Alnylam Pharmaceuticals Inc (ALNY) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss the fourth quarter and year-end 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, Senior 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; 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 provide general context. Akshay will provide a summary of our clinical and preclinical research and development activities. Patty will review our financials and guidance. And Barry will summarize our business highlights and 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 and thanks to everyone for joining us this afternoon.

We made great strides in 2009 as we continue to lead the industry's efforts in the discovery and development of RNAi therapeutics, a whole new class of innovative medicines. Our most important achievements in 2009 relate to our clinical pipeline and our delivery progress, precisely the two areas that are most important for our company's future and also for the future of RNAi therapeutics in general.

In 2009, we significantly advanced our pipeline, particularly our three key clinical stage development programs, ALN-RSV01 for the treatment of RSV infection, ALN-VSP for the treatment of liver cancers, and ALN-TTR for the treatment of transthyretin-mediated amyloidosis, or ATTR.

Regarding our ALN-RSV program, we continue to be very excited about the potential for this drug to treat RSV infection, an area of major unmet need, and are pleased to be leading the industry in this effort with what we believe is the most advanced RNAi therapeutic program in clinical development today.

Based on encouraging results from the Phase IIa study we reported last year, we announced just this week that we've initiated a Phase IIb trial of ALN-RSV01 in RSV-infected lung transplant patients, which is designed to repeat and extend the clinical results observed in the earlier study. Now, because the initial Phase IIa study was very small, it is important to bear in mind that we may not be able to repeat the encouraging effects that we saw in certain clinical endpoints in this new Phase IIb study; however, if we do, we think this will be an important outcome for the advancement of ALN-RSV01, and most importantly, for this patient population where there is a dire need for effective treatment options.

We are also making excellent progress on our other clinical and pre-clinical programs, including ALN-VSP for liver cancer, ALN-TTR for ATTR and our efforts in hypercholesterolemia and Huntington's disease. We're looking forward to sharing our initial ALN-VSP data in the middle of this year, and we're excited about the ALN-TTR Phase I study start.

Overall, we continue to lead the field in the translation of RNAi into clinical studies and ultimately believe that we will lead these innovative medicines to the marketplace. As Akshay will detail in just a moment, we are learning a lot in our translational efforts, and this will be an important aspect of our continued efforts with systemic delivery of RNAi therapeutics.

Another major event for the year and also a key inflection point in our history is the significant progress we made in the delivery of RNAi therapeutics, expanding our platform with second-generation lipid nanoparticles, or LNPs. A key point here is that the rather dramatic advances that we've made in delivery are only just now becoming known to the world. Akshay will review these major advances in further detail. Also, we hope that you will participate online in our upcoming RNAi roundtable on March 4, which will be focused on delivery.

In general, I think our scientific leadership in the field is now very well established. For example, we and our colleagues at Regulus published 25 peer-reviewed papers last year, the largest number of peer-reviewed papers that we've published in any single year.

Turning to the business side, we demonstrated the strength of our existing partnerships, as Barry will summarize shortly, although we were disappointed to have not met our goal of two or more new partnerships in addition to the Cubist deal that we did last year. Of course, we will do more partnerships, as we did just today with a new Regulus-GSK deal, and Barry will provide more context on our new partnership efforts.

Finally, on the patent front, we significantly advanced Alnylam's IP estate through the issuance and grant of more than 40 patents worldwide in 2009 alone. And we believe that there will be much more of this to come in the future.

So let me just take a step back for a moment. Strategically, we believe we are in the midst of perhaps one of the most important ongoing discoveries in modern biology, namely the central role of RNA in broad aspects of gene expression in both human health and human disease. Because of these important discoveries in biology, we believe that the next ten years could be viewed in the future as an RNA decade. RNA interference is a critical part of this new RNA world, and at Alnylam, we are leading the world's efforts in translating these new discoveries toward the development of innovative medicines.

In our view, all this defines incredible opportunities for Alnylam in the near term and the long term. So with that, I'll turn the call over to Akshay for a review of our clinical activities, our pipeline and some of our scientific progress. Akshay?

Thanks, John. As you mentioned, in 2009 and to date in 2010, we have made several important advancements with our pipeline, including our most advanced program, ALN-RSV01 for the treatment of RSV infection. In July 2009, we presented complete data from our Phase II randomized double-blind study of inhaled RSV01 or placebo in RSV-infected lung transplant patients. This study achieved its primary objective of demonstrating the safety and tolerability of ALN-RSV01.

