Alnylam Pharmaceuticals Inc (ALNY) 2009 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss the Second Quarter 2009 Financial Results. There will be a question and answer session to follow.

Please be advised that this call is being taped at the Company'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 at Alnylam. With me today are John Maraganore, our Chief Executive Officer, Barry Greene, our President and Chief Operating Officer, Patty Allen, Vice President of Finance and Treasurer, and [Jared Gollub], Senior Director of Clinical Research, who is sitting in for Akshay Vaishnaw today, who is on a well-deserved brief vacation.

During today's call, John will provide some introductory remarks and business context. Jared will provide an 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 would like to remind you that this call will contain 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 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, and thanks, everyone, for joining us today for our Second Quarter 2009 call. We're thrilled to be able to share with you today some of our progress and accomplishments over the past several months as we continue to focus on creating a whole new class of medicines based on RNA interference, or RNAi, and on advancing our product pipeline of RNAi therapeutics.

Let me start by offering a current perspective on events in our industry and the opportunities that these events can bring for Alnylam today. Certainly, these are very, very interesting times in our industry, perhaps the most interesting that I've personally seen in my nearly 25 years in the biotech industry.

First, the pace of biomedical discovery is faster than ever, supported by the completion of the genome and the use of powerful post-genomic tools for validation of disease genes. Perhaps the most powerful of these tools is, in fact, RNAi.

We're also seeing an increased recognition that the transcriptome is much larger than the genome and the proteome, and is therefore likely to harbor disease targets that fit into our sweet spot of RNAi therapeutics. This underscores the importance of RNAi-based therapies for the future of medicine.

Further, the pharmaceutical industry remains starved for innovation and recognizes the importance of translational research efforts from the broader biotech industry as key to its future. While significant changes to the pharmaceutical market were clear to many people as long as a decade ago, virtually all Pharma companies now recognize the need to change their drug discovery models and are also now recognizing the need for new platforms and the critical role that they play in their futures.

This creates a very positive strategic and partnering environment for Alnylam. This is evident to us in the new kind of dialogue we are having with leaders in the pharmaceutical industry that we believe can be transformative for our existing and, importantly, future relationships. And also, this is, frankly, refreshing.

Now, in opposition to these positive forces are the remarkable times that we live in regarding our broader global economy, which is recovering from a deep recession, as well as the challenges at FDA and the advent of sweeping legislative changes in healthcare reform. We've done extremely well at Alnylam to build a balance sheet focused on long-term growth, thereby shielding our exposure to these specific economic times.

And our technology and product strategy fit perfectly well with the emerging changes in both healthcare and at the FDA. With incrementalism now dead, innovations that can lead to breakthrough, novel, therapeutic approaches, like the ones that we're focused on, are also the future of medicine.

So, in sum, these are times that actually greatly support Alnylam's vision and mission as we are advancing transformative changes in the discovery of new medicines in a time and place where such transformation defines the required norm, not the exception.

Turning more specifically to our quarterly results, and as you'll hear in greater detail shortly, we continue to make great progress in our efforts across all aspects of our enterprise - scientific leadership, pipeline, IP and business execution, and the second quarter was certainly no exception.

Most notably, we continue to make significant advancements with our product pipeline, with positive phase II data for ALN-RSV01, initiation of a phase I trial with our first systemic RNAi therapeutic, ALN-VSP for liver cancer, and, as we announced today, selection of ALN-TTR as our 2009 IND candidate, a product that we believe is a potential breakthrough therapy for an orphan disease.

We aim to end this year with three RNAi therapeutic products in clinical development, establishing a continued leadership position across the industry. In a moment, Jared will summarize this progress, along with other notable achievements in our scientific leadership efforts.

You'll also hear from Patty about our very strong financial position, and from Barry about our existing partnerships, as well as our excellent progress with our existing alliances and in forming new partnerships where, of course, we are aiming to form two or more this year.

I'd like to close my introductory remarks by commenting on an important effort we announced last month in which we donated our intellectual property estate and technology to a patent pool established by GSK to aid in the discovery and development of new medicines for the treatment of neglected tropical diseases. We are doing so on a royalty-free, non-profit basis as it relates to the use of our technology in the least developed countries of the world.

We are joining the patent pool because we believe that our technology has the potential to aid in the discovery of new medicines for a wide range of neglected diseases that cause significant morbidity and mortality across the poorest nations of the world. We are choosing to do so because we simply cannot fulfill our mission of advancing breakthrough medicines to patients while ignoring the needs of global health. Indeed, the pool will make it easier for researchers across the world to access needed intellectual property, technology, and know-how.

All told, we believe that this project represents a bold new vision of social responsibility in medicine, and we are very proud to be joining GSK to help lead this effort as the first biotech company to contribute to the pool. We very much look forward to other pharma and biotech companies joining the pool and believe that our industry can collectively contribute to the world's best technologies to address the many challenges of global health.

Now, with that, I'll now turn the call over to Jared for a review of our clinical activities, our pipeline, and our scientific progress.

Jared?

Thanks, John.

