Alnylam Pharmaceuticals Inc (ALNY) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss the third quarter 2009 activities and 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.

Good afternoon. I'm Cynthia Clayton, Director of Investor Relations and Corporate Communications at Alnylam.

On the call today are John Maraganore, our Chief Executive Officer; Barry Greene, our President and Chief Operating Officer; Akshay Vaishnaw, Senior Vice President, Clinical Research; and Patty Allen, Vice President of Finance and Treasurer.

During today's call, John will provide some introductory remarks and business context. Akshay will provide a summary of our clinical and preclinical research and development activities. Patty will review our financials and guidance. Barry, who is joining us by phone from Japan, 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 provision 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 obligations to update such statements.

I will now turn the call over to John.

Thanks, Cynthia, and welcome, everyone. Thanks for joining us today on our third quarter 2009 call.

I am pleased to share with you today a report on Alnylam's activities this past quarter, which we believe reflect substantial progress in the discovery and development of RNAi therapeutics, a whole new class of medicines that have the potential to treat disease in a fundamentally new way.

During the quarter we made important strides in our R&D efforts. We continued to advance our clinical pipeline and remain on track to have three clinical stage programs by the end of this year with our planned IND filing for our ALN-TTR program, a potential breakthrough therapy for an important orphan disease.

In addition, we are very pleased to announce today that Alnylam plans to advance ALN-RSV01 into a Phase IIb trial in adult lung transplant patients for the treatment of respiratory syncytial virus, or RSV. This study is designed to repeat and extend the encouraging lung function and clinical results we saw in this important adult-patient population with our recently reported Phase II study. At the same time, we will be advancing our second-generation RNAi therapeutic, ALN-RSV02, into the pediatric RSV infection setting together with our partner Cubist.

We are also making excellent progress on our other clinical and preclinical programs, such as ALN-VSP for liver cancer and our efforts on hypercholesterolemia and Huntington's disease. Further, we're making important progress in our delivery research efforts, where we're now on track to achieve single-digit microgram-per-kilogram systemic RNAi potency, a truly remarkable achievement.

All told, our R&D progress this past period demonstrates our leadership in translating the science of RNAi into a robust drug-discovery platform and our commitment and passion to advance these innovative medicines to patients.

On the business side, we've demonstrated the continued strength of our existing partnerships, having advanced our collaboration with Roche to an exciting new phase, as we announced just this morning. This new phase of our Roche partnership was a predefined component of our original 2007 agreement, namely, a commitment to enter into a drug-discovery collaboration within a two-year period, which is where we are now. The specific collaboration terms have now been agreed and include a 50-50 co-development and co-commercialization structure and the commitment of each company to bring their specific delivery technologies into this effort.

We're also pleased to have recently, during the quarter, extended our partnership with Novartis for its fifth and final planned year. It goes without saying that we reap many benefits -- strategic, scientific, clinical, and financial -- from our existing partners, which also include Takeda, Medtronic, amongst others. These relationships, combined with our unparalleled patent estate and financial strength, continue to place Alnylam in a strong and unique position to continue to build a leading biopharmaceutical company founded on RNAi.

Now, regarding our plans for future partnerships, there remain significant interest across the industry for new alliances in RNAi therapeutics based on Alnylam's capabilities, our technology, and, certainly, our intellectual property. However, regarding our goal of two or more new major partnerships in 2009, we must remain focused on completing the right alliances with the right partners, and we will continue to do so. While multiple discussions remain ongoing with potential biotech and pharmaceutical partners, we now believe that the timing for achievement of this goal could extend beyond year end. Of course, while we're pleased about our news this morning with Roche, we certainly don't score that alliance against our 2009 major partnership goal.

As you'll hear shortly from Patty, our financial position remains one of the strongest in the industry's, representing an asset which we are particularly proud of, given the difficult economic environment, and our cash position underscores our ability to do the right partnerships at the right time.

Finally, we announced today Ed Scolnick's decision not to stand for reelection to Alnylam's board of directors next year. As many of you know, Ed has had one of the richest lives in science and industry, and as he is now turning 70, he has elected to focus his remaining career on his passion for his scientific research in neurobiology and the human genetics of neurological disease. We wish him all the very best in his future endeavors and look forward to his continued wisdom through the middle of next year.

So to sum up this past quarter, Alnylam made excellent progress on advancing our innovative medicines to patients. We made major progress on delivery, and the strength of our existing partnerships, combined with our leading IP capabilities and cash position, put us well on track to fulfill our mission of building a new top-tier biopharmaceutical company. We continue to have excellent discussions on new partnerships, but the timing for completing these may extend into the next year.

Looking forward, I'll remind you of our RNAi 2010 goals we introduced in January of 2008. In this regard, we are very much on track to fulfill or exceed our objectives on delivery, pipeline, and business partnerships.

