Alnylam Pharmaceuticals, Inc. (ALNY) Q4 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Alnylam Pharmaceuticals Fourth Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to introduce to your host for today’s conference from Alnylam. You may begin.

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 Investor page of our website at www.alnylam.com. During today’s call as outlined in slide 2, John will provide some introductory remarks and provide general context. Actually we will summarize the clinical projects with our Alnylam team and partnered programs. 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 3, I’d 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 allot for joining us this afternoon. By all accounts, 2012 was a remarkable year of clinical and business achievement for Alnylam as we lead the development of RNAi therapeutic. Over the last year, there were two notable clinical accomplishments that gave us tremendous confidence and the continued advancement of our science. Specifically, data from our ALN TTR-02 program demonstrated an up to 94% knock down of a disease causing protein and data from our T-59 program showed an up to a 50% decrease in LDL cholesterol. These data service unambiguous prove point that RNA works in Mane. In the recent period, we continue to execute on our pipeline average by enrolling patient in our phase II trial for TTR-02 and filing and obtaining approval for a TTA to initiate a phase I study with ALN TTR SubQ a subcutaneously administered RNAi therapeutic for the treatment of a TTR, the first subcutaneous RNAi therapeutic to ever go into clinical studies. We also advanced our ALN AT3 program for hemophilia and where bleeding disorders with not human private data presented a dash. And we have advanced the new program ALN AS1 for the treatment of acute intermittent porphyria and ultra rare orphan disease. In aggregate, it has been a tremendous reproductive and exiting period for the company. We are executing on a clear product development and commercialization path that we called Alnylam 5x15 were we are advancing RNAi therapeutics toward genetically defined targets for diseases with high admit need and where we intend to directly commercialize certain core programs in this effort in major parts of the world. Our science is working and we have demonstrated robust RNAi effects demand and we are supporting our business with new alliances with outstanding partners that will work with us in advancing robust RNAi affects therapeutics to patients. While we also retain key product rights to build maximum value for our shareholders. The year ahead is where we advance programs into late-stage development and toward the market. So with those introductory comments. I’ll now turn the call over to our Akshay for a more detailed review all our clinical activities, our pipeline in our scientific progress, Akshay?

Thanks, John, and hello everyone. As John mentioned, we have an extremely rewarding and productive year on the clinical front with Alnylam 5x15 product development and commercialization strategy. As all of you are aware L&T 2 is our flagship program is aimed at the treatment of transthyretin-mediated amyloidosis or ATTR. ATTR is a devastating hereditary and fatal disease caused by mutations in the TTR gene. As an open disease ATTR affects approximately 50,000 people worldwide and it associated with significant morbidity and a mean like expectancy of just 5 to 15 years from symptomoza. It’s clear that new therapies are needed for the treatment of ATTR and we believe that our mechanism of actions silencing of the disease calling TTR gene leading to knock down the circulating TTL protein has the potential to generate a profound therapeutic impact. In mid-2012, we reported positive clinical data from our Phase I trial with LNT chart two an intravenously delivered RNAi Therapeutic. Results from this study as shown on Slide 8, Show that a single dose of LNT chart two rapid dose-dependent, durable and specific knockdown assume TTL levels. The overall results were highly statistically significant with p-value less than 0.00001. even it tells us as low 0.15 mg/kg substantial CMT gas suppression achieved. Where mean 82% reduction was observed that. This was extended as the next dose order of 0.3 mg/kg, but we showed an 87% mean TTL knockdown and then as 0.5, but we showed at 94% level of TTL knockdown down. L&TTRA exhibit in the rapid set of action and general response. We believe this supports of once-month also dosing regimen going forwards a very compelling profile for breakthrough therapy in this clinical setting. LNT chatter two was generally safe and well tolerated in the study. Consistent with outdoor clinical…

