Alnylam Pharmaceuticals Inc (ALNY) 2010 Q2 法說會逐字稿

Welcome to the Alnylam Pharmaceuticals conference call to discuss the second quarter financial 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 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. In addition, Stuart Pollard, Vice President, Scientific and Business Strategy, is also on the call and will be available for Q&A. For those participating via conference call, the slides we have made available for the webcast can also be accessed by going to the Investors page of our website, www.alnylam.com.

During today's call, as outlined in slide two, 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 financial and guidance, and Barry will summarize our business highlights and goals. 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 Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking 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. Welcome, and thanks to everyone for joining us this afternoon. I will refer you to slides four and five during my introductory comments. These are indeed exciting times for RNAi therapeutics, as an increasingly robust pipeline of RNAi therapeutics are entering and emerging from efforts. And the field stands at the frontier of generating key human proof of concept data across a number of programs. Of course, Alnylam leads this effort.

The data that we aim to obtain as they emerge will provide further and continued validation of RNAi therapeutics as a whole new class of innovative medicines. With this very important objective in mind, our development programs are steadily progressing through human clinical trials, and during the second quarter we made a number of significant advancements which Akshay will detail for you shortly.

At a high level, these milestones included the presentation of preliminary data from our Phase I ALN-VSP study for liver cancer at the a ASCO annual meeting in June, initiation for our Phase I study for ALN-TTR01 in patients in transthyretin-mediated amyloidosis, or ATTR, and continued enrollment in our ALN-RSV01 Phase IIb study in RSV infected lung patients.

It is very exciting to be sitting here at Alnylam today with a pipeline that now includes three promising RNAi therapeutic programs in clinical development. The important progress that we have made in the past several months reflects our evolution into an even more robust and more advanced clinical stage company. We are extremely proud of the growth that we have achieved on this front, and of course, this growth and advancement will only continue.

Now in parallel with our clinical progress, this past quarter and recent period is also notable for our continued advances in delivery of RNAi therapeutics. We believe that our continued advances in delivery define Alnylam's overall scientific leadership in the RNAi therapeutics field, which in turn translates to leadership in clinical development and leadership in partnerships. We also continue to make very strong scientific progress on our Alnylam Biotherapeutics efforts, having now shown that this technology is broadly impactful and also that is scalable.

Turning to the business front, the notable achievement during the period was the new microRNA therapeutics partnership between Regulus and Sanofi-Aventis. We are very proud of this alliance, the second partnership we have done this year. Barry will discuss this in more detail momentarily, but I think it is noteworthy that Alnylam can now count major alliances with most of the world's top pharmaceutical companies, including Novartis, Roche, Takeda, Medtronic, and through Regulus, GSK and Sanofi-Aventis. We have great relationships with all of these companies and in fact many others where we have ongoing business discussions.

I think it is fair to say that these existing and future relationships will continue to drive success in Alnylam's business execution, both in terms of access to key capabilities from our dedicated partners and also for continued access to funding. Indeed, as a reminder, Alnylam has earned about $750 million to date from these alliances and has been a cash flow positive business on a cumulative basis since inception, something which is extremely rare in biotech. And we aim to build on this track record for the future.

On the organizational front, our successful culture was recognized once again, as we were named to the Scientist Magazine's 2010 Best Places to Work in the Industry. The success of Alnylam depends on our people, and we pride ourself on attracting the best in the field. As such, we were excited to expand our management team this past quarter with two new appointments, including Laurence Reid as Senior Vice President and Chief Business Officer and Ken Koblan as Vice President and Distinguished Alnylam Fellow. In addition, one of our leading scientists, Rachel Meyers was promoted to the role of Vice President of Research, where she will be responsible for heading the RNAi lead development, immunology and viral disease efforts.

So to wrap up my introductory remarks, across all key dimensions of Alnylam; people, scientific leadership, clinical pipeline, IP leadership and business execution; we believe that we are leading the advancement of RNAi therapeutics as a whole new class of innovative medicines and also building a very important company. We are confident that our activities and overall strategy will reward our shareholders, and we thank you for your continued commitment in this regard.

