Alnylam Pharmaceuticals, Inc. (ALNY) Q3 2012 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Welcome to the Third Quarter 2012 Alnylam Pharmaceuticals Earnings Conference Call. My name is Chris, and I will be your conference moderator for today. Presently, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. And at this time, I would now like to turn the conference over to your presenter for today, Ms. Cynthia Clayton. Ma’am, you may proceed.

Good afternoon. I’m Cynthia Clayton, Vice President of Investor Relations and Corporate Communications at Alnylam. With me today are John Maraganore, Chief Executive Officer; Barry Greene, President and Chief Operating Officer; Akshay Vaishnaw, Executive Vice President and Chief Medical Officer; and Mike Mason, Vice President of Finance and Treasurer. 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.alnylam.com. During today’s call and as outlined on slide two, John will provide some introductory remarks and provide some general contexts. Akshay will summarize the clinical progress with our Alnylam 5x15 and current programs. Mike will review our financials and guidance, and Barry will provide a brief summary of our business highlights and goals before we open up 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 will now turn the call over to John.

Thanks, Cynthia. Welcome and thanks everyone for joining us this afternoon. Our activities and accomplishments this quarter and recent period reflect very important scientific and clinical progress for Alnylam, and in fact for the entire field of RNAi therapeutics. Highlights include positive results we reported in our clinical programs and continued execution on our Alnylam 5x15 product strategy. Importantly, we reported positive data from a Phase I study of ALN-TTR02, the lead program within our Alnylam 5x15 efforts, where we showed that a single dose of drug results in rapid dose dependent, durable, specific and RNAi mediated knockdown of Serum Transthyretin or TTR for disease causing protein in transthyretin-mediated amyloidosis. Specifically, we showed TTR knockdown of up to 94% that was sustained in nearly 80% at one month. We believe this data document and unprecedented level of clinical activity for RNAi therapeutics, and serve as an important industry milestone in the advancement of this new class of medicines to patients. In the meanwhile, we continue to enroll patients in our Phase II multidose study of ALN-TTR02 in ATTR patients. With the recent accomplishments in our pipeline efforts, we continue to be convinced that with Alnylam 5x15, we have a very exciting opportunity to advance RNAi therapeutics focused on genetically defined targets for diseases that currently have limited treatment options for patients and their caregivers. We also believe that this product strategy creates an important path and a complying path for overall value creation for our shareholders. The other highlight for the quarter and recent period is our success in business development. Indeed, we completed three significant deals during the quarter and recent period, including an alliance for ALN-VSP in China with Ascletis, an alliance with Monsanto for applications of Alnylam RNAi technology in agriculture and an alliance in our ALN-TTR…

Thanks, John, and hello, everyone. As John mentioned, we’ve had an extremely rewarding and productive quarter on the clinical front. I’m going to focus on the recent progress with our Alnylam 5x15 programs, beginning with the recap of data we presented from our ALN-TTR02 program. As all of you are aware, ALN-TTR02 is the flagship program in our 5x15 product strategy and as I aim that the treatment of TTR-mediated amyloidosis or ATTR. ATTR is a devastating, hereditary and often fatal disease cause by mutations in the TTR gene. As an often disease, ATTR afflicts approximately 50,000 people world-wide and is associated with significant mobility and a mean life expectancy of just five to 15 years from symptom on set. It’s clear that new therapies are needed for the treatment of ATTR and we believe that our mechanism of action, silencing of the disease causing TTR gene leading to knockdown of the circulating TTR protein has a potential to generate a profound therapeutic impact. In July, we reported data from our Phase I trial with ALN-TTR02. The trial was conducted as a randomize single-blind, placebo-controlled, single-ascending dose study with 17 healthy volunteer subjects. Our objective of the study was to evaluate the safety and tolerability of a single dose of ALN-TTR02. In addition, pharmacodynamic and clinical activity for ALN-TTR02 were measured based on circulating serum TTR protein levels through at least day 56 falling the single dose. As you can see on slide eight, results from the study showed that a single dose of ALN-TTR02 resulted in rapid, dose dependent, durable and specific knockdown of serum TTR levels, which appear to be RNAi-mediated, with the overall results being highly significant with the p value of less than 0.00001. Even at doses as low as 0.15 milligram per kilogram, substantial serum…