With that, I'll now turn the call over to Akshay for a review of our clinical activities, our pipeline, and our scientific progress, where we've had quite a bit of activity this past quarter. Akshay?

Thanks, John.

This quarter we made significant progress across our pipeline in scientific activities. In fact, to be clear, this past quarter has arguably been the most important in the company's seven-year history as it relates to our pipeline and scientific leadership objectives.

In short, we obtained data that warranted initiation of the company's first Phase IIb study, we've enrolled a significant number of patients in our first systemic delivery trial, we're on track to initiate our third clinical stage RNAi program, and we've made some very important and unprecedented advances in delivery.

Let me start with our lead clinical program, ALN-RSV for the treatment of respiratory syncytial virus infection. In July we presented complete data from a Phase II randomized, double-blind study of inhaled ALN-RSV01 in lung transplant patients naturally infected with RSV. The study achieved its primary objective of demonstrating safety and tolerability of ALN-RSV01 in an adult lung transplant setting. Due to the small sample size, the study wasn't powered for antiviral clinical end points, and so results should be considered exploratory.

Nevertheless, we were encouraged to see that treatment with ALN-RSV01 was associated with improved recovery of lung function and a statistically significant reduction in the incidences of new or progressive bronchiolitis obliterans syndrome, otherwise known as "BOS." I want to note in passing that BOS is in fact a life-threatening complication of RSV infection and an irreversible disease of the transplanted lung, resulting in approximately 50% mortality within three years of onset.

Now, as John mentioned, after evaluating the clinical data for ALN-RSV01, we and our partner, Cubist, have agreed to develop ALN-RSV01 in the adult lung transplant setting in parallel with the development of a second-generation compound, ALN-RSV02, which will be focused on the pediatric population. This approach of advancing two distinct NC's meets the objectives of providing the needed product profile differentiation to maximize the value of our overall investment.

Accordingly, Alnylam plans to advance ALN-RSV01 in a new Phase IIb clinical trial in RSV-infected adult lung transplant patients and expects to begin enrolling in this study in early 2010. The objective of this new study is to repeat and extend the clinical results observed in the original Phase II study. Alnylam will fully fund the continued advancement of ALN-RSV01, and Cubist will retain an opt-in right for the product in the adult lung transplant indication. Cubist will take the lead in advancing the ALN-RSV02 molecule toward the pediatric setting in continued collaboration and 50-50 funding with Alnylam.

Now moving on to our ALN-VSP program for liver cancer, enrollment is going well in our Phase I multicenter open-label dose-escalation trial to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of ALN-VSP in patients with primary and secondary liver cancer. We are very excited about this program, which is our first systemic RNAi program and our first RNAi program in an oncology indication. A double-digit number of patients have been enrolled across multiple dose cohorts, and all of the trial sites are open at this time. We expect to present preliminary data from this Phase I trial in mid-2010.

In addition, we're also working on an RNAi therapeutic for TTR-mediated amyloidosis, or "ATTR," a hereditary systemic disease with devastating effects. Just this week we presented new preclinical data from ALN-TTR at The Liver Meeting in which we shared additional preclinical results demonstrating the ability of a single dose of ALN-TTR to durably fund the target-messenger RNA for a period of several weeks. These almost antibody-like pharmacodynamic properties further support the advancement of our promising program for this indication.

Indeed, we're on track to file regulatory applications for this program by the end of the year, with the goal of initiating the Phase I trial in early 2010. To be clear on our external communications, as long as we remain on track for our early 2010 goals, we will not be announcing the specific event related to the filing of our IND. Indeed, we'll likely be commenting on the starting plans for our Phase I trial sometime in the first quarter of 2010, closer to the Phase I start date.

Our advancement -- our advanced preclinical pipeline includes ALN-HTT, an RNAi therapeutic for the treatment of Huntington's disease that we're developing with our partner Medtronic. In September we and Medtronic presented new nonhuman primate data from this program. In these studies, there were two important findings. Firstly, therapeutic silencing of the endogenous primate huntingtin gene was demonstrated in a manner supportive of scaled effects for the human brain, and, secondly, continued infusion in the CNS over a period of 28 days was found to be well tolerated. We're excited about the opportunity to advance this important innovation to patients suffering from this devastating neurodegenerative disease.

Our efforts in cardiovascular disease are also significant as exemplified by our PCSK9 program, where development activities are advancing. In this therapeutic area, Alnylam is pleased to be a participant in a new cardiovascular research grant, where our scientists will be working with world-class labs at the University of Pennsylvania and the MGH. This is yet another example of how Alnylam's leadership in RNAi forms the foundation for powerful relationships with leaders not just in the pharmaceutical industry but also in academia. It also illustrates yet again how RNAi is transforming the discovery of new medicines.

