Alnylam Pharmaceuticals, Inc. (ALNY) Q1 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Alnylam Pharmaceuticals Conference Call to discuss the First Quarter 2013 Financial Results. There will be a question-and-answer session to follow. Please be advised that this call is being taped at the company's request. I would now like to turn the call over to the company.

Good afternoon, everyone. 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. Laurence Reid, our Chief Business Officer is also here and available for Q&A. For those of you participating via conference call, the slides we have made available via webcast can also be accessed by going to the Investors page of our website at www.alnylam.com. During today's call, as outlined in slide 2, John will provide some introductory remarks and provide general context. Akshay will summarize the clinical progress with our Alnylam 5x15 and partnered programs. Mike will review our financials and guidance. And Barry will provide a brief summary of our business highlights, goals and upcoming milestones before we open the call for your questions. Before we begin, and as you can see on slide 3, 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 annual 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.

Thank you, Cynthia. Welcome and thanks everyone for joining us this afternoon. By all accounts, these are incredibly exciting times at Alnylam. With our Alnylam 5x15 product strategy, we are focused on development and commercialization of RNAi therapeutics directed towards genetically defined targets for diseases where there are limited treatment options for patients and their caregivers. Our efforts here drive what we believe is a compelling opportunity for the development of high impact medicines that can drive significant value creation. Activities of the past quarter and recent months represent a notable period of pipeline and business accomplishment for Alnylam. On the pipeline side, we continued enrollment in our ALN-TTR02 Phase II trial, started enrollment in our TTR SubQ Phase I trial, completed a number of key pre-IND activities for our AT3 hemophilia program IND filing for mid-2013, and ramped up efforts in our PCSK9 hypercholesterolemia program following completion of our alliance with The Medicines Company. With these and other efforts, we are positioned for a very data-rich period with key data that we'll report in May, June and July. We also plan to host an R&D Day in New York on July 11th to put all of these data into context for you as we continue to execute on our Alnylam 5x15 product strategy. So, we are very excited about the months and year ahead as we advance our programs into late-stage development and towards the market. With that, I'll now turn the call over to Akshay to provide a more detailed review of our clinical activities, our pipeline and our scientific progress. Akshay?

Thanks, John, and good afternoon everyone. As John mentioned, we've had an extremely rewarding and productive period on the clinical front with our Alnylam 5x15 product strategy. I'll start with an update on ALN-TTR02 program. As most of you are aware, ALN-TTR02 is our lead program and is aimed at the treatment of TTR-mediated amyloidosis or ATTR. ATTR is a devastating, hereditary and often fatal disease caused by mutations in the TTR gene. As an orphan disease, ATTR afflicts approximately 50,000 people worldwide and is associated with significant morbidity and a mean life expectancy of just 5 to 15 years from symptom onset. It is clear that new therapies are needed for the treatment of ATTR and we believe that our mechanism of action that is silencing the disease-causing TTR gene leading to knockdown of the circulating pathogenic TTR protein have the potential to generate a profound therapeutic impact. We're conducting a Phase II study with ALN-TTR02. This is an open label, multi-center, multi-dose, dose escalation trial. Primary objectives of the study are to evaluate the safety and tolerability of multiple doses of ALN-TTR02 and to measure clinical activity based on serial measurements of circulating serum TTR levels. We're announcing today that we expect to report initial results from this trial at the Biannual Meeting of the Peripheral Nerve Society being held June 29 to July 3 in St. Malo in France, pending acceptance of our submitted abstract. We also plan to expand the study to a total of about 30 patients with additional study sites to explore additional cohorts treated with once every three-week dosing regimen and the reduced steroid premedication regimen. We expect data from these additional cohorts to be available later in the year and to add to our overall body of data to finalize dose and…