Thanks, Akshay and good afternoon everyone. Turning to slide 15, we continue to maintain a strong financial profile, ending the third quarter of 2012 with $295.8 million in cash, cash equivalence and marketable securities, which excludes the upfront payment of $22.5 million from our recent alliance with Genzyme, which was received in the fourth quarter. Our GAAP revenues for the third quarter of 2012 were $16.8 million as compared to $20.8 million in the third quarter of 2011. Q3 revenues consists primarily of $9.3 million of collaboration revenues related to our alliance with Roche, which assigned its rights and obligations to Arrowhead Research Corporation during 2011 and $5.5 million of revenues related to our alliance with Takeda. Looking ahead, we expect revenues to decrease due to the completion of amortization of Roche/Arrowhead deferred revenue during the third quarter of 2012, partially offset by revenues from the Monsanto alliance which will be amortized on a straight line basis over five years. Moving to expenses, R&D expenses were $22.1 million in the third quarter of 2012 as compared to $24.3 million in the prior year period. The decrease is due primarily to lower clinical trial and manufacturing expenses related to our ALN-RSV and ALN-VSP programs, partially offset by additional expenses related to the advancement of ALN-TTR program. G&A expenses were $12.8 million in the third quarter of 2012 as compared to $9 million in the third quarter of 2011. The increase was due primarily to an increase in consulting and professional services fees related to business and legal activities. Regarding year-end guidance, we now expect to end 2012 with greater than $280 million in cash, which will continue to provide us with a strong balance sheet as we advance RNAi therapeutics through clinical trials and towards the market. Our previous guidance was to end the year with greater than $250 million. This increase is due to upfront payments from new alliances with Monsanto and Genzyme. As we outlined in our press release, the new guidance excludes any potential payments related to a resolution if any of our ongoing litigation. This concludes the financial highlights and I’ll now turn the call over to Barry. Barry?

Thanks Mike. As you heard this afternoon, we were demonstrating with human clinical data that the RNAi pathway could be harnessed to create high impact, innovative medicines. In addition to the substantial advancements with our pipeline, we also made tremendous progress in our business development efforts in the recent period through new collaborations with Genzyme, Monsanto and Ascletis. Notably, we recently formed a strategic alliance with Genzyme to advance our TTR amyloidosis program in Japan and the broader Asia-Pacific region. Genzyme clearly the industry-innovator and leader in bringing orphan drugs to patients in need will leverage its proven regulatory and commercial capabilities and the Japanese in broader Asian market to advance ALN-TTR program, which includes ALN-TTR02 and ALN-TTRsc. Very importantly, Alnylam maintains all other rights consistent with our plans to develop and directly commercialize this potential breakthrough medicine in North and South America, Europe and rest of the world. Under the terms of the agreement, Genzyme has made an upfront cash payment of $22.5 million to Alynam. In addition, Alynam is eligible to receive certain success-based milestones payments totaling $50 million. Furthermore, Genzyme will make tier royalty payments to Alynam that are expected to yield an effective rate in the mid-teens to mid 20s on sales of ALN-TTR and the territories covered by Genzyme. The royalties in this agreement represent a very attractive way for Alynam to participate in the success of ALN-TTR in Japan and other Asian countries. We are very excited to form this alliance with Genzyme and we believe that as a result of this alliance, ALN-TTR will get to patients in Japan and other Asia-Pacific countries sooner and that our drug will reach these markets much faster. We are also excited about the partnership we formed with Monsanto, a leader in the field of agriculture. This…

Thank you. (Operator Instructions) Our first question comes from the line of Geoff Meacham with J.P. Morgan. You may proceed.

Hi. Thanks. This is actually Mike in for Geoff. Thanks for taking the question.

Hey, Mike. How are you?

Good. Thanks. I just had a question on the hemophilia program. Other than that, are we seeing some of the Phase III data for Biogen’s hemophilia program? I was curious if that in any ways sort of changes how you view the market opportunity for the AT3 program?

Absolutely. Well, let me have Akshay and Barry address that question. Akshay, do you want to start?

Yeah. There are a number of very exciting things about the Biogen program, including potentially less frequent administration of intravenous replacement factors for factor VIII and factor IX. I think more importantly for us and what’s really exciting about the Alnylam approach, is it’s a completely different approach. It relies on subcutaneous dosing. They are really no programs in the hemophilias base that can effort subcutaneous dosing. It's an innovative approach targeting AT or antithrombin, which will allow us to address several very important segments. So there are these very high unmet need patients with inhibitors who have no ability to take any replacement factor on a regular basis. So, I think there's tremendous possibility there. And then with respect other hemophilia A and B patients, administration of ALN-AT3 drug could lead to less frequent dosing of the replacement factor, potentially still or even at one, and one possibilities that they might even be able to do without replacement factors if product has an outstanding profile, which we hope that it does. So there is lots of opportunities there in hemophilia itself and then not to mention, rare bleeding disorders, so these are deficiencies of some of the other clotting factors like V or VII or X, XI. And we believe we can have an important role to play in those bleeding disorders as well. So we see tremendous responsibility for our subcutaneous approach across the range of targets there.

