Alnylam Pharmaceuticals, Inc. (ALNY) Q3 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals Conference Call to discuss the Third 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’d now like to turn the call over to the Company.

Good afternoon, I'm Cynthia Clayton, Vice President of Investor Relations and Corporate Communications at Alnylam. With me today are John Maraganore, our Chief Executive Officer; Barry Greene, our 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 have been made available via webcast can also be accessed by going to the Investors page of our website www.alnylam.com during today's call. As outlined in Page 2, John will provide some introductory remarks and provide general context for activities in a quarter and recent period. Akshay will summarize the clinical progress with our Alnylam 5x15 pipeline program; Mike will review our financials and guidance; and Barry will provide a brief summary of our business highlights and goals, 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 containing 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 will specifically disclaim any obligations to update such statements. I will now turn the call over to John.

Thank you, Cynthia. Welcome, and thanks to everyone for joining us this afternoon. This is a quarter of remarkable progress at Alnylam, particularly in the advancement of our Alnylam 5x15 pipeline programs and the recognition of the RNAi therapeutics as a new class of innovative medicines. A key highlight was achieved with positive data from our Phase I clinical trial with ALN-TTRsc in development for the treatment of Familial Amyloidotic Cardiomyopathy. In this study, we demonstrated knockdown of serum TTR of up to 94% and show that ALN-TTRsc was generally safe and well tolerated, thereby demonstrating human translation of our proprietary GalNAc-siRNA conjugate delivery platform. As such, these data are very important, not only for our ALN-TTRsc program but for essentially the entirety of our Alnylam 5x15 pipeline, which employs this now clinically validated delivery approach. To be clear these human POC data with TTRsc, in addition to the very significant improvements that we made on our subcutaneously administered GalNAc conjugate siRNAs, support our strong belief that our GalNAc delivery platform is best in class for RNAi therapeutics that target liver express disease genes. We also had an excellent quarter at recent period with our ALN-TTR02 program and for starters we’re very excited to announce today that we have obtained our INN name for this medicine and the name is Patisiran. Regarding our continued progress on Patisiran, we were very pleased to complete enrollment in our Phase II trial and to initiate enrollment in our Phase II open label extension study, also known as our OLE study. Otherwise we remain very much on track to start our Phase III pivotal trial for Patisiran and TTR polyneuropathy patients by the end of this year and look forward to updating you on this in the coming weeks. In addition to our TTR Alnylam doses programs, we also made important advances in the remainder of Alnylam 5x15 programs, including a CTA filing for ALN-AT3, which is our RNAi therapeutic targeting antithrombin for the treatment of hemophilia. We also selected development candidates for our ALN-AS1porphyria program and our ALN-PCSsc Hypercholesterolemia program which happens to be partnered with the medicines company. We also presented key data from our porphyria program at the OTS meeting and also more recently, data from our ALN-AAT program, which is focused on liver disease associated with alpha-1-antitrypsin deficiency. With all these recent advances we believe that that we are building a compelling opportunity for shareholder value creation with a modular and reproducible approach for the development and ultimately commercialization of innovative medicines for genetically defined diseases. We believe that this approach for genetic medicines is in fact unmatched in the entire biopharmaceutical industry and could position Alnylam as a leading company in this space for the future. I would like to now turn the call over to Akshay for a more detailed review of our clinical activities, our pipeline and our scientific progress. Akshay?

Thanks John and hello everyone. As John mentioned, we have had an extremely productive period on the clinical front with our Alnylam 5x15 programs and we're encouraged by the growth and collectivity and safety data from these programs. I will start with an update on our ALN-TTR02 or Patisiran program. As most of you are aware that Patisiran is our main 5x15 program and is the end of the treatment of TTR Amyloidosis doses for patients with Familial Amyloidotic Polyneuropathy or FAP. We have completed enrollment in our Phase II trial litmus program and we will be presenting results from the study at the IFFAP meeting next week. As a reminder and as you can see on Slide 8, we presented interim data for this program at the PNS meeting a few month ago. Results at that point demonstrate up to 93% knockdown of TTR. Patisiran activity was found to be rapid, dose dependent and durable with similar levels of TTR knockdown observed towards toward both wild-type and mutant protein. In addition, Patisiran was found to be generally safe and well tolerated in this study. We have also begun enrolling patients in an open-label extension study with Patisiran. This study will evaluate the long-term safety and tolerability of Patisiran and will also measure effects of treatment toward a number of clinical endpoints, including a modified Neuropathy Impairment Score called “mNIS+7.” Eligible patients treated in the Phase II study can enroll in the only study [indiscernible] study where they will receive Patisiran at a dose of 0.3 milligram per kilogram every three weeks for up to two years. We plan to report clinical data from this study about once a year with initial data in 2014. In addition, we remain on track to start a Phase III pivotal trial for Patisiran…