In the second quarter, we have made several important advancements with our pipeline. Last month, complete data were presented from the phase II study of ALN-RSV01 in lung transplant patients naturally infected with respiratory syncytial virus, or RSV, at the BIT Life Sciences second annual summit of antivirals held in Beijing, China. The phase II study was a randomized, double-blind study of inhaled ALN-RSV01 or placebo in adult lung transplant patients naturally infected with RSV.

The study achieved its primary objective of demonstrating safety and tolerability of ALN-RSV01 over 30 and, as recently reported, 90 days post-treatment. Related to the 90-day data, key prospectively defined clinical secondary endpoints included recovery of lung function as monitored by forced expiratory volume in the first second, or FEV-1, and then clinical determination of new or progressive bronchiolitis obliterans syndrome, also known as BOS.

These endpoints were exploratory in nature, given the small study size, and also since the study was not powered for efficacy outcomes. However, 38% of placebo patients had an FEV-1 at least 20% below pre-infection baseline levels at day 90 compared to only 14% of ALN-RSV01 treated patients, an encouraging, albeit statistically non-significant trend.

Regarding the BOS endpoint, ALN-RSV01 treatment was associated with a statistically significant decrease in the total incidence of new or progressive BOS at 90 days compared to placebo. In fact, 50% of placebo patients showed new or progressive BOS as compared with only 7.1% of ALN-RSV01 treated patients.

These data are notable because FEV-1 is the key parameter reflecting lung function in lung transplant patients, and BOS, a known complication of RSV infections in this patient population, is in fact the key determinant of long-term morbidity and mortality in lung transplant patients. We, along with partners Cubist and Kyowa Hakko Kirin, plan to evaluate these and additional data from the broader ALN-RSV01 program, including our second-generation molecule, to determine the optimal development strategy and specific plans for all RSV indications.

In April, we advanced ALN-VSP for liver cancer into the clinic in a phase I multi-center open label dose escalation trial designed to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of ALN-VSP in patients with advanced solid tumors with liver involvement, including hepatocellular carcinoma.

The phase I trial is ongoing in the U.S. and represents our first clinical program with a systemically delivered RNAi therapeutic. Dose escalation is proceeding well so far, with many patients now enrolled across multiple dose cohorts.

Assuming the trial continues to progress at this pace, we now expect to complete accrual around the midyear point in 2010, with preliminary data around the same time. More than one million liver cancer patients are diagnosed annually, and they currently have limited therapeutic options and extremely poor survival rates. With this trial, we are targeting two well-validative genes that are critical for tumor proliferation and survival with what we hope will be an attractive strategy for the advancement of novel anti-cancer medicines.

As a reminder, this is our first systemic RNAi program, and also our first program in oncology.

Beyond our RSV and liver cancer programs, we are pleased to announce today that we have selected ALN-TTR as our 2009 IND candidate. And as John mentioned, this program represents a potential breakthrough therapy for an orphan disease. ALN-TTR is a systemically delivered RNAi therapeutic targeting the transthyretin, or TTR gene, for the treatment of TTR amyloidosis, a hereditary systemic disease caused by a mutation in the TTR gene. In its severest forms, TTR amyloidosis presents a tremendous unmet medical need with significant morbidity and mortality as an orphan disease.

The two severest forms of the disease are familial amyloidotic cardiomyopathy, or SAC, which occurs when mutant TTR deposits in the heart, and familial amyloidotic polyneuropathy, or FAP, which occurs when mutant TTR deposits in the nerves. It is common for these amyloid deposits in the heart and the nerves to contain both mutant and wild-type TTR, and this validates our strategy of silencing both the wild type and mutant TTR genes in our therapeutic strategy.

These severe forms of TTR amyloidosis are estimated to affect over 50,000 people worldwide. The only treatment option for a certain subset of these patients is liver transplantation, and historically, this is an inadequate approach for the majority of patients. In our preclinical studies performed in rodents, transgenic mice and non-human primates, we demonstrated that sn-RNAs targeting TTR dramatically reduced the levels of normal and mutant TTR mRNA in the liver and TTR protein in circulation.

For example, in a transgenic mouse model using ALN-TTR, studies showed reduced TTR plasma levels and liver TTR mRNA by greater than 90%. Further, in non-human primates using ALN-TTR, studies demonstrated reduced liver TTR mRNA levels by approximately 80 percent.

In sum, data to date suggests that treatment of TTR amyloidosis with an RNAi therapeutic may represent a breakthrough strategy, including the ability to simultaneously reduce the expression of mutant, as well as wild type TTR. We expect to file an IND for this program by year's-end.

While ALN-TTR is slated as our next IND, rest assured that our efforts on other development programs remain very active. In particular, we remained extremely committed to our ALN-PCs program, an RNAi therapeutic targeting PCSK9 for the treatment of hypercholesterolemia, where we recently presented some exciting new data. And our Huntington's disease program with Medtronic also remains a priority effort.

All told, these and other additional programs will comprise our IND candidates in 2010 and beyond, thereby providing a consistent flow of innovative clinical development programs from our discovery efforts.