Thanks, Akshay, and good afternoon everyone. I will be referring to slide 13 to review our financial results for the quarter. Alnylam continues to maintain a very solid balance sheet, ending the first quarter with $400.8 million in cash, cash equivalents and marketable securities. In the quarter, we further strengthened our balance sheet with a public offering of 9.2 million shares that resulted in net proceeds of $174 million. Our GAAP revenues were 18.6 million in the first quarter of 2013 as compared to 20.6 million in the first quarter of 2012. In the quarter, we recognized the remaining deferred revenue of 9.7 million under our agreement with Cubist, which was terminated in the period. As a result, we expect net GAAP revenues from research collaborators to decrease for the remainder of 2013. Regarding the $25 million upfront payment from our Q1 Medicines Company alliance, we will be recognizing GAAP revenues related to this payment on a straight-line basis over five years. Moving to expenses, R&D expenses were $22.2 million in the first quarter of 2013 as compared to $21.1 million in the prior-year period. This increase was due primarily to additional expenses related to the advancement of our ALN-TTR02, ALN-TTRsc and ALN-AT3 programs. G&A expenses were 6.3 million in the first quarter of 2013 as compared to 10.4 million in the first quarter of 2012. The decrease in G&A expenses in the first quarter of 2013 as compared to the first quarter of the prior year was due primarily to a decrease in consulting and professional services related expenses, related to business activities, primarily legal activities. For the remainder of 2013, the company expects that general and administrative expenses will remain consistent with the first quarter. With respect to guidance for 2013, we continue to believe we will finish the year with greater than 320 million in cash. In sum, we believe we have a very strong balance sheet that will enable us to advance our Alnylam 5x15 product development and commercialization strategy. This concludes the financial highlights. I'll now turn the call over to Barry.

Thanks, Mike. As you've heard this afternoon, we're demonstrating with human clinical data that the RNAi pathway can be harnessed to create what we believe will be high impact, innovative medicines. In addition to the exciting clinical advancements we made in the recent period, we also made excellent progress on the business and operational fronts. Specifically, as you heard from Mike, we completed a very successful offering that strengthens our balance sheet for continued execution on our Alnylam 5x15 product strategy. We also formed a strategic global alliance with The Medicines Company to advance ALN-PCS, an RNAi therapeutic targeting PCSK9 for the treatment of hypercholesterolemia. This alliance includes ALN-PCS02 and ALN-PCSsc, which are RNAi therapeutic product candidates administered by intravenous infusion and subcutaneous injection, respectively. We're particularly excited about the opportunity for subcutaneous administration and have made some very strong progress on that aspect of this program. Per the terms of the agreement, Alnylam will lead completion of certain pre-clinical and Phase I clinical studies while The Medicines Company will lead and fund development from Phase II forward and will own commercializing ALN-PCS program if successful. The Medicines Company has made an upfront cash payment of $25 million to Alnylam. In addition, Alnylam is eligible to receive development and commercial milestone payments totaling up to 180 million, as well as double-digit royalties at ALN-PCS product sales. In aggregate, these recent business achievements strengthen our efforts in bridging innovative medicines to patients who currently have limited treatment options. In closing, I want to take a moment to summarize our goals and our plans shared data. With regard to our TTR program, we expect to present data from our Phase II trial with ALN-TTR02 at the PNS meeting being held June 29 through July 3. We aim to begin our open-label extension…

(Operator Instructions). Our first question comes from the line of Marko Kozul with Leerink Swann. Your line is open.

Hi. Thanks for taking the question. This is Irene in for Marko.

Hi, Irene.

Hi. On ALN-TRR02, you've mentioned that data will be coming in late June and you're extending the study to 30 patients. So just want to ask if you can clarify for us if the data for all 30 patients will be presented in late June?

Yeah, maybe…

Sure.

Maybe Akshay could answer that.

Yeah, so we will be presenting initial data at the meeting in France at the end of June, early July, as you mentioned. And we're expecting those data to be in line with the original study, whereby we had said we're dosing across the dose range going up to 0.3 milligram per kilogram dosing every four weeks. And I think we'll be in good shape to present those data, both from a safety perspective, as well as importantly the clinical type data with the pharmacodynamic activity of the drug, now looking to see how does it look like over multiple doses after the very exciting data from last year with single doses at 0.3.