Thanks Akshay and good afternoon everyone. I will be referring to slide 17 for a discussion of our financials this quarter. Alnylam continues to maintain a very solid balance sheet ending the third quarter with $367.1 million in cash, cash equivalents and marketable securities. Our GAAP revenues for the third quarter of 2013 were $9 million, as compared to $16.8 million in the third quarter of 2012. Revenues this quarter included $5.5 million related to our collaboration with Takeda, $1.4 million related to our collaboration with Monsanto and $2.1 million related to our collaboration with The Medicines Company, research reagent licenses and other sources. For the remainder of 2013, we expect net revenues from collaborators to remain consistent with the amount recorded in this third quarter. Moving to expenses; R&D expenses were $34.5 million this quarter, as compared to $22.1 million in the prior year period. The increase was due primarily to higher clinical development costs related to our ALN-TTR02, ALN-TTRsc and ALN-AT3 programs. In addition, stock-based compensation expense increased during the three months ended September 30, 2013, as compared to the three months ended September 30, 2012, due primarily to an increase in the Black-Scholes value of stock options granted in the third quarter of 2013. Partially offsetting these increases were license fees due to certain entities related to our delivery and platform technologies that were expensed in 2012. Looking ahead, we expect R&D expenses to decrease slightly for the fourth quarter of 2013, due to a decrease in stock based compensation expense. G&A expenses were $6.8 million in the third quarter of 2013, as compared to $12.8 million in the third quarter of 2012. The decrease in G&A expenses as compared to the prior year period was due primarily to a decrease in consulting and professional service expenses related to business and legal activities. Alnylam expects G&A expenses will remain consistent for the fourth quarter of 2013. With respect to guidance for 2013, we continue to believe we’ll finish the year with greater than $320 million in cash, which provides us with a strong balance sheet to execute on our business plan and advance our RNAi therapeutics through clinical trials and towards the market. This concludes the financial highlights and I will now turn the call over to Barry. Barry?

Thanks Mike and good afternoon everyone. As you’ve heard from John earlier, we really have had a tremendously productive quarter, in fact a productive year so far. Importantly, we expect it to continue for the remainder of this year and into 2014. As we do every year, we’ll be providing further detailed guidance for 2014 in January, but there are still few key milestones coming before year end. With regard to our TTR program, we expect to present data from our Phase II trial with the Patisiran at the International Symposium on FAP in Rio next week. These data will include full TTR knockdown results for approximately 30 ATTR patients, and will also include important safety and tolerability readouts. For patients enrolled in the Phase II study, we began rolling over these patients into our only study that includes clinical end-point data that will begin to readout in 2014. Finally, we remain on track to initiate a Phase III pivotal trial for Patisiran in polyneuropathy patients by the end of the year. This will be an exciting transition for us as we enter the final stages of clinical development with our lead program. Importantly as Mike said, we plan to end this year with greater than $320 million cash. At upcoming scientific and medical meetings, we plan to have updates on several of our Alnylam 5x15 programs including ALN-PCSsc at the American Heart Society Meeting in mid-November and ALN-83 ALN-TC5 and ALN-TMP at the ASH Meeting in December. In summary, I think it’s very clear that we’re executing on our goal of driving innovative RNAi therapeutics to patients in need. With that, I would like to turn the call back over to the operator for question. Ashley, we will take questions now.

Thank you, ladies and gentlemen. (Operator Instructions) our first question is from Marko Kozul with Leerink Swann. Your line is open.

First question ISFAP coming next week November 10 through the 13. Could you give us either a day by day or a date on when you’re actually going to present the data?