In addition to our pipeline efforts, we continue to expand our platform for the delivery of RNAi therapeutics. We formed a new collaboration with Isis, focused on the development of single-stranded RNAi, or ssRNAi technology. SsRNAi comprises chemically modified single-stranded RNA-like oligonucleotides that may have improved properties for systemic administration while harnessing advantages of the RNAi mechanism. Isis has co-exclusively licensed the technology to Alnylam in exchange for up-front payments, R&D milestone payments, and royalties. This alliance provides for both companies to have the opportunity to discover and develop drugs employing this approach.

We also recently formed a new research collaboration with Tekmira and research scientists at the University of British Columbia and a new independent company called AlCana, focused on the discovery of novel cationic lipids for the systemic delivery of RNAi therapeutics. In the new research effort, Alnylam obtains exclusive rights to all new inventions and the sole rights to sub-license this technology to our existing and future partners. Tekmira retains the rights to use the technology for their specific RNAi therapeutic programs that are licensed to them under Alnylam's InterfeRx program.

This new effort is aimed at pushing the frontiers of lipid nanoparticles, or LNPs, as evidenced by the recent progress we highlighted in a presentation on our PCSK9 program. Indeed, we are on a clear trajectory to achieve low single-digit microgram per kilogram efficacy with LNPs based on this progress.

And lastly, we continue to demonstrate our scientific leadership in the industry as demonstrated by continued publication of our research in peer-reviewed journals and presentation of our research at scientific meetings. Some of our recent highlights are listed in our release that we issued this afternoon.

Overall, it was an extremely busy quarter in which we executed on several of our product development and scientific goals.

I'd like to now turn the call over to Patty to review our financials.

Thanks, Jared, and good afternoon, everyone.

Our business remains extremely solid from a financial perspective. At the end of the second quarter, Alnylam had cash, cash equivalents and marketable securities of $473.8 million. Our cash position continues to lead the biotech industry and remains one of the top 10 net cash positions across the entire U.S. biotechnology industry, providing us with significant financial flexibility as we have no need to raise new capital in the equity market for the foreseeable future. We also continue to have no write-offs related to our cash and fixed income portfolio to date.

We were also very pleased to have Novartis announce that they would extend their collaboration with us for a fifth and final plan year, and to have them purchase 66,000 shares of our common stock for $1.2 million in accordance with their contractual rights and opportunity to maintain their ownership interest in Alnylam of approximately 13.4%

Moving to revenues. Our GAAP revenues were $24.6 million for the second quarter of 2009. As you know, the amortization of up-front payments from the strategic alliances we have formed with Roche and Takeda accounts for a significant portion of our quarterly GAAP revenues.

For our Roche alliance, we are recognizing approximately $14 million in GAAP revenues each quarter over a five-year period. With our Takeda alliance, we are amortizing the up-front payments and milestones totaling $150 million over a seven-year period, which equates to over $5 million per quarter in GAAP revenue. For our recent Cubist alliance, we are amortizing the $20 million up-front payment over seven years, which equals over $700,000 per quarter.

Finally, please recall that the $15 million in upfront payments from our second quarter 2008 alliance with Kyowa Hakko Kirin continues to be deferred for GAAP revenue purposes until we can determine our last deliverable to Kyowa.

Turning to our expenses, R&D expenses were $38.6 million in the second quarter of 2009 compared to $29.6 million in the second quarter of 2008. The increase over the prior year was due primarily to $11 million of one-time license fee payments associated with our ssRNAi agreement with Isis.

G&A expenses were $8.4 million for the past quarter compared to $7.1 million in the prior year period, and were higher primarily as a result of higher professional service fees in association with business activities, including legal activities. We reported a GAAP net loss of $22.7 million, or $0.55 per share, on both a basic and diluted basis, where our net loss was higher in Q2 as compared to the prior year primarily as a result of the $11 million one-time license fee payment associated with our ssRNAi agreement with Isis.

As you can see, we have maintained a strong financial position with no debt. To reiterate our 2009 guidance provided earlier this year, we expect to end the year with over $435 million in cash and a non-GAAP cash net operating loss of approximately $35 million to $45 million, excluding the one-time license fees paid in connection with our ssRNAi alliance with Isis. We continue to expect that our spend profile for the rest of the year will represent a prudent and modest increase over 2008.

This wraps up our financial highlights. I'll now turn the call over to Barry.

Thanks, Patty, and hello, everyone.

It's been a very exciting quarter on the business execution side, including progress on intellectual property on the business side, as we announce successes with several of our existing collaboration partners. Now, as Patty mentioned, Novartis elected to extend their collaboration with us for a fifth and final plan year. This extension runs through October 2010, continuing our very strong working relationship and resulting in continued research and development funding to Alnylam.

As a reminder, Novartis retains an option to purchase a non-exclusive platform license for $100 million of upfront payments in addition to future milestones and royalties on products. This option is exercisable up through the research term. This broad non-exclusive license grant to Novartis would be structured similarly to our non-exclusive platform licenses with Roche and Takeda. In addition, Regulus Therapeutics, which is co-owned by Alnylam and Isis, achieved an initial $500,000 milestone in its collaboration with GlaxoSmithKline.