Based on the results from our previous studies with ALN-RSV01, we recently initiated a Phase IIb global, multi-center, randomized, double-blind, placebo-controlled study of ALN-RSV01 in the adult lung transplant setting. The primary endpoint of this study is a reduction in the incidents of new or progressive bronchiolitis obliterans syndrome, or BOS, in RSV-infected lung transplant patients.

Secondary endpoints include assessments for safety and additional measurements of efficacy, including anti-viral activity, recovery of lung function as monitored by the proportion of patients with recovery of lung function greater than 80 percent of their pre-infection baseline value, and improvement in RSV systems as measured by cumulative daily total system score.

This trial will be performed in over 30 sites worldwide, and aims to enroll up to 76 patients who will be randomized in a one-to-one drug-to-placebo ratio. All patients will receive standard of care, and those receiving ALN-RSV01 will have drug administered as a 0.6 milligram per kilogram dose by inhalation once daily for five days. As this study begins to accrue in the northern and then southern hemispheres, we look forward to updating you on expected timing for the study's conduct.

In parallel with the development of ALN-RSV01 for the treatment of RSV in lung transplant patients, Alnylam and our partner for RSV, Cubist, are developing a second-generation differentiated compound, ALN-RSV02, which will be focused on the pediatric population.

Now, turning to our liver cancer program, in April 2009, we advanced ALN-VSP into a Phase I multi-center, open-label, dose-escalation trial designed to enroll approximately 55 patients with primary or secondary liver cancer. The primary objective of the study is to evaluate the safety and tolerability and pharmacokinetics of intravenous ALN-VSP. This is our first systemic RNAi program, and also represents our first clinical program in an oncology setting.

A significant number of patients have been enrolled across multiple dose cohorts, and we expect to present preliminary data from the initial dose cohorts of the Phase I trial in mid 2010. Now, please keep in mind that the expected presentation will relate to data documenting the early experiences in this program.

We're also very excited about our ALN-TTR program for the treatment of transthyretin-mediated amyloidosis, also called ATTR, which we advanced toward the clinic in 2009. We have filed regulatory applications for ALN-TTR01 and are on track to initiate a Phase I trial in ALN-TTR patients in first half of 2010. ALN-TTR01 is a systemically delivered RNAi therapeutic that employs first-generation LNPs. Pre-clinical studies have demonstrated potent and durable silencing of both the normal and mutated TTR gene in rodents and non-human primates. Further, administration of the RNAi therapeutic is being shown to reduce the pathogenic accumulation of mutant TTR in peripheral tissues in studies performed in a transgenic mouse model of the disease.

In parallel, Alnylam also is advancing ALN-TTR02, which utilizes second-generation LNPs. We also continue to advance important new developments in pre-clinical programs, including ALN-PCs, a systemically delivered RNAi therapeutic targeting PCSK9 for the treatment of hypercholesterolemia, and ALN-HTT, an RNAi therapeutic targeting the Huntington gene for Huntington's disease, which we are developing as a drug device combination in collaboration with Medtronic. We're making great strides in both of these programs, and we expect to have ALN-PCS in clinical studies in 2011.

As you know, many experts in the field appropriately regard RNAi delivery as a key technical challenge facing the advancement of RNAi therapeutics. Last year and early into this year, as John noted, we continued to advance our platform for RNAi delivery and made very important progress in this area that's critically important for the future of our technology and for pipeline efforts.

First, we have achieved major improvements in the potency of LNPs, with in vivo efficacy at doses as low as 0.01 milligram per kilogram in both rodents and non-human primates. This puts us on a clear trajectory for even further advancing this platform with single-digit microgram per kilogram doses to achieve therapeutic gene silencing.

Second, we have solved a key mechanism for the delivery of LNP-encapsulated siRNAs to hepatic sites. This mechanistic insight provides an invaluable roadmap in our clinical translational activities as well as in our continued research on optimizing delivery.

Furthermore, based on improved potency of LNPs and also our understanding of mechanism, we've been able to engineer targeting of these formulations and also to achieve delivery beyond the liver, to tissues including tumors and immune cells such as macrophages and [divertic] cells.

Finally, in 2009 we expanded the scope of our external collaborations on delivery to include a new collaboration with AlCana and the University of British Columbia on the design and senses of novel lipids and also performed a new collaboration with Isis to explore single-stranded RNAi approaches.