If you look on the agenda that’s available online you see that we have, Jared Gollob has a presentation scheduled for I think it’s noonish, I don’t have the exact time but it’s noon on Wednesday 13th.

We’re presenting those data.

I am sorry I will be missing it, but next question, regarding the open label expansion which has now been open I think for 5 or 6 weeks, how is the transition going for patients and are you expecting most of the safety trial patients to enroll?

Marko that’s a great question. Let me have Akshay answer that.

Marko there is obviously lot of excitement for these patients to transition over to the open label expansion. It’s going to well and I think we expect majority to enroll.

Yes, our expectation Marko is that, the majority of patients that were treating in the Phase II will in fact rollover and it’s one of the benefits of going into the phase II study, knowing that ultimately they can get access to drug for the foreseeable future.

Terrific and just one more before I jump back in queue and that is, what level of incoming interest are you observing from both large and smaller companies interested in exploring or leveraging your GalNAc conjugation delivery technology? I imagine there must be some interest out there some large historically transaction in the space such as the Dicerna 1.1 billion acquisition by Merck seven, eight years ago? Thanks.

So, Marko, it’s a great question and absolutely I mean the data we presented at HFSA, the knockdown data of TTR with TTRsc data really I think is completely changed the type of dialogue we have had with potential partners. As you now though just keep in mind, our strategy is not to partner extensive forces of our pipeline but rather directly commercialize, but we will look to partner in territories outside North America, Europe and South America like the type of deal we do with Genzyme last year in Japan and Asia. So our partnering interest for the most part is around regional partnerships, not global partnerships. That said, there certainly are some programs in our pipeline that we would look at as being programs like PCSK9 for example, which would be global partnership programs. I mean Laurence anything else to add on that.

You’ve captured it exactly and I think it’s with the [indiscernible] platform, I think the notion getting into diseases through a partnership, global partnership mechanism, things like some infectious disease and metabolic disease that we begun to talk about become much more engaged conversations obviously with pharmaceutical companies than they were a year ago. As John says, the focus is really on me regional rights around the key platform of programs.

I think it’s clear to say Marko that hedge of R&Ds and major pharma companies that look GalNAc conjugate data that we’ve generated and are quite excited about the progress that we made and the remaining data points along those lines that obviously we don’t share openly but rest assured that there have been many important conversations along those lines that create opportunities for us as a the company for the future.

Thank you. Our next question comes from Alan Carr of Needham. Your line is open.

This is actually Mark on for Alan. I was wondering if you could talk little about hemophilia trial that we have coming up, maybe give us some idea on the kind of patients that you’ll be enrolling in the hemophilia portion, not in the healthy volunteer portion. What kind of secondary end points we’re going to look at and just things that we should be paying attention to as targets underway.

Yes, Mark, that’s a great question. Akshay, you want to handle that?

Yes, sure. So for the [indiscernible] study, we’ll be enrolling patients with AOB, with moderate to severe [indiscernible] and the idea is that we can -- we have a very good safety margin as proven by our work in hemophilia animals so that we can really get to significant degrees of antithrombin knockdown evidence of associated with increased levels of thrombin generation of the in term associated with improved hemostasis. Now in the context of our Phase I study, we hope to reproduce obviously the safety that I talk about in our systems, is by chemical changes which would very be encouraging from clinical perspective ultimately and we’ll be monitoring safety throughout. That’s part of the objective and that as part that we’ll be looking bleeds as well as they occur. But naturally in context of the Phase I study we’re not going to be reporting leads or so forth because of the, I believe the study’s design of Pharmacal safety, the study is not [indiscernible] show that but we will capture anything information on it as possible. The most powerful information beyond the safety will be the AT3 knockdown and increase in thrombin generation associated with the increased hemostasis. I think it’s been very, very keen and very exciting.