With that I will turn the call over to Akshay for a review of the clinical activities, our pipeline and our scientific progress. Akshay?

Thanks, John, and hello, everyone. As John mentioned, during the past quarter we made significant advancements across or pipeline activities and in our scientific leadership efforts.

Starting with ALN-VSP, we are starting to make progress with the Phase I multicenter open label dose escalation trial. This is an important study, and to our knowledge it is one of the most comprehensive clinical conducted with a systemic delivered RNAi therapeutic product, and probably the most expensive -- extensive experience with an RNAi therapeutic in cancer. Specifically, this study is designed to enroll approximately 55 patients with primary and secondary liver cancer. Patients divided across potential eight potential dose levels ranging from 0.1 to 1.7 milligram per kilogram. The primary objective is to evaluate the safety, tolerability and pharmacokinetics and intravenous ALN-VSP, including demonstration of the maximum tolerated dose.

In June we were pleased to present preliminary clinical data from the trial at the 2010 ASCO meeting. On slide seven you can see that the study results from the initial 19 patients in the first four days' cohorts demonstrated that was ALN-VSP was well tolerated in most patients. Also, results from pharmacodynamic measurements demonstrated preliminary evidence of biological activity based on DCE-MRI measurements. DCE-MRI is a measurement of blood flow through the tumor and is known to be a possible measure of antiangiogenic effects. As you know, our ALN-VSP drug product contains an sRNA that targets [VEGF],a mediator of angiogenesis in tumors.

The Phase I ALN-VSP study has not yet reached the maximum tolerated dose, and so we are continuing to enroll patients with dose escalation. We also announced today the initiation of a multicenter open label extension study of ALN-VSP in patients who have completed the dosing cycles in the Phase I study and are deemed to have stable disease or better. We look forward to providing updates on the progress with the ALN-VSP program and expect to do to in the coming months.

We have also made important progress with our ALN-TTR program for the treatment of ATTR. Indeed, we initiated a Phase I randomized blinded placebo-controlled dose-escalation study of ALN-TTR01 in patients, which is summarized on slide 8. The study is currently being conducted in Portugal, Sweden and the UK and is designed to enroll approximately 28 patients. The primary objective of the study is evaluate the safety and tolerability of a single dose of intravenous ALN-TTR01 in ATTR patients, with patients being enrolled into five sequentially cohorts of increasing does ranging from 0.01 to 0.04 milligram per kilogram. In addition, we also believe we have an opportunity to assess the preliminary human proof of concept based on measurements of serum TTR levels in patient samples. We have already enrolled several patients in the trial, and we will update you on potential timing for completion as the study continues to advance.

As we turn to slide nine, in April we presented a new preclinical data from our ALN-TTR program at the International Symposium on Amyloidosis, showing the first time that treatment from ALN-TTR01 can result in the regression of pre-existing pathogenic TTR deposits, in peripheral tissues, including dorsal root ganglia, sciatic nerve, stomach and intestines. The potential for ALN-TTR01 to affect regression of TTR amyloid deposits is a very important preclinical finding, extending our previous results showing that ALN-TTR01 can prevent TTR deposition administered in a prophylactic regimen. We are encouraged by the preclinical data achieved to date with this program, which we believe point to the breakthrough potential of an RNAi therapeutic strategy in ATTR and look forward to this important Phase I trial as it progresses.

Turning to our most advanced program, we are also continuing to advance our Phase IIb study of ALN-RSV01 in RSV-infected adult lung transplant patients. The primary study end point is reduction in the instance of neuroprogressive [boss], a life threatening complication of RSV infection that results in approximately 50% mortality within three to five years of onset. As you know, this multicenter global randomized double-blind placebo-controlled study aims to enroll up to 76 patients, randomized in one-to-one ratio drug to placebo, and it is active in over 30 sites worldwide. The study is progressing well and enrolled double digit numbers of patients. As we enter the northern hemisphere's RSV season into the fall and early winter, we expect to have greater clarity on timing for competitor completion of the study and will update you at it.