Thanks very much. That's very helpful. Just one more on TTR, it seems that there could be a lot of data presented at the November [ISTH] meeting. Could you give us a preview of what you believe might be presented there?

Well, Akshay, you should make some comments, but obviously we will be presenting additional data at that meeting as well. We certainly plan on being at that meeting. Our program is a very important program in the community, and we're going to be obviously presenting our Phase II data mid this year and we'll also present our TTR SubQ data middle of the year as well. We haven't given more precise dates on that. But we'll also be presenting data at that November meeting. Akshay, anything else you want…?

No, I mean I think it's a wonderful opportunity in front of a key audience. And both those areas will be highlighted with more data, I'm sure.

Thanks very much. And regarding ALN-AT3, can you talk about your [control of the test gate] [ph] therapeutic window and any predictions you have on what the ideal therapeutic titration level might be? And last week, Bayer ran into a snag with a 6150 program. Can you talk about maybe the composite landscape of the candidates being developed specifically for patients with inhibitors?

Yeah, absolutely. Akshay, do you want to handle that?

Yeah, so let's just start with the competitive landscape. I think sadly these patients are in a very disadvantageous position compared to other bleeding disorder patients. They can't have any prophylaxis treatment currently, because the one drug that's available to them, NovoSeven, and they can of course use the related fiber product as well, have to be given intravenously and they have short half lives and they just can't be given frequently enough to make them practical prophylactic treatments. So really they need something that will prevent bleeding when they're in this terrible situation with antibodies as a replacement factor. The product you're speaking about, the Bayer long-acting 7A and the idea that it's long-acting so that it could be given several times a week as opposed to NovoSeven will have to be given every day, several times a day almost for it to be effective. So the Bayer product would have been given less frequently, but sadly as is often the case, even as (inaudible). And so that's really a bad situation and understandably the study was stopped. Now with respect to our product, and as you said, we're initially very interested in developing in inhibitor patients where there's this high unmet need and if you look at hemophilia patients that have inherited deficiency of AT3, rather than any issues in terms of thrombosis or anything like that, they are in a much better position than the average hemophilia patient. They stop bleeding later in age. They consume less replacement factor. And most of them have much fewer in the way of joint and muscle complications, which are sadly common in hemophilia. So, there's a very wide therapeutic index perceived from that experiment of nature, where hemophilia patients have inherited so-called thrombophilic mutations like AT3 deficiency. We also get information from the mouse. And so if you take a hemophiliac mouse and you cross on to that AT3 deficiency, it's better than the human complex. Those mice in fact do very well and they benefit and they have fewer reductions. Again, there's no evidence of thrombosis or blood clots. And so all of this goes to say and we're increasingly finding with our laboratory work that in knocking down AT3 in the hemophiliac context really to our data and our mind speak to very expanded therapeutic index and the idea that there would be significant benefit. The details beyond that, we're going to present at the ISTH meeting but we're really pretty excited about this. John, I don't know whether you want to add…

Yeah, I would just add, Irene, obviously we are going to be presenting some data relatively soon in June – late June, early July and that's a very important data set by our counts, and just stay tuned. But we are very excited about the program. We think it could be a transformative therapy for many segments of the hemophilia patient population and certainly including the inhibitor patients. And the Bayer – unfortunate news of the Bayer program obviously just speaks to the need for new, important medicines in that segment.

Thank you so much for taking questions. And congratulations on a very exciting progress.

Thank you.

(Operator Instructions). Our next question comes from the line of Ted Tenthoff of Piper Jaffray. Your line is open.

Great. Thank you very much. Thanks for the update. It's going to be an exciting summer and remainder of the year. I guess my question – yes, my question is for Barry and kind of the comments along the lines of some additional partnering opportunities. My understanding is that these core programs, TTR, hemophilia, and the new one that you announced, are programs that Alnylam really intends to retain and develop internally. But what are some of the partnering opportunities beyond that? Are we talking specific target-type deals, almost like with respect to what ISIS has been doing with some of their rare disease? Is there – what is sort of the higher level thinking in terms of additional partnering opportunities?