And Barry, anything you can add on that?

I think Akshay winded up very well. The other value that Biogen’s efforts create is to help the prescribing physicians and patients understand that moving to a more convenient product will provide benefit. So when we come out with a game changing subcutaneous administration that resets a coagulation cascade and works in a fundamentally different way with data to support that, the market will be tuned to try different products. And as Akshay said, we will now produce to treat a broad range of patients with a very different approach by once a week, or once every other week subcutaneous administration, and to be highly amenable to both treating physicians and patients to try.

Mike, does that answer your questions?

Yeah. That’s great. Thank you.

All right.

Our next question comes from the line of Marko Kozul with Leerink Swann. You may proceed.

Hey, good afternoon.

Hey, Marko.

Hi. Good afternoon. I want to maybe start with a question on your ASH Abstract. If you could review the AT3 ASH Abstract and what else might be presented at the meeting?

Thanks, Marko. Obviously the Ash Abstract just went you, I guess this morning and we are going to be presenting two data updates, one from our hemophilia program and one for our hemoglobinopathy programs. In the case of our hemophilia program, we are going to be showing some pretty exciting data using ALN-AT3 and non-human primates where we demonstrated very nice results looking to knockdown of antithrombin but also increasing trauma generation. And as you know, Marko, trauma generation is what’s deficient in hemophilia patients and now we’ve shown in non-human primates, these are obviously wild hub animals not hemophilia animals that were able to achieve a significant increase in thrombin generation, following administration of drugs subcutaneously in those animal studies. The second key study is going to be related to our Tmprss6, T. M. PR. SS6 program, which really has become an exciting approach for the treatment of hemoglobinopathy. And I’ll leave the abstract for you and others to read, but it really demonstrate that knocking down Tmprss6 can have, in fact, disease modifying effects in a model of beta-thalassemia as well as in a model of hemochromatosis. And so we think these data are very exciting and clearly demonstrate, again, a disease modifying affect of these treatments. Akshay, do you want to add anything about those abstracts?

No. I mean I think the hemophilia one you outlined very nicely. They’ve just to add to Tmprss6, Marko realizing that hemoglobinopathies such as beta-thalassemia/sickle cell disease, but really these patients have no access to any disease modifying approach at all. Essentially, the idea is to give them transfusion, if they running low in the hematocrit or hemoglobin count, treat the complications and offload the iron because at some point they get overloaded with iron. And what Tmprss6 does is, it aggravates the uptake of iron from the gout effectively by dramatically raising and circling in hepcidin levels and what we found that not only does that -- I mean, the iron overload problem in very nice model of beta-thalassemia in the mouse, which is rather reminiscent of the human problem. But importantly, it begins to correct the bone marrow defect and normalizes the alpha to beta globin ratio, which stands as knock-on effect in terms of improving the splenomegaly and the extra modular metastatis that’s going on and that’s all bring about the realities of modifying approach. So, loyalties in the abstract we let you guys read that but we’re fundamentally excited about date of that point to disease modifying approach and the data set that have been well received by [replacement to] treat this type of diseases.

And of course that’s what we limiting our comments now Marko, it was in the abstracts and so that we don’t clear any embargos and we will obviously be presenting full data at the meeting, which might include additional data that we are not discussing right now.

Perfect. And if you don’t mind, my squeezing in one on TTR, I was wondering if you could give us your updated thoughts on a possible cohort expansion strategy or what might be driving the mid-2013 data? Thanks.

Akshay?

Yeah. Marko, just to reiterate, you have seen the Phase I data. We have shared them with everybody. They’re obviously very interesting and exciting. They’re driving the approval right now in the Phase II study. It’s going well and we’ve said about mid '13 looks to be good timeframe to us to get the study done and share the data we were fully anticipating, positive data the present time I think is going well and on to phase III by the end of 2013.

(Operator Instructions) Now, next question comes from the line of Alan Carr, Needham & Company. You may proceed. Alan Carr - Needham & Company: Yeah. Hi. Thanks for taking my questions.

Hi. Alan. Alan Carr - Needham & Company: So RSV you are going to be meeting with, I guess, FDA and EMA by year end. I am wondering your options are there for next steps in turn, what sort of trial you’d run next? And then also regarding Monsanto, can you give us a sense of how development might progress here timelines to win something might be commercialized in a broad sense? Thanks.

