowa Hakko along with government funding and payments we are receiving from our InterfeRx alliances are generating a strong and steady revenue stream for the foreseeable future. Let me walk you through some of the accounting for these allowances.

Since the amortization of up-front payments accounts for a significant portion of our quarterly revenues, each quarter we will be recognizing approximately $14 million in GAAP revenues from our Roche alliance over a five-year period. With our recent Takeda alliance, we will be recognizing both the $100 million up-front payment as well as the $15 million in technology transfer milestones or over a seven-year period. That equates to over $5 million per quarter in GAAP revenues for the Takeda alliance beginning in Q3. We also received $15 million in up-front payments in Q2 from our recent Kyowa Hakko alliance, but until we can determine our last deliverable to Kyowa, we will defer the up-front payment and not record GAAP revenues for time being with this alliance. We also have a strong and steady stream of revenues from our NIH and DOD grants, and we were happy to announce this morning that the NIH has extended our grant for another year.

We were also very pleased this quarter that Novartis the has elected to exercise their option to, tend our 2005 transformative alliance for another year , through October 2009. This extension will result in continued significant R&D funding from Novartis, and there will be no change to our current accounting for this alliance. Also, it is notable that our InterfeRx program continues to be successful, as we are starting to receive milestones from our partners, such as [Quark] and [Kwondo], as they move their RNAi programs along into clinical development. In total, the success of our partnerships and alliances are generating a steady and sustainable GAAP revenue stream of well over $20 million per quarter. Even with these strong revenues we are focused on tightly managing the business.

Turning to expenses and net loss, our net loss was higher this quarter compared to Q1 primarily due to some unique onetime payments as a result of the Takeda alliance and an investment in Tekmira. Our R&D expenses continue to increase as our pipeline progresses. What is significant about this quarter is although we had our second highest quarter ever in R&D expenses our strong revenues are covering the expenses of investing in our pipeline. Takeda R&D expenses with the $5 million in payments to Isis and others as a result of the Takeda alliance. We also made a strategic investment in Tekmira in conjunction with their merger with Protiva and recorded a $2 million license fee charge in Q2 associated with that investment. more importantly, the increase spend reflects a protection of our pipeline as we initiated a new phase II Clint clinical trial for RSV, we advanced ALN-VSP toward the 2008 IND, and we made other investments in our pre-clinical pipeline to our PSK 9 and Huntington's program.

We are also making significant investments in delivery with collaborations with Tekmira, MIT and others , and we have grown our head count in R&D to support our programs and delivery initiatives. As one would have expected, we saw an increase in G&A expenses in Q2 primarily as a result of our business development activities and a continued investment to develop, prosecute and protect our IP portfolio. On taxes, primarily as a result of our 2007 Roche alliance, we incurred GAAP income tax expenses of $ 1.3 million in Q2. Although somewhat counterintuitive since we are in a net loss position, the accounting rules require that the quarters where there is a higher net loss will result in higher income tax expenses being recorded. We continue to have a favorable tax strategy, and now expect to record approximately $3 million to $4 million in tax expense in 2008. Of course, this would exclude the impact of any further major alliances in 2008.

Finally, turning to cash, as John commented earlier, we are in a very strong position, and we ended Q2 with $538 million in cash. Due to the considerable up-front payments from the new alliances completed year to date, we are significantly increasing our year end cash guidance from $390 million to approximately $500 million. That's our financial profile, it's extremely strong right now, reflecting our solid cash position and steady stream of revenues. We can count on future revenues from existing and new alliances to help drive the business. Certainly we're in an excellent position to build the company and execute on our business plan. Let me now turn the call over to Jason Rhodes to discuss our recent execution on our business development objectives, certainly one of the highlights for the

Thank you, Patty. Q2 was a big quarter for business development. Therefore, with the signing of three important partnerships, we have met all of our 2008 business development goals . The major highlight of the quarter was the formation of a strategic worldwide platform alliance with Takeda pharmaceuticals valued over at over $1 billion, with $150 million up front and near term technology transfer payments. This is the first major RNAi therapeutics partnership between a Japanese pharmaceutical company and a US biotechnology company, and Takeda has become Alnylam's strategic partner for RNAi therapeutics in Japan. The alliance provides Takeda with a broad worldwide nonexclusive platform IP license and significant enablement, with Alnylam's RNAi platform technology in the fields of oncology and metabolic disease. Importantly Alnylam retains the right to opt in to codevelop and cocommercialize Takeda RNAi programs in the US market on a 50 /50 basis.

