Alnylam Pharmaceuticals Inc (ALNY) 2011 Q4 法說會逐字稿

Welcome to the Alnylam Pharmaceuticals conference call to discuss fourth quarter and full year 2011 financial results. There will be a question-and-answer session to follow. Please be advised this call is being recorded at the Company's request. And I would now like to turn the call over to the Company.

Good afternoon. I'm Cynthia Clayton, Vice President of Investor Relations and Corporate Communications at Alnylam. With me today are John Maraganore, our Chief Executive Officer; Akshay Vaishnaw, Chief Medical Officer; Mike Mason, Vice President of Finance and Treasurer; Laurence Reid, Chief Business Officer and Barry Greene, our President and Chief Operating Officer. For those of you participating via conference call we have made the slides available via webcast, and they can be viewed going to the Investor's page of our website at www.alnylam.com.

During today's call as outlined in slide two, John will provide some introductory remarks and general context, Akshay will summarize our clinical and preclinical R&D activities, Mike will review our financials and guidance and Barry will provide a brief summary of our business highlights and goals before opening 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 the forward-looking statements as a result of various and 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

Thanks, Cynthia. Welcome and thanks to everyone for joining us this afternoon. I will be referring to slide four during my brief introductory comments.

For quite some time now we have emphasized that Alnylam's focus is on generating clinical data and our belief that clinical data are what matters the most for Alnylam and the entire field of RNAi Therapeutics. I am pleased to say that our team has delivered, and I am also please to see that people appear to recognize the significance of our recent progress.

Indeed, 2011 proved to be a remarkable year of important clinical achievements for Alnylam, putting us on what we believe is an exciting and strong trajectory to fully transition from a platform company to a product company focused on RNAi Therapeutics. Notably, last January we demonstrated RNAi proof of mechanism in our Phase I trial with ALN-VSP for liver cancers documenting RNAi proof of mechanism in patient biopsy samples and then at ASCO we highlighted promising anti-tumor activity for this drug.

Then just a few months ago, we were quite thrilled to report preliminary human proof of concept data from our ALN-TTR01 Phase I study demonstrating the first ever RNAi silencing of a human disease gene, namely the Transthyretin, or TTR gene, which is involved in the pathogenesis of TTR Amyloidosis.

And then, more recently new preliminary data from our ALN-PCS, severe hypercholesterolemia program showed first ever RNAi efficacy as measured toward a clinically validated end point, namely LDL cholesterol. These data in particular were important not only for this program, but also for the overall advancement in our LNP delivery research and our 5x15 strategy as they were the first to be reported using Alnylam's second generation LNP technology.

I must say that in my over 25 years in biotech, I can't recall a single calendar year with positive clinical data from three distinct programs let alone positive clinical data surrounding the advancement of a potential whole new class of medicines. We believe the impact of all of this for Alnylam in our value creation should be clear.

With these important accomplishments in hand, we are more confident than ever in the execution of our Alnylam 5x15 strategy, including the continued advancement of our ALN-TTR02 program for ALN-TTR where we recently obtained approval to start a Phase I study and where we expect to start pivotal trials next year, and also for ALN-APC program for hemophilia. 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 we transition from a platform company to a product company we are committed to focusing on what we believe to be our highest value opportunities. Specifically as John just mentioned, we will focus on our ALN-TTR02 program for TTR disease and our ALN-APC program for hemophilia, as we believe these programs represent our strongest opportunities for accelerated clinical development and for advancement of RNAi Therapeutics to markets of the highest unmet medical need. Let me start with the TTR program where we made considerable progress in the past several months.

Last November at the Eighth International Symposium on Familial Amyloidotic Polyneuropathy we reported positive preliminary clinical results from our ALN-TTR01 Phase I study showing statistically significant reductions in serum TTR protein levels in TTR patients. We believe these data represents the first time RNAi has been shown to silence a disease causing gene in patients.

Specifically, we showed a statistically significant mean reduction of 41% knockdown in serum TTR at the top dose of one milligram per kilogram, including a patient showing an over 80% knockdown in serum TTR. These results are very important since TTR is the pathogenic protein and we've demonstrated that we can effect it's knockdown in symptomatic TTR patients.

Furthermore, ALN-TTR01 was found to be well tolerated with no serious adverse events related to the administration study drug, including no elevation in liver enzymes and no injection site reactions. We've completed enrollment in the Phase I study and expect to report final data in the first half of 2012.

We are also pleased to announce today that we have received acceptance by the UK MHRA to initiate a Phase I trial with the ALN-TTR02 which we believe is our go to market product from this program. ALN-TTR02 is comprised of the same [SR] as ALN-TTR01, but it is formulated in a more potent second generation LNP, including the propriety Alnylam lipid, MC3.