Thanks, Akshay. And good afternoon everyone. Now we’re referring to slide 16. We continue to maintain a strong financial profile and in 2012, of $226.2 million in cash, cash equivalents and fixed income marketable securities. We also improved our cash position in Q1 as a result of a public offering of common stock and we completed in January. Generating net proceeds of $174 million as well as a $25 million upfront payment from our recent management company alliance. With respect to guidance for 2013. We believe we will finish the year with greater than $320 million in cash. This financial profile provides us with a strong balance sheet to build our business, mainly through execution on our own Alnylam’s account 5x15 product strategy. Our GAAP revenues for the fourth quarter of 2012 or $8.5 million as compared to $20.5 million in the prior year period. For the full year in 2012, we recognized $66.7 million, of GAAP revenues. As compared to $82.8 million for the prior year period. As you know we continue to record the amortization of upfront payments from the strategic alliances, we have formed which account for a significant in recurring portion of our quarterly GAAP revenues. Regarding the $22.5 million upfront payment from our Q4 Gen Alliance we will be fully deferring revenue recognition and now record any GAAP revenues for the time being applied. GAAP revenues are expected to decrease significantly during 2013, as compares 2012 due to the completion of the amortization of Roche deferred revenue. This decrease will be partially offset by the expected recognition of our remaining deferred revenue balance of $9.7 million related to our Cubic collaboration, which ended in Q1, 2013. After Cubic elected not to opt into further develop AlNR-CO1. Moving to expenses, R&D expenses were $21.7 million in…

Thanks Mike. As you’ve heard this afternoon, we’re demonstrating with human clinical data for the RNAi tab where can be found us to create high impact innovative medicines for patients in need of new therapeutic approaches. In addition to the substantial advancements to our pipeline, we’ve also made a tremendous progress in our business development efforts to new collaborations with Genzyme, Monsanto, Ascletis and most recently the Medicines company. This new collaborations have resulted in over $75 million and realized cash payments. Now turning to slide 18, in the fourth quarter, we fund a strategic alliance with Genzyme, prevents or treat amyloid dose program in Japan, and the broader Asia-Pacific region. Genzyme, the industry innovator and leader in bringing morphan drug to patients who need. The leveraged improvement regulatory and commercial capabilities in the Japanese and broader Asian market to advance the ALN TTR program, which includes of both ALN TTR-2 and ALN TTR SC. Very important, Alnylam maintains all other rights consisted with our plans, develop and directly commercialize this potential breakthrough medicine in North and South America, Europe and rest of World. Under the terms of the agreement, Genzyme is made in upfront cash payment of $22.5 million. In 12 months, in addition, I’ll now through a certain success based developed milestones totaling over $50 million. Furthermore will make cured royalty payments that are expected to yield infective rates in the mid-teens to mid-20s on sales of ALN-TTR in the territories covered by Genzyme. The royalty very attractive way for amount of participate and success of the product in Japan and other Asian countries. We’re very excited about from and it’s already off to a great start. We’re convinced that as a result of new alliance ALN-TTR will get the patients in Japan and other Asian Pacific countries…

(Operator Instructions) Our first question comes from the line of Ted Tenthoff with Piper Jaffray. Your line is open. Ted Tenthoff – Piper Jaffray: Great, thanks. So, you guys hear me out that.

Yeah, yeah. Hi, Ted. Ted Tenthoff – Piper Jaffray: Hey how are you? And congrats on the great success after really exciting start. Question on ALN-TTR subcu. And wanted to get a sense on where the program is and really why this is the drug that you’re looking to take forward into familial cardiomyopathy, are their differences specifically between the formulation, obviously is mild and while take TTR is synthesized in the liver. So is there something that different between the drugs or is, why is that this is the one that you want to take forward into the larger TTR patient population.