Beyond the pipeline, we've continued to advance our platform for RNAi delivery. Our progress in this regard has never been stronger, and I think upcoming presentations and publications from our scientists will illustrate this to all of you. What's really remarkable is the level of in vivo potency we're achieving in our current efforts.

Finally, it deserves mention that while the efforts I summarized above take place in Cambridge, we have a very active effort in place in San Diego in the form of Regulus. Our colleagues there are focused on microRNA therapeutics, an entirely new frontier of pharmaceutical research. We're excited about the progress at Regulus -- that Regulus is making towards its therapeutic progress. In particular, work from another group has shown that anti-miR-122 has impressive efficacy as a hep C antiviral in a chimp model of HCV infection. This, in fact, is our lead program at Regulus, and Regulus exclusively controls IP related to this approach in the US, Europe, and Japan. Furthermore, there's encouraging progress on both miR-21 in heart failure and fibrosis and also Regulus's immuno-inflammatory disease program with GSK.

So quite an active period in R&D, and, accordingly, we're looking forward to providing a more in-depth view of our pipeline and our research programs at our upcoming R&D Day next week in New York City. On the agenda, we're pleased to have two noted academics in addition to the program leaders and management from Alnylam. Dr. Allan Glanville, a pulmonology leader from University of South Wales Australia will be present to discuss the need for treatment for RSV infection in lung transplant patients, and Professor Philip Hawkins, Director of the National Amyloidosis Center based at the University College London, will be joining us to discuss the opportunities that exist for our TTR amyloidosis program. It should be an exciting event, and we hope to see you there.

Now I'd like to turn the call over to Patty for a review of the financials from the quarter. Patty?

Thanks, Akshay, and good afternoon, everyone.

I am happy to report that our financial profile remains extremely strong. At the end of the third quarter, Alnylam had cash, cash equivalents, and marketable securities of $453.5 million. Our cash position continues to lead the industry and remains one of the top-ten net cash positions across the entire US biotech industry, providing us with significant financial flexibility in a runway of several years. Importantly, we are in a strong position that allows us to execute on our overall corporate strategy, including the advancement of our science, pipeline, intellectual property, and business partnerships. We also continue to have no write-offs related to our cash and fixed-income portfolio to date.

Our GAAP revenues for the third quarter of 2009 were $24.2 million. As you know, the amortization of upfront payments from the strategic alliances we have formed with Roche and Tekada accounts for a significant and recurring 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 Tekada alliance, we are amortizing the upfront payments and milestones totaling $150 million over a seven-year period, which equates to over $5 million per quarter in GAAP revenues.

For our early 2009 Cubist alliance, we are amortizing the $20 million upfront 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.

Moving to expenses, R&D expenses were $23.2 million in the third quarter of 2009 and were comparable to the $22.1 million in the third quarter of 2008.

G&A expenses were $10.7 million for the third quarter of 2009, compared to $6.9 million in the prior-year period. The increase in G&A expenses this quarter was due primarily to higher professional service fees in association with business activities, primarily legal activities, and higher noncash stock-based compensation. We expect that G&A expenses will increase slightly in Q4 2009 as compared to this past quarter, primarily as a result of increased legal activities related to our ongoing litigation.

In the third quarter we recorded an income tax benefit of approximately $600,000, which was primarily as a result of now having higher expected legal expenses in the second half of 2009 related to our ongoing litigation.

As you can see, we are in a strong financial position with no debt.

With respect to guidance for 2009, we now expect that our cash position at the end of the year will be greater than $430 million, which provides us with many years of runway to advance our scientific and pipeline efforts. The slight change in cash guidance is, again, primarily related to an increase in legal expenses in the second half of 2009 we are incurring as we prepare for our trial date in February of 2010.

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

Thanks, Patty, and hello, everyone.

I'd like to start by discussing our partnering efforts. As John mentioned, our existing partnerships continue to be strong and fruitful, and we recently advanced and expanded some of our existing partnerships. Sitting here in Tokyo, I can tell you firsthand that our partners in Japan remain very enthusiastic by the progress in RNAi.

Also, just this morning we announced that we advanced the RNAi therapeutic collaboration phase of our landmark 2007 alliance with Roche. Under the expanded collaboration, Roche and Alnylam will jointly collaborate on the discovery and development of specific RNAi therapeutic products, and each will contribute key delivery technologies in the new therapeutic effort focused on specific disease targets. These new delivery technologies include Alnylam's LNP's, or lipid nanoparticles, Roche Madison dynamic polyconjugate delivery technologies, and possibly other delivery technologies from the outside, such as Tekmira's SNALP.