Let me answer the Monsanto question first and give some context of the RSV question. And then Akshay should finish the RSV question. But on the Monsanto question, we are not really in liberty Alan to comment any more than what is currently in the release. What I can say is that Monsanto is extremely committed to the technology and to the application of RNAi in their BioDirect program. They have a -- I think a very clear vision around advancing biological strategies in ways that improves crops and obviously improve the ability of farmers to succeed in agriculture. And so it is something which we’re very enthusiastic about their level of commitment to it. And we’re very enthusiastic about working with them. There is probably no better company in the world to work within the agriculture setting the Monsanto but we can’t give any further details on that. On RSV, I want to be really clear that there are, I think, a range of different options that can occur. One option is that after discussing the results with regulators both in the U.S. and Europe, we and our partners at Cubist and Kyowa Hakko Kirin decide that it’s not necessarily we are preceding and that’s one side of it. And that may be an outcome that we decide with them. The other outcome is that we clearly define and delineate a path forward for approval, largely focused on a phase III trial that with support approval. And that we all feel a good about that type forward in the Cubist and Kyowa Hakko Kirin make the commitment to proceed with that. So, those are the book-ends. I throw it to Akshay the comment that he has, anything to add further than that but those are basically the book-ends and the discussions are very much scheduled and we’ll have information for you about year ends.

That’s exactly right John. And we look forward doing that.

Yeah. Good. Alan Carr - Needham & Company: All right. Thanks very much.

Our next question comes from the line of Megan Dow with MLV. You may proceed.

Hello, everyone. Thanks for taking my question.

Thank you, Megan.

We just had a couple of questions as you have such great progress on preclinical data and your phase I data moving forward, we were curious as this was as you can expand anymore on some of the points here in your press release of an agreement with the major pharmaceutical company, if you can expand on that at all? And I was also curious how you see the relationship of Alnylam and Regulus as the two companies move forward as separate entities but with the line there?

Sure. That’s a great question, Megan. Well, so let’s start with your first one as it relates to the news we announced today in our quarterly release with regulatory Alnylam about therapeutics effort. This is a new partnership that we formed with a global top five major pharma company that has an interest in biotherapeutics. And we are working with them to use our technologies to improve biologics manufacturing to engage that and that’s all we were really saying about their technology or that partnership at this time. Obviously, we hope it succeeds in their efforts and obviously that will be attractive to Alnylam in the future if it does so. So that’s what we can say there. And then your other question, Regulus is great one. We’re obviously very pleased that Regulus was successful in their IPO, and we remain committed to Regulus and their success. We have board representation on Regulus but Regulus is an independent company. And obviously, we owned 70% of it and are committed to it for the long-term but we do believe that it represents value to Alnylam shareholders because as Regulus builds value, our ownership or equity ownership on Regulus will grow in value and that ultimately delivers value back to our shareholders. So we are pleased with their IPO, it clearly was an important step forward. And we’re also pleased with the deals they did with AstraZeneca and Biogen Idec over the same recent period. So very busy period for Regulus and clearly a very successful year.

Certainly, that’s fine. And just one quick follow-up question, can you expand it all in any of the discussions you have been having further PCSK9 program?

Well, I mean what I can say in very general terms that there remains very significant interest in the target. We do have discussions that are ongoing and when they are ready to be talked about in final form, we’ll be talking about them in final form. We’re encouraged by the progress that our program has made, not only the clinical data, the very strong clinical data that has been generated, which again we feel is very much inline with what’s been achieved in single of those non-staff and containing studies with the PCSK9 antibodies as highlighted by some of the results that came out today at the America heart meeting where we are seeing a 50% decrease in LDLc which is comparable to what is being seen with the antibodies. But, of course, our approach is differentiated and they were blocking the synthesis of PCSK9. And we think that’s going to be important as it relates to optimal efficacy. But the other data point, I think that’s quite important is the generation of the GalNAc conjugate lead for that program which enable subcutaneous dosing. And that’s going to be very important in that setting and that will be a program that will be ramped into the overall program with the partnership that we look forward. So we think that’s very encouraging. And we look forward to updating you when we can talk about specific partnership that has been accomplished.

That’s fine. Congratulations, guys.

Thank you, Megan.

And we have no further questions at this time. I would now like to turn the call back over to Alnylam for any closing remarks.

Great. Well, thanks everybody. Look Alnylam continues to lead the development and advancement of RNAi therapeutics to patients. We’re very proud of our recent clinical data and business accomplishments and we look forward to sharing more results on both dimensions throughout the remainder of the year. Thank you very much. Bye-bye.

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