Alnylam Pharmaceuticals Inc (ALNY) 2008 Q3 法說會逐字稿

Welcome to Alnylam Pharmaceuticals Conference Call to discuss the third quarter 2008 financial results. (OPERATOR INSTRUCTIONS) Please be advised this call is being taped at Alnylam's request. I would now like to turn the call over to Alnylam. Please proceed.

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, and Patricia Allen, Vice President of Finance and Treasurer. During today's call John will go over the highlights of the quarter, Akshay will review a R&D summary, Patty will review our financials and guidance, Barry will summarize our business highlights and our progress against goals, and we will then open the call for your questions.

Before we begin I'd like to remind you this call will contain certain remarks concerning Alnylam's future expectations, plans and prospects which 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 those discussed in our most recent 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.

Thank you, Cynthia. Welcome everyone and thank you for joining us today. As always it's a pleasure to discuss our progress on the advancement of RNAi Therapeutics. As you know, Alnylam is leading what we, and many other people believe is a transformative technology for the advancement of innovative medicines to patients. To say the least, these are very interesting times across the world and also very challenging times for many companies in the biotechnology sector.

At the same time, two important things have not changed. First, human disease is far too prevalent and still faces a paucity of new medicines. And second, new approaches for patients are desperately needed and traditional approaches to drug discovery are simply inadequate to address these needs. For these reasons RNAi Therapeutics are an inescapable approach for the entire pharmaceutical and biotechnology industry, and for these reasons, Alnylam has never been stronger. In addition, we are a Company with one of the strongest cash balances in the entire biotech industry and a Company advancing what may well be the industries most important innovation to patients. This places Alnylam in an extremely strong position to continue to execute on its business plan of advancing breakthrough medicines to the market while funding its business through major alliances with the pharmaceutical industry.

We remain committed to our goal of building a great Company and resolute in our efforts to achieve this mission. Turning to the efforts during the third quarter and recent weeks you'll hear momentarily from Akshay and Barry, on the important progress we're making on our pipeline, scientific leadership , intellectual property, and our business execution goals. I'm very pleased with the progress we're making across our pipeline including our clinical efforts in our RSV program and efforts on advancing our first systemic delivery program , ALN VSP for liver cancer to an IND filing on track for this year.

Bringing our first systemic delivery program to an IND stage is a huge accomplishment for the advancement of RNAi Therapeutics as a broad product class. We are also very excited to announce today the advancement of a brand new development program, ALN TTR, which is an RNAi Therapeutic for the treatment of transthyretin or TTR amlyadoisis. This is an exciting opportunity for us to make a profound difference in the lives of patients afflicted with a tragic orphan disease. So, given these programs and also our development programs for hypercholesterolemia and Huntingtons disease, we expect to have three RNAi Therapeutics in active clinical trials in 2009. This puts us firmly on track to meet our RNAi 2010 goal of four or more clinical programs by the end of 2010.

This is really remarkable progress for the therapeutic advancement of RNAi, which we should not forget was only first described as a new biology in [mammalian] cells by Alnylam scientific founders less than 10 years ago. Importantly, we're building a platform that will create a large number of pipeline programs, and we are simply not a Company held hostage by only a few opportunities. Just look at the large number of papers or scientists have published to understand where this science can lead us.

There are very few companies that can point to this quality and quantity of technology proof points, and I suspect that you'd have to go back to the early days of biotech in the 1980's to find comparables. The future is also bright for additional opportunities in RNAi Therapeutics that far exceed our original expectations for this field. And Alnylam scientific leadership continues to provide us with what we believe is a commanding presence to lead the advancement of these opportunities. As with our opportunity to create a leading effort in micro RNA Therapeutics in our joint venture Regulus, we see similar opportunities for our other applications of RNAi.

Recently, we decisively consolidated the IP related to RNA activation or RNA-A technology. We're excited about this technology and its applications in certain genetic diseases and cancer. Earlier this week we published a paper in Nature Medicine on a new class of siRNA's that both silence disease causing genes and also stimulate an intended immune response. These so-called three PS RNA's might comprise an interesting approach for cancer, infectious disease and vaccine aduvents applications.

On the Business Development front, we have a very strong set of existing partners that include Novartis, Medtronic, Roche, GSK, and Takeda amongst others. Given the breadth of our technology and the significance of our innovation, we have many, many opportunities for additional partnerships and to this end, we have many ongoing high quality senior level partnership discussions and we remain fully on track to achieve our goal of forming two or more major new alliances from now through the end of 2009. Of course, we are only as strong as our people, and we feel we have one of the best teams. We were extremely pleased to welcome our new CSO Jack Schmidt who joined us from Sanofi Aventis. Welcome, Jack.

We also made a number of additional promotions to our research and operations team and we're very pleased to add key people to the leadership of our Regulus joint venture. With those key introductory remarks I'd like to now pass the call over to Akshay Vaishnaw for his update on our R&D and

Thanks, John. Over the past quarter we've made important advancements with our pipeline programs. Firstly, with the continued development of ALN-RSV01, a lead RNAi candidate for RSV infection and secondly with ALN-VSP01, an RNAi Therapeutic for the treatment of lip cancer and Alnylam's most advanced systemically delivered program which remains on track to file an IND by the end of this year. In addition, we have advanced a new program, ALN TTI into development and have demonstrated outstanding scientific progress through the publication of breakthrough research in top tier peer review journals and scientific presentations at high caliber meetings.