Finally, last fall we also launched Alnylam Biotherapeutics. This is an internal effort focusing on the application of RNAi technology to improve the manufacturing processes for Biologics. RNAi technologies can be applied to improve the quantity and quality of Biologics' manufacturing processes, using mammalian cell culture such as Chinese hamster ovary, or CHO, cells. This approach can be applied to the improvement of manufacturing processes for existing marketing drugs, new drugs in development and for the emerging biosimilars market.

We're really very excited about the progress in this particular effort, and look forward to updating you soon in this regard.

I'll now turn the call over to Patty for a review of the financials for the quarter and the year.

Thanks, Akshay, and good afternoon, everyone. I am pleased to report that we continue to be in a very healthy financial position. I'll keep my comments brief, so please refer to additional detail in our press release.

At the end of 2009, Alnylam had $435.3 million in cash, meeting our guidance of ending 2009 with greater than $430 million in cash. This strong cash position provides us with significant financial flexibility and enables us to continue to invest prudently in our pre-clinical and clinical pipeline, our efforts in delivery and the overall scientific platform.

In addition, I am happy to report that in 2009, we achieved our highest quarterly and annual GAAP revenues to date. Our GAAP revenues for the fourth quarter of 2009 were $26.6 million, and for the full year in 2009, we achieved $100.5 million in revenue.

Moving to expenses, R&D expenses were $21.6 million in the fourth quarter of 2009, as compared to $24.9 million in the prior-year period. The decrease in R&D expenses in the fourth quarter is primarily due to license fees incurred in the fourth quarter last year related to various IP assets, which were partially offset by an increase in clinical trials and manufacturing expenses in the fourth quarter of 2009.

For the full year in 2009, R&D expenses were $108.7 million, as compared to $96.9 million for the prior year. The increase in R&D expenses for the full year as compared to last year is primarily a result of increased clinical trial and manufacturing expenses associated with our ALN-TTR pre-clinical program and our ALN-VSP clinical program.

G&A expenses were $13.1 million in the fourth quarter of 2009, as compared to $7.3 million for the prior-year period. G&A expenses were $39.9 million for the full year in 2009, compared to $27.1 million for the prior year. The increase in G&A expenses over the past quarter and the full year is due primarily to higher professional service fees, in association with business activities primarily related to our ongoing litigation, as well as higher non-cash stock-based compensation.

We also recorded an income tax benefit in the fourth quarter of 2009 of approximately $400,000, which was primarily a result of increased tax credits during the quarter. For the full year, we recorded income tax expenses of $600,000.

With respect to guidance for 2010, we expect our cash position at the end of the year to be greater than $325 million, excluding the potential $100 million payment from Novartis, should they decide to execute their adoption license later this year.

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

Thanks, Patty, and good afternoon, everyone. As John mentioned earlier, the strength of our existing major partnerships was critical in 2009, and remains a key driver of future value creation. Over the last year or so, we were pleased to announce important progress on our collaborations. Our partnership with Novartis has been very productive, and in July 2009, Novartis elected to extent its RNAi therapeutics collaboration with us for a fifth and final planned year. This extension continued significant R&D funding to Alnylam, and we believe it is also a clear sign of the very productive relationship that Novartis and Alnylam have built over the last many years.

We also further advanced our 2007 landmark alliance with Roche, announcing the initiation of the drug discovery component of this alliance. Specifically, Alnylam and Roche will jointly collaborate on the discovery and development of certain RNAi therapeutic products and contribute key delivery technologies focused on specific disease targets.

In addition, we recently received a milestone payment from Roche related to the initiation of pre-IND studies for an RNAi therapeutics product candidate, a clear sign that Roche is making outstanding progress in their own efforts.

We're also making very solid progress in our other collaborations, namely with Medtronic and Takeda.

In our RSV effort, we formed a strategic partnership with Cubist for the development and commercialization of the company's ALN-RSV program in January of 2009. Our partnership with Cubist is a 50-50 co-development and profit-sharing arrangement in North America, and a milestone and royalty-bearing license arrangement in the rest of the world, outside of Asia where ALN-RSV is partnered with Kyowa Hakko Kirin.

Now, we modified this agreement in late 2009, to enable Alnylam's focus on ALN-RSV01 for adult RSV-infected patients, while continuing joint efforts with Cubist and ALN-RSV02 for pediatric patient populations.