This opt in rate can be exercised on at least four Takeda RNAi therapeutic products, and importantly, we can opt in for each product as late as the start of phase III studies, which is of course, a very derisked stage of government . Importantly, this partnership, like our Roche partnership is nonexclusive, thus preserving Alnylam's opportunity to form future partnerships and to pursue proprietary work in RNAi. Barry and I returned from the kickoff meeting in Japan together with a broad Alnylam team. This is a critical application for Takeda and one at the senior levels of the organization are actively engaged in. Also this quarter, we formed an exclusive strategic alliance with Kyowa Hakko to develop and commercialize ALN-RSV01 in Japan and other major markets in Asia. Kyowa is a very strong partner for RSV program in Arabia and their commitment to innovative medicines and important pediatric focus.

Importantly, Alnylam retains all development and commercialization rights worldwide for ALN-RSV01, excluding Asia. During the quarter we are also excited to announce the first major partnership for Regulus Therapeutics our joint venture with Isis. GlaxoSmithKline and Regulus formed a strategic alliance valued at over $6 million to discover, develop and market novel micro RNA targeted therapeutics to treat inflammatory diseases. GSK obtained an option to license product candidates directly at four different microRNA targets within this disease area. GSK is an excellent partner for Regulus, and we 're excited to add them as a partner with Alnylam and Alnylam's efforts. Our Regulus CEO, Kleanthis Xanthopoulos, is on the phone today, and will be happy to answer any questions regarding the progress on this partnership and other advances with Regulus. This was also an important period with regards to our existing partner Novartis, who elected to extend their collaboration with us for at least another year, through October 2009.

This landmark RNAi alliance was initiated in October 2005, and is focused on discovery, development and commercialization of RNAi therapeutics for a defined number of Novartis selected disease gene targets. The extension of the collaboration demonstrates Novartis' commitment to Alnylam and also continued validation of RNAi as a transformative technology for the discovery of innovative medicines. We are very pleased to continue our work with Novartis. Finally let me turn to our InterfeRx program. 002 Recently we granted pharmaceuticals a new nonexclusive InterfeRx license to discover, develop and commercialize a synthetic SIRNA directed toward an undisclosed cancer target. It includes Alnylam to opt in for codevelopment and cocommercialization of the RNAi therapeutic market in the US market. This is a powerful feature of the Alnylam InterfeRx program. On a related note, we're also pleased with the continued progress of another InterfeRx licensee, in this case Quark, who has advanced their ocular disease program into phase II trials together with their partner.

Finally we noticed this week the retirement of our InterfeRx license to MDRNA, formerly Nastech, where our previous exclusive grant to TNF alpha comes back to Alnylam, allowing us the the opportunity to develop RNAi therapeutics towards this target either alone or with another partner with stronger financial and R&D resources than our previous licensee. As you know we have enacted business development at Alnylam, and we will continue to pursue alliances like these and many others where we can achieve significant value recognition, including the opportunity to collaborate on specific diseases and targets while maintaining rights in the US market. As John mentioned, over the next six to 18 months, we have a very active set of business discussions, and we confidently expect to form two or more strategic collaborations. All of this is made possible through our consistent and sustained demonstration of scientific leadership in the RNAi field and by our having secured the key intellectual property that we believe is required for all industry efforts to commercialize RNAi therapeutic products. I would now like to turn the call over to Barry to discuss some recent updates on IP and also our progress toward our 2008

Thanks, Jason. And I want to congratulate you and the entire team on an amazing quarter for business execution. Now let me first discuss our progress on the intellectual property front . As we discussed before we continue to focus on strengthening what is clearly an unmatched and the dominant IP position in the entire field of RNAi therapeutics. To that end we announced today the issuance of grant of two key patents that are owned, controlled or exclusively licensed by Alnylam in the RNAi therapeutics field. First the Tuschl II patent that we hold exclusively was allowed by both the Russian patent office and the Mexican patent office. The Tuschl II patent has been previously awarded in all of the major markets, US, EU and Japan, and a number of other important countries. The strength of this patent continues to be manifest by its issuance across the world and importantly there's more coming.