Now let me begin with RSV. Our Phase II trial with ALN-RSV01 is continuing to make good progress, as you may recall this is a double-blind randomized Phase II study to assess the safety and tolerability of aerosolized ALN-RSV01 versus placebo in adult lung transplant patients naturally infected with RSV. We're continuing to actively enroll patients in multiple sites across both hemispheres, and expect to complete enrollment in mid 2009 with data soon thereafter. While of course we're dependent on the intensity of the RSV season in the northern hemisphere, we have a large number of sites active in the North, in the US, in the northern hemisphere, in the US, Canada and European spheres and we feel good about completing enrollment at mid point next year.

We're excited about the lung transplant population for ALN-RSV01 and we'll also consider opportunities to expand development of our drug for this indication in the future including consideration of registrational trials in this setting. Regarding our pediatric trial, our goal is to move forward in this population with the right levels of both prudence and urgency. Prudence as this is a pediatric population, where we want to proceed wisely and urgency as there's a very high level of unmet need of therapeutic approaches for these patients.

We've had excellent discussions with the FDA who have been very supportive of our overall strategy for ALN-RSV01, including our current Phase II trial in adults. Now, based on our internal discussions and our dialogue with the FDA, we believe that the results of our current lung transplant Phase II trial will be important and informative prior to initiating our pediatric Phase II study. There for, our current plans are to initiate the pediatric Phase II trial upon completion of the ongoing adult Phase II study. Importantly, we only view this change as a shift in staging the studies, not in the change in our overall timeline for when ALN-RSV01 might make it to the market in adult and pediatric indications.

Let me now turn to ALN-VSP01, where we've made tremendous progress on many fronts and are on track to filing an IND by the end of this year. This will be our first systemic RNAi IND which is a testament to the very strong progress we've made on systemic delivery. ALN-VSP01comprises two SRNA's in the lipid nanoparticle formulation that target distinct genes critical in the growth and development of tumors, kinesin spindle protein or KSB, which is required for tumor proliferation and vascular endothelial growth factor or VEGF which is required for tumor growth. And just this past weekend, we expanded our preclinical work with the presentation of key new data at the 23rd annual meeting of the International Society for Biological Therapeutic Cancer.

These new data demonstrated robust efficacy in orthotopic liver tumor model including the inhibition of tumor growth as measured by serum AFP levels and statistically significant survival benefit. Moreover, (inaudible) also presented confirming that the effects of ALN-VSP01 were mediated by RNAi towards both KSB and VEGF genes expressed by the tumor. In aggregate, we believe our preclinical data on ALN-VSP01 are the most robust results with RNAi in an oncology setting ever reported and we look forward to publishing these data soon.

Now, to filing our IND and assuming the standard amount of time between filing an IND, obtaining FDA approval and obtaining approval from IRB's, we expect to initiate dosing patients in the Phase I trial in the first half of 2009. The Phase I trial will enroll patients with either primary or secondary liver cancer, both clear areas of unmet need. Secondary liver cancer is anything but is metastatic to a liver. which typically but not exclusively includes colorectal cancer.

Genes express in the liver are clearly responsible for many important and devastating diseases and based on our clear success in achieving delivery to the liver we're now launching a new development program, ALN TTR. This is a RNAi Therapeutic (inaudible) transthyretin or TTR, for the treatment of a type of amyloidosis called TTR amyloidosis. TTR amyloidosisis a hereditary, systemic disease caused by mutation in the TTR gene. The resulting abnormal protein is deposited as TTR containing amaryl fibrils, and [extrahepatic] tissues and including peripheral nerves in the heart. TTR amyloidosis presents an unmet medical need. It's an orphan disease estimated to affect approximately 10,000 people worldwide, and is associated with significant morbidity including neuropathic pain and disabling autonomic symptoms of the GI tract.

The current standard of care is liver transplantation which is an extremely invasive procedure for which most patients are not unfortunately eligible. When liver transplant patient is performed, it is essentially curative demonstrating a very clear clinical validation, that the disease is caused by the mutant TTR, and it's fully reversible by removing the mutant TTR product. We believe that with an RNAi Therapeutic targeting TTR, we can rapidly provide a solution to this devastating disease.

As part of our standard practice of presenting new data at a a peer review scientific forum, we'll be presenting preclinical data on this program later this year. Clearly you can expect that we're very excited about the preclinical data we've seen so far. Accordingly, Alnylam TTR becomes a potential R&D candidate for 2009, along with Alnylam PCS RNAi Therapeutic targeting the PCS canine the treatment of hypercholesterolemia and Alnylam HTT RNAi targeting the Huntington gene for the treatment of Huntingtons disease. ALN TTR also an example of large number of orphan-like indications that Alnylam intends to advance in the market as there's a very significant unmet medical need here and the possibility of early biomarker data in clinical studies and a clear opportunity for large therapeutic impact for patients and potential for expedited timeliness for clinical trials and regulatory approval.