Regulus Therapeutics, our microRNA therapeutic company co-funded and co-founded with Isis, also announced key progress. Notably, Regulus just announced this morning that they have formed a new collaboration with GlaxoSmithKline to develop and commercialize microRNA therapeutic products targeting miR-122 for the treatment of Hepatitis C viral infections. This is a very exciting program that could represent a breakthrough treatment for HCV through the targeting of an essential host factor required for viral replication.

Regulus completely owns the IP in this space, and recent publications have shown that [algos] targeting miR-122 result in an over two-log reduction in HCV in a chimpanzee model. Regulus has the potential to receive more than $150 million in upfront payments and milestones, in addition to royalties, as the two companies advance microRNA-based therapeutics targeting miR-122 with the goal of filing an IND application in 2011.

As a reminder, Regulus formed an earlier alliance with Glaxo in 2008 around the discovery and development of microRNA-based therapeutics focused on immune diseases, so it's great to see further endorsement of the great progress that Glaxo and Regulus are making on microRNAs. This continues to be very exciting.

As I discussed, we continue to enjoy significant value from our existing partners, and in addition to the recently announced partnership between Regulus and Glaxo, expect to form new alliances in 2010 and beyond. Now, these alliances could include platform alliances, like we have with Takeda and Roche, product alliances such as those we've formed with Medtronic, Kyowa Hakko and Cubist, or further Regulus alliances such as the two Glaxo alliances. As well, and importantly, value creation around formation of new business ventures.

Further, the successful launch of our Alnylam Biotherapeutics initiative forms the foundation of additional partnership opportunities across the entire biotech industry.

Now, of course, a critical element across all these partnership opportunities in addition to our outstanding scientific platform is the dominance of our intellectual property position. That strengthened significant in 2009 through the issuance and grants of over 40 new patents worldwide, stemming from the pioneering, innovative research efforts of our scientists and collaborators. This includes new patent grants that were announced today in our press release.

In addition, last year we were proud to join GSK in donating IP to a patent pool for neglected tropical diseases, helping to make significant strides towards the development of new medicines for some of the world's poorest nations. Earlier this year, BIO Ventures for Global Health, or BVGH, was chosen to administer the patent pool and we're very excited about the expertise they bring to move this important initiative along.

Now, as you know in June 2009, we joined Max Planck in pursuing legal action toward the Whitehead Institute, alleging that Whitehead has breached its contractual obligations to Max Planck and Alnylam in a manner in which it is prosecuting the Tuschl-I patent applications and its fiduciary duty to all of the co-owners of the Tuschl-I patent series. Also named in this suit are MIT and the University of Massachusetts.

Recently, we announced that the court granted Alnylam and Max Planck the right to file an amended complaint with additional claims, expanding upon the allegations in the original complaint. The judge has accepted these claims, and has rescheduled the start date of the trial, which is currently expected to start on June 1 of this year.

Overall, our IP continues to remain unparalleled in the industry, and the aggregate of all of our fundamental patents continues to significantly benefit our business and support our and our partners' development of novel RNAi therapeutics.

So in closing, I'd like to summarize our expected upcoming goals. In the next 12 to 18 months, we expect to have four RNAi therapeutic programs in clinical development, including ALN-RSV, ALN-VSP, ALN-TTR and ALN-PCS. In addition, we plan to advance additional pre-clinical RNAi in microRNA therapeutic programs.

We plan to continue advancing and developing novel delivery solutions for the systemic delivery of RNAi therapeutics, both on our own and through multiple industry and academic collaborations.

We expect to publish key findings related to RNAi therapeutics and the Company's broader technology platform, including microRNAs, in 15 or more high-quality, peer-reviewed scientific journals, continuing our leading scientific efforts across the entire industry.

We also expect to form additional new alliances in 2010, across our efforts at Alnylam, Regulus and through our Alnylam Biotherapeutics initiative.

We expect to further strengthen our dominant IP by receiving greater than 30 additional patent issuances and grants from patent offices around the world, and from a financial perspective, as Patty highlighted, we'll continue to maintain a very strong balance sheet and expect to finish 2010 with greater than $325 million in cash, excluding the potential $100 million payment from Novartis, should they decide to execute their adoption license later this year.

So with that, I'd like to turn the call back over to the operator and answer your questions. Tameka?

Thank you. (Operator Instructions). Your first question comes from the line of Simos Simeonidis of Rodman & Renshaw. Please proceed.

Hey, guys. Thanks for taking the question, and congratulations on the year and the GSK deal this morning.

Thank you, Simos.

