Alnylam Pharmaceuticals Inc (ALNY) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss the fourth-quarter and year-end 2010 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. Please proceed.

Good afternoon. I am 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.

In addition, Laurence Reid, our Chief Business Officer, is also on the call and available for Q&A.

For those of you participating via conference call, the slides we have made available via webcast can also be accessed by going to the investors page of our website at www.Alnylam.com.

During today's call, as outlined on slide two, John will provide some introductory remarks and general context, Akshay will summarize our clinical and preclinical R&D activities, Patty will review our financials and guidance, and Barry will summarize our business highlights and goals. We will then open the call for your questions.

Before we begin, and as you can see on slide three, 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 recently 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, everyone, and thanks for joining us this afternoon. I will be referring to slide four during my introductory comments.

As all of you know, the year 2010 was marked by major and, in some cases, very surprising changes in the field of RNAi therapeutics. But for Alnylam, it was actually a year of incredible progress that positions us for an exciting transformation. Indeed, because of our efforts in 2010, we have never been stronger as it relates to the most important drivers of our Company's future, our science, our technology, and our clinical advancements.

Here are the key points. First, we made major progress in our delivery efforts, including significant improvements in potency with lipid nanoparticles and also with siRNA conjugates, our two most advanced delivery platforms. Second, we significantly extended our overall human experience with systemically-delivered RNAi therapeutics. Finally, we demonstrated RNAi in man, a landmark accomplishment in our scientific efforts.

In short, we have now learned that we can deliver RNAi therapeutics safely in man and that RNAi therapeutics are biologically active in man. So, we've never been stronger -- in a stronger position to advance these therapeutic products, and we are extremely confident in our ability to pioneer this effort and, frankly, to do so all alone if necessary. In fact, at this point in the development of RNAi therapeutics and in the building of our business, the increasing scarcity of what we do presents itself as a rare opportunity, since it only creates more value for us and for our partners that remain committed.

Now, as a result of our scientific and clinical advances, Alnylam has launched Alnylam 5x15 to execute on a clear and definable plan that advances RNAi therapeutic products toward later stages of clinical development and potential product commercialization. This effort represents a transformation in our business and a focus on the advancement of RNAi therapeutic products for the treatment of genetically-defined diseases with high unmet medical need.

In my over 25 years in biotech, I have never been more excited about the potential to help patients and to create enormous value with this specific product strategy, and we will make this abundantly clear to the outside world with the one and only thing that counts, clinical data. We know what we need to do, and all of us here at the Company have signed on to do it. So with that introduction, I'll now turn the call over to Akshay to discuss this strategy in more detail, as well as to review our clinical pipeline activities. Akshay?

Thanks, John, and hello, everyone. As John mentioned, in 2010 and to date in 2011, we have made important progress. As we look across our pipeline activities, progress on delivery, expanded translational human experience, and our data showing RNAi in man, we're now more confident than ever in the significant product potential of RNAi therapeutics.

And in this regard, and as you can see on slide six, we recently launched our new Alnylam 5x15 strategy, which is focused on the development and commercialization of innovative RNAi products to treat very high unmet need, genetically-defined diseases where we believe there is a rapid and clear path for clinical advancement and commercialization. Specifically, by 2015, we expect to have five RNAi therapeutic programs in advanced clinical development, including ALN-TTR for the treatment of Transthyretin-Mediated Amyloidosis, ALN-PCS for the treatment of severe hypercholesterolemia, ALN-HPN for the treatment of refractory anemia, and two additional programs, which we will designate and advance into development later this year.

The products included in our Alnylam 5x15 strategy share several common, key characteristics. They are all focused on genetically-defined targets and diseases, and they have the potential for significant therapeutic impact. Given our recent scientific and clinical progress, they will also all leverage existing Alnylam delivery technologies. Importantly, each program has a blood-based biomarker that can be easily monitored in Phase 1 trials for human proof of concept. And lastly, these are programs that have an established clinical path for an NDA, and with a focused patient database and possibly accelerated paths for regulatory approval.

Our lead 5x15 effort is ALN-TTR, an RNAi therapeutic targeting the transthyretin gene for treatment of Transthyretin-Mediated Amyloidosis, or ATTR. In July 2010, we initiated a Phase 1 randomized, placebo-controlled dose escalation study of ALN-TTR01 aimed at evaluating the safety and tolerability of ALN-TTR01 in patients with ATTR. The study continues to enroll patients, and just last month, we received orphan drug status in the EU. We expect to complete the Phase 1 study in the first half of 2011 and will report data in the third quarter of 2011.

