Alnylam Pharmaceuticals, Inc. (ALNY) Q4 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing-by and welcome to the Alnylam Pharmaceuticals Conference Call to discuss Fourth Quarter and Year End 2019 Financial Results [Operator Instructions] 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 morning. I’m Christine Lindenboom, Vice President of Investor Relations and Corporate Communications at Alnylam. With me today are John Maraganore, Chief Executive Officer; Barry Greene, President; Pushkal Garg, Chief Medical Officer; Jeff Poulton, Chief Financial Officer; and Yvonne Greenstreet, Chief Operating Officer. Akshay Vaishnaw, our President of R&D is traveling today and unable to join us for today's call.For those of you participating via conference call, the accompanying can be accessed by going to the even section of our newly redesigned Investor page of our website at www.alnylam.com/event.During today’s call, as outlined in Slide 2, John will provide some introductory remarks and provide general context. Barry will provide an update on our commercial and medical affairs progress, Akshay will review recent clinical updates, Jeff will review our Q4 and year end 2019 financials and discuss our 2020 guidance, and Yvonne will provide a brief summary of upcoming milestones before we opening the call for your questions.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 our 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 obligation to update such statements.With that, I’ll turn the call over to John.

Well, thanks Christine and thanks everyone for joining us on this call this morning. Let me make a few key points to provide some overall context for our discussion. First, in the fourth quarter and recent period, we made tremendous progress advancing our commercial products. Bringing RNAi therapeutics to patients around the world. With, ONPATTRO, we saw greater than 20% quarter-on-quarter growth in global ONPATTRO net revenues. Driven by significant new patient adds in the US and EU along with a strong Launch in Japan.With the FDA approval of GIVLAARI this past November and the positive CHMP opinion just past week, we became a multi product commercial company and are pleased to now be making this medicine available to an acute hepatic porphyria in patients in the US and soon in Europe. In 2020, we look forward to continued global commercial execution with ONPATTRO and the global launch of GIVLAARI bringing the benefits of these innovative therapies to patients around the world.Secondly, in the fourth quarter we made strong progress on our pipeline. And we're excited to report positive top-line results in the LLUMINATE-A Phase 3 of lumasiran in primary hyperoxaluria type 1 marking our third program to achieve positive Phase 3 data in 2019 alone. We're now focused on completing our regulatory filings for the lumasiran and assuming favorable regulatory reviews, we believe we should be in a position to bring this medicine to the market by the end of this year.Another notable milestone of Q4 was positive Phase 3 results for inclisiran leading to the $9.7 billion acquisition of the medicines company by Novartis. We're very pleased to now be partnered with Novartis and look forward to supporting their efforts as they prepare to bring inclisiran to patients around the world. We believe that improved inclisiran has a potential to be a transformative medicine for patients representing an important future source of potential product revenues for Alnylam and also a potential opportunity to strengthen our balance sheet outside of the equity markets.In addition, we continue to advance our ongoing [Tech Difficulty] for patisiran, the unbranded name for ONPATTRO and vutrisiran, into the hereditary and wild-type ATTR amyloidosis with cardiomyopathy settings. We believe that our approach is silencing the production of ATTR with RNAi therapeutic has a potential to be the best in class mechanism in ATTR amyloidosis. We also believe that the potential opportunity for fitusiran and then vutrisiran in the ATTR amyloidosis cardiomyopathy indication assuming positive Phase 3 results and regulatory review could represent a multibillion-dollar anchor opportunity for building Alnylam, similar to what Regeneron had with Celgene with Revlimid.Now as you know, our robust product pipeline also includes some earlier stage clinical programs and areas such as the [Indiscernible] diseases hypertension, chronic HBV infection and alpha ones liver disease, we were pleased to share some of the initial data from these programs in our R&D day this past November and you should expect to see more data from these efforts throughout 2020 highlighting Alnylam's next wave of potential opportunities for sustainable innovation and growth.The final point I'd like to make is that Alnylam is now very much focused on achieving a self sustainable financial role model. Our CFO Jeff Fulton will elaborate on this later in the call, but to be very clear realizing this goal is not a question of if but rather a question of optimizing the when and the how with the goal of achieving significant impact for patients and delivering strong value for shareholders.We believe that we have a clear line of sight to get there and over the next five or six years we see an opportunity of building a top five biopharma company bringing transformative medicine in both rare and common diseases the patients around the world and growing with excellence, innovation and responsibility. We're committed to this future for Alnylam and we believe that we're very well positioned to achieve it.With that I'll not turn the call over to Barry to review our commercial and medical affairs progress in more detail. Barry?