In addition, Alnylam and Roche will co-develop and co-commercialize RNAi therapeutic products in the United States market, and Alnylam is eligible to receive additional milestone and royalty payments for products developed in the rest of the world. I think it's very notable and a sign of a very strong continuing partnership that Roche will be bringing their dynamic polyconjugate, or "DPC" technology, into this collaborative effort. I'll remind you that Roche obtained access to the DPC technology as part of their 2008 $125 million acquisition of Madison, Wisconsin-based Mirus. Alnylam now stands to benefit from this promising technology.

Our relationship with Novartis has also been very productive. Novartis recently elected to extend our RNAi therapeutics collaboration for a fifth and final planned year through October 2010. In addition to the important learnings we are each sharing with each other, this commitment from Novartis results in continued R&D funding to Alnylam. By all accounts, the Novartis partnership has been beneficial, and we are impressed with their commitment to the RNAi field, as noted by their significant hiring in this area.

As you know, our partnerships are a key part of Alnylam's corporate strategy, and we are very focused on executing additional deals that will continue to build value for the companies and our stockholders. As we've noted on this call and in the past, we remain focused on completing the right alliances with the right partners. We also need to find the appropriate balance to communicate with investors while maintaining maximal leverage in our business discussions. As John also noted, while we have multiple discussions currently ongoing regarding new partnerships, we do not believe -- we do believe these discussions could extend beyond the 2009 calendar year.

Turning to the IP side very briefly, we've made important additions to our intellectual property estate, as detailed in our release today. So far in 2009, we've had over 35 new patents issued or granted in countries around the world, vastly exceeding our goal of 15 or more patent grants this year. We remain very confident that our IP estate is unparalleled in the industry and is required for the development and commercialization of all RNAi therapeutic products. In addition, along with our collaborators at Isis and Regulus, we continue to expand our fundamental IP position in the area of microRNA's.

So, just to wrap up and give perspectives, by the end of 2009, we intend to have three clinical stage programs, we expect to continue to strengthen our scientific leadership and intellectual property positions, we are advancing a number of new business development discussions that we believe will continue to strengthen and add value to our overall business plan, and from a financial perspective, as Patty highlighted, we expect to end the year with greater than $430 million in cash.

We look forward to reporting back on our additional progress in the weeks and months to come, and as Akshay mentioned, we hope to see all of you in New York City next week on the 12th to present our important R&D progress.

With that, I'd like to turn the call back over to the operator for your questions. Ken, please open the line for callers.

(Operator instructions.) Our first question comes from the line of Simos Simeonidis from Rodman & Renshaw. Please proceed.

Hey, guys.

Hey, Simos.

Thanks for taking the question, and congratulations on what seems to be a very busy and productive quarter.

Thank you.

It's getting harder to read your press releases because they're getting so long. You've done (inaudible). So --

Oh, well, we'll send you an abridged version.

So, after praising you -- and I know you guys have done, I think, a tremendous job -- I want to concentrate on a couple things that I want to question about. The first is the partnership, and the other one is the RSV program.

So on the partnership, you decided to change the guidance, and so, first of all, is it that you see enough good deals out there and you're thinking that, because of timing or whatever, it might be Q1 or Q2 -- and I know you're not going to give guidance -- but is it more a matter of executing the deal than getting done, or is it a matter of not having enough good deals out there?

Yes.

Because that's the -- that was the impression that I was -- or that was my interpretation, and on the one hand, if you're -- I think you're making the right decision not to take just any deal just to fill in, kind of, an arbitrary goal. On the other hand, one of the main attractions for investors in Alnylam was, A, your ability to bring in all this very significant -- over $600 million in nondilutive capital -- and your ability to set these goals and execute. So -- and this seems to be a departure, and I know you have a very high bar that you've set, but I think people are going to be disappointed. So is it that there's a smaller number of parties interested and/or they're willing to pay less? Is it tougher to do a deal today than it was 2007?

Yes. So let me answer your question, Simos -- it's a very good one -- and then we can go on to the RSV question afterwards.

So the level and quality of discussions we're having across the pharma and biotech industry around partnerships has -- is phenomenal, and we are having senior-level discussions with many of the leaders in both traditional sectors of pharma and big biotech. And there's no question of their continued interest and conviction in the potential and the opportunities with RNA interference, as well as their belief set in Alnylam's leadership in that regard.

So this is really a timing issue as it relates to the specific goal, and it's one that, obviously, we want to be very clear with people that we believe that it could extend into next year but, in the meantime, we have ongoing discussions right now, and our goal is to get them done as efficiently and expediently as possible but, certainly, only under the conditions that they're the right partnerships at the right time, and that's more important to us, as I think you'd agree, than any other thing.

I'll also comment that we also have very brisk partnership discussions through our colleagues at Regulus, who are, obviously, pioneering a whole new frontier of medicine, where there's also very substantial interest in their technology and partnering there.