In addition to our progress on our pipeline we continue to demonstrate scientific leadership across all dimensions of the RNAi Therapeutics field. As John mentioned, we're very proud of our scientist's progress in recent data on 3p-siRNA which is published in Nature Medicine and also consolidation of IP in the RN AA space where you can expect to hear much more in the future. But we're also pleased with the papers we've published in TNS on our PCS canine non-human primate data and also very strong showing of scientific delivery on Alnylam scientists demonstrate at the recent OTS meeting here in Boston. We've now published 10 peer review journals in 2008 achieving our goal of 10 or more papers in 2008, but there's quite a bit more on the way as you'll see. And all this progress continues to widen the eyes of scientists in the Academy and the industry pointing to the important roles of RNAi Therapeutics in the future of drug discovery and for the advancement of innovative medicines. And with that I'd like to turn the call over to patty Allen to review the financials. We've now published 10 peer review journals so far in 2008, achieving our goal of 10 or more peer review papers in 2008, but there's quite a bit more on the way as you'll see. And all this progress continues to widen the eyes of scientists in the Academy and the industry pointing to the important roles of RNA in the advancement of innovative medicines. And with that I'd like to turn the call over to Patty Allen to review the financials. Patty?

Thanks, Akshay. Good afternoon everyone. We had another strong quarter financially that speaks to the continued importance of our business execution strategy from the last several years. Our cash balance at September 30, 2008, was $520 million, excluding the recent $20 million technology transfer milestone achieved from Takeda and included in accounts receivable at quarter end. Importantly, we are now able to increase our year-end cash guidance once again, and forecasts that will end 2008 with greater than $0.5 billion dollars. Because of this very substantial cash position, we have no need to raise new capital in the equity markets for the foreseeable future.

It goes without saying that this is a very fortunate place to be during this current economic situation. I'm also pleased to report that we had our strongest revenue quarter ever, with $26 million in revenues for the third quarter of 2008. This strong revenue performance is largely attributable to our collaborative partnerships with Roche, which total $14 million for the quarter and our first rolled quarter of GAAP revenues from our Takeda alliance of over $5 million. Revenues for the third quarter 2008 also included $7 million of expense reimbursement and amortization revenues from Novartis, the National Institute of health, the Department of Defense, Biogen Idec , InterfeRx, and services licensees and other sources. As I explained last quarter, the amortization of up front payments from many of our partners accounts for a significant portion of our quarterly revenues.

For our Roche alliance, each quarter over a five year period , we are recognizing approximately $14 million in GAAP revenues. With our recent Takeda alliance, we are recognizing the $100 million up front payment, the $20 million technology transfer milestone we just achieved, as well as the $30 million in additional technology transfer milestones and our amortizing this total of $150 million over a seven year period, which equates to over $5 million per quarter in GAAP revenues, beginning with this most recent quarter. As a reminder, the $15 million in up front payments from our Q2 alliance with Kyowa Hako, is being deferred for GAAP revenue purposes until we can determine our last deliverable to Kyowa

Expenses were significantly lower in the third quarter of this year, compared to the same last year due largely to the significance of the expenses incurred in conjunction with the Roche alliance in Q3 last year. R&D expenses were $22.1 million in the third quarter of 2008, as compared to $59.6 million in Q3 of 2007. Included in last year's R&D expenses were $27.5 million in payments due to certain third party licensors, primarily Isis, related to the Roche alliance as well as one-time non- cash stock based compensation charges also related to the Roche alliance. G&A expenses were $6.9 million in Q3 of this year, as compared to $8.1 million in Q3 last year and also were lower primarily as a result of our 2007 alliance with Roche, where we incurred higher professional service fees as well as one-time non-cash stock based compensation charges.

As a result our GAAP net loss was also significantly lower than the third quarter of last year, only $2.9 million or $0.07 per share for the third quarter of 2008 compared to $52.8 million or $1.35 per share in the third quarter of 2007. Our NOL's are decreasing as compared to prior year periods, primarily as a result of our strong and recurring GAAP revenue stream. You can expect, however, that due to the investments that we are making in our pipeline that our NOL's may still be lumpy from quarter to quarter.

Regarding taxes, during the third quarter we reviewed our calculation of estimated state income tax expense for 2008, and determined there was an overstatement in state income tax. We have determined that the state income tax expense will be less than originally anticipated, there for we recorded a benefit of $800,000 this quarter. Driven primarily by certain proceeds from our Roche alliance , we are generating US taxable income during 2008 and we expect to record income tax expense of less than $500,000 in Q4 of 2008.

So in closing, we are extremely pleased with our financial performance this past quarter as well as our financial position overall at this time. As John commented earlier, we are truly in a strong position to continue to execute on our business plans and to bring our important innovation to patients. I'll now turn the call over to Barry for

Thanks, Patty. Let me first start by highlighting a key point that Patty made. Our strong balance sheet. We have the cash to drive our business many years into the future without any foreseeable need to tap into the equity markets. Our position is a testament to the execution on our business strategy which has from the very foundational start of Alnylam focused on dominant intellectual property, excellence in science, development of the strong pipeline, and the formation of industry leading business alliances.