Thanks John, and good morning, everyone. I'll begin by reviewing ONPATTRO's commercial performance. We achieved $55.8 million in global ONPATTRO net product revenues in the fourth quarter representing 21% quarter-on-quarter growth compared with Q3. And we achieved $166.4 million in global ONPATTRO net revenues for the full year in 2019. In terms of geographic split, we achieved $35.8 million from the US and $20 million from the rest of world. US ONPATTRO net sales in the fourth quarter represented 6% quarter- on- quarter growth, while underlying demand sales growth was 12% driven by new patients initiating therapy.Jeff will comment on the differences between reported and underlying demand sales growth later in the call. International sales represented 61% quarter- on- quarter growth which was driven by continued execution in EU countries, where pricing and reimbursement exists and with strong recent launches in both the UK and Japan.Now most importantly as of year-end over 750 patients worldwide were receiving commercial ONPATTRO treatment. When we include patients and clinical trials and in our expanded access program of EAP, we achieved over a 1,000 patients worldwide who were being treated with ONPATTRO or fitusiran as of year-end, an exciting milestone in our overall efforts and highly encouraging for the overall HATTR community.Now let's move on to review some of the market dynamics in the US specifically. On the physician front, we continue to see growth in both numbers of new prescribers, as well as repeat prescribers with our total number of ONPATTRO prescribers now at over 230 since launch. We believe continued growth in new prescribers reflect ever-increasing disease awareness on part of HCPs, driven largely by Congress presentations and the benefits of multiple players engaged in disease state education. Regarding a mix of US prescribers in the fourth quarter based on start forms received about 41% of start forms were from neurologists; about 37% coming from cardiologists.As a reminder, all start forms regardless of specialty are for the treatment of the polyneuropathy of hATTR amyloidosis. For 2019 overall, cardiologists accounted for 44% of start form submitted with 38% coming from neurologists and 18% from other physician specialties. Overall and as many of you heard it at R&D day, we believe HCPs across specialties in the US are growing increasingly comfortable with creating the polyneuropathy of hATTR amyloidosis with ONPATTRO. Adherence to therapy also remains very strong to date, a very encouraging sign and consistent with the Apollo Phase 3 data when real-world evidence lines up with clinical trial results.We continue to estimate over 90% of adherence rate for commercial ONPATTRO. Regarding US market access, as reported by external coverage reports, we're very pleased that we now have confirmed access to ONPATTRO if prescribed for more than 99% of US lives across commercial, Medicare, Medicaid and other government paying categories. Even in an increasingly competitive landscape, we continue to effectively partner with US payers and have avoided the payer and patients out-of-pocket headwinds often reported with other orphan drug launches.We're very proud of this role in the complex US market access environment and believe it reflects the constructive, collaborative, proactive approach we've adopted with a payer community including the use of value based agreements or VBA's. In the United States, we've now completed definitive VBA's full on ONPATTRO with 15 commercial payers including each of the top five commercial payers and eight of the top 10. These VBA's now cover over 130 million US lives.Let's now turn to the rest of the world. We're also very pleased with ONPATTRO performance. As I noted earlier, we achieved $20 million in international net product revenues in the fourth quarter reflecting 61% quarter-on-quarter revenue growth and 63% growth on new pipe patient adds. This is also the first full quarter in which we recognize sales in Japan, where we saw strong demand and initial performance in this important region where there is endemic disease. As we previously mentioned, we anticipate that exiting 2020 Japan will likely be our second largest country after the US on ONPATTRO both in terms of patients on commercial drug and of course revenue.Other notable achievements during the quarter include the continued launch of ONPATTRO in the UK and achieving a pricing reimbursement in several countries including Belgium, Israel and Italy. Through direct reimbursement, named patient sales or paid expand and access, we're now selling ONPATTRO in 16 countries outside the United States. We're seeing the source of our international business coming from both front line treatment as well as switches from other products such as TTR stabilizers.We believe this highlights the value that the hereditary ATTR community is seeing with ONPATTRO. Further, as we achieve reimbursement in different EU countries, we're seeing patients who've been our expanded access program convert to commercial drug as we saw recently in the UK. Our team also remains committed to addressing the challenge of raising disease awareness and improving diagnosis in hATTR amyloidosis and we highlighted previously our Alnylam Act program as a third party, genetic screening initiative in the US and Canada aimed at facilitating diagnosis for the benefit of patients suspected of having hATTR amyloidosis.As of January, over 21,700 samples have been submitted out of which over 1,300 have tested positive for pathogenic TTR mutation. Continuing a consistent percentage of positive mutation results. We see this highly encouraging.Let me now turn to GIVLAARI and the initial progress we’ve made in the short period into drugs early approval in November. For the initial six weeks from approval of GIVLAARI in US through the end of 2019, a total of 13 start forms were submitted. Net product revenues to the fourth quarter were approximately $200,000 which represents initial channel stocking. We are very pleased with a strong initial interest from patients, physicians and payers which continues in the first few weeks of 2020. We've been in discussions with multiple commercial and government payers and have made progress towards establishing VBAs for GIVLAARI including the implementation of our newly formed prevalence based adjustments.As mentioned, we're highly leveraging the capabilities built from ONPATTRO launch and following the best practice developed country by country, our team is focused on improving the awareness, egg diagnosis of acute hepatic porphyria in the HCP patient and payer communities and laying the groundwork for a successful launch. To that end, the Ironwood and Alnylam teams are fully staff trained and in the field and as I mentioned being received very well.As you're aware, through Alnylam Act we provide access to third party genetic testing for individuals in the US or Canada may carry a gene mutation known to be associated with AHP. While this program for AHP is still in early stages, we report 705 tests submitted in 78 patients, so approximately 11% confirmed of AHP associated gene mutations as of January 2020. As we noted last week, we received positive CHMP opinion for givosiran for the treatment of AHP in adults and adolescents age 12 and over in the EU.We now look forward to expected decision for GIVLAARI by the European Commission this year, which we followed by commercial launch in the EU following pricing and reimbursement negotiations country by country.With that I now turn the call over to Pushkal to review our recent R&D and pipeline progress. Pushkal?