Great question, great question Ted and let me start and then Akshay and Barry can join me as well. We’re very committed to developing therapies for ATTR patients and obviously had been involved in this community with these patients for the last, almost 3.5 years now between our TTR-01 program and now TTR-02 and this new Subcu program. So, we have a very strong commitment to this patient community and to advancing important high impact medicines and making a difference in these patients lives. As part of that overall effort obviously TTR-02 has shown beautiful data last year. We’re now in our Phase II study. With that, we’re looking forward to having data that we report, middle of the year. With that program and advancing that program into Phase III trial, as you know Ted, that drug is given by intravenous infusion. It shows a very significant knock down effect on TTR, which is the pathogenic protein. But at the same time, we’ve also been interested in developing a sub-Q version of the drug that would for many patients potentially be profitable than an IV infusion type approach and with the advances that we made in our GalNac conjugate platforms. This is now a chemically modified Small interfering RNA without any formulation. It’s a simple formulation that can be ministered subcutaneously, we think we have an opportunity for a new program that would be complementing our IV drug to go after and to approach the needs of these patients and that our focus from a developmental standpoint is to really focus on the cardiomyopathy indication with TTR subcu while we’re focusing on the, Polyneuropathy patient population with our IV administered TTRO2. So you asked earlier, you asked us in the front of your question was the drug add well. Great news. We filed our IND equivalent in the UK late last year. We’ve just received approval to start our Phase 1 study that’s about the start in the next few weeks and we’ll have data from that Phase 1 study in the middle of the year and those data I think are going to be quite important not only will they show that the knocked out of the disease causing proteins with a subcu delivered RNAi therapeutics but that same delivery technology is also being used in our hemophilia program and also in our porphyria program, and potentially in our PCSK9 program. And so that’s validating event will be quite significant for the broader pipeline activities that Alnylam is undertaking. So that some context and some perspective Akshay I don’t know if you want to do. I was a little long-winded there but anything to add to what I just said.

You are perfect, you made many important points shown I agree.

Good, Ted is that as your question? Ted Tenthoff – Piper Jaffray: Very helpful. I appreciate it.

Yeah.

Our next question comes from the line of Marko Kozul with Leerink Swann, your line is open. Marko Kozul – Leerink Swann: Hey good afternoon and congrats on a terrific 2012.

Thanks Marko. Marko Kozul – Leerink Swann: I also have a T-Tier subcu FAC questions. I was hoping that maybe you could talk a little bit about the literature and what it shows, as well as clinical data, what is it suggests regarding the rationale for why TTS subcu should work in the Cardium Mayopathy patient.

Great am I have Akshay answer that.

Hi Marko, so familial amyloidotic cardiomyopathy, is mediated by and we, as John was describing we have wonderful opportunity TTRSC, the subcutaneous self-administered Conjugate to attack both forms of the protein that cause infiltration of the heart muscling and lead to Arrhythmias and heart failure. Now the full disease of specimen at the SAC is caused by mutations, typically in the US, one of the common mutations. This is mainly in tie solutions mutation position 1 to 2 that’s very, very common in the African American population sadly, about 4% of African-Americans have and many of them will go on to develop TGI cardiomyopathy in relation to that. Many of the other mutations that about 100 TGI mutations described can also mediate cardiomyopathy, another one for example is T60A mutation and so this will come on a little bit later than SAP, which tends to come on in the ‘40s. Cardiomyopathy will tend to come in late ‘50s and ‘60s, but once it comes on with the heart failure and arrhythmia sadly in mortality is high and patients will die generally within 2 to 4 year period after the diagnosis norm sets. So as a very serious of devastating disease and we think that reducing the burden of TTR will have a very significant impact in this disease and has done in other amyloid of cardiomyopathies where AMLO-proteins were dispositive in the heart. Now there is second form of TTR cardiomyopathy that is important that is mediated wild-type CTR so called systemic amyloidosis and of course our drug TTRSC will also be on because we can reduce type TTR that is increasingly being recognized in patients starting in their mid-60s onwards and too is associated with heart failure arrhythmias and it too is also cycle fetal and patients died within in a 5-year period or so. So, we have a very expansive opportunity here. And we hope to really confirm very significant clinical findings with these patients.

Yes your question, Marco ?. Marko Kozul – Leerink Swann: It doesn’t just a quick follow-up. Congrats on obtaining clearance to initiate the Phase I key TTR subacute trial. Can you talk little bit about your enrollment expectations for the 40 patients you have planned. And then, how long would these patients receive exposure to the – to the candidate.