This quarter is no exception and we have continued our track record of success. We have completed three major alliances this year with Glaxo with our alliance of Regulus, Takeda and Kyowa Hako, and as John covered we continue to be in active discussions with many new potential partners. As we guided in the last quarterly call, we confidently expect to form two or more strategic collaborations from now through the end of 2009. These potential new alliances include new platform alliances , new product specific alliances, and new business formation alliances. Our ongoing discussions are excellent, but the industry clearly appreciates the enablement of Alnylam's scientific leadership and strength of our intellectual property. We look forward to updating you on our business as these discussions progress.

Now, as we highlighted earlier, we had our strongest revenue quarter to date driven by partnerships with Novartis , Roche, Takeda and the government. Additionally, Alnylam earned a $20 million technology transfer milestone with Takeda with payment that was subsequently received in October and therefore, will be recorded during the fourth quarter. This payment is part of the strategic alliance the companies formed in May of this year and relates to the transfer of our platform technology including documents, materials, and know-how to Takeda for the development of RNAi Therapeutics. This milestone is a good sign of our continued progress in enabling Takeda with Alnylam RNAi drug discovery capabilities and intellectual property.

As a reminder, we are also eligible to receive an additional $30 million in similar technology transfer payments as part of this collaboration. We are also pleased this past quarter to receive a continued committment from Novartis for funding the fourth year of our 2005 drug discovery alliance and also from the government to continue to fund our Ebola efforts. Let me now turn to intellectual property. We continue to strengthen our dominant IP with the issuance or grant of important patents owned, controlled, or licensed by Alnylam in the RNAi Therapeutics field.

Most importantly, the US Patent Office has granted new claims of the crook patent that broadly cover RNAi Therapeutics. The claims from the recent crook patent embrace methods of treating a patient with siRNA's We're also making continued progress on our Tuschl II patent state which is exclusively licensed to Alnylam for RNAi Therapeutics and was recently allowed by the Korean patent office. The Tuschl II patent has been previously awarded in all major markets, the US, EU, And Japan among other jurisdictions with broad claims covering siRNA's.

In addition to this progress on fundamental intellectual property, the target patents were allowed by the US Patent Office and granted by the Japanese Patent Office. All in all, we are executing on all fronts of the business including our pipeline, scientific leadership and business development. Even with a challenging economic environment, we are very well positioned, in fact, better than ever to advance our innovation and bring important medicines to patients. With that, let me turn the call back to the operator so we can

Thank you. (OPERATOR INSTRUCTIONS)

Your first question comes from the line of Sapna Srivastava with Morgan Stanley. Please proceed.

Hi. Thanks. It's Dave calling in for Sapna.

Hi, Dave, how are you?

Good how are you doing?

Good.

Just a quick question, actually two questions. The first was in terms of the RSV program, I think it was my previous understanding that you were going to potentially start the pediatric inpatient trial before the lung transplant trial completed. I was wondering just if we could go into any more detail about if that's a change and whether the FDA would have permitted you to do that if you wanted to or whether that was a sort of a deal breaker for them.

Well let me what's your second question.

The second question is about the Glover patent. In terms of what happened there and what's the process from now going forward, and if you could just remind me whether the Glover patent is approved anywhere else besides Europe.

Okay, well let me answer the second question first and then I'll segue into the first question. So the Glover patent was a party to an opposition process that occurred in Europe over the quarter, and resulted in the granted claims in Europe being overturned during the opposition proceeding, the oral opposition proceeding. We are going to appeal that decision by the European Patent Office and the opposition court of the European Patent Office, and typically about 50% of appeals result in the patent being restored back to its original grant.

David Glover's work and the work of Zernicka-Goetz (inaudible) was actually quite important in the field, as it relates to early discoveries of the role of RNAi Therapeutics in o site mammalian systems and so we think it is meritorious scientifically. I urge people to read the actual scientific paper that was first published related to that work and we think that it will in fact be upheld upon the appeal proceedings that take place. That proceedings, David as you probably know, takes some time. Europe has certainly a longer time period in patent prosecution and typically has this opposition and appeal type procedure that takes place. So we're very confident about it, but I think very importantly and contextually, for Alnylam, Glover is only one of many patents that have been issued or granted in Europe or any other jurisdiction. And we very much view our patent estate as a very significant picket fence, and this is just one picket in many regard,s but we're optimistic about where that will go.

Now, regarding your first question regarding the RSV program , let me, I'll have Akshay comment very specifically in just a minute but I think the key point here is that we think we're going to learn something from the adult study that will be very helpful to how we advance and how rapidly we advance with pediatric, the pediatric study and this has come out of both internal discussions, but also discussions with the FDA. So Akshay, do you want to comment

Yes, David if I understood your question correctly, our approach and the approach of most sponsors when you're making decisions about transition from one step to the next is how to accumulate the best information possible before initiating that next study or the study after. And based on our internal conversation about the evolving lung transplant study and also dialogue with the FDA, what was very clear is that it was to be appropriate to say, "let's get all of the information from this lung transplant study, It's very useful, we're learning a lot of important safety and potential efficacy information and in light of that, and understanding the pharmacology of all of that let's move forward to the pediatric protocol", and that's how we came to the decision with the agency and that's how we'll proceed.

