Alnylam Pharmaceuticals Inc (ALNY) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss the first quarter 2011 activities and financial results. There will be a question-and-answer session to follow. Please be advised that this call is broadband taped at the Company's request. I would now like to turn the call over to Alnylam.

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 Mike Mason, Vice President of Finance and Treasurer. In addition Laurence Reid, our Chief Business Officer is in the room 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, www.analym.com. During today's call as outlined on slice two, John will provide some introductory remarks and general context, Akshay will summarize our clinical and preclinical activities, Mike 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 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 would 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 brief introductory comments. This is a very important and exciting period for Alnylam, as we transform our business from a platform company to a product company. During the first quarter we made important progress in this transformation. Specifically, we launched our Alnylam 5x15 product strategy, focused on the development of RNAi therapeutics for the treatment of genetically defined diseases with high unmet medical need. Where we are aiming to have five RNAi products in late stage clinical development by the end of 2015.

We believe RNAi is a compelling approach for the advancement of innovative medicines in genetic diseases. We are also convinced that we can build a significant company based on this strategy, and we are making key strides with this initiative. Specifically, we are making excellent progress in our lead programs in this effort, including our clinical study with ALN-TTR01 and our advancement of ALN-PCS, where we are on track with our IND filing this quarter, leading to the start of clinical studies very soon thereafter.

Importantly, we will have clinical data from our TTR and PCS programs this year, including human proof of concept data from our TTR program in the third quarter, as well as human proof of PCS-K9 program at the end of the year in the fourth quarter. Other efforts in our Alnylam 5x15 initiative are also proceeding well, including our new refractory anemia program. Of course we are also making important progress with our partner based programs, such as ALN-VSP and ALN-RSV, both of which Akshay will detail for you momentarily. Importantly, we are set to present our ALN-VSP data at ASCO in June of this year, representing our third key clinical data point in 2011. All-in-all we are very encouraged by the progress we are making toward our primary goal of clinical advancement of RNAi therapeutics, and the generation of key human data in 2011 and beyond.

Now beyond the pipeline we also had an active first quarter on the business front, which Barry Greene will detail for you shortly. We are particularly pleased with our Takeda relationship, indeed Takeda is making continued progress in RNAi therapeutics, and are very committed to the field. On the other hand, we were very disappointed with Tekmira's decision to sue Alnylam. We believe this action is fully without merit or foundation, and in our view, it is nothing short of an unwarranted act. We have answered this complaint and have filed our counterclaims and I encourage you to read our response if you are interested. Otherwise, since this matter is part of ongoing litigation, we will not be discussing it any further in any further detail at this time.

We also announced a few changes to our management team and Board of Directors during the period. Mike Mason who is here with us today, was promoted to Vice President of Finance and Treasurer. He was formerly our Senior Director of Finance and Corporate Controller of Alnylam, and is replacing Patty Allen, who departed Alnylam earlier this year. We are very fortunate to have Mike in this new role, and we welcome him to this new responsibility. Of course, we wish Patty all the best and taking time off with her family.

It is also notable that Regulus Therapeutics appointed Dr. Neil Gibson as its Chief Scientific Officer, as a former CSO at OSI Pharmaceuticals, Neil is a fantastic addition to the Regulus team, and brings a rich experience of drug discovery and development to the efforts at Regulus. Finally, as we announced today Vicki Sato will be leaving our Board. Vicki has been a great Director over the last five years, contributing to Alnylam on many levels. She will be missed, and we thank her deeply for her years of excellent service to our Company.

In closing I want to emphasize as I have before that Alnylam's success is driven by our people and our culture. In this regard we were honored to be recognized for the third year in a row as one of the Top 20 Best Places to Work by The Scientist Magazine. I will now turn the call over to Akshay to review our clinical activities, our pipeline, and our scientific progress. Akshay.

Thanks John, and hello everyone. As John mentioned during the past quarter we made significant progress in the advancement of our pipeline. In this regard and as discussed on our last quarterly call, we launched our Alnylam 5x15 strategy, which is focused on the development and commercialization of innovative RNAi products for the treatment of genetically defined diseases that address major unmet medical needs. By the end of 2015 we expect to have five RNAi programs in advancement clinical development.