Marco it is exciting. Yes you’re right we’re going to be taking of surely with this study, which will encompass both the single ascending animal ascending dose aspect. The study will be in healthy volunteers. So we expect it to go in a obviously relatively quick and smoothly and if you follow our progress last year with our PCS and PTR02 studies in healthy volunteers that gives you something of an idea of a timeframe in which we’re operating in, and our goal is to get some data outside.

Yeah.

Hi. Thanks for taking the questions

Our next question comes from the line of (inaudible) with JPMorgan. Your line is open.

This is on Anupam in for Jeff. Just a quick question on TTR02 Phase III which you guys are going to set, let’s start at the year-end. When you say you start to trial at year-end, does that mean you’re going to start the sort of activation or you’re going to actual – have actual patients enrolled starting by year-end. And just talk a little bit about enrollment timelines for that – that trial.

Sure, I mean when we give guidance and we’ll start to trial we’ve dosed the patient. So that – that is what we’re guiding for the end of the year.

And Akshay, you want to comment a little bit about the enrollment expectations?

Yeah, the sample size, obviously it’s a Phase III study, so will be consistent with that. The Tafamidis study that was conducted by Fold RX and families then went on to Pfizer, 125 patient study took several years to the accrue. We’re going to be in that ballpark of 100 patients to 200 patients. And I think, we’ll be able to give much more detail guidance of the accrual period, obviously as we get close and start in rolling.

Great. Thanks, for taking our question.

Thanks.

(Operator Instructions) Our next question comes from the line of Alan Carr with Needham & Company. Your line is open. Alan Carr – Needham & Company: Hi, guys. It’s actually Mark, on for Alan. I wanted to, well first up, I wish you good luck. I read on the Weather Channel that or something, so be safe?

Yeah.

Yeah. That usually means it’s going to be a little. Alan Carr – Needham & Company: I don’t know, they seem to be going for Armageddon by you guys, so please – please be safe over the next...

Thank you. Alan Carr – Needham & Company: 24-36 hours. I had a question on – the sort of a bigger picture question on nominating programs going forward in this by 5/15 strategy. Are you guys expecting one a year going forward after this, it seems like that’s the sort of the track we’ve been on. We’re just wondering if that was the sort of thing that could expect going forward into next year?

You know, that’s a great question and I’m – I’m glad you’re asking it. We’ve got a number of programs that you don’t even hear about that are advancing in our research group, that always represent opportunities for us to consider putting it into a development cycle or not. And we’re – we’re excited about the potential, I mean, given – given our confidence around delivering sRNAs to hepatocytes and knocking down hepatocyte express disease chains, and given the incredible, disease burden of human disease that is mediated by liver, we were expressed target genes, we have a lot we can do and we have a lot that we can consider doing and evaluate that on a very active basis now, we are going to stay very focused on TTR AT3 and our porphyria program at least in the near term because we think those are the programs that we can allocate significant resources to enable advancement for late-stage clinical and then into a market where we going to control significant portions of the commercialization of those products. And what that does mean is that for some of these earlier efforts that we have some of them will choose to advance with partners, but some of that we’re just going to hold on to for a while and make them part of Alnylam’s next wave, beyond porphyria if you will. And so, it is a strategy to the active strategy portfolio management. Is that the strategy of identifying opportunities that we think create the greatest amount of impact for patients and value for shareholders. Near term focus on the three that I just mentioned, but lots of opportunities beyond that and having demonstrated with such confidence, the ability of achieving targeting knock down in the liver and doing that increasingly…

I think product to market absolutely comes before next candidate. It doesn’t mean that next candidates amount – potentially a emerge in the meantime, but we’ve got a very sharp focus on getting our products to market. That is mission of one number one in this company. Alan Carr – Needham & Company: Great. Well, thanks very much guys. Have a good weekend.

Our final question comes from the line of Stephen Willey with Bank of America. Your line is open. Stephen Willey – Bank of America: Hi. Can you elaborate on your conference level in your 50,000 worldwide patient estimates with TTR. And can you comment on whether there are any geographic trends on a per capita basis that favored the prevalence in one region over another.