Okay, and would the agency let you go forward if you said that we want to go forward by year-end?

I think the agency in our discussions with them, share our belief that the right thing to do is to complete the lung transplant study and to advance from there, and again, when you think about the best way to develop this drug, we want to do it with great urgency because the unmet need is very high, but also very prudently in terms of how we advance it into different populations. We also are quite excited about the pace and progress of the lung transplant study and if we felt that study was going to take longer or that study would in fact, not be as potentially productive as it is, we might feel differently.

Okay. And just sorry last quickly, does the Glover patent issue affect the prior IP deals you have in terms of the terms?

No, not at all.

You don't have to (inaudible) some money Not at all. Not whatsoever.

Great. Thank you. And along those lines as you know probably, it's rarely even mentioned by the Company as one of the key patents. It's really the other patent elements that are the key patents for the Company and it's again, it's only one of many, many that we have.

Great. Thanks.

Super.

Your next question comes from the line of Ted Tenthoff with Piper Jaffrey.

Great. Thank you very much. Thanks for taking my question and thanks for the good update on the call and in the press release. A lot of detail there.

Thanks, Ted.

How are you? So I guess my first question really has to do with these tech transfer fees, just to kind of try to model this appropriately because the R&D line has been bouncing around a little bit here, but will there be some license payments booked in the R&D line as a result of those tech transfer fees to Takeda?

Sublicense payments to our licensors?

Yes.

Is that what you're asking? The answer is no, because those are essentially related to accomplishment of effectively an R&D activity and R&D transfer activity, so they fall outside of the up front payments or other types of sublicense elements that we have in our agreements with different licensors.

Great. That makes a lot of sense. And kind of maybe a question for Barry, and you, John, more of a 30,000 foot level. You mentioned that conversations are going well. Just to kind of dig in a little bit deeper here, because clearly, the world's falling apart in front of us right now. There is obviously a premium placed on cash right now, but also specifically in the RNAi field I've noticed a lot more noise in terms of smaller competitors kind of popping up and really sort of being in situations where they need cash from partners, and maybe a lot more willing to partner for significantly reduced terms to the bars that you guys have set. So can you just kind of comment on that overall noise right now in the RNAi space? Obviously, I think from your patent experience or from you guys partnering experience the quality is clearly with you guys but just kind of give me a sense of what those discussions are like and maybe how they've changed over the last year or so.

Well, we continue to see, it's a great question , Ted. We continue to see a very strong hunger from the pharmaceutical industry for innovation and for RNAi therapeutics. In fact, we're only seeing if anything, increasing levels of conviction in RNAi therapeutics as a fundamental technology that the pharma industry and large biotech needs to have access to, and so that's clearly there, and that's clearly continuing. Now, we don't need and will not do small partnerships just to fund a few people around the Company. We're way beyond that point. And so we look at partnerships as being ones that bring strategic value to the Company, either in the form of frankly a source of raising significant funding through platform alliances, where we shown a very solid track record and the results of our cash position speak to that. But we've also seen obviously we have a strategic interest and also product based partnerships for ex-US activities but we also see significant opportunities for new product opportunities, new outright business opportunities like we form with Regulus last year and that's off to a phenomenally attractive start. It's actually remarkable. We're finding more and more potential applications of this technology than we ever expected when we started the Company. So we think that whole frontier of what we did with Regulus s just the beginning of where that can go, So I think we find ourselves really in the drivers seat in a leadership role in a positive leadership role across the whole industry.

We actually wish these small companies well. We wish them success. They come to talk to us. We have good relationship with most of them. Ultimately, they're going to need our intellectual property and ultimately, we will certainly be open to discussing business terms in terms of how we ultimately enable them. But the fact is, that for a Company whether it's Roche or whether it's Takeda or whether it's Novartis who have formed very large substantial partnerships with us, they are paying a premium to get access to the best science which is deserved. And they are also getting access to fundamental freedom to operate with no ambiguity about whether or not they will be able to commercialize drugs. That's huge. That's huge and that remains the case and I think it's only stronger as time

Great. I'll hop back in with another question, thanks.

Your next question comes from the line of Simos Simeonidis with Rodman & Renshaw. Please proceed.

Yes, hi.

Hi, Simos.

Hi, guys, how are you?

Welcome.

Thank you. I'm back. Congratulations on another strong execution according to the financials, applications, data presentations, IP, strengthening the team overall, the board, things you guys are working hard on doing really well. But I want to get back to the first question that Dave, [Dave Friedman] asked about the " Change" -- potentially change on the timeline of doing the pediatrics trial. And I totally understand how because, this new trial is going to be treating babies, you want to take your time and make sure you have the data from the adult trial, but why does this come up now? Why didn't you say from the beginning, look we'll see the adult lung transplant and then we'll go with babies. Was there something that has come up in your thinking that has changed? So I think you probably are doing the right thing to wait, but why didn't you do it that way the first time?