In parallel, we are also advancing ALN-TTR02, which takes advantage of the important achievements we've made in delivering and utilizing our second-generation delivery technology. We are on track for filing and IND with ALN-TTR02 in the second half of 2011.

Our second Alnylam 5x15 program is ALN-PCS, an RNAi therapeutic targeting PCSK9 for the treatment of severe hypercholesterolemia. We're advancing this program towards clinical studies with a plan of filing an IND in the first half of 2011 and reporting clinical data by the end of 2011.

We also presented key preclinical data around this program last year, including nonhuman primate data demonstrating durable reductions of LDL cholesterol levels with over five weeks' duration after a single dose. Since ALN-PCS targets both intra- and extracellular PCSK9, our drug acts to phenocopy the human genetics, making it what we believe is the preferred strategy as compared with antibody approaches.

In early January, we expanded our Alnylam 5x15 pipeline with the addition of ALN-HPN, an RNAi therapeutic program focused on the treatment of refractory anemia. Anemia of chronic disease, otherwise known as ACD, occurs in patients with end-stage renal disease, cancer, and chronic inflammatory disease. Patients with ACD who are unresponsive to the current standard of care, such as erythropoietin and intravenous iron, define a condition of refractory anemia for which we believe there is substantial unmet need.

ALN-HPN is a systemically delivered RNAi therapeutic targeting hepcidin, a genetically-defined target that is the central regulator of iron homeostasis. We've demonstrated through preclinical in vivo studies that the administration of an ALN-HPN siRNA results in silencing of the hepcidin gene and increase in serum iron levels. We expect to advance this program towards the clinic in 2011 and file an IND in 2012.

In addition to our Alnylam 5x15 programs, we're also continuing to advance our partner programs, including ALN-RSV01 for the treatment of respiratory syncytial virus, ALN-VSP for the treatment of liver cancer, and ALN-HTT for the treatment of Huntington's disease.

Beginning with ALN-VSP, we continued to advance our Phase 1 multicenter, open-label dose escalation study in patients with liver cancer in 2010 and to date in 2011. We presented interim data last year from this trial, highlighting the drug's safety, pharmacokinetics, and preliminary clinical activity. Then in January 2011, we presented new data from the study, demonstrating proof of RNAi mechanism in man, a critical milestone for the overall advancement of systemically-delivered RNAi therapeutics.

We are very excited about this program, and we expect complete accrual in our study in the first half of this year with a plan to update you with additional and new ALN-VSP clinical data in the second quarter of 2011. In addition, we expect to partner this program prior to initiating a Phase 2 trial.

Now, moving on to RSV, we continue to enroll patients in our Phase 2B study of ALN-RSV01 in RSV-infected adult lung transplant patients, and expect to present data from this study in 2012. The study is progressing well with over 30 centers enrolling worldwide, and we're very pleased to announce today that the study has now enrolled over 50% of patients.

Finishing up with ALN-HTT for the treatment of Huntington's disease, we continue to make progress with this program, which is being developed in collaboration with Medtronic and the CHDI Foundation, and expect to advance it towards the clinic and file an IND in 2012.

And with that, I'd like to turn the call over now to Patty for a review of our financials. Patty?

Thanks, Akshay, and good afternoon, everyone. Please refer to slide 12 in our deck.

I'm happy to report that we continue to deliver strong financial performance. At the end of 2010, Alnylam had cash, cash equivalents, and marketable securities of $349.9 million, exceeding our original 2010 cash guidance. Importantly, we continue to have no write-offs related to our cash and fixed-income portfolio to date.

Our GAAP revenues for the fourth quarter of 2010 were $21.2 million, and for the full year in 2010, we achieved $100 million. As you know, we continue to record the amortization of upfront payments from the strategic alliances we have formed, which account for a significant and recurring portion of our quarterly GAAP revenues. Looking to 2011, we expect quarterly future revenue from current partners to be closer to the levels we reported this quarter. We will continue to report quarterly GAAP revenues, primarily from our alliances with Roche, Takeda, Cubist, and other ongoing alliances.