So as you can see on slide ten, we have three promising RNAi therapeutics currently enrolling in clinical trials, which reflects the substantial progress we have made in the advancement of our pipeline over the past couple of months.

We are also very encouraged by the continued advancement of our preclinical programs, including ALN-PCS for hypercholesterolemia and ALN-HTT for Huntington's disease, which we are developing in collaboration with Medtronic. Both of these programs, in addition to the second generation ALN-TTR02 program, are candidates for IND filings in 2011. Clearly we continue to make strong and industry leading progress in translating the science of RNAi into a novel class of therapeutics that we think will treat disease and impact patients in a fundamentally new way.

Beyond our pipeline, we also made important contributions during the quarter towards further advancing the delivery of RNAi therapeutics. This remains a continued area of focus and effort at Alnylam. In collaboration with Max Planck and AlCana, we published new research describing key mechanisms related to systemic delivery of RNAi therapeutics using LNPs. These are really very important data, and we actually believe that the [paper by our kension] colleagues in the Journal of Molecular Therapyrepresents one of the most important pieces of science on RNAi therapeutics ever published. Moreover, the new data demonstrate targeting strategies for the delivery of RNAi therapeutics and highlights potential targeting approaches for delivery to tissues and cell types beyond the liver.

In addition, we continued to expand on the key advances with systemic delivery of RNAi therapeutics stemming from our collaborations with scientists at MIT, AlCana, Technera and the University of British Columbia through publications in PNAS and Nature Biotechnology. In fact, just starting today many of our scientists and collaborators are attending a major scientific conference in Vancouver and are collectively presenting 12 posters and an oral presentation. So you can expect to hear important additional progress very soon indeed.

And finally I think it is quite notable that our scientists continue to distinguish themselves with excellence in leadership through the publication of papers in peer-review journals, as you can see on slide 22 -- on slide 12. If fact, we already published 19 papers this year, exceeding our goal of 15 or more papers by the year's end. I'm pleased that we are starting to see papers emerge from our clinical studies as well. Many of these and other recent accomplishments are highlighted in further detail in our press release we issued this afternoon. And with that, I will turn over -- turn the call over to Patty for review of the financials from the quarter.

Thanks, Akshay, and good afternoon. I will keep my comments brief, so please look at our release for additional detail. Also please refer to slide 14 in our deck.

I'm happy to report that we continue to maintain an extremely strong financial profile. At end of the second quarter Alnylam had cash, cash equivalents and total marketable securities of $396.9 million and zero debt, providing us with continued financial flexibility and allowing us to invest prudently in our development pipeline, our efforts in delivery, and the overall scientific platform. Our net cash position remains in the top 15 across the entire biotech industry, and of course, this position may strengthen further should Novartis exercise their adoption license for our technology in the months to come. Importantly, we also continue to have no write offs related to our cash and fixed income portfolio to date.

In addition, we achieved one of our highest revenue quarters to date. Our GAAP revenues for the second quarter were $26.6 million. As you know, the continued amortization of upfront payments from the strategic alliances we have formed account for a significant and recurring portion of our quarterly GAAP revenues. This quarter also includes the recent $1.9 million payment from Regulus related to the Sanofi-Aventis alliance. The $1.9 million was received in cash in July after the end of Q2.

Related to expenses, I will once against compare results from this quarter to Q1 of this year, which I believe is more informative. R&D expenses were $28.1 million in the second quarter, compared to $24.7 million in the first quarter of 2010. As expected, the ramp-up in R&D expenses this quarter includes expenses associated with the advancement of our clinical programs, including ALN-RSV01, ALN-VSP and ALN-TTR01. I would continue to expect to see this higher level of R&D expenses for the remainder of 2010, as we now have three programs in active clinical trials.

Our G&A expenses were $10.1 million in the second quarter, compared to $11.2 million in the first quarter of 2010. The decrease this quarter is due primarily to lower professional services fees, primarily legal fees related to our litigation. I expect to see our G&A expenses continue to be a bit lumpy from quarter to quarter until the precise timing of the trial related to our ongoing litigation is known.