As detailed in slide six, these include ALN-TTR for the treatment of transthyretin amyloidosis. ALN-PCS for the treatment of severe hypercholesterolemia, ALN-HPN for the treatment of refractory anemia, and two additional programs from our multiple ongoing preclnical efforts, which we will designate and advance this development late this year. The products included under our Alnylam 5x15 strategy share several common key characteristics that we have discussed before. The key point is that we are focused on developing RNAi therapeutic products with a rapid and clear path to advancements for new medicines that really matter.

Now turning to slide seven our lead Alnylam 5x15 program ALN-TTR01 continues to enroll in a blinded randomized placebo controlled dose-escalation phase 1 study, aimed at evaluating the safety and tolerability of ALN-TTR01 in patients with ATTR. Patient accrual in this trial is going very well, and we are pleased to report today that based on the favorable safety data today, we have now received regulatory approval to extend the Phase trial with additional dose cohorts of 0.4 mg per kg to up to 1.0 mg per kg, expanding the trial size from 28 to 36 patients.

This amendment and expansion will make the Phase 1 study even more robust, and strengthen the data we plan on releasing in Q3 with our human proof of concept. Specifically our goal of showing a significant decrease in TTR plasma levels. In addition, we were very pleased that in the first quarter we received Orphan Drug Status in EU for ALN-TTR. Also we are on-track with our ALN-TTR02 program, that utilizes our second generation ALNP technology. Specifically we are on track to file an IND for ALN-TTR02 in the second half of this year.

We will also continue to advance our additional Alnylam 5x15 programs towards clinical studies, including ALN-PCS for the treatment of severe hypercholesterolemia, and ALN-HPN for the treatment of refractory anemia. As John mentioned, we are on track to file our IND application for ALN-PCS in the second quarter of this year, with the goal of presenting clinical data by the end of the year. We also advancing ALN-HPN towards the clinic, with a goal of filing an IND in 2012.

Anemia of Chronic Disease, or ACD, occurred in patients with end stage renal disease, cancer, and chronic inflammatory disorders. Patients with ACD who are unresponsive to the current standard of care, such as erythropoietin and IV iron, define the condition of refractory anemia, for which we believe there is substantial unmet need. With regards to the additional 5x15 programs that we expect to designate later in the year, what I can say today is that we are making excellent progress in our discovery assets. We are very encouraged by our ability to identify a large number of compelling opportunities for advancement into development. By all accounts we at Alnylam are living in a world where there are many opportunities for new programs, and it is truly an embarrassment of riches situation.

In addition to our Alnylam 5x15 programs, we are also continuing to advance our partner-based programs as noted on slide eight. Beginning with ALN-VSP last month we completed enrollment in our Phase 1 multicenter open label dose escalation study in patients with liver cancer. ALN-VSP was administered to over 40 patients, at doses ranging from 0.1 to 1.5 mg per kg. While we completed enrollment of new patients, a good number of patients continue to receive therapy on the study. We have presented new clinical data from the study in the first quarter demonstrating RNAi mediated target mRNA cleavage, and thus proof of RNAi mechanism in man without systematically delivered RNAi therapeutics.

We are very encouraged by the overall data here, and hope that you will be able to participate online in our upcoming RNAi Roundtable on May the 13th, which will be focused on the review of these specific data. We will report our Phase 1 clinical data of this program at the ASCO Annual Meeting in June, and look forward to seeing you at our presentation. We also continue to enroll in our Phase 2b study of ALN-RSV01 in RSV infected lung transplant patients. We announced today that we have received regulatory approval to perform and interim analysis blinded to Alnylam and the investigators, which could possibly expand enrollment to up to 120 patients. This analysis was introduced to maximize the probability of success in this trial, and to adaptively sample size in a manner consistent with best practices.