Well, I think, Simos, it's a great question. Drug development is a dynamic beast and it's always driven by making decisions about how to best advance programs to the market. And I think that at the end of the day, we want to do the right thing and that's what our focus is. So a lot of it came out of internal discussions in terms of how we should best advance there and how much information we'll get out of the lung transplant study that will actually help us accelerate how rapidly we can move into the pediatric population. So as we said on the call, we actually from an overall perspective, we think there's no change in the overall certainly our overall perspective on how we advance this program to the market and the timing of that. But we're just changing some of the staging and some of the strategy around that as a fundamental management decision about how to best develop the program. And so we feel very good about the decision, we think it's the right thing to do. We obviously we had a different thought and a different plan earlier in the year, but we want to be able to do the right thing, and that's what we focus on first and foremost.

Okay, and then so I don't know if this is related or not or maybe totally unrelated, but is there any delays in the adult trial? It seems that it's a small number, I think 21 patients you've been following in the northern hemisphere for a while, and I think now you guys are in the southern hemisphere, are you close to completing? Is it hard to enroll? Can you give us any color on that, because that also seems to be maybe getting pushed back by a couple months or a quarter.

Oh, actually we've never given guidance on that Simos. We started that trial on schedule as we had stated as a goal, which was our key goal for the program this year, and in addition to the Gemini results which were thankfully very positive. But we never gave guidance on when the study would be done, so this quarterly call is the first time that we've given guidance on when that would be done So we're saying it will be done mid next year, with data shortly thereafter, and that's the first time we've given that guidance. It is enrolling quite well, both northern and southern hemispheres and we're transitioning between the RSV season in the South to the RSV season in the North.

Obviously, if there's a paucity of RSV during the season in the north, that could change things. We don't expect that to be the case, based on normal levels of RSV infection and numbers of sites we have actively going on. The investigators are extremely enthusiastic about the study and are quite encouraged so far, but of course it remains blinded. There's no information we're aware of at this point in time, other than it's proceeding well and accruing patients and so far so good, in terms of any safety element. Great, and then the final thing I want to ask, I'll try to ask Ted's question in a little different way.

You've exceeded your quota so to speak of deals this year obviously, and you've said the next 6 to18 months, two or more. And again given that you've seen some of the lowering in terms for the deals that are happening, would you think that you've been more willing to take like a platform deal, like Roche or Takeda versus a deal that is for RSV or -- ? The reason I'm asking is because even though you guys are doing really well on a lot of fronts, sometimes you get penalized because of your success in a way if you don't do a big deal. And the investors sometimes are expecting a lot out of you because you've done really well so you're kind of the victim of your success. So if the next two deals for example, are deals like the RSV deal which I thought was a great deal,l but it was small compared to the blockbusters you've done, so -- I guess what I am trying

Well, I think what you're describing is something that actually motivates our team enormously, so what you describe as a challenge is only a point of internal encouragement and motivation to continue to do bigger and broader things. But practically aside, obviously that is a major motivation but practically aside, we're going to be doing big deals like Roche-like alliances. And we'll be doing more tactical product related deals that are smaller in course and economics, and it's going to be a balance of both of those type of things. And how the timing of one versus the timing of the other, is always hard to predict with absolute certainty in the business development realm even with the quality of the business development team that we have. And so people just have to be patient, know that our track record has been one which is probably I would think relatively solid in the eyes of the outside world, and we'll continue to deliver on that front.

All right, great. Thank you so much.

[OPERATOR INSTRUCTIONS]. Your next question comes from the line of Pamela Basset with Cantor. Please proceed.

Hi, Pamela.

Hi, thanks for taking my call. Congratulations.

Thank you.

I wonder if you can talk a little bit about how 3p-siRNA as well as RNAA might impact your alliance strategy and/or your business model.

Great questions, Pamela. Thanks for asking them. I think these are two important points, okay? RNA activation technology is a whole new platform, so none of our partnerships that exist today include RNA activation. They're specific -- the license grants are specific for RNA interference and so it actually provides a whole new platform for doing new types of deals and new types of partnerships in the future. So that's a really important element and as we validated like we have with RNAi inhibitory approaches, interfering based approaches, we think there will be interesting opportunities for new partnerships in the future with that approach. Similarly with the 3p-siRNAs although in some ways the 3p-siRNAs are really I call them more iterative, as it relates to the RNAi technology than with the RNAi activation.

The RNAi activation is a very genuinely distinct platform whereas the 3p-siRNAs in fact many ways are interesting approaches, that we think are quite exciting in the setting of certain oncologic indications and (inaudible) disease indications where you would design intended immustimulatory responses. But one exception to that with 3p-siRNAs would be in vaccine aduvents, where we think there's a distinct opportunity and could be an opportunity for future partnerships as time goes on. But there's more work to do on both of those and I want to be clear to people that as excited as we are with those technologies, we are now doing what we do well which is applying our technologies to advance those and translate them into pre-clinical efficacy studies and ultimately clinical studies. And that's going to be what potential partners will want to see, before they're willing to commit the type of value proposition partnerships that we like to create as a Company.