The Phase I trial will be conducted in the UK as a randomized single-blind single-ascending dose study enrolling up to 32 healthy volunteer subjects. The objectives of the study are to evaluate safety and tolerability as well as pharmacodynamics as measured by serum TTR levels following a single dose of ALN-TTR02 with subjects enrolled into five sequential dose cohorts ranging from 0.01 to 0.5 milligram per kilogram. We expect to begin enrollment in the first half of 2012 and report data in the third quarter of 2012.

We also expect to initiate a Phase II multi dose study of ALN-TTR02 in TTR patients in the second half of 2012, and assuming positive results, start a pivotal trial for ALN-TTR02 in 2013.

Lastly, early in January, we also announced plans to advance a subcutaneous program in our TTR efforts, utilizing a GalNAc-conjugate delivery approach. This approach provides an opportunity for product differentiation in the TTR indication.

We are encouraged by the pre clinical data we've generated to date with ALN-TTRSc, suggesting that once repeat dosing enables robust and sustained silencing of TTR over a multi week period. We expect to file an IND, or IND equivalent for ALN-TTRSc in the second half of 2012 with data expected in the first half of 2013.

Turning to our hemophilia program, we recently presented pre clinical data with ALN-APC at the 53rd ASH meeting sharing proof of concept for this exciting approach for a novel therapeutic strategy for the management of hemophilia. Our approach in this program is to silence a key indulgent anticoagulant enzyme resulting in increase thrombin generation and improved hemostasis in hemophilia.

This strategy has been validated in human genetics based on co-inheritance of prothrombotic mutations in hemophilia patients where these patients exhibit significantly reduced bleeding complications. Our focus in this program is to target protein c. In pre clinical data we showed at the ASH meeting demonstrated rapid, dose dependent and durable silencing of protein c messenger RNA after a single dose of the drug. We will continue advancing this program toward the clinic with a goal of initiating a Phase I trial in the first half of 2013 with data expected in the second half of 2013.

In addition to our efforts with our ALN-TTR and ALN-APC programs, we are also making progress in our additional Alnylam 5x15 program, including ALN-PCS for severe hypercholesterolemia, ALN-HPN for refractory anemia and ALN-TMP for hemoglobinopathies. Just last month we presented positive [flurry] data from our Phase I clinical trial with ALN-PCS at the Brigham and Women's Hospitals. The results reported are very exciting for Alnylam for different reasons. Importantly they demonstrated safety and tolerability as well as potent, robust and statistically significant knockdown of PCSK9 plasma levels and reductions in low-density lipoprotein cholesterol, or LDL-C levels, a clinically validated endpoint.

In particular, we showed a greater than 66% knockdown of PCSK9 and a greater than 50% lowering of LDL-C. We're continuing dose escalation in this study and we expect the result may improve with higher doses. In addition, results from this important study demonstrated improved potency with our second generation MC3-based LNPs in human studies, which will likely become a go forward formulation for certain Alnylam 5x15 programs. We plan to partner our ALN-PCS program prior to initiating a Phase II study.

We also recently designated our fifth Alnylam 5x15 program for the treatment of hemoglobinopathies. Hemoglobinopathies are defined by genetic defects in the globin chains of hemoglobin and are associated with chronic anemia, extra medullary hematopoesis and iron overload. Our therapeutic candidate, ALN-TMP, comprises a systemically delivered RNAi therapeutic targeting TMPRSS6, or [tmpr6], for the treatment of hemoglobinopathies, including beta thalassemia and sickle sell anemia. TMPRSS6 is a genetically validated target expressed on the hepatocytes. It functions normally by cleaving hemojuvelin resulting in reduced hepcidin levels and increased iron mobilization.

Pre clinical studies with ALN-TMP have demonstrated corrective effects on iron overload, and in addition broader disease modifying effects, including improvement to hemoglobin levels and [splenic histopathology]. We see this program as a potential breakthrough strategy for the treatment of hemoglobinopathies where there is a significant unmet medical need. And we plan to partner this program prior to conducting a Phase I study.

To sum up the progress we've made with our Alnylam 5x15 programs, we also presented pre clinical data from our ALN-HPN program for refractory anemia at the recent ASH meeting. These data documented transferring receptor type 2, or TFR2, as an ideal target for hepcidin pathway antagonism and demonstrate efficacy in animal models. We plan to partner our ALN-HPN program prior to initiating a Phase I study.

Now in addition to our Alnylam 5x15 programs, we have a number of programs focused on other disease indications with existing partnerships that we have formed or new alliances that we expect to form in the future. This includes our RSV program which has completed enrollment in it's Phase IIb study. We expect to report results from this study in mid 2012.