Thanks Barry. And good morning, everyone. In the interest of time, I'm going to focus my comments on our progress in advancing or six late stage programs. Starting first with the recent FDA approval for GIVLAARI. As John and Barry mentioned, we were really excited to receive early approval for GIVLAARI, our second RNAi therapeutic last November in the United States which was followed by a positive CHMP opinion just last week in the European Union. And while we eagerly await the European Commission decision, we're delighted that both health authorities have granted broad indications for GIVLAARI for the treatment of acute hepatic porphyria based on the efficacy and safety data for the pivotal and vision study, which will enable us to address a broad range of patients suffering from this devastating disease.Let me now turn to our efforts in ATTR amyloidosis where we are working diligently to advance our two product candidates, fitusiran and vutrisiran. While fitusiran is currently approved in multiple markets around the world to treat the polyneuropathy associated with hereditary ATTR amyloidosis, we're also conducting the Apollo B Phase 3 study as a potential path towards expanding the products label for the treatment of cardiomyopathy in both hereditary and wild-type ATTR amyloidosis patients. Apollo B is a study in approximately 300 patients using a six-minute walk test primary endpoint with other important secondaries including the rates of death and hospitalizations.Enrollment is ongoing and expected to complete late this year. And if the study is positive, we plan to seek regulatory support for an expanded label for fitusiran in approximately the late 2021 to early 20222 timeframe. In parallel, we're also advancing vutrisiran which is delivered by a quarterly subcutaneous injection and is also in development for ATTR amyloidosis. Here, we're conducting two Phase 3 studies. The first is HELIOS-A which is enrolling hereditary ATTR amyloidosis patients with polyneuropathy. We're really pleased with enrollment in HELIOS-A and as announced last month at JPMorgan, we've enrolled over 85% of the study and expect to report top-line results in early 2021.Back in November, we also initiated the second Phase 3 study of vutrisiran HELIOS-B which is conducted --being conducted in both hereditary and wild-type ATTR amyloidosis patients with cardiomyopathy. This study if successful and following regulatory approval could allow the vutrisiran to enter the very large wild-type ATTR market with an outcomes-based label that we believe would be optimal for competitive positioning of the product. Primary end point of the study is a composite outcome of all cause mortality and recurrence CV hospitalizations, which will be assessed at 1:30. We may also conduct interim analysis providing the opportunity for earlier data readout.I'll now turn to recent progress with lumasiran, an investigational RNAi therapeutic we're developing for the treatment of primary hyperoxaluria type 1 or PH1. PH1 is an ultra-rare autosomal recessive disease caused by genetic defect in liver enzyme AGT that results then in hepatic overproduction of an insoluble metabolite called oxalate. This oxalate can deposit first in the kidney causing recurrent painful kidney stones leading to end-stage renal disease and also significant systemic complications. There are about 3,000 to 5,000 patients with this serious disease and their treatment options are very limited. Today, they're primarily medically managed with hyper hydration and dialysis in severe cases can ultimately require a dual liver and kidney transplant.To address this need, we're evaluating the safety and efficacy of lumasiran in the Illuminate program. This is a comprehensive set of studies across the entire spectrum of PH1 disease includes Illuminate A, our pivotal study in patients aged 6 and older with mild to moderate renal impairment. It also includes the Illuminate B study in pediatric patients less than 6 years old with mild to moderate renal impairment, which as we announced in our press release today has now completed enrollment. And it also includes a third study Illuminate C which is being conducted in patients with severe renal impairment. Together, the Illuminate program is the most comprehensive set of studies ever conducted in PH1.Now back in December, we reported positive top-line results from the Illuminate-A Phase 3 trial. Lumasiran showed a highly significant effect on the primary endpoint of the percent change from baseline and 24-hour urinary oxalate excretion average across month 3 to 6 in drug treat patients compared with placebo. The study also achieved statistically significant results for all tested secondary endpoints including the proportions of patients who achieve near normalization or normalization of urinary oxalate. And on the safety side, we were very encouraged by the results there as well. There were no serious or severe adverse events and the safety profile was very much in line with what we've reported previously for lumasiran including no significant LFT elevations.The full study results we presented in late March at the Oxaleurope Europe meeting in Amsterdam and as John mentioned, we recently initiated our rolling NDA submission for lumasiran and plan to complete our NDA submission as well as our NMA submission in early 2020. As you also know, we have two additional late stage programs that are in development with partners. This includes include inclisiran in development for hypercholesterolemia which is partnering now with Novartis and Futuris, development for hemophilia A or B with or without inhibitors, partnering with Sanofi.We're very excited about the prospects for both of these products. Both cases, they have highly differentiated profiles compared to agents that are either on the market or in development. And as Novartis recently announced the NDA and NMA for inclisiran have now been filed. Of course in addition to our late-stage clinical programs are robust -- our robust pipeline of early stage programs as being advanced to a sustained innovation growth and we look forward to updating you on these programs throughout 2020. So with that let me now turn it over to Jeff to review our financial results and outlook. Jeff?