No problem. Could you remind us and walk us through what happens in October of this year if Novartis decides to exercise their option and get the license? So they'll give you $100 million, and what do they get? They just get access to your IP, or does the collaboration start over? For example, you send people over. Or could you help us clarify that?

Sure. Sure, Simos. And let me answer that question, and then Barry can chime in as well. As Barry said, the relationship with Novartis is now on its fifth and final planned year. It was originally structured as a three-year relationship with Novartis having the sole right to continue it for a fourth year and then a fifth year. And we were very pleased that they, on both the anniversary of the--both the fourth year and the fifth year, they chose to continue it. And as you know, they continued their equity investment in Alnylam during that period of time. They have the right per the original agreement that was signed in 2005 to take a license to our fundamental and chemistry intellectual property on a non-exclusive basis for the development of RNAi therapeutic products, in return for a $100 million payment. In addition to future milestones and royalties on all the products that they generate, based on that license grant. And so it's quite a substantial grant. It's for all fields. And obviously, it's a very attractive opportunity both for Alnylam and Novartis. And it's basically structured in a similar, although there's some nuance differences, with the type of non-exclusive license grants that we provided to both Roche and Takeda. But obviously, Novartis has this right and negotiated this right much earlier than both Roche and Takeda. But after they take that license, there's no further obligation of Novartis or commitment by Alnylam to do any further work. That of course may happen and we may choose to do that because we have enjoyed our relationship with them, but there's no legal, contractual agreement in place to do more at that point. Barry, anything to add?

The only thing I'd add is, Simos, we will continue to benefit in addition to the $100 million, should they choose the adoption license, but on the programs that they have and the potential new programs under the adoption license, we'll continue to benefit by milestone and royalty payments with the successful development of products. So clearly, our incentive is to make sure they're successful because we benefit greatly in the future.

Okay, great. A quick question on the RSV program. Do you believe that this Phase II you're going to run is powered enough for you to draw strong conclusions about whether you want to go into a Phase III, for example? Or do you think you could potentially run into situations similar to the first Phase II in adult lung transplantations where you saw some signs of efficacy but because of the small sample size, you were not able to draw definite conclusions?

So Simos, let me have Akshay handle that, but I'll just preamble that by saying obviously the study, which is now powered based on an endpoint of the incidents of newer progressive bronchiolitis obliterans syndrome is of course quite a bit bigger than the study that we just performed, where we did show statistically significant effects on bronchiolitis obliterans syndrome. So those considerations were at play in the design of the trial as well as in our discussions with our investigators, as well as discussions with the FDA. So we're doing the trial to have a definitive answer, and to clearly repeat and extend what we did in the Phase IIa study. But Akshay, do you want to make some further comment on that?

Simos, just to reiterate why we did the initial Phase II study, so that Phase IIa study was a 24-patient study with a primary objective of establishing safety and tolerability, and we clearly did establish that, and I think very gratifyingly showed that 0.6 mg per kg over multiple days is very well tolerated in this patient population, in the context of acute RSV infection. Now, to our surprise and pleasant surprise, we in fact did manage to show, as John outlined, this reduction in the incidents of BOS in the ALN-RSV01-treated patients versus the placebo, and those data, as well as work with investigators and reviewing the literature, has allowed us to do a very robust Phase IIb design, where as again John said in the 76-patient study, we found it clearly to show reduction in the incidents of BOS. So I think we're very confident, based on our findings from the Phase IIa study and the literature, that this study is well designed and robustly so to test the hypothesis does ALN-RSV01 over five days reduce the incidents of BOS? And the findings from the Gemini study, the findings from the Phase IIa study, are all very provocative, and we look forward now to efficiently conducting this study.

Great. Thanks. A final question for Patty. If the Novartis deal or collaboration ends this year, roughly what percent of your revenue goes away? I think it should be below 10%. And secondly, do you think you've reached a state of equilibrium in terms of your spending, about $100 million in R&D and $40 million in SG&A? Or do you think that next year could be completely different?

To answer your first question, yes, Novartis was just under $10 million in revenues for fiscal year 2009, so that's right, about a little less than 10%. Although we don't give specific line-item guidance as we think about next year, what I will say is that as you can imagine, I would expect to see a slight increase in R&D expenses in 2010 as we have three programs in clinical trials that are progressing.