The charge of $3.9 million related to our on ownership of Regulus this quarter was higher than usual as we recorded our 49% share of the net losses incurred by Regulus, which included approximately $3.8 million, for payments due to Alnylam and to Isis related to the Sanofi-Aventis alliance in mid-June 2010. I would expect to see this line item decrease for the remainder of 2010, as these were one-time charges and Regulus will begin to record the revenues from the Sanofi alliance.

With respect to guidance for 2010, we expect that our cash position at the end of the year about be greater than $325 million, excluding the potential payment from Novartis should they decide to execute their license in the coming months. This wraps up our financial highlights, and I will now turn the call over to Barry.

Thanks, Patty, and hello, everyone. As John discussed earlier, the strength of our partnerships is critical to our business and remains a key driver of future value creation. We as exciting quarter on the business front. Notably, we announced a global strategic alliance between Regulus and Sanofi-Aventis to discover, develop and commercialized microRNA therapeutics. This landmark alliance, the third major partnership for Regulus, represents the largest microRNA partnership to date, valued at over $750 million, and will initially focus on the therapeutic area of fibrosis.

As you can see looking at slide 16, Regulus received a $25 million up front fee and additionally will receive a $10 million future equity investment subject to mutual agreement on Company evaluation, as well as annual research support for three years with the option to extend two additional years. Regulus is also eligible to receive preclinical and develop milestones, as well as milestones and royalties on product sales. Regulus and Sanofi-Aventis will collaboration initially up to four microRNA therapeutic targets, and Sanofi-Aventis will also receive an option for broader technology alliance with up to plus $50 million, in addition to milestones and royalties that could provide Sanofi with access to Regulus microRNA platform technology and defined product licenses.

As Patty mentioned earlier, Alnylam and Isis each received a payment of $1.9 million from Regulus as a result of this alliance. This represents 7.5% of the $25 million upfront payment from Sanofi-Aventis to Regulus. In addition, we are eligible to receive a similar percent of potential future success-based milestone payments from this alliance. We are particularly excited about this collaboration because of the continued recognition it brings to the area of microRNA therapeutics and Regulus' unquestionable leadership position within the industry.

We continue to own a significant piece of Regulus, approximately 50% today, and the new alliance with Sanofi, as well as earlier alliances with GlaxoSmithKline, allows us to build value in Regulus with no foreseeable need for funding over the next several years, and therefore no significant dilution of our ownership position.

Further, on the Alnylam partnering front, we are pleased to have Novartis purchase an additional 55,000 shares of our common stock for approximately $1 million in accordance with their contractual right and opportunity to maintain their ownership interest in Alnylam at about 13.4%. Now as our partnership success is the result of our scientific progress, it is also dominates -- is dependent on our dominant IP position, and we made a number of key additions to our IP estate during the past quarter. As you can see turning to slide 17, so far in 2010 we have 28 new patents issued or granted in countries around the world, with 16 secured in the second quarter alone. This puts us well on track to exceed our goal of 30 or more patent grants in 2010.

We are particularly proud of the successful outcome from the European appeal board on the Kreutzer-Limmer 954 patent, which covers RNAi mediated by double-stranded RNAs with a length of 15 to 49 base pairs. We are pleased with the new US issuances in the "John et al" and "Manoharan II" patent families, since these have very broad claims. All tolled, our IP estate remains dominant in the field and continues to be required by all companies developing RNAi therapeutics.

Of course, we also recognize that our IP technology should be made available on a nonprofit basis to efforts aimed at tackling the neglected diseases in the world's poorest countries. In this regard, we are pleased to announce that MIT and South Africa's Technology Innovation Agency joined GlaxoSmithKline, Alnylam and BBGH in expanding the pool for open innovation.