Yeah, that’s a great question, Steve. Akshay you want to handle this.

Yeah. So in terms of that 50,000 number one way to approach it is about 10,000 represents the SAP population the polyneuropathy population. There is geographic concentration of those patients around Portugal, Sweden, Japan, Brazil and the United States. And more recently as the disease has become even better known, we are identifying large focus of patients in several European countries including France, Italy, Germany, Spain, etc and clinical size as well to study with. The SAP numbers then complemented by a much larger number for the cardiomyopathy FAC, which is at least 40,000. We have as a very conservative estimate, in part because FAC is heavily driven by this V1 American mutations. And we want to enjoys present 4% of the African American population. So That’s really a much larger number. And even if we assume in a lack of full penetrance is 40,000 is really a very conservative estimate. That’s not accounting for other forms of FACSA start with the other minor mutations like T68 etc. And what we’re not really accounted for even in this 50,000 number, is recent emergence round data suggesting that seeing familial amyloidotic cardiomyopathy valve type really a very significant in older patients and the extras can you with cardiologists were interested you don’t believe the number that will it clicks anything to do with FAPNFAC. So that’s kind of how we, how we get this 50,000 number, which we believe as a conservative estimate for ATTR.

And Steve do you know certainly Pfizers estimated or commented number for the FAT population is similar to our number and certainly keeping in leaders that we work with agree with the numbers that we have. So we think that these are reasonable estimates. Obviously, there is no exactness of our own the type of numbers. But they’re obviously very well supported in literature. Stephen Willey – Bank of America: And where Japan in their area of particular interest for Genzyme or was then negotiation really limited by your interest in holding the rest of the world to yourself?

Well, actually both. Steve, do you know for – we certainly in our negotiations with Genzyme made it very clear that we want to build a Genzyme also and we want to keep significant parts of the world to commercialize TTR. And so that was important as part of that discussion and they understood and appreciated and agree with what that represented. But they’re also quite excited about the opportunity in Japan, the disease is endemic in Japan and there is without a question. They are the strongest company in advancing and developing and commercializing and orphan medicines in Japan, stronger than any the nationals in Japan as well. And so they really represent a very powerful partner for us in this setting a bar, our TTR program. We’ve had a number of meetings with them since the partnership was formed, we couldn’t be more pleased with our colleagues over there in terms of the quality of the people that we’re working with and their commitment to helping us get this product into that market and entry those phase as fast as possible. So we are poised to do great things with them in those markets.

And just to, to add to that. In Japan of courses Genzyme is of course very knowledgeable about Asia Pacific that we partly with them and with them we start identifying focus of patients significant numbers of patients in additional Asian countries beyond Japan including, Korea, Taiwan and another places. So it’s going to terrific toward with them and part of the world. Stephen Willey – Bank of America: Okay, very helpful. And just lastly your agreement with Monsanto, I was curious is that strictly a IP full agreement or do you think you will be actively involved in developing some planned based jing blockers?

well, it is a license and collaboration agreement. So there is a collaborative aspect of that relationship that’s ongoing. And, but you know Steve, we’re not proposing or planning ourselves on developing products in the ad market, but we will certainly worked with them around specific projects we’re all working with them around specific projects where we’re using aspects of our technology to enhance their commercial advancement. I mean they’re very active in this field there an impressive company to say at least and they clearly see the opportunity with party eyes and natural approach for generating some products in the ad space that could be very important for our products. Stephen Willey – Bank of America: Very good. Thank you.

Great, thank you.

My apologies. That concludes our question and answer session for today’s call. I’d like to turn the call back over to Alnylam for closing remarks.

Great thanks, everyone. Obviously, we continue to be very solid about where we’re going and obviously as part of that advancing our RNAi therapeutics add therapeutics to patients. We’re really pleased with the progress we’ve made in our clinical and business aside the shop and we very much look forward to sharing results with you this year. We believe it will be a very exciting year for the company. Thank you very much and good night.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone have a great day.