Thanks Pushkal. And good morning, everyone. I'm pleased to present Alnylam Q4 and full year 2019 results. 2019 was a significant year for Alnylam as it marked our first full year of commercial operations with the launch of ONPATTRO occurring in the second half of 2018. As Barry has already highlighted 2019 was a year of strong commercial execution as we now have more than 750 patients on commercial ONPATTRO across 17 markets globally. After commenting on our fourth quarter and full year 2019 results, I will also provide our financial guidance for 2020.Please now turn to Slide 24 for a summary of our Q4 and full year 2019 results. Barry noted global ONPATTRO net product revenues in the fourth quarter were $55.8 million representing 21% global growth from the third quarter, driven by new patient growth across all markets. US ONPATTRO revenue grew 6% in the fourth quarter in comparison to Q3 while underlying demand sales growth was 12% in the quarter. The reason for the difference between reported and underlying demand sales growth was higher sales deductions in the fourth quarter.The full year gross to net percentage for ONPATTRO in the US was approximately 20% and in line with our expectations. Additionally, US Q4 ONPATTRO sales included a modest amount of inventory stocking but this had minimal impact on reported growth versus the third quarter as a similar amount of modest destocking occurred in Q3. Inventory levels in the US at year-end remain within target levels of two to three weeks. As Barry has already noticed the growth in our international markets was particularly strong in the quarter at 61% compared with Q3. Driven by strong launches in both the UK and JapanFull year ONPATTRO global net revenue was $166.4 million driven by growth in both existing and new markets over the course of the year. The US represented about 70% of full-year ONPATTRO sales and our international markets represented 30%.We also recognized our first sales at GIVLAARI in the quarter following FDA approval on November 20th. Net sales of approximately $0.2 million represent initial channel stocking. We look forward to updating you on the progress of our GIVLAARI launch throughout 2020. Net revenue from collaborations was $15.7 million in the fourth quarter an approximate 75% increase from the fourth quarter of the prior year. Primary driver for the increase was revenue recognized under the Regeneron collaboration that was established in the second quarter of 2019.Net revenue from collaborations was $53.2 million for the full year representing a 15% decrease from the prior year primarily due to reduced revenue from our Sanofi - Genzyme collaboration offset by revenues from our Regeneron collaboration.Cost of goods sold in Q4 was $12.2 million resulting in a 78% gross margin on product sales. Gross margin in the quarter was impacted by an approximate $5 million write-down for excess and obsolete ONPATTRO inventory that had been manufactured conservatively to ensure adequate stock was available to support initial launch demand. Absent this write-off, gross margin for Q4 would have been approximately 87% consistent with gross margin in prior quarters of 2019. Gross margin on product sales was 85% for the full year.Non-GAAP research and development cost were $166.5 million in Q4 representing the peak quarterly R&D spend during the year. Before spend was impacted by a high level of clinical material manufactured for future trials.For the full-year non-GAAP R&D expenses were $566.2 million representing a 33% increase from the prior year. The majority of our R&D spend were approximately 70% in 2019 went towards supporting late-stage clinical program, fitusiran, vutrisiran, givosiran and lumasiran. Non-GAAP selling, general and administrative expenses were $124.9 million in Q4 also representing the peak quarterly SG&A spend during the year. Q4 expense was impacted by spend on GIVLAARI given the November 20th FDA approval and preparations for commercial launch.SG&A spend for the full year was $393.1 million representing 29% growth from 2018 due primarily to the continued expansion of our global commercial infrastructure to support the ongoing launch of ONPATTRO and initial launch activity for GIVLAARI.Our balance sheet remains strong as we ended 2019 with cash, cash equivalents and investments balance of $1.55 billion compared with $1.13 billion at the end of 2018. The increase was due to proceeds received under our equity offering in the first quarter of 2019 and proceeds received under our collaboration and equity agreements with Regeneron offset by cash used in our operations and capital expenditures.Now turning to Slide 25 and our 2020 financial guidance. Starting with our global net product sales guidance for ONPATTRO which we are providing for the first time. We project our global net sales in 2020 will be between $285 million and $315 million per ONPATTRO. The midpoint of the guidance range represents 80% growth versus 2019. We believe growth will continue to be driven by both new patient funding and existing markets and expansion into new markets. Please note that we are not providing net product sales for GIVLAARI given that 2020 represents its initial commercial launch year.Our guidance for net revenue from collaborations is ranged between $100 million and $150 million with the midpoint of the range representing 135% growth compared with 2019. Growth in 2020 is expected to come primarily from our collaboration with Regeneron. Our guidance from non-GAAP R&D and SG&A expense is a range between $1,025 million and $1,125 million. The midpoint of the guidance range represents a projected 12% increase in 2020 compared with 2019. Key drivers of expense growth are expected to include investment in our early-stage R&D pipeline via our Regeneron collaboration and continued SG&A investment in ONPATTRO and now GIVLAARI. Importantly, as we are now focused on becoming a self sustainable business, this 2020 projected 12% operating expense growth significantly below the 31% growth in 2019 and combined R&D and SG&A expense.The moderating growth and operating expenses reflect discipline in our approach to capital allocation and the initial benefit of operating leverage from the commercial infrastructure we have developed to support ONPATTRO and now GIVLAARI. As we've discussed previously, we believe 2019 represents our peak non-GAAP net operating loss year. The top line and non-GAAP operating expense guidance we have provided today for 2020 is consistent with this. And we believe represents an important step on our path to becoming a profitable company.And finally, our balance sheet remains strong. As we project to $1.55 billion in cash and investments on hand at the end of 2019, will support company operations for multiple years based on current operating plans.With that I'll now turn the call over to Yvonne to review our goals for the remainder of the year. Yvonne?

Thanks Jeff. And hello, everyone. We believe 2020 is poised to be another catalyst rich year for Alnylam. So we plan to continue our global commercialization of ONPATTRO as well as the global launch of GIVLAARI including in Europe where we have a positive CHMG opinion and expect the European Commission decision in the coming month. We also expect two additional regulatory approvals by the end of the year. Lumasiran and inclisiran we're executing on six late stage programs in nine distinct clinical trials including Apollo B and our HELIOS-A and HELIOS-B studies.And as mentioned in today's press release, we plan to highlight additional clinical data from our fitusiran development programs at the upcoming ISA meeting in early March in Tarragona, Spain. For lumasiran, we continue to look forward to presenting full results when the Illuminate-A Phase 3 study at the Oxaleurope Europe International Congress on March 31st in Amsterdam.Furthermore, now having completed enrollment to the Illuminate -B study and PH1 patients under 6 years of age, we remain on track to report top-line results from that study in mid 2020. And of course, we will also continue advancing the rest of our pipeline as well as exciting preclinical efforts and will highlight milestones we achieved in these programs throughout the year as they occur. Notably, we aim to deliver two to four new IND products including ALS HSB for NASH and ALN for [LEG] for LEG2 amyloidosis in 2020 from our organic product engine, feeding sustainable innovation.Let me now turn it back to Christine to coordinate our Q&A session. Christine?