Moving to expenses, R&D expenses were $26.1 million in the fourth quarter of 2010, as compared to $21.6 million in the prior-year period. The increase in R&D expenses during the quarter was due primarily to increased preclinical and clinical trial costs to support the Company's product platform and expanding product pipeline. For the full year in 2010, R&D expenses were $106.4 million, as compared to $108.7 million for the prior-year period. R&D expenses in 2010 decreased slightly as compared to the prior year in 2009, as described fully in our press release today.

Looking ahead to 2011, we expect to see R&D expenses continue to be lumpy during 2011, but overall we'll be lower than 2010, primarily as a result of the corporate restructuring we completed in late 2010.

G&A expenses were $7.5 million in the fourth quarter of 2010, as compared to $13.1 million for the prior-year period. For the full year in 2010, G&A expenses were $37.7 million, compared to $39.9 million for the prior year. The decrease in G&A expenses for both the fourth quarter and the full year was due primarily to lower consulting and professional services expenses related to business activities, primarily our ongoing litigation.

Looking ahead to 2011, we expect to see G&A expenses continue to be lumpy from quarter to quarter, particularly as a result of the expenses that will be incurred related to our ongoing litigation, for which we currently expect the trial to begin this March.

In regards to our equity in Regulus Therapeutics, for the full year in 2010, we incurred $7.6 million, and for 2009, we incurred $4.9 million. The increase in equity and loss of joint venture of Regulus for 2010 was due primarily to Alnylam's share of sublicense fees paid to Isis and Alnylam by Regulus in connection with the strategic alliance formed between Regulus and Sanofi-Aventis last June. In October 2010, Sanofi-Aventis made a $10 million equity investment in Regulus, resulting in Sanofi-Aventis owning approximately 9% of Regulus. Following this investment, Alnylam now owns approximately 45% of Regulus.

We also recorded $6.4 million in other income in 2010, as compared to $600,000 in 2009, composed of two unusual items this quarter. We recorded a $4.4 million gain on the issuance of stock by Regulus due to the increase in valuation of Regulus as a result of Sanofi's $10 million equity investment in Regulus I just discussed. This amount was added to our investment in Regulus account on the balance sheet, and this asset will be reduced in future quarters as we continue to report our 45% share of Regulus's losses in our P&L.

In addition, we received $2 million of awards under the federal government's Qualifying Therapeutic Discovery Project Program, which were also recorded in other income.

Regarding income taxes, we are pleased to report today that we expect a $10.7 million cash income tax refund from the IRS in 2011. This will not have any P&L impact in 2011.

With respect to guidance for 2011, we believe we will finish the year with greater than $275 million in cash, excluding proceeds from any significant new business development partnerships we may form. This financial profile provides us with a multiyear runway to build our business, including execution on our Alnylam 5x15 product strategy.

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

Thanks, Patty, and hello, everyone.

As we've discussed on the call thus far, the progress we made last year has positioned us for an extremely exciting time ahead. With the execution on our Alnylam 5x15 strategy, more human proof-of-concept data expected from our clinical programs, and the advancement of additional partner-based development in clinical programs, we're more confident than ever in the development of RNAi therapeutics into a whole new class of innovative medicines.

As John commented earlier, we believe that this creates an exciting opportunity for value creation, which in our opinion is one of the most compelling opportunities in biotech today. By the end of 2011 alone, we now expect to expand our pipeline efforts from three RNAi therapeutic products in the clinic to five programs in the clinic, and to report clinical data from three of these programs.

As you can see on slide 14, on the business and organizational front, we were also pleased to announce some important progress in the fourth quarter of 2010 and to date in 2011. In December, the European Patent Office fully and completely upheld a key patent in our Tuschl II estate in oral opposition proceedings. This decision affirms our longstanding and resolute belief in the groundbreaking nature of the Tuschl II innovation, which is very important and valuable in our overall broad estate of patents we believe required for the development and commercialization of RNAi therapeutics.

In our efforts in Alnylam biotherapeutics, we announced today that over the past year we have formed two collaborations with leading biotechnology and pharmaceutical companies, generating approximately $2 million in payments to the Company. Of interest, it turns out that both of these collaborations relate to the use of our technology on currently-marketed biologic products. So we're gaining confidence in the potential opportunity that this technology effort can deliver in the near term. Indeed, and as we have guided, we expect to form additional collaborations with Alnylam biotherapeutics in 2011.