This also includes our liver cancer program where we established RNAi proof of mechanism, and as of today, still have three patients with disease control receiving ALN-VSP under an extension protocol, including an endometrial cancer patient that has been on drug for over 20 months. We plan to partner this program prior to starting Phase II.

We are also advancing ALN-HTT, our Huntington's Disease program, that we are working together with Medtronic and the CHDI Foundation and we expect to file an IND and advance ALN-HTT into clinical trials in the second half of 2012. 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 14 in our slide deck. We continue to maintain a strong financial profile, and in 2011 with $260.8 million cash, cash equivalence and marketable securities. Our GAAP revenues for the fourth quarter of 2011 were $20.5 million, and for the full year 2011 we recognized $82.8 million of GAAP revenues. As you know we continue to record the amortization of up front payments from the strategic alliances we have formed which account for a significant and recurring portion of our quarterly GAAP revenue.

Moving to expenses. R&D expenses were $23.4 million in the fourth quarter of 2011 as compared to $26.1 million in the prior year period. For the full year of 2011, R&D expenses were $99.3 million as compared to $106.4 million for the prior period. R&D expenses in 2011 decreased slightly as compared to the prior year primarily as a result of lower pre clinical expenses in connection with the our ALN-PCS program as we advance this program to a Phase I clinical trial.

G&A expenses were $10.7 million in the fourth quarter of 2011 as compared to $7.5 million for the prior year period. For the full year of 2011, G&A expenses were $38.3 million compared to $37.7 million for the prior year. The increase in G&A expenses during the fourth quarter as compared to the prior year period is primarily due to higher consulting and professional services expenses related to business activities, primarily legal activities.

With respect to guidance for 2012, we believe we will finish the year with greater than $180 million in cash. This financial profile provides us with a strong balance sheet to build our business mainly through execution on our Alnylam 5x15 product strategy. This concludes the financial highlights, and I will now turn the call over to Barry.

Thanks, Mike. Hello, everyone. The progress we have made this past year has positioned us for an extremely exciting time ahead, and we are more confident now than ever in our ability to harness the RNAi pathway for the development of high impact, innovative, commercially attractive medicines. We are continuing our transformation from a platform company to a product company, and so as we have discussed, we are focusing our near term efforts and resources on what we believe to be our highest value opportunities. Specifically, accelerating clinical development plans for our amyloidosis program and our hemophilia programs where we see clear development (inaudible) of significant unmet needs.

As a result of this increased focus, we recently implemented a strategic corporate restructuring which included an approximate 33% reduction in our workforce. While difficult for all of us as a personal level, we are extremely confident it was the right move and an important step in building our Company for the long-term. Of course, we are extremely grateful to all of our employees, past and present, for their dedication, passion and commitment in advancing RNAi Therapeutics to patients.

Looking forward, we have set out exciting goals for 2012 and beyond which you can see on slide 16. Specifically, we expect to accelerate development of our ALN-TTR program which includes the presentation of final data from our Phase I study for ALN-TTR01 in the first half of 2012, initiate our Phase I trial with ALN-TTR02 in the first half of 2012 with data expected in the third quarter of this year, start a Phase II multi dose study of ALN-TTR02 in patients in the second half of 2012, and assuming the data are supportive, initiate a pivotal trial for ALN-TTR02 in 2013. Further, we expect to file an IND for a subcutaneous version of this drug, ALN-TTRSc in the second half of 2012 with data expected in the first half of 2013.

Additionally, we expect to advance our ALN-APC program toward the clinic with a goal of initiating a Phase I clinical trial in the first half of 2013 and report data in the second half of 2013. We will have mentioned continuing our Phase I trial with ALN-PCS with planned dose escalation ongoing and our plan to report additional data in the first half of this year. As we have guided, the plan is to partner this program prior to initiating a Phase II study. On other 5x15 programs, we expect to advance our ALN-TMP program for hemoglobinopathies and our ALN-HPN program for refractory anemia via partnerships prior to conducting clinical studies.

On the other pipeline opportunities, we will continue to advance our partner-based programs, including reporting data from our Phase IIb study with ALN-RSV01 in mid 2012 and filing IND to advance our Huntington's Disease program into clinical trials in the second half of 2012. Rounding out our goals, as we've mentioned before, we expect to form additional partnerships, and we will maintain a strong balance sheet, and in 2012 with greater than $180 million in cash. With that I would like to turn the call back over to the operator for your questions. Brian, we will take questions, please.

Absolutely. (Operator Instructions). And your first question comes from the line of Marko Kozul of ThinkEquity. Please proceed.

Hey, good afternoon. Congratulations on your progress and momentum into the beginning of the year. Looks like you'll have a lot of interesting data sets and drivers coming up as well.