We also made progress on expanding value creating applications of our RNAi beyond the therapeutic pipeline of RNAi therapeutics that Akshay described. Specifically, as noted on slide 18, another area of considerable progress for us is our Alnylam Biotherapeutics efforts where we are advancing the applications of RNAi technology to transform the manufacturing of biologics. We view this as a clear area of leveraged research. In June we presented new data describing the discovery of novel delivery lipids, or NDLs, that efficiently deliver sRNAs resulting in improved protein quality, with potent gene silencing activity resulting in improved protein quality. We also demonstrated the ability of scaling this delivery of sRNAs at least 40 liters. This is a very significant step up in scale, as it pertains to the ultimate applications of this technology at about 100-plus liters scaled. Further more, these NDLs showed no measurable adverse effects on cell density or viability. Really tremendous progress to date.

Further, we are pleased to welcome Dan Anderson, Charlie Cooney and Bob Langer to our Alnylam Biotherapeutics scientific advisory board. These world-renowned scientific leaders will be a critical asset as we continue to advance this technology. All told, we are very excited about Alnylam Biotherapeutics and the opportunity it gives to us expand and accelerate the applications of RNAi in medicine. And we believe it could start to have a anything significant impact on Alnylam's overall business profile in the near future.

Now to review your goals over the next 12 months, let us turn to slide 19. We expect to have four RNAi therapeutic programs in clinical development and advance additional preclinical RNAi and microRNA therapeutic programs, including proprietary and partnership based programs. Continue advancing and developing novel delivery solutions for the systemic delivery of RNAi therapeutics. We fully expect to form additional new alliances across our efforts atAlnylam, Regulus, Alnylam Biotherapeutics and through potential formation of new ventures, all of which could provide near term potential for value creation. We also expect to further scientific leadership and intellectual property position. And finally we will finish 2010 with greater than $325 million in cash, excluding potential payment of $100 million from Novartis should they decide to execute their adoption license in the coming months.

We believe our industry leading partnerships, intellectual property position and financial stability continued to position Alnylam as a leader in the development of RNAi therapeutics, and we expect to only strengthen this position further in very exciting ways throughout the rest of the year. With that, I would like to turn the call back over to the operator for your questions. Jennifer?

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

Hi, guys, and thanks for taking the question.

Sure. How are you, Simos?

I'm good. How are you?

Very good tracks you.

A quick one for you, Barry and Patty, John. As you are looking at your P&L and with spending about in the mid-hundred millions per year roughly the past couple of years, and assuming that you get the Novartis $100 million upfront payment, you roughly would have about three years worth of cash. And now that you are maturing, you are running into the issue that traditional biotechs have, that when they go into clinical development, as you have successfully done, with three and in a few months four programs in the clinic, I guess the question is do you see a potential shift in terms of your spending, or do you -- towards maybe focusing more on your development programs? And do you -- are you thinking that you are going to continue to be spending at the current rate?

Simos, thanks for the question. Look, the horizon that we are building for this Company is a very significant horizon from the standpoint of our cash balances. And as you know, we expect to continue to raise -- earn funding through existing partnerships as well as future partnerships. You commented on the Novartis adoption license payment, which could happen. And that is $100 million, but there are obviously other partnerships that we will do going forward that continue to provide very significant funding for the business.

So the business model that we have shown to date has actually been on a cumulative basis a cash flow positive business in biotechnology. Pretty unusual in our industry, as I think you would agree, for a company that is still in development stages, not on the market with products. So we hope and aim to continue that profile going forward as a way of funding our business, funding our pipeline, advancing our medicines, while retaining significant share of product opportunities within at least the US market. And that is the strategy. We are executing on it, we are confident that we can continue to do it, and obviously that is the aim and focus of our efforts at the Company. Barry or Patty, anything more to stay?

Just to slightly expand on that, and, Simos, thanks for the question. The idea is to develop a robust product of pipeline opportunities, as Akshay walked through. And based upon how we are looking at our expense profile, our revenue profile with current partners, we see the current balance sheet we have, which is extensive, and we haven't given formal guidance on this lasting way beyond the three or four years you suggested. And we have value creating opportunities of current unpartnered assets, future deals that we have highlighted, as well as Alnylam Biotherapeutics, all of which we are look at to bring in revenue that funds our pipeline.

Sounds great. Thanks for taking the question.

Thanks, Simos.