Well, so Ted let me have Barry and Laurence, who is here…

Hi, Laurence.

Also answer part of that question. Barry, why don't you start with some context and then Laurence, you give some general dimensions.

Ted, thanks for the question. As you're well aware, first of all, from the beginning, our business model was develop and commercialize important therapeutics in major markets on our own. And at the beginning of this year, we clarified that to say that our TTR program, the hemophilia program, and the new porphyria program were programs we were going to commercialize in North and South America, Europe and selectively partner as we do with TTR in the Asia region. So for those core programs, we're going to take the drugs forward on our own. We've given guidance that other programs in order to move forward would require partnerships. And let me ask Laurence to touch on, on some of those.

Yeah, hi, Ted. There is two categories I would say as we think about it actively these days and they are product-driven types of partnerships as you're referencing and then to actually broader things as the technology platform continues to expand all these capabilities. So on the product side, you've understood and recapitulated very nicely that the strategy to focus our key investments and bandwidth currently in the three leading projects as a 5x15 strategy has really expanded in the last couple of years, a number of other very exciting projects that are behind that where we're looking to partner them so we can bring extra resources in through a partner to really expand the pipeline and our participation, the value of the overall 5x15 program. And the two leading examples of that, that we've talked about publicly although we have others coming behind that we're getting increasingly excited about, but the leaders are really the AAT liver disease program. So that's for the liver disease that follows from AAT genetic deficiency and that program is in a preclinical research program. And then secondly, equal priority rate, the ALN-TMP program which targets TMPRSS6 for iron overload diseases, treatment of beta-thalassemia and potentially other disorders in which iron overload is a chronic problem. So both those projects we talked about publicly. Very exciting data sets. On both cases, we have world-class collaborators and we think those are both exciting projects and they've been a lot of our business development conversations in a very active, ongoing way. And then broadening out from that, as we have come to understand the potential of the conjugate subcutaneous platform we think was really going to be an increasing set of diseases where chronic administration of a subcutaneous drug product is really going to open up for us in a number of new disease areas that historically we've not been focused on and we haven't really talked a lot about those publicly, but I think they are going to increasingly become part of our strategy and I think there we'll probably look to bring in partners early in some of those programs, maybe taking from a partnering perspective into disease areas where Alnylam probably may not be best to go all the way towards the commercial product ourselves, at least in the earlier years of that strategy. And then I always think about it in two broad categories.

Ted, just to add to that, clearly, they are going to be some programs beyond porphyria and hemophilia and TTR amyloidosis that we will continue to keep ourselves and advance into the major markets of the world as a direct commercial effort. So, we are trying to find the right balance. There's certainly more here than we can possibly do on our own. So there will be partnerships in the future. But most importantly, the things that we think really drive value are the programs that we are retaining ourselves and driving all the way in the market.

I agree. Quick question, if I may, on TTR02 and TTR SubQ. I like how you're using FAC to explore the potential of a SubQ administration and I know that you had really good knockdown with the IV formulation. What if SubQ just looked significantly better? I mean I know that it's potentially a little bit less potent, but there's more administration. In a longer term, is this something where potentially you could seek approval for both drugs if they both work and we're so fortunate in both indications and then let patients kind of determine how they want to be treated or sort of see how the clinical data really leads out? What's your sort of longer term view of this balancing of TTR02 and TTR SubQ between the different manifestations of TTR?

I'm going to let Barry answer that question, but I'm just going to start by saying that we are very, very committed to best-in-class medicines for patients with ATTR. And so it has been important for us to really launch what we think is the industry-leading effort in this disease. And then Barry, you should comment a little on our thinking with [Oved] and our commercial thinking around how this all plays out.