On the IP side, we announced several important updates to our key Kreutzer-Limmer and Tuschl patent [estates] during the second quarter and to date. We've highlighted these many achievements, and I'd invite you to read our press release to see those.

As announced in June, we have joined the Max Planck Society in taking legal action toward the Whitehead Institution for breach of its contractual obligations to Max Planck and Alnylam in a manner in which it is prosecuting the Tuschl I patent application and its fiduciary duty to all the co-owners of the Tuschl I patent series.

Please understand that, because we are currently in active litigation, we are not able to provide any additional details at this time. Nevertheless, I will say this - we and Max Planck are convinced of the merits in our case and believe we have the facts to succeed in our efforts.

So far in 2009, we've had 30 new patents issued or granted in countries around the world, vastly exceeding our goal of 15 or more patent grants this year. We fully expect additional patent grants by year-end. The aggregate of all of our fundamental patents, as well as patents in chemistry, delivery and targets, significantly benefits our business and supports our mission to develop and commercialize RNAi therapeutics.

Of course, we remain very confident that our intellectual property is simply unparalleled in the industry, and, in fact, needed to develop all RNAi therapeutics.

In closing, we remain on track to achieve our 2009 goals. We intend to have three programs in the clinic, sign two or more partnerships, end the year with greater than $435 million in cash, and further strengthen our scientific leadership and IP position.

Now, Jared provided an overview of our plans to achieve our IND goal with our ALN-TTR program. Of course, another key goal in this list relate to our major partnership goals. In this regard, I can update you in general terms by saying that we are having excellent discussions with many potential partners, and the same applies with our team at Regulus.

While it's impossible to predict exact timing or precise timing for these goals, believe we're still on track for achieving these new partnerships in 2009. By all accounts, we look forward to the progress that the next several months will bring.

Now, with that wrap-up, I'd like to turn the call back over to the operator for your questions. Operator?

(OPERATOR INSTRUCTIONS.)

Simos Simeonitis with Rodman & Renshaw.

Hi, guys. Congratulation on your quarter.

Hi, Simos. How are you?

I'm good. How are you?

Very good.

I was wondering if you can--one of you guys could please speak on the newest Tekmira deal, whatever you can discuss in terms of terms, who's funding what, and your rationale behind extending this partnership.

Great. Great question, Simos.

So, we -- the deal that we -- the partnership that we announced this morning is part of our continued and, as you know, very passionate commitment to advancing the delivery technologies around RNAi therapeutics. And in this new relationship, Alnylam is funding, directly funding, 100% of research efforts that are going on at the University of British Columbia in the laboratory of Professor Pieter Cullis, and a new independent company called AlCana, which is also located in Vancouver, and is associated also with the University of British Columbia and comprised of some scientists, some key scientists, that were formerly at Tekmira.

So, we're doing the funding of the effort. We retain all of the intellectual property out of that effort exclusively, and we also retain the exclusive rights to sub-license that technology to our existing partners and also to future partners that we form.

And now, Tekmira gets the benefit of using that intellectual property for the purposes of developing RNAi therapeutic products that are licensed to Tekmira under Alnylam's intellectual property estate in our InterfeRx program.

So, essentially, it's a exciting new collaboration focused on delivery. It's one that is truly aimed at taking the discovery of novel lipids and lipid nanoparticles to a whole new level. And as Jared commented, it is aimed to push the frontiers of the delivery technology to levels of potency that we believe are very, very achievable in the low microgram, single-digit microgram per kilogram range, and to also broaden the bio-distribution to extra-hepatic tissues.

So, we're very excited about it. Obviously, being set up in a way that is consistent with our efforts. It doesn't have any material economic effect on our forecast for the year, but, obviously, a very important effort amongst others that we have done in the past, including Isis at MIT, and amongst others that we will do in the future with other technologies that we're assessing.

Okay, thanks.

A quick question on the RSV program. I was there for the full day when you presented the data. But what can you tell us at this point in terms of what your plans are, going forward, with this product in terms of going to the pediatric population versus adults, the different dosing schedules? What can you tell us about that issue?

Thanks, Simos. That's a great question.

So, in terms of the RSV program, as we've guided, we are obviously very pleased with the completion of our lung transplant study. There is an ongoing phase I dose fractionation study in healthy volunteers that is in the course of being completed. There are discussions that we have with key opinion leaders as well as with our partners, Cubist and Kyowa Hakko Kirin, as well as with regulatory authorities.

So, all this is happening as we speak and into the fall of this year. And the goal is to update people on the specific plans and timing of specific plans by year's end, and we'll certainly meet that goal.

To be clear, there are really three potential paths forward here. Certainly, under all paths, we're proceeding with this program, and we're excited about where this program is going, okay?

But, the three different scenarios that we are looking at together with our partners include the following - one, that we advance ALN-RSV01 into both the pediatric and the adult populations, two, that we advance one molecule into the adult population and the other molecule into the pediatric population, to achieve what we think is needed -- potentially needed differentiation of these products. Or the third scenario is that we focus on the second-generation program and put the first generation program in a [parking] zone.