So this is something which is really a timing issue and something which we -- it's not a question of if, it's simply a question of when, and at this time late in the year, it is more appropriate to, obviously, reflect on the potential that they could go into next year.

Sounds great. The -- jumping into the RSV questions, I have two or three very probably yes-or-no answer type of questions.

So, first of all, why are you splitting up this way and -- or, actually, what I really want to ask is why is Cubist not wanting to do the adult -- pursue the 01 with the adult?

Secondly, why the different molecule in kids or in pediatrics? Is it that it's a more appropriate sequence, for example, for kids, or is it you think it's a better, more appropriate for any other reason to go into kids?

And then, basically, if you can just tell us the difference between the two -- the 01 and the 02 molecules and -- as much as you can get into it in terms of is it modification or simply the sequence?

Yes, so let me tag-team with Akshay on answering the question. I think it basically had three parts, as far as I can tell.

The first related to Cubist, Cubist is absolutely excited about the RSV program. It is really, in their pipeline, a critical strategic program. They have always been primarily focused on the pediatric opportunity in that program, and while they fully support and are absolutely on board with our advancement of RSV01 into the lung transplant setting, their primary interest remains in the pediatric market and the pediatric segment. Okay?

That said, I think the second part of your question is why go with one molecule in the adults and then the other molecule in the kids, and the simple answer there is that, ultimately, as everybody knows from examples like Avastin, Lucentis, and even palivizumab -- namely, Synagis -- which is largely only used in prophylaxis for kids, it's -- because of differences in size and dosing levels that are required, it's impossible to think about a single product that would go into both segments. So, ultimately, to get the most value out of this opportunity, one has to think about differentiation of the product profiles consistent with the one market versus the other. Okay?

So regarding your third question on what is it about RSV02 that makes it interesting versus RSV01, I'll lead off by saying that, in all aspects, in my experience, of drug discovery, you always find better molecules behind your lead molecule. In fact, if you don't, it's -- something's wrong. Right? So there's always ways to improve molecules as you take your lead program forward into clinical development because you always learn things in your development program that you didn't know when you started. Okay? So it's very common to have second-generation programs in molecules.

Now, with that, I'll turn it over to Akshay to comment on some of the features of what's different and also what's similar between the two molecules.

Yes. So I just want to reiterate what John said about the excitement around this lung transplant indication. So we're very much looking forward to kicking this Phase IIb study off.

Now, in respect of 01 versus 02, again, as John said, there -- through, principally, our use of chemistry and everything we've learned about how to modify these molecules, we've been able to generate several very interesting molecules, one of which will become RSV02. And these molecules feature improvements in stability, and that will translate to improvements in PK, improvements in safety, potentially, and all of that whilst maintaining the potency of the molecule. And I think we've discussed the potency associated with RSV01 many times both in the preclinical and clinical settings, and so we, obviously, want to maintain that potency because that will translate to efficacy -- but improving PK and improving safety. And so all of that wrapping up into the possibility to take a molecule that overall will be just much better suited for the pediatric setting and allow the differentiation that John spoke about.

Right. And, Simos, at next week's R&D Day, we're very gratified to have Allan Glanville join -- coming all the way from Australia, and he's one of the world's experts in the lung transplant setting, and I think that you'll hear from him his perspective on the unmet need and the opportunity for RSV01 in that specific setting. But also Akshay will also introduce some of the features of RSV02 that have us excited about that molecule for the pediatric setting as well. So there'll be some data there that you'll be able to reflect on. I must say you'll have to wait for a week to see it in its fullest form, but I think you'll be pleased.

Thanks. I'll ask one quick one and jump back in the queue.

Sure.

Akshay, one of the, quote-unquote, issues or problems for the initial RSV01 trial in the adult lung transplant was the size, and I know it was an initial trial and you didn't want to go into more than 21 patients and recruitment and everything else. The problem that came out of -- that was a problem because the data that you got was -- some of which was very encouraging, I thought -- was hard to interpret because of the small sample size. So in the next trial that you're going to do in adults, is it going to be significantly larger or is it going to be another one with 20, 30, 40 patients?

Yes, Akshay.

So just to recap, Simos, that first study was indeed a 21-patient safety study, and that was -- sorry -- a 24-patient safety study, and that was always the primary objective, and we hadn't powered it for efficacy. In fact, we were gratified that, even with such a small sample size, we saw the encouraging efficacy that you alluded to.

Now, that being the case and reviewing the data with Cubist, we are very excited now to move on, having learned a lot about the indication and, really, the very significant unmet need, particularly with respect to this BOS end point, to a significant study that will unequivocally demonstrate the efficacy protocol of the molecule. And in due course, as we get that study going, we'll, of course, be sharing more details of the study design --

So it will be quite a bit larger.