Now for Regulus Therapeutics, our micro RNAi therapeutics company that we co-founded with Isis, we also announced key progress in 2010. Last June, Regulus and Sanofi-Aventis formed a major strategic alliance valued at over $750 million to discover, develop, and commercialize four micro RNAi therapeutic products, initially focused on the therapeutic area of fibrosis. In the fourth quarter, as Patty mentioned, Sanofi completed its $10 million equity investment in Regulus. This investment, made at $130 million pre-money valuation, values our 45% ownership of Regulus at approximately $60 million.

Lastly, we were very happy to welcome Marsha Fanucci to our Board of Directors last year. Marsha is widely recognized as a leader across multiple strategic dimensions of building innovative-based biotechnology companies, and she will continue to bring this expertise to our Board.

Looking forward, reviewing our goals for 2011, which can be seen on slide 15, we expect to complete the Phase 1 study for ALN-TTR01 in the first half of 2011 and report data in the third quarter of 2011. We expect to file an IND for ALN-TTR02 in the second half of this year, and then as we have stated, our goal is to start Phase 2 for the TTR program in 2012.

Continuing on for PCS, we expect to file an IND in the first half of 2011 with a goal of reporting data by the end of this year. We also expect to advance ALN-HPN toward the clinic in 2011 with a goal of filing an IND in 2012. We will continue to advance our partner- based programs, including more clinical data on ALN-VSP in the second quarter of this year, form additional partnerships, and, importantly, maintain strong financial performance ending 2011 with greater than $275 million in cash, excluding proceeds from any significant new business development partnerships we may form.

I thank you for your attention. With that, I'd like to turn the call back over to the operator for your questions. And we will now take questions.

(Operator Instructions). Marko Kozul, ThinkEquity.

Good afternoon, everybody, and congratulations on the progress. I look forward to the year ahead. So, first question on biotherapeutics. I was wondering if you could give us a little more color possibly on the scope and nature of the recently signed deals late last year.

Marko, we can't say much more than we've said already in the release and on our comments.

Again, they're two separate agreements that we formed that are focused on marketed biologic products. They were formed with two separate companies, both with longstanding commitments to advancing biologic medicines. You know, we're hopeful with the progress on those relationships and where they may lead. And we're also hopeful for additional partnerships in 2011.

Clearly, it's an exciting technology effort at Alnylam that we believe can deliver positive cash flow for the Company for the future. It's a building area in terms of the deals that we're doing. And there's quite a bit of interest out there, and that's about all I can say at this point in time.

All right, perfect. And maybe just a quick one on business development opportunities. Could you possibly describe some of the assets that are out there that you might have interest in, such as the [Marist] Wisconsin facility in terms of how your interest might work synergistically with your growth strategies going forward.

Let me say a few things, and then maybe Laurence can make some comments. I think in general, in terms of opportunities for us to either partner or in-license or acquire, we have a very active external view of different efforts and technologies that are out there.

There's always been, for many years now, an internal team that performs assessments of external technologies. We are obviously very aware of the technologies at Marist and certainly look forward to Roche's efforts in trying to find a new home for those efforts. And we are certainly aware of all that.

Having said all of that, it's interesting. We are at a stage in the Company now where the bar has gotten very high in terms of those technologies, given the progress that we've made on our L&P platform and also on our subcu delivery platform with conjugates. But that said, we keep a very open external approach and maintain longstanding commitments, including our collaborations with MIT, University of British Columbia, and others. Laurence, do you want to make any comments about it?

(Multiple speakers). I think that's right in terms of we're proactive all the time looking at new [read] technologies.

Thanks, Marko.

(Operator Instructions). Keay Nakae, Chardan Capital Markets.

A couple of questions. First, on ALN-PCS, what's the gating, I mean, at this point for filing the IND?

Akshay, do you want to handle that question right off?

Yes, Keay, hi. We're looking forward to filing in the first half of this year, and we're just wrapping up the GLP toxicology studies. So, really, we feel we're on track for that guidance, and data -- clinical data by the end of the year on that program.

Okay, very good. And then, moving on to VSP, can you give us some ideas of what we might see at ASCO or whenever you present additional data in Q2? Obviously, we're looking for MTD patients on the drug longer, but what else might we see at ASCO with respect to that trial?