Thanks, Marko.

First question. Do you plan on filing on INDs and ALN-TMP and ALN-HPN, the refractory anemia program, or you think this is something you'd do in conjunction with a partner?

Yes, Marko, we are going to do that in conjunction with a partner. The near-term plan is to really focus on the TTR amyloidosis program and the hemophilia program as things that we drive forward full force deep into clinical development toward pivotal trails, including TTR and pivotals in 2013. The other programs are going to continue to move forward, but we will obviously leverage partnerships that we expect to form on those programs as they move forward.

John, thanks for that answer. You plan on partnering these programs before initiating Phase Is. Should we be thinking that you might be near partnerships for those compounds? If so, what kind of deals do you think we should be thinking about?

It is always hard to predict, and we don't want to predict when partnerships might occur. We certainly expect to do partnerships this year, and that's our goal. We will certainly let you know when those partnerships occur. But it would be premature to say when and what phase we're at. We have a lot of discussions that are always ongoing.

Perfect. And maybe just a quick one on financials. I realize there is a lot of moving parts, but I was wondering if you could give us some thoughts on your longer term expenses, maybe beyond 2012? Thanks.

Sure, Mike, you want to do that?

Sure. Marko, we definitely will expect to see R&D expenses decrease in 2012 due to the recent restructuring. And G&A we expect to decrease slightly in 2012. And then going forward we are not giving any specific long-term guidance, but we do expect these expenses to stay in-line going forward.

I think the other thing I will add, Marko, is that obviously as we bring new partnerships in to fund some of these additional programs, we think that is obviously going to be part of our financial story going forward.

And if I could just sneak in a quick one on your announcement today regarding the circulating extracellular RNA detection method. I was wondering what else do you need to do to validate this and maybe use it in humans? And how would you envision the technology applied in the real world to some of your programs? Thanks.

Marko, thanks for asking that question. It is actually a very exciting discovery by our scientists, and one that we think could be actually rather revolutionary in the whole RNA Therapeutic space. Not just sRNAs, but also Antisense as evidenced by ISIS taking a license for the technology, microRNA Therapeutics, even gene therapy.

We are as we speak, advancing this technology on human samples from our clinical studies. Stay tuned on that. Being able to measure knockdown of the mRNA in animal studies or in humans, obviously in concert with modulation of the protein at the same time, just adds a whole new dimension of biomarkers that we can use in our clinical research.

It is a powerful tool. We believe it will have high impact for the entire field. It is something which we are obviously actively involved in translating its use in humans, and we believe the entire industry will find it to be a very useful technology and we are prepared to help enable them with licensing.

Thanks for taking the questions, and congratulations on your progress.

Thanks, Marko.

And your next question comes from the line of Ted Tenthoff of Piper Jaffray. Please proceed.

Great, thank you very much for taking the question and congrats from me as well. It is great to see the turn around taking place driven by the clinical programs. A question on TTR2. I know you guys have shown some pretty compelling data regarding the increased silencing of the proteins. How big of a magnitude should we expect that to translate into human, or kind of a way you think about that? And ultimately, what does that mean for the clinical outcome and the clinical applicability built of the drug?

That's a great question, Ted. Akshay, you want to handle it?

Hey, Ted. In terms of the translatability, what is looking increasingly clear to us is that the non human primate is rather representative with products like ALN-TTR01 which is the first generation LNP, and with [LNP02] where we use the second generation LNP, the data there are very representative of what eventually will turn out to be true in the human studies.

So for example, 40% knockdown at one milligram per kilogram on average in the non human primate with TTR01. And at that dose levels that's exactly what we saw in the TTR01 human study which we reported in Japan in November. Similarly with PCS02 on a one milligram per kilogram basis, the results we're seeing are almost exactly in-line with the knockdown we saw with PCSK9 in the non human primate.

So I think if we carry that lesson forward, and of course, we are projecting here so we can't be sure, but increasingly I think we feel confident that with TTR02 we should at doses in and around 0.3 milligrams and above see very significant knockdowns. So for example, a dose of 0.1 milligram per kilogram of TTR02 in the non human primate gives you 70% knockdown. No reason why that shouldn't happen in the human being I think, and we will find that result out soon. At 0.3 milligrams and above we are anticipating 80%, 90% or better knockdown after single doses. Certainly, both we feel and the field consider that kind of knockdown would result in significant clinical efficacy in terms of improvement in TTR patients.

The only thing I will add, Ted, is when you think about the profile of our drug for TTR, you are talking about once a month IV infusion with far greater than 50% knockdown that is sustained for three to four to five weeks. So it starts to set out this once a month dosing paradigm. A very attractive profile for a drug.