This interim analysis will be performed with 75% of patients are evaluable for the study's primary end point of bronchiolitis obliterans syndrome, or BOS at six months. Based on the severity of the RSV season, and high investigator awareness, patient accrual in this trial is possible to actually exceed our estimations, and we have now fully accrued to our initial target of approximately 76 patients. Now because 75% of patients have not reached the six month BOS evaluation end point, it has become necessary for the study protocol to be amended to allow accrual beyond the previously planned level of 76 patients, until the interim analysis can be performed later this year. Regardless of these adjustments we maintain our guidance of presenting data from this study in 2012.

Overall we remain very excited and encouraged with the progress of our clinical RNAi therapeutics, and look forward to sharing multiple important data points with you throughout the year. Frankly, it is very exciting to us at Alnylam to be in our current position with three clinical programs today, that we expect will grow to five programs this time next year, and where we expect to have important clinical data read out every quarter, from now through to year's end. All of this makes for an exciting year at Alnylam to say the least. And with that, I would like to now turn the call over to Mike for a review of our financials. Mike.

Thanks Akshay, and good afternoon everyone. Please refer to slide 11 in our presentation. I am happy to report that our financial profile remains very strong. At the end of the first quarter we had cash, cash equivalents, and marketable securities of approximately $343 million. We had a particularly strong quarter based on non-recurring cash payments related to a Takeda milestone, and our income tax refund. Our GAAP revenues for the first quarter of 2011 were $20.9 million. As you know, we continue to recognize amortization of up front payments from the strategic alliances we have formed, which account for a significant and recurring portion of our quarterly GAAP revenues.

Moving to expenses R&D expenses from $26.3 million in the first quarter of 2011, as compared to $24.7 million in the prior year period. The increase in R&D expenses during the quarter was due primarily to increased clinical trial and manufacturing costs, as we continue to advance our pipeline. However, looking ahead we expect that R&D will decrease slightly in subsequent quarters during 2011. G&A expenses were $10.2 million in the first quarter of 2011, as compared to $11.2 million in the prior year period. The decrease in G&A expenses was due primary to lower consulting and professional services expenses related to business activities, primarily legal activities.

Regarding income taxes as expected we received a $10.7 million cash income tax refund from the IRS in 2011. This did not have any P&L impact in the first quarter, as this refund was related to taxes paid in prior years that we had anticipated getting back in 2011.

With respect to guidance for 2011 we continue to expect that 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 multi-year runway to build our business, including execution on our Alnylam 5x15 RNAi therapeutic product strategy. I will now turn the call over to Barry.

Thanks Mike, and it is great to have you on our senior team. So far in 2011 we have had an active quarter on the business front, which is summarized on slide 13. First, we were pleased to earn an additional $10 million technology transfer payment from Takeda, as part of our strategic alliance we formed with them in May 2008. This payment is related to the achievement of certain predefined objectives in the transfer of our RNAi therapeutics product platform and Intellectual Properties to Takeda, for the development of RNAi therapeutics. We have now received the full $150 million in up front and technology transfer payments from Takeda. They remain an important partner, and we are eligible to receive significant milestones and royalties related to the successful advancement of RNAi therapeutic products.

Importantly, we also have specific opt-in rights in the US market, a feature that is of potentially great value. All told, we are excited about the progress our colleagues at Takeda are making in their RNAi therapeutic efforts, and we continue to wish them well in their recovery. Also this past quarter we and Max Planck reached a settlement with Whitehead, MIT, and UMass regarding the Tuschl patent litigation. As part of the agreement Max Planck will assume the role of coordinating and leading the future prosecution of Tuschl I and Tuschl II patent families in the US. In addition, we will also continue prosecuting the Tuschl II patent family outside of the US, with UMass leading the Tuschl I patent family prosecution outside of the US.

Further we have granted UMass the right to sublicense the United States Tuschl II patent families to Merck, subject to certain Alnylam third-party obligations, in exchange for a share of future sublicense income. Our greatly strengthened patent estate continues to be an important strategic asset to protecting RNAi therapeutic innovations for Alnylam and our partners.