And I also think, Pamela, that both of those are great examples of something in being part of our strategy. We're collaborating with the best labs in the world continuing to innovate this science and those are great examples of Alnylam staying on the innovation edge and continuing to lead the way in RNA Therapeutics which sets up future business opportunities and future pipeline opportunities.

That's a great point.

Great, thank you. And just a quick question about delivery. Could you tell me which systemic delivery technologies are being used for DSP TTR or are they still open questions?

No, they aren't open questions. They are very locked down questions for VSP. TTR is a potential candidate for next year so we are using the Tekmira, our relationship with Tekmira is being used to use our technology for the VSP program.

Okay and then TTR?

Well that's still being explored, but potentially Tekmira as well as other proprietary approaches that we're developing in the Company.

And can you give us any sort of update on a little bit more detail on progress with Novartis and Roche and Takeda?

Absolutely. Let me say what I can say, which unfortunately is not as much as I'd like to be able to say, but Novartis is going very well. It's a three year, it was designed as a three year partnership with the option that they have the unilateral right to extend for two additional yearly increments. And their decision to proceed, interestingly along with their decision to up their investment in the Company in the first half of the year, I think are the proof points that I can point to externally with how well that's proceeding. And as you know that's a drug discovery alliance on a defined number of gene targets that are nominated by Novartis that we essentially provide them with RNAi therapeutic candidates for them to then take into development. So that's proceeding quite well. We're pleased with that by all accounts, and they're a very strong partner of Alnylam. And they made the pioneering decision to get involved in the space early which I think has rewarded them very well.

In addition as you know Pamela, they have the option anywhere between now and the four year time point,or if they continue through the five year time point, of taking a platform license from Alnylam which is associated with an additional up front payment that will not embarrass anybody by any accounts or disappoint anybody is the right word. As well as future milestones or royalties, and that's something which we're excited about that potential from Novartis. That's what I'll say on Novartis. With Roche, Roche is very. very committed to this field. Obviously, they made a very substantial investment in obtaining Alnylam Technology and Alnylam Intellectual Property giving them the freedom to operate, as well as capabilities to advance RNAi therapeutics.

They have subsequently done an acquisition of a technology company called Myris, related to Myris delivery technology which is a very interesting technology. And then further, I think it's fair to say that Roche in the context of their broad thinking views RNAi very highly at the senior most levels in the context of how they want to advance new, innovative medicines to patients. So we're quite pleased with them as a partner, but there's not a day-to-day relationship with Roche, as there is with Novartis because of the structure with those deals. And similarly with Takeda it just started; however we've already achieved our first key milestone in that relationship with the $20 million technology transfer payment. And we are very pleased with our interface with our colleagues at Takeda. They are very committed to this as well. They are making a strong effort and we're excited about that for the future, but it's just beginning in many ways. It was only signed in whatever it was, July or June or May, sorry, in May.

So are we going to start getting a peek into the types of indications and the targets soon?

I think over time you will, Pamela, they as you know, pharmaceutical companies had different types of disclosure practices with regard to discovery programs. Once again with the development, they will start being much more clear about what those programs are. It varies from Company to Company. Some companies in pharma are increasingly highlighting even discovery approaches. Some companies in pharma are still really talking about Phase II programs and later. And we don't have the freedom based on our confidential disclosure requirements in these agreements to say much more than that. So you really and I wish I could, you have to look at the proof points like Novartis making an additional investment, Novartis extending for year four, Takeda paying its first milestone just recently. These are all-important proof points.

So we'll watch for milestones then.

I think so. That's the best way to look at it.

Okay, great. Thanks very much.

Thank you.

Your next question comes from the line of Steven Willie with Thomas Weisel Partners. Please proceed

Good afternoon guys.

Hi, Steve, how are you?

I'm doing well. How are you doing?

Great.

Just a quick question, it may seem maybe a little trivial , but biologically you're enrolling patients in the lung cancer trial from both northern and southern hemispheres, and presumably you'll also be enrolling peds from both hemispheres as well. Is there much difference in terms of the RSV strains that arise in each hemisphere in terms of disease severity. And is that something else that may skew the data one way or another depending on the hemisphere in which each each patient

That's a good question. Let me have Akshay address that.

Steven, there's been a lot of work looking at the two different major types, RSV A and B and the subtypes thereof and pathogenesis and outcome, and essentially there's really no great correlation between any particular type or subtype in virulence . And so the nature of the disease of the outcome is fairly uniform across the northern and southern hemisphere. So it's a good question, but based on the already available evidence, it's unlikely that the outcomes will be very different or that the trial will be confounded by that kind of an issue. The other point is that we've done a tremendous amount of work in vitro and in vivo in the lab and preclinical systems looking at over 90, actually almost 100 different RSV types and subtypes, and the drug is active because the target site is maintained and the drug potency is maintained across all of these hundred or so

In addition, I'd just add that as you probably know, Steven, the Gemini trial was done with a clinical isolet as well. That's only representative of one of course, but we have data with actual bonafide clinical isolets.