So, those are the three potential scenarios. We're looking at all three of them right now. And we'll certainly get back to people by year's end in terms of where that goes.

Okay.

And then, a quick final question on Regulus. I don't know if [Cliantes] is there, but we saw the initial milestone achieved from GSK. What's coming up in the next six to 12 months in terms of milestones or in terms of corporate strategy, going forward, for the new company?

So, just for everybody to be on the same page, Simos, as you are, Regulus, as people know, is our jointly owned company together with Isis Pharmaceuticals, focused on the advancement of microRNA therapeutics, a very exciting new frontier of pharmaceutical research. And obviously, we have a 50% ownership of that company together with Isis, so we have a very strong commitment to its success, and we believe strongly in the potential opportunity that exists and resides within Regulus and the Regulus team.

What I can say very briefly, Simos, is that the progress on the R&D side has been fantastic. Obviously, their efforts are focused on MIR122 antagonism for hepatitis C, as well as MIR21 antagonism for both heart failure and fibrotic diseases. And then, the third major area right now is our collaboration with GlaxoSmithKline, which is focused on developing microRNA therapeutic inhibitors as a possible -- immune disease modifying agents. And there's been great progress there as evidenced by the recent milestone.

In addition to that, Regulus will continue to consolidate its intellectual property. It will continue to demonstrate scientific leadership through the publication of significant new papers. And it will also continue to execute on what we think are some very exciting business development opportunities that it has in front of it -- in front of themselves.

So, it's really those key dimensions of pipeline advancement, scientific leadership, intellectual property and business execution that, of course, are paralleled to what we've done here at Alnylam that Regulus is now executing on.

Thank you very much. I'll jump back in the queue.

Okay. Thanks, Simos.

Pamela Bassett with Cantor Fitzgerald.

Hi. Thanks for taking my question, and congratulations on the continuing progress.

Thanks, Pamela.

A little bit more on the announcement earlier today with Tekmira and the new company. Does Alnylam own 100 percent of AlCana?

No. AlCana is an independent company. They're capital structure -- we have no equity ownership. We have no ownership interest in the company. It is a new company that we are currently funding in a research collaboration, but they're free to do other things and other aspects of the technology outside of the field that we're exclusively partnered with them in.

So, they're independent. They're discreet. They're associated with the University of British Columbia. And Alnylam has a research collaboration with them on discovery of novel lipids.

So, is the IP or technology that's being used in AlCana coming from UBC and very new and different than what Tekmira has been working on historically? And how--.

Well, that's a complicated question, but certainly the new inventions that come out of the research effort, Pamela, are new inventions. And by virtue of being new inventions, as all new inventions, they are ultimately patented and owned by the company, AlCana in this case, and UBC potentially, but they're exclusively licensed to Alnylam. And we have the exclusive rights to use it and sub-license it, and Tekmira has the benefits of using it for their RNAi therapeutic programs that they have also licenses from Alnylam for developing those products.

So, it's really a win-win-win-win, if I can use that proverbial term, across all four dimensions, and we're excited about where it'll go. And we'll certainly be pleased and happy to update people as progress comes from those efforts.

Could you remind us of the structure with Tekmira and kind of update us on what's going on with new drug delivery programs in that relationship?

Sure. So, independent of our relationship that we announced today with UBC, AlCana and where Tekmira's participating, as you know, we've had a longstanding relationship with Tekmira, and that continues. And that relationship includes a research relationship where there are specific formulation-related activities that are being performed at Tekmira. And it also includes a manufacturing relationship.

So, what goes on at Tekmira today is the formulation and production of our ALN-VSP product and supply of clinical material, as well as the formulation and generation of GMP supply of our ALN-TTR program material that's being used in GLP studies that have been performed, but also in the supply of clinical material when that program starts dosing patients.

So, they are both a research and manufacturing partner of Alnylam. And in the case of the new partnership with AlCana, UBC that Tekmira's also part of, of course, this is mostly a specific research collaboration.

And I think one way to think of it, Pamela, is that the new relationship is focused on discovery of novel lipids, whereas the existing relationship with Tekmira is really focused on formulation improvements, general work on SNALP technology, the SNALP technology that Tekmira has generated, as well as manufacturing of our drug products. So, they are very discreet activities.

Okay, that's very helpful.

And if I recall, Alnylam also has exclusivity around SNALP, as well.

So, we have exclusivity around the Semple and Wheeler patents, that is, the broad, over-arching patents that are in this space. Tekmira has its own intellectual property. We have non-exclusive licenses to all of that intellectual property. So, they have control of those patent elements. We have a non-exclusive license for all of that intellectual property, and we have exclusive licenses for Semple and Wheeler.

Obviously, this is complicated. I mean, we'd be happy to go through it in more detail. But, it's obviously very clearly laid out in agreements. I think the key point is that we and Tekmira are very close partners. We work very well together. They are advancing their RNAi therapeutic programs. We are advancing our RNAi therapeutic programs. They have certain delivery technologies. We obviously have delivery technologies together with them. But, we also have other efforts. We have our MIT relationship, and we have other efforts that we have that are discreet from what goes on there.