Your next question comes from the line of Josh Schwimmer from Leerink Swann. Please proceed.

Thanks for taking the question, I guess either for John or Akshay. I was looking around and seeing some of the work of microRNA mutations in schizophrenia and wondering whether that is a target for Regulus, any of your programs ongoing? And wondering what other work is ongoing internally or externally to identify and really definitively link other microRNA mutations with specific disease states.

That is a great question, Josh. I'm aware of that paper that you are referring to that came out relatively recently, and it is exciting piece of emerging biology on microRNA and diseases like schizophrenia. MicroRNA right now is one of the most active area of scientific and clinical research in the world. And these microRNAs, as you are probably well aware, are being found to be either mutated or disregulated across a broad range of different human diseases, and it is increasingly becoming validated in that regard.

Now regarding schizophrenia, that is not a specific program at Regulus today. But because of the IP estate that we built at Regulus and the scientific and technology leadership that we established, we are very frequently contacted and approached by major academic groups around these type of findings. And in fact we have become in many ways the partner of choice to work with these academic groups, to provide them with tools and approaches that can help them understand the potential applications of microRNA therapeutics in these very important disease states. So in this case we weren't involved specifically, because we can't be involved with everything. There is obviously a need for levels of focus as well within the Company.

The Company's predominantly focused today on its efforts in HCV with miR-122, its efforts on miR-21 in liver fibrosis and other fibrotic diseases, as well its efforts with -- its immune biology collaboration with GSK. But it keeps its eyes very active on other therapeutic areas and therapeutic indications, and very frequently collaborates with academic leaders in world around those type of applications. And again, because of the IP position that Regulus is in, and also its scientific leadership position, it is frankly the place to go in that regard. Akshay, do you have any further comments? Josh, did that answer your question?

I think that did. Terrific. Thanks so much, John.

Your next question comes from the line of Andrew Vaino from ROTH Capital Partners. Please proceed.

Hi, Andrew.

Hi, how are you guys doing?

Hello?

Hi, yes, I just had a question about the VSP -- sorry, the RSV02 study.

Yes? So RSV02 is still preclinical. You mean the RSV01 study in the RSV-infected lung transplants patients.

I'm trying to get a sense of when you expect to begin any clinical study of RSV 02.

Well, we haven't given guidance on that. It is still an active program with Cubist, and we are still moving it forward, but we haven't given any specific guidance at this time on that specific program.

Okay. And then on the VSP program, do you have any inclination based on your preclinical data as to what the effective -- minimum effective dose would be?

We have obviously done work in animal tumor models, Andrew, and it is -- we believe that the dose levels with allometric scaling that we are using in man will allow us to get to those comparable dose levels based on the animal responses, where we saw very significant antitumor effects in orthotopic tumor models, and also in a transgenic tumor model, but also in tumor xenograft models in mice.

But it is very important to keep in mind, as I'm sure appreciate, that those type of model systems are really imperfect, especially in cancer. And that is why going as we have into the real test system, which is the patient, is a critical step forward. And I am thrilled with what we are learning from the ALN-VSP program, and we look very much forward to updating you guys in the coming months on some of the updated progress since ASCO. And it will be important, I think, for your overall efforts.

Great, thank you.

Thank you.

(Operator Instructions). Your next question comes from the line of Stephen Willey from Stifel Nicolaus. Please proceed.

Hi, good afternoon.

Hey, Stephen. How are you?

Doing well, thank you. Question, now that we have seen kind of the last piece of the Isis and the Genzyme data today, just wondering if your thoughts around PCSK9 have changed at all with respect to the pace at which that program moves forward?

Yes, no, we are -- we have always been excited about PCSK9 as a target for the treatment of severe hypercholesterolemia and believe that for many reasons -- and this is -- these are judgment calls that very smart people can have delivering opinions on, so I'm not in any way, shape or form trying to say anything negative about Apo B as a target -- but we just think PCSK9 is a better target. And the reason for it at the end of the day is because of the genetics. The human genetics validate PCSK9 as really being an ideal target for the advancement of novel therapies for the reduction of LDL cholesterol. And it is a different mechanism than Apo B. But I was pleased to see the data from Isis today, and I'm encouraged by where they can go with that program. But it is a big patient population that is ultimately available for these type of new therapies. That obviously is going to leave a lot of room for multiple players, and PCSK9 we think is a great target.