Yes.

Yes.

Perfect. Okay.

It will not be 20, 30 -- that kind of thing.

Right. Yes.

Okay.

Good. Thanks, Simos. You can come back in the queue later.

Our next question comes from the line of Pamela Basset with Cantor Fitzgerald. Please proceed.

Hi, Pamela.

Hi. Thanks for taking my question, and great progress.

John, I wanted to ask you about something you -- I thought I heard in your opening remarks about achieving single-digit mg-per-kg dosing?

Microgram.

Oh, microgram. Okay. Thank you. Could you talk about that in a little more detail, what that means for the program, how you did it, and where you can -- you'll go from here --

Yes, absolutely. And, Pamela, I'm glad you asked the question, and, again, here too, we'll be sharing a lot more of the actual data next week at the R&D Day, which I'm sure you'll enjoy seeing.

I mean, it's actually been pretty remarkable in many ways. So the efforts that we've put in place now over the last 18 to 24 months are bearing quite important fruit. In particular, the collaborations with Tekmira, the collaborations with AlCana and UBC -- University of British Columbia -- and, of course, our collaboration with MIT, have yielded a range of new lipids -- new chemical entities that, when combined as LNP's, as lipid nanoparticles -- achieve these very substantial improvements in the dose levels that are required for the silencing of target genes in animals, including nonhuman primates. And this is very important for many, many reasons because, obviously, one reason is the fact that you'd obviously like to have the most potent possible molecule to effect RNA interference in humans, and now we're able to do that very efficiently with even better LNP's than the current version that is in clinical studies, namely our VSP program with the SNALP formulation.

So we think this is pushing a whole new frontier that also opens up the opportunity for extra hepatic delivery of LNP's through targeting and other strategies that we're developing as well. But I think you're going to see some very exciting data, and it's, frankly, hard for me to even think about typical antagonist pharmacologic classes that are operative at these low dose levels. I mean, antibodies, for example, typically are going to start in the one to five mg-per-kg level or higher in human studies, and with RNAi, because of the power of that natural mechanism, we're down into the micrograms per kilogram level, and that's an astonishing level of potency.

So the benefits would include more efficient delivery?

Broadened efficiency, broadened therapeutic index, ability to go to different tissues and -- with targeting -- all of the above.

Does it reduce it at any level any potential for off-target effects because it's a lower dose, or that doesn't come into play here at all?

In general, the less you give, the better. Right?

And then longer -- looking way ahead, what about cost? Will --

I mean, it improves that --

-- significant to lowering cost of goods?

Absolutely. All of the above.

Uh-huh. Okay. Okay. Great. Thank you.

So it's got broad-ranging implications for our business in very significant ways, and this has been, I think, one of the major achievements of this whole year actually, without question. I mean, Akshay commented in his remarks about this being a very productive period in R&D. It's been very, very important to us internally, and at the end of the day, that's the thing that's most important.

Uh-huh. So it sounds like, when you talk about extra hepatic delivery, this will circulate with -- and have you decided on specific tissue targets that you're going to go after, or is it a portfolio at this point? Are you ready to do that?

It's -- I'd call it more of a portfolio at this point, Pamela, and something which we probably won't go into in a great -- that dimension, we won't go into it a great amount of detail next week, but you'll certainly see the progress that we're making with the LNP's in general and why we think it's a game-changing type of data.

Okay. And is there a targeting component here as well that's LNP related or some other type of targeting mechanism?

Not that we'll disclose next week at this point.

Okay. Thanks very much.

Thank you.

Our next question comes from the line of Marco Kozul. Please proceed.

Hi. Good afternoon, and congratulations on your progress.

Thanks, Marco. Appreciate that.

Yes, I wanted to follow up maybe briefly on the last question and ask that, as you can canvass the landscape of various RNAi delivery approaches and technologies, beyond Tekmira's SNALP, which ones do you find most interesting, promising, and potentially ready for in-human evaluation near term?

Well, it's -- Marco, thanks for the question. I mean, I think actually I was just in a meeting today on RNAi here locally in Boston and heard a couple of presentations, and that question came out of the audience, which is largely a technical audience in pharma. And I think that, without question, the LNP technology, which, obviously, we've been working on, Tekmira's been working on, we've been working on together with MIT scientists and scientists at the University of British Columbia, is the most advanced.

And, obviously, you've seen, for example, a number of companies also partner with Tekmira. And those are proof points that should not be ignored, and, obviously, we have a very strong relationship with them, but also some independent work that we're doing as well. So that's clearly a category that has been, obviously, very important.