Great. Thank you very much for the clarity.

Thanks, Pamela.

Marko Kozul with Jeffries.

Hi, good afternoon, everybody.

Hi, Marko.

Hi. So, a clinical question. For your phase 1 ALN-VSP trial, can you provide us any color on dose escalation protocol or patients and which cohorts they may have been enrolled?

So, I'm going to hand this over to Jared to respond. What we don't want to do is get into the specifics of where we are and how many patients enrolled. But, what we can do is describe the general protocol for you.

And Jared, do you want to go ahead and do that?

Sure.

The protocol design is a very kind of classic phase I dose escalation design where we go step-wise from dose level to dose level, bringing on approximately three patients per dose level until we reach a maximum tolerated dose. So, essentially, the study itself has about eight different dose levels on it, and, essentially, once we reach a maximum tolerated dose, we'll probably then go on to an expansion phase and bring additional patients on to the study for a further look at both safety and efficacy at that maximum tolerated dose.

And just to add to that, Marko, as you know, we're looking at multiple endpoints. As you may know, we're looking at multiple endpoints in the study. So, Jared, do you want to describe some of the key endpoints?

Yes. The primary endpoint, of course, is safety and tolerability and determination of a maximum tolerated dose, but there are also the other key secondary endpoints that include a analysis of the pharmacokinetics of the drug, as well as very important pharmacodynamic endpoints, including looking at response rate by standard imaging techniques, also looking at whether we can detect an anti-[androgenic] effect using DCE MRI.

In addition, we're also going to be performing voluntary tumor biopsies to really look at whether our drug is affecting key pharmacodynamic endpoints at the actual level of the tumor in addition to looking at various angiogenic proteins within the blood that can also be affected by the ALN-VSP.

So, there are a number of different pharmacodynamic endpoints that are secondary endpoints but are very important endpoints in the study, but the primary endpoint, of course, of the phase I study is safety, tolerability, and determination of the maximum tolerated dose.

Is that clear, Marko?

Just one related follow-up. If your delivery partner, Tekmira, were to show positive phase I results with their ApoB SNALP compound, what takeaways would you apply to that for -- take away from that and apply towards your ALN-VSP program?

Well, we think that's a very good question, Marko, and we think it's obviously a very -- we're watching that progress very closely. It's hard to make any one-to-one correlations, per se, given the fact that it is a different sRNA toward a different biological target. We haven't been involved in selecting that specific siRNA, but obviously we would find that as a very encouraging sign as they achieve knock-down of ApoB in their efforts.

But keep in mind, it's not a program that we are directly involved in, either from a scientific or clinical or ownership or rights standpoint. It's really Tekmira's program, so we don't have real control in any way, shape or form. But, we are obviously very hopeful and supportive of their efforts, and we wish them success with it.

Perfect. Thanks for taking the questions.

Great, Marko.

Andrew Vaino with Roth Capital Partners.

Hi. Thanks for taking my call. Just a quick question on the TTR. How many patients does that affect in the United States?

Oh, how many patients in that space? So, if you look at--.

In the U.S.

In the U.S. So, Barry, do you want to take that question?

Yes.

So, as you're aware, there's a -- this is an orphan indication that, as Jared explained, fall across two major familial subtypes - FAP and FAC. Worldwide, there's about 10,000 patients for FAP, over 40,000 patients for FAC. And the exact demographics of how they're broken out are not entirely known. We know that there's major populations in the United States, in key pockets in Europe, and in Japan. And as the program develops and clarity around specific subsets of the populations and families are tracked, we'll be out with a little bit more color.

Okay.

And then, secondly, in -- so, I mean, you look like you're targeting another systematic drug delivery, and then it looks like next year it'll also be a [hypercholesterolemia]. Do you have a rough guess as to when you guys might look at some type of systemic delivery for a non-liver organ?

Andrew, that's a great question. I think that, obviously for systemic delivery, certainly this year and into next year I think the focus will be on liver targets -- liver disease targets. But, the progress we're making in extra-hepatic delivery is extremely encouraging, and I think that, beyond this year and next year, as we look into 2011 and beyond, I think we'll start cracking those doors open, as well.

But, I think we obviously have plans and forecasts with programs that are marching forward that we could forecast into next year already, to a large degree, not with absolutely certainty, but with the type of certainty that you have around development programs. And I think that, clearly, we have our programs with PCSK9, which is a liver target, and our program, which is a direct delivery program with Huntington's, which is together with Medtronic, and then, obviously, continued progress on RSV and VSP and TTR.

And so, for systemic in that stable of programs I just mentioned, they're all liver genes that are being expressed. And we like them because they are really the low-hanging fruit type of opportunities in front of us.

Excellent. Thank you.

Thanks, Andrew.

Alan Carr with Needham & Company.

Hi. Good afternoon, everyone.

Hey, Alan. How are you?

I'm doing pretty good.

Good.

How are you?

Great.

A few more questions on TTR. Why this program over the other ones? Is it because it's an orphan indication, or are there other reasons involved?