And then is there anything you have seen preclinically to suggest that you may not see the transient transaminase spikes in hepatic fat increases that we are seeing with Apo B? Is that target specific, or do you think it is more of a function of just the liver being a clearance organ?

We believe it is target specific, and in all of our preclinical research when we targeted Apo B, you can generate steatosis in the liver. And yet when you target PCSK9, there is no steatosis in the liver, and we published that research in some of our papers. So it is our view that PCSK9, because of its role in upregulating LDL receptor -- when you antagonize PCSK9, you upregulate LDL receptor -- you get better clear clearance of LDL cholesterol from the circulation where it is atherogenic. And that mechanism, of course validated by human genetics, is why we are so excited about that target. Akshay, do you want to add anything? No?Okay.

That is helpful. Thank you. And then maybe a question for Barry. The issuance of the Zamore patents earlier in July, does that have any impact on the way the Alnylam payloads are designed?

Zero.

Zero. Barry, want to add anything?

Zero. And, Stephen, as I highlighted earlier, our patent estate, which we believe is dominant and required by all companies developing RNAi therapeutics that's worth competing, just continues to get strengthened and continues to expand. And the two new patents we highlighted today, the "John et al" and "Manoharan II" patents, are great examples of incredibly broad patents that continue to enrich our patent estate and make it dominant.

And let me add one other thing, Stephen. We -- Phil Zamore is a founder at Alnylam, and we were obviously aware of that patent years ago, and chose not to license it in because it wasn't worth anything from our perspective.

Thank you, and congrats on getting TTR into the clinic.

Great, thank you.

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

Thank you. Thanks for taking my question, and congratulations on all the progress.

Thank you, Pamela.

It looks like you are moving forward rapidly with the Biotherapeutics opportunity, and I'm wondering at what scale-up level does this become commercially interesting? You are at 40 liters now. How far can you go with it?

Well, let me turn it over to Stuart to address that question.

Hi, Pamela. That is a great question. The data that was referred to that was presented in San Francisco recently, as you already pointed out was at 40 liter scale, and that is done in a [bona fide] bioreactor. And in fact in engaging some of the folks that John -- Charlie Cooney, and people like that, Bob Langer -- as well as contacts in industry, that is the sort of scale that gets people very interested.

As you know, manufacturing of biologics can go up to a 10,000, 20,000 liter scale. However, this is at a scale that is showing very robust RNA interference and impact on critical pathways, as highlighted in the presented work. And a scale that is capturing processing development and manufacturing folks' interest. This is very encouraging and points towards applications at the scales of commercial manufacturing.

And I think the other thing that is very encouraging about the data that I would just add, Pamela, is that it has been very reproducible as we have gone from shake flask -- small volume shake flask type volumes -- through one liter volumes, three liter volumes and now 40 liter volumes. I mean the reproducibility of the knockdown data and the beneficial effects on cell growth characteristics and the consistency of the cell growth characteristics are superimposable across those scales. And is very, very important.

Should we be expecting commercial activity in this area?

We certainly hope so. There is quite a bit of interest in it.

What is the timeline?

We are not going to give any specific timelines on those, but there is quite a bit of interest in it, and I'm sure you will see something sometime reasonably soon.

And is the first application yield, or are there others that will be --

[George], do you want to?

The applications are -- I mean there are three broad ways of thinking about this, Pamela. There is yield, but importantly there is also quality and attributes of the product. And as we -- increasingly the regulators and manufacturers are demanding ever more quality and reproducibility, and the ability to tailor things like post-translational modifications, like glycosylation, is really as important as yield per se. But one of the beauties of using RNAi is we can attack all of the pathways simultaneously or individually. And it allows for tailoring to not only improve things like yield, but also to maintain or even improve quality features of the product.