Okay, and on the alpha-synuclein paper that was recently published, is that an active preclinical project and if so, would that be something that would be considered under a Medtronic agreement with respect to most likely needing some kind of implantable pump device there?

Absolutely. So, it's actually a very exciting program as you probably know, Steve, alpha-synuclein -- is a very much believed to be involved in the pathway of Parkinson's Disease. There are familial forms of Parkinson's where there are distinct duplication of that gene that is involved in, defined as the genetic basis of the disease in those familial forms. And there are also data -- very strong amounts of data that indicate that alpha-synuclein over expression is involved in sporadic disease which of course is the more common disease.

Clearly, this is an approach where one would need direct delivery into the CNS, and so therefore, partnering this program with regard to our Medtronic relationship is exactly the way to go, and that's how we look to advance that program. Currently, it's in discovery. Our main focus of Medtronic is to focus on Huntingtons, which we think is also a very attractive program. And obviously as we've learned from our Huntingtons program, all that learning will apply very readily to the program with Parkinson's Disease.

Great. Thanks and congrats on the execution.

Thank you.

Your next question comes from the line of Alan Carr with Needham & Company. Please proceed.

Hi, good afternoon, everyone.

Hi, Alan.

A couple sets of questions here. One of them about the RSV program. How much have you disclosed about the design of this trial and the sizing and the pediatric one that you're planning now for next year? I'm wondering about its duration and what you expect to learn from it.

Well we haven't disclosed a lot on that trial, Alan, because we typically don't do that until the trials are starting, okay? But it clearly was aimed to be a study. I'll just give you some general descriptions of how we have been thinking about the design, that would first and foremost be dose escalating in the pediatric population with a reasonably small number of dose groups. And also a study that would be designed where the risk-benefit to the patients would be adequately measured at the individual patient level, which is an important ethical consideration in doing pediatric studies given that one has to provide, even in the context of a placebo controlled study the potential for benefit in that type of population. And so those have been some of the considerations in that design. The first study would be logically in the double digit numbers of patients and it would be done in a double-blind placebo controlled fashion.

And did I hear you correctly, that you thought that even though you'll wait until the lung study is done to start this, you don't think it's going to impact timing for an NDA submission or potential market launch?

That's correct.

Can you elaborate on that?

Sure.

We're expecting a little bit of a -- I mean it is a few months later than what you were expecting, but --

Yes, so drug development in an indication like that, is greatly accelerated when you have additional data that allows you to more rapidly accrue patients. And so to the extent that one has data out of a lung transplant study that is more robust, we believe it will help in terms of the rates of accrual and pediatric study and so that's largely how we look at it, Alan.

Okay.

So we don't view any substantial change in terms of our thinking about the timeliness for the program advancing.

I see. And my other set of questions is around your preclinical programs. It looks like you have your goal is to get a couple more into the , no, let me get this right. You've got the RSV program and then also the liver cancer one and those would be in the clinic next year and you mentioned that you were getting a third one into the clinic, so the candidates for that would be the

PCS, Huntingtons and TTR program.

So among those three, PCS, ACT, and TTR, some have been around longer than others. And I was wondering if you could give us a sense of what sort of events still need to be met here, or what criteria still need to be met? Who is winning this horse race I guess is what I'm wondering.

Well the horse race is very active. Let me describe it as follows: Obviously, we think all three programs are quite exciting. Huntingtons is moving along very well with Medtronic. It's a direct delivery approach which has obviously many interesting features that are different than the systemic delivery approach to the PCS and TTR. And that's moving along quite well, but obviously has to be one that's working closely with Medtronic and using a pump and device system. okay? And then with the PCS program, it's a systemic delivery approach where we have, it's a liver express gene where we have a lot of very encouraging systemic delivery technologies and obviously advancing our VSP program with that type of strategy. But when you think about the time to market with that approach, it might be slower given the questions that have emerged over the last year as it relates to hypercholesterolemia and LDL cholesterol compared to a TTR based approach which is an orphan indication where there's a clearly a very clear path from the standpoint of dosing, early biomarkers and time to show benefit and the type of benefit that one achieves. And increasingly, and don't take this as anything other than just a part of overall strategy, we like those orphan diseases where there's a very high unmet need, in an orphan indication where we think we can have a very high therapeutic impact.

So I guess some of the criteria here -- not just in going through the steps in preclinical development also and also optimizing these different candidates but you're also, it sounds like you're considering regulatory issues here as well. That's what you brought up with --

Yes, but also just general business strategy, and value creation strategy around the pipeline.

Okay.

Those all play into the thinking. Very helpful, thank you.

Good.

With Mr. Carr as your final question I'd like to turn the call back over to Alnylam for closing remarks.

Thanks everybody for joining us today. We look forward to keeping you updated throughout the rest of the year on our continued progress. And we are continuing to be very excited about where our Company is going, and our efforts to build a great Company so thank you very much.

Thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect and have a great day.