Well I am really excited to see that program progress. Thanks for taking the question.

Thanks, Ted.

And your next question comes from the line of Alan Carr of Needham & Company. Please proceed.

Hi, thanks for taking my question.

Hi, Alan.

I wanted to ask you about the TTR2 trial that you have coming up. Can you comment a bit more about that? It looks like it is in healthy volunteers, I think it was single ascending doses as opposed to patients for TTR1? What is the rational behind that?

Sure, Akshay, you want to handle that?

Yes, Alan, I think if you look at the body of work over the last few months, you have seen that we've shown the target knockdown against multiple targets, TTR and PCS. We have shown it with our first generation, we have shown it with our second generation, we have shown it in healthy volunteers, we have shown it disease settings. We are very confident that TTR02 will knockdown TTR both in patients and healthy volunteers.

The reason why we selected healthy volunteers for the [SAD] study is simply so that we could move very, very quickly and demonstrate the [POC] at a dose that we can carry forward into later development. And I think today's announcement is very exciting for us. We are cleared to initiate our Phase I study. And so in the first half I think we are going to be getting important data there.

I would just add, Alan, that I think over really the last couple years between our VSP liver cancer program and the TTR01 program, we have learned a lot about the safety profile that is an important factor when you consider going into human volunteers. So both with the PCSK9 program and now with this TTR02 program moving into human volunteers to get quick sets of data that allow us to go into Phase II, is certainly now enabled by the safety data we have in general. So that is certainly a factor in this as well.

And then a second question I have in light of the restructuring. Can you give us a sense of what percent are your resources this year? Are going to be going into the APC and TTR programs versus other programs and some of your discovery stage work?

That's a great question. Let me just give you some general color on that, and then Mike, you can add some additional color. I think we are at a stage now of a company where it is about 65%/35% mix of activities around development versus -- if you look at our R&D activities versus delivery-related research. We still have an ongoing delivery research effort within the Company. But it is proportionally now more focused on our pipeline related activities. That's a general mix of the overall spend.

As it relates to TTR, both the 2002 program and the subcu program, obviously those two programs combined are the most significant investment that we are making in the Company. The hemophilia program now is ramping up quite a bit, and will ramp up toward the back half of the year as we affect our R&D transition toward IND filing in the first half of 2013. TTR is certainly the program where we have the highest level of investment in the Company for all of the right reasons. And that is probably the second up on that ranking order would be the hemophilia program, and then the other programs are being advanced with partnerships. Mike, do you want to add anything to that?

No. That's exactly right. As John mentioned, approximately two-thirds of our R&D spend is directed toward the development (inaudible), with TTR and APC taking the majority of that spend, and with the rest of it going to research which is about the other third of our R&D spend for 2012.

Okay. Where I'm going with this is that you guys have been able to bring forward several candidates here. Are you focusing on a couple of them internally, several you are looking to partner. I'm wondering if out of your research programs, are you going to be bringing forward some more candidates that you might develop internally? A third one behind TTR02 and APC?

Yes, Alan, we actually are. We have a research engine that is able to generate, frankly, more clinical assets than our clinical organization can afford to invest in. But what we are doing in the very near term is we are just charging our whole organization to be hyper focused on our TTR program and our hemophilia program.

Our research effort, obviously, is generating new and pretty exciting pre clinical programs. We've commented on some of them before. Program in alpha-1 antitrypsin deficiency, program in acute intermittent porphyria. So there are programs in the research side, but obviously the real core focus of the Company is what we are doing on our TTR program and hemophilia program. Because we know we can drive those programs pretty rapidly now into pivotal studies, and that's the near-term goal of the Company.

Understandable. Do you all have any internal goal about bringing forward another program behind those two, specifically for internal development all the way through Phase III, or is that -- or have you reached what you want to --

No, we have internal goals that relate to our research organization continuing to advance new important genetically defined target programs forward. There is an ongoing body of work that goes on in that regard.

I guess as they move forward you at some point decide whether or not those are something you can bring forward internally.

Absolutely, or partner them. I think our data over the last three months now has really been important, not only I think in the general outside world, but also in the eyes of the pharma industry who appreciate that our results are pretty important for what we do and opportunities for partnering.

Thanks, it has been helpful.

Great, thank you.

Your next question comes from the line of Mike King of Rodman & Renshaw. Please proceed.

Thanks, and let me add my congratulations to you guys on all of your progress.

Thanks, Mike.

Just a couple of questions. Don't know how much more color you want to give on the financial guidance. When we model your expenditures, it doesn't seem like you got to bring in a whole lot more in terms of partnering revenue to meet the financial projections we got for you guys for 2012. I guess what my question is if you do some partnerships, do you think you might turn the dial back up on R&D to address some of the programs you just have spoken about and in answer to the previous question in terms of (inaudible -- technical difficulty) or other.