Looking forward reviewing our goals for 2011 which can be seen on slide 14, we expect to report human proof of concept data for our Phase 1 ALN-TTR01 study in the third quarter of 2011, file an IND for ALN-PCS program in the second quarter of 2011, with a goal of initiating a Phase 1 clinical trial in the second half of 2011, and reporting initial human proof of concept data by the end of 2011. We also plan on advancing ALN-HPN toward the clinic in 2011, with a goal of filing our IND in 2012.

Of course, we continue to advance or partner based programs including the RSV program, the liver cancer program, and ALN-HTT, the Huntington's program, through our existing or future partnerships. We will have data study for our ALN-VSP study to report at ASCO this June. On the business front we aim to form additional partnerships, which could include platform and multi-target discovery alliances, such as our partnerships with Takeda and Novartis, or product alliances, such as the ones we have formed with Medtronics, Cubist, and Kyowa Hakko.

In addition, we will continue to explore new alliances related to RNAi technologies, such as our efforts in microRNAs with Regulus, which has formed major collaborations with GlaxoSmithKline and Sanofi-Aventis, and biologics manufacturing with Alnylam Biotherapeutics, which has two collaborations with biopharmaceutical companies. And lastly, we will maintain a strong financial performance with a goal of ending 2011 with greater than $275 million in cash, excluding proceeds from any significant new business development partnerships we may form.

With that, I would like to turn the call back over to the operator for your questions. Jonathan, questions please.

(Operator Instructions). And your first question comes from the line of Marko Kozul with ThinkEquity. You may proceed.

High good afternoon and congratulations on your progress.

Thanks, Marko.

I have a couple of questions on TTR, starting with the additional cohorts that you are planning for the study. Can you give us a sense of what you might be expecting to see on the safety and efficacy side, with the increased dose up to 1 milligram per kg?

Well, let me take that question and then hand it over to Akshay. I think first and foremost the overall goal for the study is to establish the safety and tolerability of ALN-TTR01 in patients with ATTR, but a very important element overall for the study, is to demonstrate a significant reduction in TTR plasma levels, and that is a goal that we have in place now in front of us, with the original trial as it was designed, but obviously in a more robust fashion with the amendment that was just done. Akshay do you want to comment?

Yes, just to elaborate on that a little bit, John, the goal of course of any Phase 1 first in human study is to establish safety tolerability and PK, and to that end Marko, we are delighted with the safety data accrued to this point, and that fully supports us does escalating to 1 mg per kg, which means we can just keep pushing the dose, and try to identify a maximum tolerated dose, which should always be the goal of the Phase 1 Study. So we are encouraged from that viewpoint, and of course by the additional cohorts, we developed the dose response curve even more finely, as we looked for TTR knock-downs and to expand, the exciting thing is the speed at which accrual has gone, and the progress with the study, we are still guiding for Q3/Q4, of the full wrap-up of the safety data, the PK data, and the pharmacodynamics around TTR knock down.

And then Marko, what was your second question?

Well, there was a bit of a follow-up there, which is do you have any sense or hypothesis on whether you might see a linear or exponential decrease in the TTR plasma levels at this point, or is it too early to say?

I think our approach to any experiment is we go to complete the experiment, analyze all of the data, and then we will report our the data to you guys. So it is, we really shouldn't speculate right now about the shape of that dose response curve, until we finish the study.

Great, and that is my second question, in the third quarter, when you do provide proof of concept data, would there be any data on the additional cohort or cohorts, or just the original planned patient pull?

I mean what we plan on presenting in the third quarter is the complete study results that would include the full pharmacodynamic data, Marko.

Alright. Fantastic. Thanks for taking the questions.

Good. Thank you.

(Operator Instructions). Your next question is from the line of Keay Nakae with Chardan. You may proceed.

Yes. Thank you.

Hi, Keay.

How is it going. Couple of questions, first with Takeda, can you give us an expectation of when they might advance a candidate into a Phase 1?

Yes. Let me let Barry handle that.