Well, that's a great question. I think the number one reason is the former. It's an orphan indication that we think has very significant unmet medical need, where we believe that there will be early opportunities for establishing human proof of concept by knocking down the mutant TTR gene that obviously are strong predictors of potential clinical benefit. And so, I think, for all those reasons, we -- it's marched up and has moved into the position that it's moved into.

Now, it doesn't take away at all from our interest in PCSK9 or, for that matter, Huntington's, and those programs are obviously continuing. But, for many reasons, it's got some attractive features related to thoughts on what clinical trials might look like and what paths to the marketplace might look like that in many ways we view as more clear-cut than what might exist in the case of hypercholesterolemia, and we're looking at that space very closely while remaining very committed to it.

So, as you know, there's been -- over the last two years, there's been a lot of discussion around LDL cholesterol as an endpoint, and that certainly has factored into some of the thinking.

Sure. And so, is this one that you feel that you would -- could develop a commercial organization around?

Oh, yes, absolutely. This is the type of product that is Genzyme-like in its features and its characteristics and requires ultimately a commercial infrastructure which is extremely tractable for a biotech company.

And Alan, I would just add to that, to what John said, which is exactly right, we have a patient population that has no alternative. For a very small set of these people, their liver transplant is available, but only for a very small set. So, we have no drugs to help these patients, and we know that we can silence the TTR gene, which is the cause of TT amyloidosis. So, we have an opportunity of targeting something that's not otherwise been tractable.

And what's the -- how does the structure of this RNAi differ from the basic -- like what you have for the ALN-RSV01? I know it's in the SNALP, right?

That's correct.

But, how else does the actual RNAi molecule differ?

Well, this is an optimized siRNA toward TTR. It has a picomolar IC50 in vitro. In terms of its ED50 for silencing TTR in Vivo, it shows knock-down -- 50% knock-down at 0.3 milligrams per kilogram, so it's a very [incomant primary], so it's a very potent molecule, very potent sRNA.

It's also been chemically modified, which is something which clearly has beneficial properties as it relates to potential risk for immune stimulation. And obviously, that's a feature that we incorporate into all of our programs at this point in time. So, it's got a lot of positive features to it.

Have you guys -- sorry, I'm not familiar -- I can't recall whether or not you guys have gone into details about the kind of chemical modifications to this one.

Well, we haven't -- we can be very open and tell you exactly what we do, as we always have, which is we routinely use chemical modifications like, 2-[primomethyl] modifications and [phosphorothyoid] modifications typically on the terminal ends of the double-stranded RNA to stabilize our molecules. That's the usual suite of chemistries that we use, and those chemistries fully stabilize these molecules and provide them with the needed properties to also escape any recognition by toll-like receptors.

So, it is the technology that is the bread-and-butter technology that we've used. We haven't seen other chemistries providing any advantages over those type of approaches. In fact, typically, those type of approaches, which are also the much more straightforward across many, many dimensions, are just as good as anything else out there.

Okay. And then, the last thing I want to get into is the collaboration with Novartis. This is its last year. And did you say it goes till October 2010 now?

That's correct.

Can you characterize for us what sort of work is underway there, and what are the objectives through the end of October next year?

Well, let me ask Barry to comment on that.

Yes, sure. Alan, as I think you'll remember, now going over four years ago, we formed, at the time, the largest collaboration between a pharmaceutical company and our RNAi company. The collaboration was focused on 30 targets, and an opportunity for Novartis, during the course of this work, to obtain an adoption license that I've described for $100 million. And the work has gone on with Novartis very well.

Ostensibly, we bring compounds forward with them collaboratively to the in Vivo activity stage, and then Novartis takes them forward into pre-clinical and clinical development. We are not at liberty to share any specifics around the Novartis programs. That's really their right to share the progress.

But, I think it should be obvious, in this world where pharma and biotech companies form collaborations, it's very rare for collaborations to be formed and then re-upped twice to a fifth and final year. So, that should speak for itself. They're two blocks away. We have people in each other's buildings virtually every day, and a very collaborative sharing effort.

Other than the $100 million, is there another -- is there additional option to buy more stock at the end of next year, too? What other features are there?

Patty might want to answer that.

Yes, Alan. They do retain their right to continue annually to buy up to their current ownership interest level of 13.4%, and that is right. And basically, it's been a settle-up for stock options that have been exercised by the company during the year, and then they have the right to buy their share of those to keep their ownership interest. But, they do retain that right for the foreseeable future.

And then, Alan, very importantly, for all the progress that Novartis makes, Alnylam gets milestones and royalties for successful products. So, we have financial benefit for their success in the RNAi therapeutic space, both under the current targets and then, if taken, under the adoption license.

And what percent do they have of Alnylam now?

13.4%.

Oh, that's the -- is there a maximum number above that that they can go to, or are they (inaudible)--?

Well, so they can -- Alan, they can -- under the investor rights agreement, they can -- we are obligated to sell them newly issued shares at the 13.4% level. They can decide if they want to take it and buy them or not. They've now decided, two years in a row, to buy them and maintain that 13.4% level. They can buy on the open market up to 19.9%.