Let me frame it, and then I'll let Akshay get into some specifics. Clearly, we're going to present everything we have available at the time of the meeting. We've submitted an abstract. The contents of the abstract don't include everything we will present at the meeting because the abstract was submitted a few weeks back and the meeting, of course, will include additional data.

But the general orientation is to really provide a very complete picture of the program and where it's going. And it includes, obviously, the safety data, the pharmacokinetic data, the pharmacology data, more biopsy data, data related to clinical activity by different means that are used including resist-type criteria, so it's going to be a complete picture in sum. Akshay, anything to add to that?

No, no. I think it will be a complete picture. The study will be over, and we're confident that we can wrap it up and report, hopefully, at that meeting, and I think it will put us in an excellent position for the partnering discussions.

Okay. Moving on to biotherapeutics, you mentioned the $2 million in payments. Can you give us an idea, what part of that is upfront versus perhaps ongoing, or what is the potential ongoing payments from those two collaborations?

That amount that we reported, which is obviously just a small amount and just an initial amount, is related to both upfront and R&D funding-based payments.

And can't give any more guidance than that at this time, Keay, but obviously as we form these new partnerships going forward, we will provide both financial guidance and, where we can, provide guidance on the partnership and exactly what the projects are.

It should be said that in many of these cases, the people that we're working with on these partnerships regard their manufacturing issues as being very confidential. And it may often be the case that we report on having formed agreements and financial components related to those agreements, but may not be able to say very much about the specifics of their specific issues because, in many cases, these are frankly marketed products.

And just to provide a little bit more color, as you remember the idea of Alnylam biotherapeutics is to use our RNA technology and our delivery technology to improve yield or quality of antibodies.

And the work that we did at Alnylam was very good. The fact that we now have talked about two collaborations and actual commercial cell lines establishes a set of data that is very powerful as we talk to other potential collaborators and starts to improve the kind of deal and deal economics that we can develop.

As John said, because of the nature of these collaborations, there may be some challenges in providing lots of detail behind them. But we felt it important to help you guys appreciate that we've signed the deals and started generating economics from them.

Fair enough. Then, one last question for Patty. On G&A, if you were to wrap up your current legal issues in -- at the trial in March or carrying over into April, what would G&A look like?

Yes, what we can say right now is that we expect G&A is going to be lumpy while the litigation is ongoing, right? And that once the litigation ends, I would expect to see a drop-off in G&A expenses, but there could be future expenses related to the litigation after the outcome of the trial, as well. But it's a little hard to predict at this time until we know the final outcome.

Right, and when you say drop off, are we looking at a number below the 7.5 you just posted, or is that a good baseline even (multiple speakers)

I would say slightly below. But as you can imagine, costs will be ramping up in Q1 as we prepare for the trial in March.

Marko Kozul, ThinkEquity.

Thanks for the follow-up. I actually had a few on Regulus that increasingly appears interesting to me. Two questions. One, I wanted to ask if you could highlight for the remainder of 2011 some of the milestones, catalysts, possible updates that we should be looking forward to. And then, the second question is if you could broadly outline your vision for how this joint venture may mature in out years. Thanks.

Sure. Thanks, Marko. Well, look, I think Regulus is a very, very exciting effort. Clearly has established itself as the leading micro RNA therapeutics company. Two deals with GSK, a partnership -- a very significant partnership with Sanofi-Aventis.

I think that -- we haven't provided any specific guidance on Regulus for 2011, nor does Regulus need to as a private company, but we expect progress on the pipeline. We expect potential new partnerships to be formed with Regulus. And we are thinking a lot about where Regulus goes in the future, whether it's in the form of an offering to additional private investors, potentially, or even the public markets, or potentially even consider the best value creation strategy in light of potential trade sales at least of our ownership position.

And we work closely with our partners at Isis who have a joint interest in Regulus's success, and we are acutely interested in building value from that ownership position that we have. But by all accounts, we certainly view it as a very compelling new opportunity where we believe Alnylam shareholders will benefit significantly from our ownership in it.

Ladies and gentlemen, that concludes our question-and-answer session. I would now like to turn the call back to John for closing remarks.

Well, thanks, everyone. As I hope you can see, we are excited about our new transformation with Alnylam 5x15. With 2010 behind us, we are spring-loaded in 2011. So thanks for your commitment and your attention. Bye-bye.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.