Thank you, Yvonne. Operator, we will now open the call for questions.

[Operator Instructions]Our first question comes from Alethia Young of Cantor Fitzgerald. Please go ahead.

Hi. This is Emma on for Alethia. So for GIVLAARI, were all 13 of the initial start forms from the initial porphyria center or Jenny come through, the Ironwood GI sales force or for many other specialties.

Okay. So, Emma, I think we didn't hear you that clearly. I think you're --I think you were asking about the Ironwood collaboration and what we're learning on the GIVLAARI side from our colleagues there. Barry, do you want to take that?

Yes. Thanks for the question. So as I mentioned on the call, both the Alnylam and Ironwood forces are out there educating the healthcare community engaging with the patient association. The 13 start forms came from a variety of prescribers. We're not really giving much color and exactly where they came from yet, but we can say right now they are coming from porphyria centers and local physicians treating these patients. And we are seeing success in some of the handoff from Ironwood already. And we will comment more with more data next quarter on all of that.

Yes. That's right, Barry. And I would just add that we're really excited about how this is-- how this launch is going so far. We are seeing very strong demand from physicians and patients. And we're looking forward to how this proceeds during the course the year. Thank you for your question.

Great. And do you intend to continue updating on the inpatient numbers over 2020? Or is that something you're moving away from now that you're guiding on revenue?

I mean we'll continue to provide the patient numbers on commercial drug and also the sort of broad umbrella number that we provide around patients that include our expanding expanded access program and clinical studies. We think it's in addition to the revenues we think it continues to be an important metric that people will like to see. So we do plan on continuing them but thanks for your question on it.

Our next question from Gena Wang of Barclays. Please go ahead.

Hi. Thanks guys for the call. This is David for Gena. My first questions on diagnosis for ATTR polyneuropathy. Do you see a positive impact for the ATTR polyneuropathy diagnosis from Pfizer's efforts on the ATTR cardiomyopathy diagnosis with this launch?

Yes. David, that's actually a fabulous question. And one that let me just make some initial comments and then maybe Pushkal can talk a little bit about some of the diagnostic evolution in the whole landscape and then Barry can comment as well. Obviously, we're very focused on ONPATTRO potential value for treating the polyneuropathy of hereditary ATTR amyloidosis in adult patients. And as we continue on that effort we also realize that polyneuropathy is being recognized in a significant number of patients throughout the spectrum of hATTR including even [B122Y] patient population that historically have been viewed as just cardiomyopathy patients.But it turns out that many of these is actually over 50% are being found to have polyneuropathy. So as a result, the work that's going on in the field to identify patients with hATTR amyloidosis really can potentially lead to patients being discovered to have polyneuropathy and that's really an important dynamic that's taking place right now. So maybe Pushkal you can say a few words on the diagnostic method evolution and then, Barry, a little bit on what we're hearing in the field out there so.

Absolutely, David just to follow on some of John's comments .I think there's greatly increased awareness around this disease first of all based on now therapeutics that have become available for patients with this what was prepared for unrecognized disease. It also used to be sort of considered two separate diseases polyneuropathy form and cardiomyopathy form. And I think as John alluded to really seeing overlap in patients and that it's really one disease. So I think what you're seeing is guidelines starting to emerge and physicians starting to congregate around how to treat diagnose and treat these patients looking for red flag symptoms like carpal tunnel syndrome and other manifestations recommending genotyping so that we can understand who has the genetic mutations in the hereditary forms of this.And then importantly the advent of non-invasive ways to diagnose these patients. For example, looking at technicians scanning to identify where patients have cardiac involvement and then because of this sort of mixed phenotype that we're seeing increasing the fact that patients to have to get evaluated in amyloidosis centers and by multidisciplinary physicians to actually in clinics to look for both the polyneuropathy and cardiac manifestations the disease. And I think that's leading to increased awareness, diagnosis and then the discussion of treatments for these patients. Maybe Barry can pick it up from there.

Yes. You covered it completely. The only thing I will add is it's our efforts and other companies' efforts doing disease state education but very importantly the amyloidosis society to physicians at cardiac; neurology and even gastroenterology clinics have whole tracks. Educating broad swaths of physicians to look for teach amyloidosis and to make sure that they do genetic testing in the case of hereditary TTML genesis in this multi system, multi function disease.

We will now move to the line of Salveen Richter of Goldman Sachs. Please go ahead.

Good morning. Thanks for taking my question. Could you just walk through the dynamics behind your 2020 guidance particularly as the ramp continues in Japan here and just talk about external factors that are at play? And then secondly, you talked about this higher sales deduction that played out in Q4. Do you think that's something we should monitor on a go-forward basis? Thank you.

Yes. Thanks Salveen. I'm going to hand it over to Jeff. Let me just say one thing on guidance. The first time I'm obviously providing revenue guidance as a company. And we do think it's an appropriate thing to do now that we've got a one year of launch behind us with ONPATTRO and so this is an approach that we do intend to take with other products as we bring them to market after the first year or so where we don't yet have visibility like in the case of GIVLAARI right now. We won't provide guidance and then after about a year's worth of experience we will. So this -- you'll see more of this going forward from Alnylam. But let me now turn it over to Jeff to comment on the specific questions you asked.