Similarly a new divisional case of the Kreutzer-Limmer patent which we exclusively own and covers SRNAs with a length of 15 to 49 nucleotides was granted by the Australian patent office. The Kreutzer-Limmer patent has been previously awarded in EU, Germany, Australia, Canada and South Africa and is pending in the US and Japan. Together with our [crook] patent, our Tuschl II patent and Kreutzer-Limmer patents comprise some of the most important fundamental patent elements currently issued. We, of course, have many other divisional applications stemming from these patents as well as other pending patent applications, such as Tuschl I, [hannen and kay]. All of this contributes to the creation of an unmatched estate, that will only strengthen in scope and breadth.

Let me turn to our Glover patent, which is exclusive licensed to Alnylam from Cancer Research Technologies, or CRT. This European patent was overturned by the European patent office through the course of opposition proceedings, a common procedural step in the opposition of European patents. To be clear, we believe that the Glover patent which stems from the pioneering work by [weoni and zernaga getz], published in 2000 is, in fact , meritorious, novel research , having important inventive matter, and is a key part of the history of RNA interference. Alnylam and CRT intend to appeal any decision that does not result in the patent being maintained in the fullest form or scope. It's important to note that about 50% of patents that are overturned in European opposition proceedings are reinstated during the appeal process.

In closing, I'd like to summarize how we are tracking against our key 2008 goals. As you know, the first quarter of this year we announced human proof of concept for ALN-RSV01 being developed for the treatment of RSV infection and we fulfilled that goal. We look forward to the publication of our data in a peer-reviewed journal in the near future. We have also initiated the phase II study in naturally infected patients and look forward to those results, as Akshay detailed. We expect to further enhance our pipeline by filing an IND by year end for ALN-VSP for the treatment of liver cancer. Our other pre-clinical programs include those with ALN-PCS for hypercholesterolemia and ALN-HTT for Huntington's disease and they are progressing very well. Those and other programs will comprise potential INDs in the future, including 2009. Scientifically, we continue to lead the field by publishing cutting-edge research on RNAi therapeutics. Already this midyear point of 2008, we have published five papers, nearing our goal of at least 10 publications, and actually believe that we will exceed the goal for the year.

As you know, we have already fulfilled our goal of forming two or more major new alliances thanks to our friends Takeda and Kyowa Hakko and GSK with Regulus. We have updated the goal with new guidance to reflect our expectation that we will sign another two or more additional deals other the next six to 18 months. These deals include potential platform alliances, new product alliances, including those that are geographically focused, significant Regulus partnerships and the formation of new significant businesses, such as our Regulus spin-off that we formed last year . Across all of these dimensions, we're having excellent discussions with many companies. It's fair to say that the pharmaceutical industry knows who we are at the most senior level, and understands how RNAi can be transformative for our entire industry. We have excellent relations be companies in the pharma space, and are committed to building very successful partnerships that advance innovative medicines to patients. On the property goals as I just discussed we will continue to expand our leadership position with additional patent issuances and grants around the world . We expect this to continue significantly throughout the rest of the year. Of course, the same IP dominance applies to our efforts on micro RNAi therapeutics with Regulus and also our recent consolidation of IP in the emerging biology of RNA activation.

And finally, as Patty mentioned we now intend to end the year with about $.5 billion in cash, providing many years of runway. In summary, we've had a remarkable first half of 2008, and our efforts have clearly paid off. We believe we are truly in a unique position in the industry with our leadership in the field of RNAi therapeutics. This leadership is further supported by our substantial cash position and sustainable revenue stream. Nonetheless, please rest assured that our entire team is as passionate as ever to make a profound impact with our technology for the benefit of patients and their families. So in closing, you can be sure that the second half of this year will certainly be an exciting period. With that, let me turn the call back over to the operator so that we

(OPERATOR INSTRUCTIONS) All questions must be submitted at this time in order for your question to be asked. (OPERATOR INSTRUCTIONS) We will pause a moment to compile a list of questions. And your first question comes from the line of Sapna Srivastava of Morgan Stanley. Please proceed.