Yes. Keay, it is always hard for us to provide significant color on Takeda. What I can tell you as evidenced by the payment of the final $10 million milestone, and the full collection of the $150 million, we have fully enabled Takeda to move their programs forward. They have said publicly that they are looking to file an IND aggressively in the 2013/2014 timeframe, but again, it is hard for us based upon this being in their control to provide much more color than that.

Okay. Thanks for that. And then for Akshay, RSV01 the interim look, I guess I don't recall that that was prespecified, so a couple of questions if that is the case. One is there a statistical penalty for doing so, and what is prompting the desire to do the interim look?. I mean obviously, it is always great to get a look, but are there any concerns there, causing you to want to look at it, and then perhaps increase the sample size?

Go ahead.

So, Keay, hi. No concerns at all. I mean we had wanted to do an interim analysis from the beginning of the study. We had met with the regulators, we based on our Phase 2a data, we were strongly encouraged to proceed with a Phase 2b study as designed, and to enroll the same six patients. Now when we met with them, they said short interim analysis, let's have a further dialogue on that. More recently, we completed that dialogue as the study was enrolling really rather rapidly actually, and everything has kind of come together, that we finalized the interim analysis with the regulators, we coincidentally got to 76 much quicker than we thought, because of the intensity of the accrual, and so now the interim analysis is in place, and we will conduct that, when 75% of the patients accrued have reached the six month primary end point, and that will be later in the year. So no concerns there, and we will be blinded to that interim analysis, and based on the outcome of the analysis we will either maintain the sample size at 76 and complete the study, or be asked to increase the sample size to a figure up to 120. So that is where it stands. This was the plan that we had from the beginning, and as I said we recently completed the dialogue with the regulators around it.

And Keay, just to provide some additional guidance on this or perspective on this, when we launched the Phase 2b study, it was based on a relatively small Phase 2a study, with the goal of reproducing the findings in that Phase 2a study which were quite striking as it related to BOS. But we always provide the caveat that that Phase 2a study was very small, and so the Phase 2b study which is three times as currently planned, three times the size of the Phase 2a, was meant to reproduce that with more robustness. The interim analysis and the adaptive clinical trial design that allows you to potentially expand, is just a wise thing to have in place, so we always envisioned having a place with the trial.

Okay. Question for Barry. The extension of the delivery collaborations. I know the timing is somewhat coincidental with the Tekmira action, but help us understand how independent these two things might be?

Well, let me handle it and then Barry can chime in, Keay. These are agreements, in one case it is an extension of an existing agreement, which is relatively simple and straightforward to put together. The Precision Analyst Systems relationship has been under negotiation for months. And so these are things that have come together at this time. We are excited about both the extension of AlCana, which has been a brilliant and very, very productive relationship for Alnylam, as well as the extension of Precision Analyst Systems as a new technology, and we continue to invest in delivery technology, as you know as we always have, and having agreements in place as part of those relationships, is always a critical part of having any relationship.

I agree completely. What we have been consistent about all along, Keay, is that delivery is something strategically that we are going to continue to improve on, and invest upon, specifically as it relates to lipid nanoparticles, we have had a very robust relationship for years with UBC AlCana, as well as MIT. And will continue to improve upon the platform there. As John mentioned, again driven by people out of UBC, what Precision offers is an exciting opportunity to investigate small lipid nanoparticles, that have potentially have different distribution properties. That along with the work we are doing with chemistries and conjugates, we will continue to improve upon and move delivery forward. It is unrelated to the other event.

Okay. And just one last question if I can from Mike. On R&D you talked about perhaps lower levels than what we just recently saw in the quarter. Just help us understand with the increasing clinical activity how those expenses shakeout?

Yes. Mike, go ahead.

Yes. Sure, Keay. So we were not giving specific guidance quarter by quarter, but we do expect that R&D expenses will decrease in the subsequent quarters of 2011, and it really depends on the clinical activity for the quarter, that really drives R&D expenses. Our headcount costs are relatively consistent, but as Akshay mentioned, with the busy quarter for RSV for example, that would drive clinical expenses up in Q1.

Okay. Thanks.

Thanks, Keay.

Thanks.

And your final question is coming from the line of Steven Willey with Stifel Nicolaus. You may proceed.