Yes. So, Salveen, guidance ranges $285 million to $315 million for ONPATTRO which represents 80% growth year-over-year if we hit the midpoint of that. We expect that growth to be driven by new patients coming on to therapy and existing markets and bringing new markets online when we get access and reimbursement. I would say we expect the growth outside the US to be higher in 2020 than in the US just given that the dynamics of getting access and reimbursement outside the US have taken longer. So many of the markets that came online outside the US were only online for partial year in 2019. Barry can comment further if you want after I answer your next question.The question about sales deductions in the fourth quarter and whether or not that should be something that would be monitored in terms of a trend. I think not the way we --the way sales deductions work is you make estimates at the time the sales are booked for sales deductions and as you get actual against those estimates be true those numbers up. And over time or quarter-to-quarter that can really lead to some changes, some distortions quarter-to-quarter and that's what happened in the fourth. We had adjustment that resulted in slightly higher number in the fourth quarter, but for the full year our gross to net deductions both in the US and globally were right in line with what we expected globally, right in line with the 25% guidance we had provided for the year. I don't expect that to be dramatically different in 2020. And Barry anything to add?

Yes. Just emphasize and Jeff covered it incredibly well. Just emphasize again the growth will come from patients continuing on therapy. We're very enthusiastic that there's over 90% adherence rate representing what we saw in the Apollo clinical trials over half the patients are stabilized or improved in their polyneuropathy. It's quite remarkable to see and anecdotally hear those stories. And then as Jeff said, we'll continue to bring new patients on the markets that are opened. We will continue to open new markets and will continue evidence generation all our growth drivers of new patients. The only other thing that I'd add is right now the pricing and reimbursement we're getting outside the United States continues to be very strong, representing the value that ONPATTRO is bringing to the treatment of polyneuropathy in this hereditary ATTR patients.

Salveen, does that answer your questions?

Our next question from the line of David Lebowitz of Morgan Stanley. Please go ahead

Thank you very much for taking my question. When you look at the ONPATTRO launch since the beginning, has there been any evolution in the type of patient, the incremental patient diagnosed and put on drug from the beginning of the launch to six months into the launch to now? And how might you expect that profile of the patient to change six months or a year from now?

Yes. That's a great question. Barry, you want to handle it?

Yes. So, David, great question. Let me first say that based upon the genetic makeup of any different country, each country quite frank has very different dynamics. The United States dynamic has a significant amount of V112I to V30M other countries of different mutations. I'd say if we go back a couple years ago and as Pushkal mentioned, most people thought of hereditary TRR as either a polyneuropathy or cardiomyopathy disease and a big fundamental shift we've seen is appreciation that this is a mixed phenotype disease. In fact, most patients including V122I patients have mixed disease.So the ability to see and look for polyneuropathy has increased over the years and should continue to increase as education continues in the healthcare community.

The only thing I would add, David, which relates to the US market which certainly did evolve over the course of the year, was the advent of combination views. And we're aware of a significant and probably growing number. We don't have precise numbers on this but growing number of patients where we understand that they're receiving the TCR stabilizer in addition to their ONPATTRO. So it reflects physicians who are choosing to treat the cardiomyopathy with the stabilizer drug that's approved for that indication and the polyneuropathy with ONPATTRO and that really is something which has changed over time and physicians are finding the ability to continue to receive robust reimbursement for our ONPATTRO in that specific setting.So that is something which did change over the course of the year, are expected to continue to change and evolve during 2020.

Our next question from the line of Do Kim of BMO Capital Markets.

Hi. Good morning. Thanks for taking my question. On ONPATTRO or the fourth quarter US sales, were there any other factors besides the gross to net reduction that impacted the growth? Was there increased competition from the ongoing clinical trials? At least this patient population and also on your 2020 ONPATTRO guidance, are you assuming any first quarter seasonality any headwinds from reimbursement resets?

Yes. Let's turn that over to Jeff. Jeff?

So first question related to the growth dynamics in the fourth quarter. So underlying demand growth. So product shift to patients to fulfill patient orders was 12% growth in the quarter. The reported product sales for the quarter were only 6%. The reason for the Delta was gross to nets. The gross to net deductions that we booked in Q4 were about 5% higher than what we booked in Q3 which was the reason for lower reported net sales growth. Maybe you could repeat the second question?

The second question is on your guidance. Whether that you expect any seasonality?

No. We don't expect any seasonality. I would again expect continued and steady growth quarter-to-quarter.

Barry, you want to add anything?

Yes. I just emphasize that as we presented multiple times, we built a very robust commercialization capability and in the United States have Alnylam assist which proactively reaches out to patients to ensure drug continuity. So we are seeing as we mentioned patients who are benefiting staying on drugs and a significant number of patient adds across the country. And feel really good that that we've been through the bolus of the United States and but we continue to seek really nice patient growth.

Our next question from Ritu Baral of Cowen. Please go ahead.

Good morning, everyone. Thanks for taking the question. Can you guys comment on how much Japan represented of 4Q ex US sales and the sales growth as well as switching patterns you mentioned switching patterns in Europe and Japan. And then I have a follow-up on Apollo B.

Yes. This is great question, Ritu. Let me on the breakdown we are going to provide that breakdown for rest of world, yes, we probably will need to start in the first quarter as Japan grows and becomes a more significant proportion of our rest of world sales. So for right now it's lumped together. What we can say is that Japan was very strong and we're very pleased with the growth of Japan. But we also had some markets in Europe notably the UK where we had full -- a full quarter of reimbursed drug during Q4. So that was also notable. Anything Jeff to add to that?