Congratulations.

Hi. Sapna, how are you?

Good. How are you?

Excellent.

I have one question, and -- just in terms of the two or more major new alliances, could you give us some more color on, like, what kind of deals are you anticipating, and do you give a six to 18 month time frame? Just -- as well.

Absolutely. Sapna, I'll be happy to do that. I'll make some comments and invite Jason to make some comments as well. We have many ongoing discussions across the pharma industry, usually at very senior levels of the industry related to the broad alliances that we obviously recognize as being the most value creating alliances, such as our platform alliances that we've done with Roche and with Takeda. We also have as part of our strategy in advancing our pipeline, a strategy of partnering ex US on our proprietary pipeline programs, and that includes our RSV program, our PCS program , our VSP program, for example, and we have a number of discussions that are ongoing with very strong interest in the pharma space that if Kleanthis wants to mention he can comment on, of course not specifics, has it related to our Regulus effort where we are certainly there, still looking at discovery based alliances with the pharmaceutical industry.

There's been very strong interest in what we're doing. And all of these discussions are going on at this time, and they proceed at a pace of development and advancement, which is hard to be precise on how they're going forward, but we're very encountered by that. And that's why we're comfortable and confident in being able to provide the guidance that we provided. Obviously, I think we've got the track record behind us, Sapna, to be confident about that type of execution. Jason, Kleanthis, any thoughts? Jason, you

That's absolutely the scope of things we're pursuing. We continue to pursue them very seriously, and given the strength of our balance sheet to be very disciplined about pursuing partnerships that will create the most value for Alnylam and our shareholders.

Any comments?

Not really. Nothing more to comment on. There's a very strong interest in RNA therapeutics and microRNA as part of that from a very large number of pharmaceutical companies.

I mean, fundamental to all this, Sapna, if I could just close the comments is that the hunger for innovation at a macro level from the pharmaceutical industry is greater than ever. I have never seen a period of time where there's such a strong interest in the innovation that comes from biotechnology; and at the way forefront of -- at the CEO level of many of these companies is RNA interference, as a transformative technology and that's a very, very real statement that we hear directly or we hear obviously from our colleagues.

John just a quick follow-up on that is, you gave a scope of different avenues, lines both for you and for Regulus. I mean, what is it something broad like Roche/Takeda like alliance or is it more to do a drug specific partnership, or it's just -- color?

It's all of the above in ways that are value creating for our overall strategy to build a very significant leading significant leading company, and clearly new platform alliances are absolutely in the mix.

Okay. Thank you.

Your next question comes from the line of Pamela Bassett of Cantor Fitzgerald. Please proceed.

Hi, Pamela. Hello?

Again, Pamela, your line is now open.

Hi. Can you hear me?

Yes, we can hear you now.

Sorry about that. I had a little bit of phone trouble. Congratulations on another fantastic quarter. I wonder if you can talk a little bit about the relationship between possibly increasing expenses going forward with these new relationships. What kind of expense increases -- if you could just review that a little bit, because having to grow the organization perhaps or anything else?

Sure. Let me make some -- a couple introductory comments, and then Patty should take the question. We're actually only 150 people in this company, and there 's probably not many companies of our size and number of people that have been able to accomplish obviously broad alliances, broad pipeline executions, so forth and so on . So we really have a very lean orientation, a very, very lean orientation in terms of how we do things. Frankly it allows us to move faster because we can make decisions so much more quickly in this type of environment, and the investments that we're making really relate to the advancement of our pipeline. Very little investment is linked to any business activities or business development activities. Some of them relate to onetime payments that come from the passenger of up-front payments that we owe to some of our licensors like Isis who is a major licensor of Alnylam, but the vast majority certainly on an operating basis of our investments are related to pipeline advancement. And so maybe Patty can comment on how you should look at that going

Sure. Hi, Pamela. As John just mentioned, this was actually a pretty high quarter for R&D expenses mainly because we had a couple of one-time items this quarter related to the $5 million payments to Isis as John just mentioned and incurred a $2 million expense charge for our investment in Tekmira. So that's about $7 million of one-time expenses. However if you look at R&D expenses compared to prior quarters and quarters last year, you're most certainly seeing an increase in R&D spend which is the appropriate thing to do at this stage as we advance our pipeline for RSV, VSP moving towards [INDR] and other pre-clinical programs. So that's what we would expect for the rest of the year.