And don't forget that RNAi is an ancient antiviral mechanism, and one of the issues that plagues the biologics manufacturing space is infection with adventitious viruses. And that has obviously very significant interest for players in the field.

Yes, it does. So, are you -- will you probably be doing individual deals that are customized for each manufacturing situation?

Yes, I think that is a strategy that we think has quite a bit of traction and quite a bit of appeal from a value standpoint. And it allows to us very broadly partner the technology across the entire biotechnology industry in a way that can build significant near-term value to our overall business. And so we do view the ABIO opportunity as a relatively near-term way to have an impact with our technology in the commercial marketplace of existing medicines.

And what is next in terms of additional applications outside of therapeutics?

Well, I mean --

Or even within therapeutics, just -- I mean, you in the past talked about vaccines and stem cells. How are those programs progressing?

Very nicely. I mean we think there is some very, very interesting applications in vaccines. As you know, we recently in-licensed technology from Mount Sinai and University of Queensland in Australia, and we think there is interesting applications in stem cells as well.

And do you think we will see some of those programs progress as rapidly as the biomanufacturing?

I think within reason, I think you will see some progress there, yes. I think so.

Okay, great. And congratulations again on TTR.

Thanks, Pamela.

Your last question comes from the line of [Kay McKay] from [Charting Capital]. Please proceed.

Hi, Kay.

Hi, how are you guys doing?

Very good.

My question is related to VSP and the extension study. Can you give us some more details, even if just qualitative? How many more cycles can folks be on? Is there a limit, or as long as they are doing well? And does it apply to how many of the doses that you thus far treated, the first four or more?

Great question. Akshay, why don't you take it?

So, just to recap on the design of the study that leads to the extension study, patients entered the Phase I study, they go through two cycles of treatment. That is four doses, one dose every two weeks. And at the end of that two month period they get reassessed, and provided they have stable disease or better, they are invited to continue into the extension study.

And when in the extension study they can stay on in perpetuity as long as stable disease or better is maintained. And they are periodically evaluated in the extension study clinically and by CT to establish evidence for stable disease or better. So that essentially is the makeup of how this works. And we are very excited today to announce the initiation of that extension study. Clearly individuals getting across the line from the initial Phase I study, have stable disease or better, and are into the extension face phases.

Now, as John said, overall, following from the encouraging data we had at ASCO and the further progress we are witnessing, we are excited about the program. And hope to update everyone later in the year, and at it I'm sure we can give more details as to what proportion of patients are getting into the extension study and the doses at which that is occurring, et cetera.

Right, and as a reminder -- I think that's -- thank you, Akshay. But as a reminder, Kay, the other thing is, keep in mind that these are patients that entered the studied I with very advanced stages of malignancy who have failed all other therapies, right? At least three other therapies. So these are patients that are, which traditional in Phase I oncology studies, quite advanced in their -- advanced in their disease. So we think it is encouraging that we have been able to open up the Phase I extension study.

A follow-up to that. How often are these extension patients then followed up? And then I guess another question, to what extent do you think you might be able to capture biopsy data in the event of mortalities?

Okay. So, Akshay, why don't you.

As patients entered the extension phase, they are reevaluated formally every two months with CT assessment, but clearly there are clinical evaluations ongoing. But formally speaking every two months for evidence of progression of disease. And then with respect to the biopsies, again as we did at ASCO, I think we can reiterate that things are looking encouraging there. We are beginning to get biopsies from a significant proportion of patients, and I think when we update folks later in the year, those will be some of the additional data we will be sharing. What are we learning from the biopsies? Clearly good opportunity to look for pharmacodynamic activity, et cetera. So more to come there.

Great. We will look forward to that.

Thanks, Kay.

There are no further questions at this time. And we will turn the call over to John Maraganore for closing remarks.

Thanks, Jennifer. So thanks to everyone for joining us on the call. As you can see, we made a lot of important progress since the beginning of the year, and we are just getting started. Excited about the rest of 2010. Lots of things going on, and we are continuing our focus on our important mission of advancing RNAi therapeutics as a whole new class of innovative medicines. Thank you again.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.