The other that I'll just comment on, because of our news today certainly, was a very promising technology that existed at Mirus and that was acquired by Roche in 2008, and that's now going to be deployed along with our LNP technology in this new collaborative effort with Roche. So we'll be excited to be firsthand involved in some of that technology as it relates to our specific disease program collaborations, and I think that work out of Mirus is noteworthy in the field.

And then there, of course, are others that we also view highly. I mean, there's the nice work from Mark Davis, who's a founder of Calando, which has been a promising technological approach, and there's been the work that we've done on conjugates that we continue to believe is going to be important for the future.

I think, generally speaking, those are the most interesting. Unfortunately, there's a lot of other approaches out there right now which I think aren't that interesting or, frankly, aren't necessarily even valid, but I'm not -- out of deference, I'm not going to really -- it wouldn't be fair for me to comment on those.

Thanks for the answer there. And just one quick housekeeping question. In mid-2010, when you gave us some preliminary data for the ALN-VSP program, what do you expect to report? Will there be any metrics of efficacy in that preliminary data release?

Yes, Marco, so we will, obviously, provide as much information as we have at that time. It's an open-label study. It's a multicenter study. We're collecting data at different time points. We're able to, obviously, report on that, but we want to do that in a more staged manner, as opposed to overly frequent manner, and so we'll provide, through a peer-review scientific meeting, a presentation of the data up to that point, and, hopefully, it will be of interest to all of us.

Great. Thanks again.

Our next question comes from the line of Stephen Willey with Thomas Weisel Partners. Please proceed.

Hi.

Hi, Stephen.

Good afternoon, and thanks for taking my questions. Hi.

Absolutely.

Was just wondering if I could follow up on some of the comments you just made about the Mirus technology and --

Yes.

-- wondering if you can maybe -- I know that that technology is a little bit lagging, I think, with respect to development relative to the SNALP, if I'm correct, and --

Yes.

-- was just wondering if you could maybe highlight what some of the potential safety and advantages are with that technology relative to what's been seen currently in SNALP?

Yes, well, Steve, I can't get into too many details there because we're under confidential agreements with Roche, unfortunately, and it would be probably imprudent for me to make too many comments there. I could just say that, obviously, it's very promising as a technology. The published data on the technology, I think, are -- speak for themselves, and it's a differentiated approach from LNP's, and it's always good to have differentiated approaches for delivery in general -- which I would also add conjugates to that list -- because it provides you with the greatest flexibility in terms of how you will advance ultimately the entire platform. And let me just leave my comments at that. I think the papers have been published from Mirus, and, otherwise, we're, obviously, working with Roche on these new programs, and we're aware of some promising information there, but it would be premature for me to say anything.

Okay. And did they happen to -- I guess, pre-Roche, did they provide any nonexclusive licenses to the technology before Roche --

The only license that they provided to the technology was in a research collaboration they had with Pfizer and -- but that was not, to my understanding, a therapeutic license at all. So the only group that has access to the technology right now for therapeutic purposes is Roche.

Great. Thanks, and looking forward to the R&D event next week.

Great. Look forward to seeing you.

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

Hi. Good afternoon, everyone.

Hi, Alan. How are you?

I'm doing fine. Thanks.

Good.

I was hoping to go over the details of this new phase of the arrangement with Roche, specifically what's changed here and what was the catalyst for this shift in phase for this agreement.

Okay. Well, back in 2007, when we formed our alliance with Roche, it was structured as a nonexclusive license and a collaboration agreement. So there was both the licensing of our technology and the transfer of technology to Roche on a nonexclusive basis, as well as a collaboration around delivery, around RNAi. But in that agreement -- and this is -- I think it's consistent with all the disclosures -- I know it's consistent with all the disclosures we've made -- there was a -- the initiation of a formal joint drug-discovery collaboration that was, back in 2007, to start two years, approximately two years after that initial agreement was signed and went effective. Okay?

And so, over the last year, we've been talking to Roche about what's that program, what's the target, what does it look like, what's the structure of the relationship, because, while it was a part of the original agreement and stated in that original agreement that we would have that collaboration, the exact commercial terms were not agreed to at that time. Okay? So it required -- it was a formal, new agreement, if you will, that papers the new structure, that documents how we will co-develop, how we will share in costs, how we will share in revenues and profits around the product, who does the manufacturing, who's doing the lead commercialization, the milestone payments that we get in Europe, and so forth and so on.

And so that's all new, but it was preset in the original 2007 agreement as a to-be-negotiated or to-be-finalized form of the agreement over that two-year period, and that's what we announced this morning.

Okay. Thanks for that clarification. Coming back to RSV, I know we had some questions about this a little bit earlier, but can you give us a little more clarity on, I guess, the scale of this Phase IIb trial and when you might move into this next phase?

Yes. Well, let me just make a couple comments, and then Akshay can comment as well.