Oh, 19.9.

Okay. That is where they -- and there's a standstill at 19.9%, okay? The standstill goes away at the end of the research term.

Okay. Well, thank you for taking all my questions. I appreciate it.

Great.

Ted Tenthoff with Piper Jaffray.

Great. Thank you very much.

A lot of my questions have been answered. Maybe just coming back a little bit to TTR, I know it's early and you've just sort of announced that as a -- your next IND development candidate. But, can you give us a sense of, sort of as you look forward, what those clinical studies might look like? [Obvious] (inaudible) an orphan indication where you really may have a disease-modifying effect, we could potentially see a relatively rapid development path.

But, I know it's early to talk about these things, but kind of what do you have in your head for the development path?

Great question, Ted, and hope you're doing well.

Very well.

Let me have Jared make some comments on this. I'll just preamble it by saying that, obviously, when we -- as we typically do when we start the trial, we'll give the firm protocol dimensions and protocol objectives and endpoints and so forth and so on, so we don't want to pre-commit on that because that obviously, until the IND is filed and so forth and so on, it's not final-final. So, we don't want to give people information that's not final.

But, we can give you -- Jared can give you perspective certainly on the -- an IND opening study, and then also just the directions from there at that point in time.

Yes--.

(Inaudible.)

Sorry to interrupt. That's perfect. And if there's anything -- I'm not really that familiar with what potential clinical endpoints might be, so just kind of starting to think about some of these things.

Yes.

Sure. So an IND opening study, in all likelihood, would be done in actual patients with TTR amyloidosis, and in all likelihood it would be done in patients who probably have different manifestations of the disease, those with neuropathy, those with cardiomyopathy, those with a combination of those different presentations.

And the first study would obviously be a safety and tolerability study and a chance for us to show that the drug itself can actually lower both mutant and wild-type TTR levels in those patients. So, that's what we'd envision the IND opening study to look like. Subsequent studies after that really -- the design of those studies would depend a lot on what we see in the first phase I study, in the initial IND opening study.

So, we'd be very flexible and nimble, really, in what types of studies would follow that, whether those follow-up studies would be focused more on patients with cardiomyopathy, the FAC patients, whether it might focus more on those with neuropathy or really look at all comers. That will really be determined by what we see in the initial study.

Sure.

Now, in terms of clinical endpoints that you were talking about, the types of endpoints we'd be looking at would be neuropathy endpoints, for instance, peripheral neuropathy endpoints in patients who have the FAP syndrome. Those can either be sensory neuropathy endpoints or autonomic neuropathy endpoints.

For patients who present with cardiomyopathy as the main part of their disease, there are number of different cardiac endpoints that include things such as looking at exercise tolerance for those with congestive heart failure, or even looking at various radiologic endpoints that give us a sense of whether we're improving cardiac function.

So, I think those would be some of the types of clinical endpoints we would be looking at in addition, of course, to looking at how the drug is affecting lowering of wild-type and mutant TTR and how long we're able to lower it for.

One of the things, Ted, that's exciting about the program and that we -- that has obviously hastened our interest in it has been the time we've spent with key opinion leaders to really understand these endpoints. And we've convinced ourselves that there's a very attractive path forward here from a clinical endpoint and registration standpoint. And clearly in the first phase I study, we'll learn about the magnitude of the drop-down -- knock-down of the TTR protein at a given dose and the duration of that knock-down in patients that will then drive -- very clearly drive our thinking about dosing in the subsequent studies that would obviously also look at clinical endpoints.

And I would also add to what John just said, that -- and to what Barry mentioned earlier, which is the fact that there really is no effective therapy for this disease, either patients with FAP or FAC. Liver transplantation is very marginally effective in those with FAP.

And as we've gone around and spoken to various experts who treat patients with this disease, and we've actually been speaking with experts both within the U.S. as well as in Portugal and in Sweden, these are other countries where you really see a lot of this disease, especially of the FAP. They've been very enthusiastic and very receptive toward any novel drug in this area that might be able to impact on the disease and very excited about potentially participating in our clinical trials in the future.

Excellent. Well, it does sound like a really exciting opportunity and really tailor-made for what you guys are doing.

One quick follow-up question. I think you maybe mentioned this earlier. As we look to advance into maybe the elderly and kids with the ALN-RSV01, when do you think the earliest we could actually see phase II-b, or whatever you're going to call it, efficacy data from those naturally infected larger populations?

Ted, I think we'll be able to provide that type of guidance later in the year when we specifically go through the plans. I think it'd be premature to do that just now. So, stay tuned on that one.

Perfect. Great. Thanks, guys.

With no further questions in the queue, I would now like to turn the call back over to Alnylam for closing remarks. Please proceed.

Thanks, [Yvette].

As you can all tell, we're extremely excited about the advancements that are being made in the ALN-RSV01 field that our leadership role in bringing RNAi therapeutics just that much closer to patients who are in need of our innovative medicines.

We look forward to keeping you updated on future calls, and again, thank you for joining us today. Bye-bye now.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.