Okay. Great. Thanks very much.

Thanks, Pamela.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Alan Carr of Needham.

Hi, good afternoon, everyone.

Hi Alan, how are you?

Good thanks. A couple questions on your lead programs there. What sort of extra information can you tell us about the RSV program in terms of timelines? I think you mentioned that there were 10 sites open. Can you give us information on enrollment numbers, when that one might finish, and also what's your guidance for the pediatric trial?

Okay. So, Alan, let me make a couple comments, and then who's Akshay joining us on the phone from the UK can also chime in as well. So the RSV program in lung transplant patients is accruing actively currently and accruing well. In the opening comments that Akshay made, what we said in the next conference call we'll provide more sitting significant guidance on when the accrual will be complete and when data will be available. The only reason we do that is we want the be certain that we 're going to be able to hit or exceed the timeline, and it's actually -- the accrual is going along quite well, but we want to be at a point in time where we have more precise visibility. There is the nature of this trial where it depends on the briskness of a given RSV season, either in the northern or southern hemisphere. So -- but we believe and have good visibility certainly today in the southern hemisphere where we have accrued patients, and previously in the northern hemisphere when the trial was started, where we also have accrued patients.

So we've done patients and have treated patients on both both sides of the equator at this point in time . By the next conference call we'll give you more precise detail on what we'll guide you to in terms of the timeline. The other question in terms of pediatric is that, that is moving along. We are aiming to be able to start that trial toward the end of this year. We've had excellent discussions with the agency about how that 's progressing, and we're encouraged by the path forward there by all accounts. Akshay, do you want to add more

Not really much more to add to that, John, but understanding the level of unmet need that's associated with RSV and the transplant setting translates to very high eagerness in terms of investigative participation and both in the northern and southern hemisphere, we've had no problem accumulating these sites. There are many more sites we could take on it if we needed to. It's gone very well, and as you said, we have accrued patients both in the northern and southern hemispheres. So far things look very good, and just further reiterating your comments about the pediatric effort, very productive interactions with the regulators on that. They clearly appreciate the importance of RSV as a major pathogen, the highest cause of infant mortality in terms of the [spirometry] virus and regard ALN-RSV01 as a very important product that could address the unmet need, and, indeed, we look forward to progressing ALN-RSV01to pediatric studies by the end of the year.

Great. Can I ask another question about the cancer and cholesterol programs?

Sure.

It looks like the cancer is clearly moving to the front of the line here --

Yes.

-- among the two of them. Now, I'm wonder why that -- you obviously have resources to pursue both aggressive. Is there something in terms of delivery or RNAi in general as to why one might be -- is one easier to go after -- one indication easier to go after then the other?

So, Alan, both are prefacing very actively, and the goal for the year is one, and we've been moving both along quite well. The VSP program does have the benefit in the context of the conduct of GLP studies that the nature of exposure or duration in those some types of studies to support INDs and oncology are quite different than the nature and flavor of GLP studies that are needed and used to support clinical trials for hypercholesterolemia program. So there really are differences there that edged in favor of the VSB program from a timing execution standpoint, and that 's really what you're seeing here.

Okay. That makes sense. Thanks very much.

That concludes the Q&A session. I would now like to turn the call back over to the CEO, John Maraganore.

Thank you. Well, listen, thanks everybody for joining us today. We very much look forward to keeping you updated throughout the rest of the year on our progress. And as always, we're very committed to our efforts in bringing new breakthrough therapies to patients based on the discoveries of RNAi and we thank you for your interest in our progress. Thank you very much.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have an excellent week.