So the goal of this new study -- so we saw in our first Phase II, as you know, Alan, some data which were very intriguing and very interesting and, if repeatable, extremely important. Okay? And, obviously, it was a small study -- 24 patients, okay? -- and to be very clear, in that small size of a study -- and you can appreciate this fully -- small differences that might exist, one patient at the end of the day having BOS or one patient not having BOS, can change your interpretation. Okay?

So it's very important. It was viewed to be very important by us as we've reviewed our path forward that we do a study that will repeat and extend the current data set that we have, and, accordingly, this will be a study that is larger to, obviously, show with strength in power and strength in significance the ability to repeat and extend those original findings.

We'll give you more clarification. There is a protocol. There's been, obviously, discussions with regulatory authorities. This is moving along very rapidly. We want to seize the first part of the RSV season in North America with this study, so you can expect it will logically start in the first half of next year. Okay?

And -- but we will give you details on the study design in the early part of next year. Whether we do it as we establish our annual objectives or whether we do it when the trial formally starts, we haven't, frankly, yet decided, Alan, but we will do that in good speed. But it's in very advanced stages of planning, and I'll just leave it to Akshay to add any more color to that that you can --

One question, I guess, that -- where you could also help out a bit is, did you get the sense from the first trial in adult lung transplant patients that enrollment became easier over time?

Yes.

I -- because it -- my recollection was that the enrollment was a bit of a challenge there for a while. I'm wondering if you can elaborate on why that might have been and your comfort level with ability to enroll this next one a little more quickly.

Yes.

Akshay, do you want to take that?

Yes, I -- it's -- enrollment certainly picked up pace but --

A lot.

A lot. And we were happy with the time point in which we managed to close out the study earlier in 2009, a little ahead of schedule as it happened. And really it's not so much that somehow patients suddenly came out of the woodwork. I think we finally got up to the required number of sites, everyone was prepared to screen the patients appropriately, and once that was in place, we took full advantage of the US season.

But one thing I can say with some confidence, having been through that experience with the team, is that we're now very well placed actually to enroll for this Phase IIb study, which will be significant, and the primary end point will focus on efficacy.

I'll just add, Alan, that the RSV season, the winter season of '08-'09 -- late '08, early '09 -- we know from other metrics, including the pediatric setting, was a bit later than usual.

Yes.

It started to really pick up in the January-February timeframe in the Northern Hemisphere, as compared to having a little bit more in the December-November type of timeframe that one can see from time to time, for reasons that are just seasonal and variable in nature as people understand from the -- from their understanding of Synagis. So that could also be a reason why it picked up quite nicely toward the end of the trial.

Can you remind me what percentage of the patients were enrolled in the Southern versus Northern Hemisphere?

So --

Do you know the numbers offhand? I don't recall.

It's, I believe, 4 of the 24 were enrolled in the --

Yes.

-- Southern Hemisphere.

Yes. So Southern Hemisphere --

Oh, only four in the Southern Hemisphere.

That's right.

Oh, okay. So most of this happened up here. Okay.

Yes. But in keep in mind we only had a -- we had a smaller number of sites down there, too, Alan.

Okay.

And we'll plan --

All right.

-- more sites in the south this time through.

Okay. Well, thanks very much. Appreciate it.

Yes.

Sure.

Our last question comes from the line of Ted Tenthoff of Piper Jaffray. Please proceed.

Great. Thank you very much for taking the question. I have three quick ones.

Firstly, when do you think RSV02 will advance into the clinic?

Well, we'll give guidance sometime soon but not today.

Okay. The trial in February 2010, what is that relating to, and what is -- what are your thoughts around it?

Oh, that's -- I'm sorry. That's -- the trial there is the litigation that is ongoing between Alnylam and Max Planck related to the Tuschl-I and Tuschl-II matter.

Yes. That's Max Planck. Okay. Great. And then -- regarding Tuschl II?

Yes. That's correct.

Okay. Great. And then, lastly, great progress, glad to see Roche moving along. When should we get our first partnered RNAi IND from either Novartis and/or Roche?

Yes, so I can't tell you confidential information we're aware of, but I can tell you public information that our partners have made available, which is Roche has been quite clear that they expect to have their first IND in 2010.

Great.

Yes.

All right. Well, thank you, and I'll see you guys next week.

Thanks, Ted. Great. You, too.

So thanks, everybody. Look, it's been a very busy quarter. We've made a lot of important progress. We're advancing on many different fronts. I think it's very important, if you are able to join us next week at our R&D Day, or, obviously, you can take a look at the Webcast and the presentations on our Web site. Feel free to contact our IR Department if you have any questions about joining the event, and, again, thank you for joining us today, and have a good evening. Bye-bye now.

This concludes our presentation. Thank you for your participation. You may now disconnect. Have a good day.