I think you hit. I mean for sure in the fourth quarter again 61% growth outside the US, the UK and Japan were significant contributors to that growth from the quarter, yes.

I think probably just one thing that I am switching in Japan where patients that have been on stabilizers for a period of time continue to progress. I think we're seeing physicians in switching those patients to ONPATTRO.

Absolutely, And, Barry, anything else to add?

No. I was going to emphasize what Yvonne said that the dynamics in countries where physicians have extensive experience semis again for the polyneuropathy and quite frankly not a positive experience it's been mostly a switch. In the United States where experiences is a little bit newer and as John mentioned the cardiac indication, we're seeing a little bit more combination use. We are also seeing newly diagnosed patients on ONPATTRO in countries around the world. So it's not only a switch dynamic.

Does that helpful, Ritu?

Very helpful. Thank you. And then my question on Apollo B now that we're getting closer to enrollment completion as you mentioned later this year. Can you remind us what the powering around six-minute walk, the six-minute walk endpoint for that study will be? And do you have any general thoughts on what that --what that data could mean as we look at and model ONPATTRO into 2021 and 2022. How do you think that six minute walk data compares meaningfulness lives versus outcomes data from [Indiscernible]?

Well, that's a really great question. We're going to -- I'm going to make a couple comments and we'll go to Pushkal then Barry. Let me just say for starter that we really are excited about Apollo B and then HELIOS -B and we really do view these two trials as being critical elements to the potential expansion assuming the trials are positive and regulatory reviews are positives. We expect the potential expansion of our broader ATTR franchise into the very, very large wild type ATTR cardiomyopathy setting very specifically. So we do think this is very, very critical for the company and we think it's a very important value creation opportunity for Alnylam. So with that Pushkal, do you want to comment on the Apollo B design?

Yes. Absolutely. Thanks Ritu for your question. So just as the big picture on this study right. There's a 300 person study enrolling both patients with wild-type and hereditary TTR with cardiomyopathy and we're following them for 12-months for a six-minute walk distance endpoint. And I think in terms of -- it's a global study, in terms of I think what we're seeing in terms of enrollment is great enthusiasm. And I think that's really spurred on by the fact that investigators are very enthusiastic about some of the post hoc and exploratory data that were published last year in circulation coming out of the Apollo study, suggesting that ONPATTRO may have favorable effects on some of the cardiac aspects of the disease, and really want to do and support this definitive study to understand that.In terms of the endpoint, the six-minute walk distance test is a validated endpoint that's been recognized by the health authority as registerable. And so we're encouraged by that and obviously we have secondarily end point to look at symptomatology using the KCC Q, deaths and hospitalizations outcomes as well that we can follow. In terms of powering, the powering, we're obviously informed by prior studies including the ATTRACT study and we can use that to really understand how to well to really well power this study. So it's a very well powered study for the primary endpoint. And so we're quite encouraged that we'll be able to see a positive result as that reads out assuming our underlying hypothesis is sound, which we do believe it is.

Great. And, Barry, do you want to comment a little bit?

Yes. The only thing I'd add and Pushkal thanks for covering that so well. As we know ONPATTRO is currently indicated for the treatment of polyneuropathy and hereditary TTR patients and as evidenced by the Apollo study, we saw stabilization and even a reversal of polyneuropathy in the majority of patients. So as Pushkal explained, we've got a number of endpoints in Apollo B that, a profile similar to that would be very competitive particularly in an opportunity where we might see patients or aspects of disease getting better.

So, Ritu, does that answer your question?

Yes. And so what all this together imply a potential reacceleration potential on positive data potential reacceleration of growth in the 2021, 2022 timeframe upon potential label expansion?

Well, yes, absolutely. We would expect that based on the opening up of the wild-type indication, absolutely.

Our next question from Paul Matteis of Stifel. Please go ahead.

Great. Thanks so much for taking my questions. I had one follow-up to Ritu's question and then one quick question on givosiran. To Ritu's question, I was wondering if you could just talk about Apollo B and if you have any assumptions or any expectation for what you might see on mortality or hospitalization? Understanding that cardiologists really care about outcomes data even more so than maybe neurologists in the GTR space. And then second on givosiran, I totally understand that it's too early to give guidance. I was wondering if could just kind of bounce qualitatively off you what consensus seems to imply. It feels like analysts that cover Alnylam are assuming that this roll out will be a lot slower than ONPATTRO and that this is a market that really requires a lot more building. I was wondering if you could speak to at least some agreement or disagreement with that assumption since consensus here really is a lot more conservative than what you accomplished in TTR. Thanks so much.

Yes. Thanks Paul. Great questions. So Pushkal do you want to handle first one, Barry the second?

Absolutely. Thanks, Paul, for your questions. I think as you were asking is really what our expectations were around the outcome measures in the Apollo B study. And so maybe a couple things again, the study was primarily powered around the six-minute walk test and the mortality and hospitalization endpoints are captured as secondaries and hierarchically tested there. I think in terms of context around that, I think if we look at the ATTRACT data as sort of an example and is similar in a related patient population. There we saw with that drug that hospitalization started to separate it around nine months and mortality differences started to emerge at around 18-months.So by that token a 12-months study know as we can see --we have to see what it looked like or it's very encouraging to us, however, is that we did the post-hoc analyses out of the Apollo study. And there as you may recall from the data that were published in circulation, we started to see separation in these post-hoc analyses in the cardiac sub population relatively early in terms of recurrent, mortality and recurrent hospitalization events. And that was in the subset of patients, Apollo was 225 patients. This is a 300 person study.So I think we are -- we obviously have included them because we're hopeful that we'll see those differences emerge. And we'll be capturing that in the context of the study.