Yes, Mike, let me answer that in a general sense. You are right in your math. The year-end forecast really doesn't include any significant business development. We have some ongoing revenues from existing licenses and other agreements out there -- which is just a conservative thing to do.

Obviously, as new partnerships arise depending on what programs are focused on, that will have two affects. One is to offset the overall spend profile on a net basis, and the other is to obviously enable investment in additional programs. From a general flavor standpoint, that is certainly the case.

These will end up being case by case. And so as we get color on specific partnerships that are formed this year and even into next year, we will provide you better guidance and flavor as to what that means financially for the Company. (inaudible -- multiple speakers)

Is it safe to say that you won't start another program until one of the 5x15 programs is partnered?

Well, I think it is safe to say we got a lot of programs that we could partner, and we want to keep our belt pretty tight around here. Because it is something -- I mean with where we have taken the technology and the Company right now and having the line of sight we have got around TTR and hemophilia, we just want to make sure that we drive those programs ahead.

A lot of what we are doing around here is making sure that people are pretty focused. And that is important just even culturally for the Company to make sure that we nail those programs. But there are lots of different things that we can do with the technology. It is pretty endless. And we will advance that as new partnerships come together.

Right. And you might have to come up with a new catch phrase.

Oh, as always.

16 or something like that.

Thanks, Mike.

Just putting that out there. Tuck that away. You guys talked about you have a GalNAc version of TTR coming. Why not PCSK9? It seems like with the competition, a GalNAc version of PCSK9 would give you a lot of advantages from a competitive standpoint and maybe drive better partnership terms et cetera.

Yes, well we love conjugates and we love where that can go for lots of different reasons. PCSK9 is a good place for it. Obviously with the human clinical data we have got which as we dose escalate we expect to only get better. We think that becomes an important aspect of the partnering discussion because it is not just the LNP delivered form, but also a potential conjugate base form as well.

And then real quick, now that you've got [CERD] technology, is it fair to say that you will [couple] CERD to all of your programs, most of your programs, as many as you can? How does that fit in with your clinical development -- (inaudible -- multiple speakers)

As many as you can. Yes, Mike, if you looked at the slides that are now on our Capella website, what you would see is that the target gene, at least with the current sensitivity of the assay, it has to be -- it doesn't have to be a super abundant message, but it has to be reasonably abundant. So depending on the target mRNA that we are going after, at least in the current manifestation, that could influence exactly the utility of the CERD assay. But so far we are very encouraged by it, and obviously in the data that we show in the poster we were able to knockdown and detect both TTR, TMPRSS6 as well as [sinucleant] from intraparenchymal infusion in the CSF. Those data are pretty compelling. And we think are they are going to be pretty important for the whole field.

Great. I will jump back in queue.

Sure, thanks, Mike.

Your next question comes from the line of Keay Nakae of Chardan. Please proceed.

Hi, Keay.

Hi, how are you guys ?

Good.

A question for Mike with respect to the financial guidance. If we think about the level of operating expense in each of the quarters in 2012, how level should we be thinking those are going to be?

Well, I think the one thing to keep in mind -- actually two things to keep in mind. The first one is the restructuring. We will take a charge for $4 million that will take place all in the first quarter of 2012. And the split, we don't have specific guidance on what the split between R&D and G&A, but it will certainly be heavily R&D weighted just because that stuff is the makeup of our Company.

And the second one different -- not so much an expense perspective, but our GAAP revenue is related to Roche, our straight line amortization under our Roche alliance ends in August of 2012. So the recurring Roche revenue that you have seen over the last few years will end during the third quarter. That will go away during the fourth quarter of this year.

Thanks for that. And then for Akshay, for TTRSc. As you move that into humans, is the inclusion criteria going to be TTR confirmed patients given that you've got some additional variables there?

So specifically, Keay for TTR -- I'm sorry you are talking about TTRSc you said, right?

Yes.

Yes. The plan is to file they IND or equivalent later in the year. We have not as yet announced the exact target population. Is it healthy volunteers, is it patients. We did on this call earlier have a discussion about how one can honestly move quickly in healthy volunteers, and as we finalize those plans we will get them out. But I think we are confident that we can file this year, and look forward to the data in terms of proof of concept on TTRSc in the first half of 2013.

Keay, one of the reasons we are excited about the subcu program in this effort is obviously we view the TTR amyloidosis clinical setting as being one with multiple, distinct opportunities for product development and having the opportunity with our platform of having both an LNP-based formulation for [FAP] patients, for example, and then being able to broaden out the opportunity with the subcu formulation is something we think is compelling.