2011. Yeah, 2010 is--

Yeah, from 2009 to 2010. So continued growth from what you saw for our 2009 results. And in G&A, the increase for 2009 over the prior year was really as a result of our litigation expenses. As you can imagine, a lot of those expenses were incurred in 2009 as we were originally preparing for our trial in February, which has now been pushed out to June. But I think a lot of those expenses are behind us.

Great. Thank you very much, and congratulations on the Regulus deal and the results for the year.

Thank you, Simos.

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

Hi, everybody. Thanks for taking my questions.

Hi, Pamela.

Hi. Can you talk a little bit about delivery to the liver and how SNALP may behave in an intact liver versus a tumor-filled liver? And also, how next-gen versions of SNALP might be modified for different physiologic or pathologic conditions in the liver, or for that matter, other solid tissue?

Sure. Let me make a few comments, and then Akshay should add on. So obviously, we're doing part of what you're asking now in man, and we're investigating exploring the safety, tolerability, pharmacokinetics and pharmacodynamics of first-generation LNPs, so-called SNALP, in our ALN-VSP program in patients that have tumors with liver involvement. So clearly, that is the critical experiment that's being done right now, and we look forward to sharing the data in the middle of 2010, the initial data in the middle of 2010. Of course, we've done extensive studies in animal models of orthotopic tumors, which are in the liver, and we've been able to show very efficient silencing of tumor genes in the liver in an orthotopic tumor model that results in anti-tumoral effects and results in survival benefits, and we've done a number of studies that you're very well aware of, Pamela. But clearly, those are models in mice, and doing the human translational experiment is a critical experiment that we're doing as we speak. Now, Akshay may want to comment on that, but let me just answer part of your second question, which is I think again, and you're aware of this very well and you'll hear more about this on March 4 if you go on our roundtable, which I'm sure you will, the progress that we've made on second-generation LNPs is really enabling the advancement of delivery more efficiently to the liver but also outside of the liver. And part of this relates to just the improvement in potency that we've achieved, part of it relates to the ability now through an understanding of the basic mechanism in vivo to achieve targeting of these LNPs and different cell types. And I think these are really huge advances for us that will expand and continue to obviously enable the company to expand and develop its pipeline, but also it's obviously critically important to our partners, both existing partners and future partners. And Akshay, you should comment further as well.

I think you covered it. The main points, Pamela, in the animal work we've shown I think rather convincingly that both in the orthotopic mouse tumor work as well as in normal livers in rodents and in non-human primates that we get very efficient delivery with conversion to important pharmacodynamic and other endpoints. And at doses, [if I may say], as low as 0.01 mg/kg, which is really quite remarkable from where we were a few years ago. And the really exciting progress over the last year has been that that work is now turning from empiric work, testing new lipids, into very mechanistic work where we're defining new, ever more potent lipids that are helping us drive down the doses at which we achieve knockdown both in the liver as well as x-ray hepatic sites, immune cells, lymph nodes, subcutaneous tumors. And so in addition to the potency, the other opportunity for improvement in terms of delivery is the targeting insights that we've understood over the last year or so. And what that's allowing us to do is to combine the potency with the ability to really drive the LNPs to specific cell types. And I think the next year to two years can only be exciting in terms of getting to lower doses and also expanding delivery well beyond the liver to multiple tissue types. And so this will build momentum in the pipeline and also create a diversity of opportunities in terms of different indications.

So the fact that tumors tend to be fairly leaky is really not much of a factor, you think, with respect to delivery?

I think, as you say, it's widely acknowledged tumor vasculature is leaky. That allows access of drugs, including LNPs, to the tumor site. And it also allows us, with targeted LNPs, to go for specific tumor types that have receptors that we can engage with [ligons] that we incorporate into our LNPs. So a lot of exciting stuff to come, I think.

So you'll potentially be able to use that situation to a delivery advantage, maybe?

Oh, absolutely. The leaky vasculature of a tumor is, from a delivery perspective, a positive feature.

Okay, great. Can you give us any financial detail around the Roche January 10 milestone payment?

We aren't disclosing that, Pamela. It's certainly included in the numbers for the quarter. So it's certainly in that number. It's not a materially big payment to us. But it's not insignificant, either. And I think the more important aspect of that payment is the fact that it marks a milestone of progression of the lead program into GLT studies, which then has further milestone payments that when they start clinical trials and advance in that program, we'll get additional payments as well.

Right. And if I remember correctly, isn't there a second product candidate that's progressing towards the clinic in Roche's pipeline as well?

Roche has got a platform license from us in four fields, and so they've got a large number of programs that they're advancing. And they're aiming to build its higher pipeline of RNAi therapeutic products, just like we are.