Yeah. Let me just emphasize what John said. In a significant disease setting such as this, we want to do everything we can to treat these patients and that includes the two product efforts we have right now. ALN-TTR02 is very focused on the polyneuropathy opportunity where we'll start a Phase III later this year. And we have a clear set of endpoints in terms of the neuropathy endpoints. We think that given the patient population, how they are disseminated that subcutaneous approach with ALN-TTRsc is very attractive for those patients who are very focused on that for cardiomyopathy. Now if you play this out longer term, Ted, and we're fortunate enough to have both products approved and on the market, the pharma economic support for both programs are similar in that we've got life threatening diseases with significant comorbidties. So there wouldn't be a financial incentive for a physician or a patient to switch on product. So we won't sort of have that issue, if you will. More importantly, we have the opportunity of, as you said, looking at each product in the other patient setting and then making sure that there's a dose convenience schedule that's right for the patient and their provider, the physician, so that some gets on our drug early and stays on our drug for the rest of their lives, preventing death from their disease.

All right, excellent. Thanks, guys.

Thanks, Ted.

Our next question comes from the line of Alan Carr with Needham & Company. Your line is open. Alan Carr - Needham & Company: Hi. Thanks for taking my questions.

Hi, Alan. Alan Carr - Needham & Company: Good evening. Can you comment on the regimen change that every three weeks versus every four weeks and some of the changes you're talking about with respect to steroids in the Phase II trial that you're expanding? Can you comment on that?

Yeah. I mean, Akshay, you want to…

Yeah. Hi, Alan. So, we're going to present the initial data from the study in the (inaudible), so we're pretty excited about that. We've met all the objectives there, those patients are enrolled in their study. And I think we have opportunity now to really look at a couple of other things. We've talked about the steroid pre-regimen. It's nice to look further into that with additional patients to see how we can optimize it. So we have an opportunity to do that now. And also to study variance on the Q4 weekly, I mean we've shared the data that we expect around once every four weekly and it looks pretty exciting. But I think we want to pick the best dose and dose regimen to go into Phase III by the end of the year. We look on track to do that, these additional data will be helpful in that decision-making. Alan Carr - Needham & Company: What prompted the shift to Q3?

We shared, as you probably recall, Alan, we shared earlier in the year some non-human primate data looking at the Q4 weekly regimen longer term. And one of the possibilities as we've always looked at those data was that Q3 weekly might be a more interesting approach as well. So we wanted to see how that plays out in humans as well. We've got clearly time to explore that before we launch the Phase III along with obviously the potential of looking at a significantly reduced steroid pre-med regimen and getting those additional data points we think will give us the best information for dose selection and dose regimen selection for the Phase III. Alan Carr - Needham & Company: Okay, thanks. And then with respect to your work with Medicines Company, can you give us any sense of what sort of work is still needed and when that might be ready to hand over to Medicines for Phase II?

Yeah. I mean, in general terms, why don't I go ahead and answer that. The program, as you know, completed a Phase I study, single-dose Phase I study. There was work that was needed to facilitate a multi-dose study, mostly preclinical type [tox] work. In addition to that, we've made this progress with our SubQ platform and there really is quite – some quite promising work that we've generated on the SubQ approach for PCSK9. And so before we get back into the clinic with the program, there are certain preclinical, nonclinical IND-enabling type work that's going on to facilitate a multi-dose approach in a Phase II study. And how that plays out between the SubQ approach going forward, I think is to be informed by the data that emerges over the next short period. And so stay tuned on that. But we certainly like where the SubQ drug positions the product vis-à-vis the competitive landscape out there with the anti-PCSK9 antibodies. Alan Carr - Needham & Company: I take it no specific guidance on a timing then at this point?

Not yet, Alan. We'll hopefully provide that sometime later in the year, but it's – efforts have been restarted and things are going along real well. Alan Carr - Needham & Company: All right, great. Thanks very much.

Thanks, Alan.

I'm not showing any further questions at this time. I'd like to turn the call back over to Alnylam for closing remarks.

All right. Thanks, everyone. We continue to lead the development of RNAi therapeutics to patients and we're very proud of the clinical and business accomplishments. As I think you've heard today, May, June and July will be important months for data readouts and we look forward to sharing these with you along with our overall progress on RNAi therapeutics and our 5x15 efforts. So thank you very much.

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.