Great. And Barry on GIVLAARI.

Yes. On GIVLAARI, So, Paul, I'm not going to comment on what we're thinking relative consensus of course we're not giving that guidance, but qualitatively we have a situation where we have a remarkable drug in GIVLAARI and a very unmet need here in a population desperate for a treatment, but it is a market we need to build. Removing this market from patients suffering a 13 to 15 year Odyssey, there are multiple inappropriate operations to trying to speed diagnosis and a mentality from treating attacks to preventing and treating the holistic aspect of the disease. So it is a market in transition that we are really building on our own. There aren't the same competitive landscapes for the same dynamics we've seen in TTR.That said we feel great about the start and where we're headed with building GIVLAARI into a very important medicine for these porphyria patients.

Great. Paul, does that answer your questions?

Our next question from the line of Maury Raycroft of Jefferies. Please go ahead.

Hi. Good morning, everyone. And thanks for taking my question. I've got another one on ONPATTRO. I'm just wondering for their launch. If you can provide more specifics on drivers for why doctors and patients are switching from stabilizers or deciding to add ONPATTRO on to stabilizers as combo. And along these lines how are doctors defining progression of disease while patients are on stabilizers and is that definition evolved?

Yes. Those are great questions, Mauri. Barry, do you want to handle both?

Yes. So, Maurice, as we've talked about the dynamics is different depending on what country. In general in countries outside the United States for hereditary TTR patients with polyneuropathy, ONPATTRO being used frontline when patients are newly diagnosed. And they're being switched as patients progress, progressions being defined differently across various physician groups, but in general as we know from the ATTRACT study all the patients progress. So it's not a question if they're going to progress, it's how quickly they progress, And as John highlighted appropriately in the United States given different indications in somewhat of the US medical practice, we're seeing a bit of combination used. But that's a bit more of a US dynamic.

Mauri, does that answer your questions?

Yes. Any idea as to the proportion of patients that are getting combo use?

We don't have great numbers on that. We know that it's a double-digit number for sure maybe more over time but we know some practices in our R&D day we had physician from the University of Chicago, a great institution by the way which where she has -- she said she has over 10 patients that are on combo use. So we do think this will increase and physicians are finding that they're able to get reimbursement or they are on ONPATTRO as well as all other parameters if that's what they're using. And so that's good.

Our next question from the line of Anupam Rama of JP Morgan. Please go ahead.

Hey, guys. Thanks so much for taking the question. Maybe following Salveen's question earlier. Just thinking about the guidance. So what's that Delta in sort of market dynamics that's assumed in achieving say the lower bound of 285 versus the higher bound of 315 in the guidance? Doest that layering on a couple more countries? Is the increased penetration? Is it a combination of things? If you could give us a little more color on that. They would be helpful. Thank you so much.

Terrific. Jeff, you want to handle that?

Well, I'll start and I'll let Barry comment. Again the range that we provided $285 million to $315 million in midpoint 80% growth. We understand the importance of achieving that guidance. We are confident in our ability to do so. We provided a range just like we had with all the other elements of our guidance just given general uncertainties. That's all I have. Barry, anything further you want to comment on around that range for ONPATTRO?

Jeff, I think you covered it well and just to emphasize, Anupam, we see growth coming from growth in countries where we have pricing and reimbursement with new patient finding and evidence generation. And then opening up new countries. We're reaching pricing and reimbursement. As I said earlier, it's going very, very well. We believe it will continue throughout the course of this year into the years to come.

Anupam, does that part of the answer as much as you'd like, but this, I think the color that we'd like to provide at this point.

Our final question today from Leland Gershell of Oppenheimer. Please go ahead.

Hey, guys. Thanks for taking my question just a financial question again on the gross to net. I think you said that you were meeting coming right in line with Europe's 25% between US and EU. Is there any way you could break down if there are any differences in the gross to net between those two regions? And I have a follow up. Thanks.

Great. Jeff?

Yes. Sure. The gross to net in the US is approximately 20%; outside the US it's closer to 40%. The blend is 25%. All those figures were in line with our expectations for the year.

Right. So you had a follow up, Leland.

Oh, great, thanks. And I just on -- just actually question on the royalties. I think you had said that you'd be do royalties up to about 20% but those are scaled. Any color you can provide on what the scaling of those royalties is or just 20% is kind of the max.

Well, the blend, thanks Leland. The blend is going to be in the high teen when you look at how the stack is structured and how the other market potential to the product is expected to play out. And obviously that gets higher and higher as the product meets expectations and Novartis is driving toward. So it's a very attractive share. I think one way to look at it is just on an NPV basis, it's about a quarter to a third of the value alone of that asset depending on spend that is associated with ultimately driving the revenues. So that's a very significant portion of value that we have in the product. And we're obviously very pleased and excited to have Novartis as our partner for it. Jeff or Yvonne, anything to add to that?

I think you nail it. I don't have anything to add.

Nothing for me either.End of Q&AThank you. Ladies and gentleman that all time we had today for questions. And now I would like to turn the call back to the company for any additional or closing remarks.

Well, great. Thanks everybody for joining us this morning for the call. We are really pleased with our R&D and commercial progress that we've been making. We're excited about where 2020 will take us and we look forward to updating you in the weeks and months to come. Thanks very much.