What we talked about, Pamela, specifically is the lead program that's advanced the GLP tox studies, that triggered the milestone. And then the collaboration program that we formed with them, where together we're working, sharing delivery and working on specific disease targets. And that's what we've talked about. They may have talked about other programs, but that's really their discussion, not ours.

Okay. And one final housekeeping question. Is any 2010 tax guidance or any major tax provision on a quarterly basis expected?

At this point, Pamela, we don't think it's significant. That will change if Novartis exercises their $100 million adoption license later in the year.

Okay, great.

Any tax payments are contained within our cash guidance.

That's right.

Okay, great. Thanks very much.

Thank you.

Your next question comes from the line of Stephen Willey of Thomas Weisel. Please proceed.

Hi, Steve. Hello?

Hi. Sorry about that.

That's fine. How are you?

I'm doing well. How are you guys doing?

Good. We're doing great.

I just have one quick question here on the Regulus deal that was announced this morning. I know that Santaris and GSK did a deal in '07 around miR-122 using the LNA technology. So just kind of wondering how we should be viewing the Regulus deal with GSK right now, whether or not that's essentially just an IP hedge? Because I know that you guys have talked about their inability to essentially operate around that target. So I'm wondering if maybe you can just give some color on the nature of that deal and maybe what GSK's intentions are, kind of if you can provide that level of clarity? Thanks.

Yes. That's a great question, Steve. So GSK's intention is to develop a great drug with mircoRNA therapeutics targeting miR-122, and the level of interest in that target based on results that we originally generated where we showed that miR-122 is a host factor for HCV replication--this is the work of Peter Sarnow that we've licensed exclusively--and the IP that we generated in the first demonstration that you could target miR-122 in vivo that we did back in 2005 or 2006, I can't remember now. Those were important highlights in the entire field of microRNA therapeutics. Roche did--I'm sorry, Glaxo did a deal with Santaris that included an option to the miR-122 program. That option, to our knowledge, has expired. And they clearly chose not to work with Santaris, and they clearly have chosen to work with Regulus. And that work they're doing with Regulus is focused on therapeutics. But it clearly, in our view, and we've been saying this for quite some time, demonstrates that you need the Regulus IP--hence the Alnylam and Isis IP--to develop a microRNA therapeutic toward we believe all targets but certainly miR-122 included amongst them. And if this isn't a clear signal of that, then it's hard to say what else would be.

Okay. That's helpful. I wasn't aware of the expired option. Thanks.

And they let that option expire, Stephen.

Okay.

(Operator instructions.) Your next question comes from the line of Ted Tenthoff of Piper Jaffray. Please proceed.

Great. Thanks very much. Two quick questions, if I may. Firstly, how high have you gotten with respect to dosing cohorts with VSP? And should we expect to see some activity with the Phase I data presented hopefully at [ATCO] this year?

Hi, Ted. So we aren't disclosing where we are, other than saying that we've enrolled a significant number of patients across multiple dose cohorts. And that's the guidance or that's the disclosure that we've done to date. The trial is actively enrolling as we speak, and we're encouraged with how the enrolment is going along. The specifics around what will be presented is that we will present the initial results from the study, and it will include safety, tolerability, pharmacokinetics, and also potential pharmacodynamic measurements that we have done in the study. And we've been pretty clear that those pharmacodynamic measurements include things like measurement of response rate based on traditional resist criteria, measurements of potential anti-intergenic activity with techniques like DCE-MRI, which is in the protocol. And to the extent that the subjects agree to receive a pre and post biopsy, there are also opportunities for biopsy-based measurements of both drug concentrations in the tumors as well as the formation of monoesters in the tumor samples, which would be a pharmacodynamic measurement of the anti-KSP activity of ESP. And so that's what is in the trial, and it's certainly those type of data that might be presented middle of this year.

I'd be curious to see, and John, I wonder if you have any initial thoughts on this (inaudible) regarding the potential safety differences between RNAi or inhibition of VEGF and KSP versus receptor tyrosine kinase inhibition? Do you have any thoughts on that, just on the safety profile?

Well, Akshay, do you want to comment?