Obviously in the near-term is to generate the translational human date in the Phase I study which we are eager to generate those type of data. And then it will open up a number of different doors for us in terms of how we think about clinical development.

And Akshay, just back to the Phase I for TTRO2. What is the risk in going in the healthy volunteers with the different formulation? We appreciate it is the same payload.

Well, I think in terms of risk, we of course are optimistic. Recall that TTR02 and the PCS program where we announced the proof of concept data in early January, they share the same LNP, the second generation LNP that is based on that MC3 lipid. To date the safety performance of that second generation LNP with PCS has been very good. And we reported those data.

So the payload, as you emphasized, the TTRS RNA is the same as the TTR01. The LNP has been evaluated in the PCS context. We are optimistic. I think it should be rapid progress, and hopefully announce POC soon with that.

Thanks.

Thanks, Keay.

And your next question comes from the line of Christopher James of MLV and Company. Please proceed.

Thanks for taking my question and congrats on a great quarter on multiple product fronts.

Thanks, Chris.

I just had a question about the TTR02 program and the pivotal program in 2013. Do you get a sense from the clinicians as to what knockdown you need to see with the second generation for this to be a clinically meaningful drug, and what number of total patients do you think you need to go into?

Well, those are great questions. Akshay, do you want to comment?

Yes, Chris, the clinical data around not just TTR, but systemic amyloidosis in general, and as you know there are a number of different systemic amyloidotic disorders, there is AL disease that occurs in the context of myeloma, there is AL amyloidosis that occurs in the context of inflammatory disorders. That landscape teaches us that greater than 50% reduction of the pathogenic protein will translate to clinical efficacy.

Even with TTRO1, from the date we had we started feeling pretty good, and in fact many investigators said come on let's go and do the pivotal study with TTRO1. But with TTR02 I think we clearly have the capacity to achieve an 80%-plus knockdown at low doses. And so we are looking towards demonstrating that in short order now.

The Phase I study is about to start. I think we will do a quick Phase II study in patients and looking forward to Phase III in 2013. But with the knowledge that 80% or greater reductions should comfortably deliver significant clinical efficacy in this high medical need area.

Thanks. And with respect to PCS, did I hear you correctly you are going forward with the third generation ?

No. No, no. That was not said. That is not the case. We are advancing the existing drug. We are dose escalating in the Phase I. We will be reporting on those complete data in the first half of the year, Chris. And then obviously the plan is to partner that program.

And when could we see the full data set for the Phase I study in terms of publications and scientific meetings?

The first half of the year, of this year.

First half, not first quarter?

First half, that's correct.

Thanks, guys. Thanks for taking my questions.

Thanks, Chris.

And your next question comes from the line of Stephen Willey of Stifel Nicolaus. Please proceed.

Thanks for taking my question and congratulations again on the progress.

Thanks, Stephen.

I was wondering if you could elaborate on one of the earlier questions with respect to deal structure and just in terms of how you are thinking about some of these earlier stage assets strategically. I'm wondering if there is in any scenario by which you would entertain some kind of cost sharing arrangement within the clinical development process? Such that maybe you are able to retain a high percentage of backend economics, and whatnot.

Yes. Stephen, we are always open to different structures. It does depend on what we think are the going forward costs and what we think are the challenges for the program specifically, and how well it might fit with our overall plans and strategy. In general we can be pretty flexible on those types of things and have been in the past. As you know we have done deals with companies like Cubist where there is a potential for sharing in the value proposition at the end. We have done other partnerships like with Novartis where it is more of a traditional milestone, royalty type structure.

And it is pretty case by case, and it typically is something which in the context of discussions often gets [verted] out. Laurence, you should comment as well here in terms of how you see this playing out. But it depends on the program, it depends on the Company's needs. We always think about how we make sure that we enable maximum value creation on the partnership structure.

Yes, I think that's right. In the immediate future, obviously the kind of partnership we are looking to do -- we are not going to increase the burn by taking a lot of extra cost sharing in some of the incremental programs that we have stated we want to partner. I think creating optionality for the longer term is ways to expand our portfolio beyond the two core programs is certainly in the back of our mind. But in the short-term I think you want to get some of these extra programs beyond the core two programs driven forward with partners, but with a significant amount of that cost covered by the [partnership].

Stephen, you and others have asked the question about the pipeline assets which John and Laurence covered very well. If you take a step back, it is our belief set that driving TTR and driving the hemophilia programs forward are the highest value creating activities, and owning those commercially in major markets is how we are going to create the most amount of value.

As partnerships emerge and those programs advance, we can certainly round out our clinical pipeline. But those two assets we think are -- we see clear lines of sight developmentally. We see them as very attractive commercial opportunities.