Yes. Thanks for taking my questions.

Hi Steve.

How are you?

Good.

Just a couple of random questions. I guess on the RSV side, how big do you assume a Phase 3 trial would need to be in this setting, if that were indeed to be determined a viable path forward?

Yes. Akshay you want it to handle that?

Yes. Steve, I think you know, the first thing is when there study wraps up, provided it is positive, is to engage with the regulators, and really look at the merits of it, and one of the possibilities of course, is that given the nature of this disease and let's recall that, upon the realization of their trials is a complication of RSV is a life threatening complication, with a 50% 5-year mortality that the size of the data phase, and the number of studies that regulators may expect could be very different from what would typically be the case, and we would have to really look at this study in and of itself, as being a critical part of that package. So that is the first thing I would say, that there are no promises that this study alone would be sufficient, but I think its certainly given the context we are thinking about with regulators when we get the data. And I think it is only at that point that we can really go studies beyond the current one.

But they may well, Steve, just to add to Akshay's comments, they may well want to see reproduced in a similar size study, which is not an unusual request from the Agency.

Okay.

And just to put it in context, the trial that we are running right now is already the largest Phase 2b prospective randomized study of RSV infection among transplants patients. So it is already a robust study by international standards in this patient population.

And I guess that is why I asked, right? If you are able to expand enrollment up to 120 patients, and not necessarily spend any alpha in doing so, could this have some kind of registrational capacity down the road?

Well, I mean certainly that is in the back of our minds, but again, it is way too early to believe that that will take place, and it wouldn't be unreasonable for an FDA to say, please show me that again, please.

Okay.

Which we always have to keep in place, but now we know how to do it, and it happened faster than we expected. Well faster than we expected this past quarter.

And then just looking at the VSP data, where you guys were able to dose-escalate I believe up to 1.7 mgs per kg without a DLT, is that correct?

1.5 was the top dose.

1.5 without a DLT. How much read through should we take from the fact that you might be able to dose TTR using the same kind of, the same kind of LNP formulation up to those levels? Is there any kind ever read through?

I mean the simple answer is we obviously the one study has been very supportive of the overall safety profile for the broader aspects of the LNPs. It also has been in general a way for us to understand the relationship of our pre-clinical data, even across LNPs in a very important manner. So it is obviously, every molecule is its own molecule at the end of the day, but there is a lot of translational learning that is very relevant. I mean, Akshay you should comment as well.

Yes. Consistent with that, the LN VSP as told us that the dose range we were projecting for ALN-TTR study should be associated with encouraging safety data, and indeed, it has been to date, and so there clearly is some read through there that is worth noting despite, as John said, every drug product at the end a thing of itself, but I think the cross learnings from these programs are critical, and inspire overall confidence in the platform of LNP based, or lipid nanoparticle based systemic RNAi therapeutics.

So I guess if you kind of get to this, if you dose-escalate up to a mg per kg, and it doesn't look like you are at the top of the curve, you still have some flexibility perhaps to amend the trial design, if indeed safety does look okay?

Yes, but we don't anticipate that need.

Okay. And then just quickly looking at the data presentations in the back half the year, are there any venues that we should be thinking about, either for TTR or for PCS-K9?

Well, what we can say now is ASCO for VSP, that is locked. And we are obviously trying to get the other venues locked between now and year's end, and we will certainly provide updates on that when we have them locked. We have got multiple opportunities for venues between now and the end the year, for the both the TTR and the PCS-K9 data points, and obviously we know that people will want to know what those venues are, and so we will get them out there as soon as we can, Steve.

Great. Appreciate it, and congrats on the progress.

Great. Thank you. So listen thanks everyone. I think what is clear, or hopefully is clear, that this is an exciting period for the Company with a lot of clinical activities going on. Clinical trials progressing, as well as clinical data in front of us, so we are excited about where things are going, and really thank you for your support and commitment. And with that, we will sign off. Good bye.

Ladies and gentlemen, thank you for your participation in today's call. The presentation has now ended. You may now disconnect. Have a good day.