Well, we think that RNAi is probably the smartest approach to the problem, given that if we--there are reasons to believe that if we knock down VEGF, then we're less likely to see counter-regulatory measures in terms of changes in regulation of receptor expression, etcetera. And so we think it's a smart approach. We've shown it with the mouse orthotopic tumor data. And we're also, given the focused delivery that we're using, unlikely to get extra hepatic inhibition of the VEGF pathway, and as we know, that's the major issue in terms of side effects with VEGF inhibitors, either currently marketed or under study with systems, problem, like hypertension, hemorrhage, bowel perforation, etcetera. So for those reasons, we like the focused delivery and knockdown of VEGF in the liver.

But we'll have to see, Ted.

Yes, that's a really good point. And then if I may, too, just a quick clarification with some things that I read at the back of the press release. It said that the Kreutzer-Limmer I and II were successfully approved this year and that Kreutzer-Limmer III granted. And I just wanted to follow up because my understanding was that I and II were maybe overturned, but I may be getting that wrong, but that III granted. So what is the status of Kreutzer-Limmer I and II, and then what are the differences with KL III?

Right. So Ted, remember, KL 1 is a patent family, and in the patent family, there are many children. So there are some patents in the KL 1 family that were opposed. In fact, I think the one you're probably thinking about is one that was opposed in 2007 or 2008, that was revoked, that is currently under appeal. And then there are others that were challenged but were successfully upheld. And the children differ by having different claims that describe them. So there are many KL I patents in Europe that have been successfully upheld. There's a couple that were revoked, but those are under appeal. Then there are other inventions that are distinct patent families that have different priority documents than Kreutzer-Limmer I, and those are what constitute Kreutzer-Limmer II and Kreutzer-Limmer III. Just like there's a Tuschl I and a Tuschl II that are distinct and separate inventions. Does that help you?

It does. Actually very succinctly, so thank you for that, John.

I know this is complicated, but in my next life, I'm going to be a patent attorney, so I'm preparing for it now.

Excellent. Thanks so much, everybody.

Thank you.

Your final question comes from the line of Andrew Vaino of Roth Capital. Please proceed.

Hi, Andrew.

Hi. Two quick questions, actually. In terms of the RSV02 study, what change in VOS and FEV is the study powered to (inaudible) discern?

So you meant to say the Phase IIb study specifically that just started?

Yes.

And you're asking about the power calculations. So we haven't disclosed that, Andrew, in terms of what the assumptions have been. If you look at the results from the Phase IIa study, you can see that the placebo-treated patients had a 50% incident of new or progressive BOS, and you would see that the ALN-RSV01 patients showed a 7% incidence of new or progressive BOS in a 24-patient study with a 2-to-1 randomization of drug to placebo. That is something which we're very encouraged by, but have more conservatively calculated effect size in a larger trial. And you can do a range of different power calculations on your own to figure out how we've been thinking about it, but ultimately, you have to tag an assumption around what your placebo rate would be, and then decide what effect size you think your drug can achieve, and that's how one comes up with the right power calculation, as you know.

Okay. And also, I'm just trying to get my head around this whole TTR amyloidosis opportunity. Do you have, for example, information on the number of patients who seek treatment for these disorders in both the US and Europe?

We do. Akshay, do you want to comment on the (inaudible)?

Yes. Probably the currently data on the prevalence would suggest they may be of the order to 40,000 to 50,000 patients worldwide. Sadly, not all are seeking treatment or haven't got access to some of the major treatment. And maybe about 10,000 or so are actively under management. The problem for a lot of these patients is the current standard of care dictates that if the patient can be diagnosed early enough, then they warrant what is a very cumbersome therapy, liver transplantation, which in and of itself has a very significant mortality and morbidity associated with it. And only about a third of patients that actually present and get diagnosed are available for liver transplantation because either the disease is too advanced or there are other complications. So really a very undertreated disease. Maybe 40,000 to 50,000 patients worldwide, of whom about 10,000 are known and managed right now.

Okay, that's helpful. Thank you.

Good. And I'd just add to that, Andrew, that clearly the absence of effective therapies underlies, in many of these cases, why there are no active treatments for these patients. So I've lived and experienced these types of things before, as we all have, where diseases where there is no effective treatment and no effective available approach tend to be undertreated because there's nothing you can do.

True. Great.

Good. So I think with that as our last question, I want to thank everybody for joining us. We made a lot of important progress in the past year, and made great strides in advancing what we think is an important new class of medicines with RNAi therapeutics. We believe strongly that the trajectory that we showed in this past year and this current year will take us to new heights. So thank you very much for your time and attention, and hopefully you can join us on March 4, and thank you for joining us on today's call. Goodbye.

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