And so when you think about potentially a deal structure for something like PCS02, would you envision providing a potential partner with a license that would also provide access to GalNAc-conjugates, or do you envision that being a separate licensing agreement?

No, it would certainly be part of the license agreement.

So they would have carte blanche access?

Yes, and they would likely fund the Company to do research on generating that lead candidate if that were of interest to them.

And maybe just lastly if you could provide a little bit of color around the recent issuance of the 448 patent? And maybe what the implications are, if any, from an economic royalty bearing perspective, and how that might change, if so, the ongoing litigation with Tekmira.

What is a 448 patent, again?

That's around the second generation LNPs.

Okay, yes. So that's obviously an exciting patent that covers our MC3 lipid. And I think what is very clear about the award of that patent is that the patent office looking at all of the available art in the world identified the novelty and the uniqueness of the MC3 lipid and the distinct characteristics from a patent ability standpoint.

And it is something which obviously provides Alnylam with I think a very important asset as it relates to second generation LNPs which clearly are critical for the advancements for RNAi Therapeutics with LNP based technologies. I going to have to say limited there in my comments other than the fact that we are obviously pleased with that new patent and it's an important invention made by Alnylam and the [ALCana] scientists, and it is an important lipid going forward.

All right. Appreciate the color and congrats again.

Thanks, Stephen.

And your final question comes from the line of Charles Duncan of JMP Securities. Please proceed.

Hi, guys. Thanks for taking my question, and congratulations on a good quarter of progress lately.

Thanks, Charles.

I'm at the end of the line which is uncommon for me. So many of the good questions were asked. I was going to ask you about partnering, and I apologize to everyone on the line if this has already been asked. But the TTR02 partnership, I think we have discussed in the past , do you think just strategically about that, what timing in terms of stage of development do you think would make most sense, or is there a way to get all of the way to the end game commercial stage with that product

Well, I think we are really attracted to the latter opportunity, and it is not to say there wouldn't be or couldn't be partnership things that we would entertain, but it would obviously have to consider very importantly our involvement with that and our driving of that, and it would probably be shaped and framed around geographic aspects of it. Where Alnylam maintains the US. But certainly the other side of it is we just drive this program, and don't focus on any partnership activity with that [entity].

Makes sense. Seems like you could do . If I could ask a follow-up on the APC program, and again apologize if it has been asked. With regard to that program, could you remind us whether or not you've demonstrated improved [pharma] levels with APC

Not experimentally as of yet. That's being done as we speak. There is a number of pre clinical studies that remain to be reported. We know from both the genetics as well as from other experimental evidence that you will improve pharma generation by knocking down protein c. And Charles as you know, it is a field I know pretty well from the Angiomax days. It is pretty incontrovertible. So at the end of the day it is very well validated that is going to be an outcome of knocking down protein c.

Makes sense. Final question probably for Mike and this probably comes more from my associates than me, but I'm wondering if you can provide some additional color on operating expenses going forward? I think you are giving some type of guidance. Can you give us some more color on that?

Sure. A couple things to think about. One is we do expect as a result of the recent restructuring -- two things. One there will be a charge of $4 million that will take in the first quarter of 2012. A one-time charge. And we also expect research and development expenses to decrease during 2012 compared to 2011.

On the G&A side, we expect expenses to decrease slightly in 2012 compared to 2011. And then the other thing I mentioned earlier on the call is on the revenue line. The one thing of note is related to our Roche revenue which we amortized straight line over five years, and that five-year period ends in August of 2012, so that revenue will go through the mid third quarter of 2012.

And then one last question in terms of patenting, and John, I understand your sensitivity around getting into details here, but I appreciated the answer you gave to the previous question regarding your patent considering all of the state-of-the-art at that time. I guess Tekmira got a couple of patents here issued recently and it includes some certain ratios of lipids in terms of the LNP formulations. I'm wondering if you think those ratios could be different than what you are doing as well as from the stand point of the chemical modification of the siRNA sequences, some of the claims that they have, or is that something we have to wait and see come out in the courts, or some other way in the future?

Yes, Charles, I think that is a real simple answer. We have licenses to those patents. We are happy they have been issued, and it is part of the broad IP estate that we've licensed into the Company from companies like Tekmira, ISIS, [Max Planck] Institute, ALCana, many companies out there. We have access to all of those patents, and therefore we are delighted to see them issue in the US PTO.

Sounds good. Thanks for the added color, John.

Thank you.

Thanks, Charles.

Good, so thanks, everyone. We very much look forward to sharing with you our continued progress through this year. It is going to be an exciting year for sure, and it is certainly a very exciting time for RNAi Therapeutics. And by all accounts, we appreciate your commitment to our efforts. Thanks, everybody.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect your lines, and have a nice day.