One of the reasons the thrombin generation data are so interesting to us is there have been some very nice studies done by number of investigators in the field, most notably Claude Negrier in France, looking at severe moderate and mild hemophilia patients where their designation as severe, mild or moderate is based on the frequency of bleeds that they have and also their requirement for replacement factor and what’s known about the differences between a severe hemophilia patient versus a mild hemophilia patient is that they are thrombin generation level XVIVO [ph] closely correlate with FEMA [ph] type and so if we’re able to show on our Phase I, in the MAD phase of the Phase I in patients that we’re significantly increasing thrombin generation, that gives us some very strong encouragement that we’re essentially taking our patient with severe disease and giving them what would otherwise be characterized as a mild or approximately to more normal overall FEMA [ph] type and that’s a very powerful end point in the Phase I that obviously is going to be very important for us and we establish a dose and a level antithrombin knockdown associated with a change in thrombin generation, that’s a dose we plan to take forward into a Phase III study with inhibitor patients. So, it’s a very systematic and direct approach, with again data readouts that will have next year as well. So we’re very encouraged by where this trial can go.

Thank you. Our next question comes from Geoff Meacham from JPMorgan. Your line is open.

Question for you, the first one is on Patisiran. So you guys are obviously close to starting the Phase III. What are your assumptions for enrollment timelines and are you planning any sort of interim analysis on the study.

Geoff, first of all I’ll congratulate you on being the first person outside of the company that’s pronounced the name and done so correctly. But then I’ll turn it over to Akshay to comment a little bit on that.

Right, I think it is a significant and important milestone for us. It’s obviously going to be very adequately sized and [indiscernible]. We are going to share more details at this upcoming Rio meeting around Phase III design and given the magnitude of this study, I think we can expect the timeline of this is going to be more than just a few weeks or few months but more to come at the [indiscernible].

Geoff, I would just add that in general, I think what we estimate is that anywhere from 2.5 to 3.5 years to from start of study to data readout based on obviously the delta they’re being based on, just the accrual time at the end of the day. So, that’s something which I think you will want to be thinking about your models.

And just John, bigger picture question, it looks like you’re well on track to beat your 5x15 goals. What do you think the realistic pipeline goal beyond that for 2015, 2016 and maybe on a way and so the conference in January, the announcement…

Geoff, that’s when we like to do that announcement as you know, but look, I think we clearly are positioning the company and this is, we said is publically, we’re going to be starting our TTRsc Phase III program in the cardiomyopathy patients next year and we’re very much on track for doing that. The hemophilia program can very rapidly go from Phase I study into a Phase III type study, Phase II, III study like an inhibitor population. The porphyria program also can very rapidly go from Phase I into a pivotal study. And so I think by the end of 2015 we're going to be looking at a very mature pipeline of multiple Phase III programs with read outs of data coming from different sources as well including our open label study. So it's going to be a very exciting next couple of years as it relates to clinical advancement and different activities on our pipeline; certainly multiple Phase IIIs, multiple programs of data read outs, and I think it just makes it a very exciting opportunity for all of us here at Alnylam and hopefully for people elsewhere to see how we can ultimately build this very modular and reproducible approach for genetic medicines.

And Geoff, I think you can bet that the future programs over the next few years are going to be consistent with our strategy to develop and commercialize in North and South America and Europe to build the kind of Company we're trying to build, a multi-billion dollar international company and these programs are very consistent with the criteria we have used for 5x15 going forward. Today if we define targets, these liver targets clear development and significant commercial opportunities. Those are all continually part of our selection criteria.

Thank you. Our next question comes from Alethia Young of Deutsche Bank. Your line is open.

First question is just can you go through with us, I have got a lot question from people about what exactly will be new and incremental FAP meeting on Patisiran?

So you obviously state, this is next week, but obviously we're going to be a doing a complete Phase II results will be presented. So that's roughly 30 patients worth of data compared to the 19 that you heard about at the PNS meeting. And there is some additional analysis that has been done in there which I think will be quite interesting to people. And so I think people will be interested in the report and the data and obviously we'll be communicating as Akshay said a little more on the Phase III design as well. So I think these are all features that we'll be talking about next week. And I just encourage you Alethia to stay tuned until then. But I’m sure people will be eager to see some of the progress that we have been making in this regard.

Definitely. And then my next question would be just on -- as far as you think about the open label study, how did you think about reading out end points and when is the right time to show kind of the different clinical end points in the trial?

Yes let me first make some comments and then maybe Akshay you can do it. First of all people have to keep in mind that we're doing the clinical measurements at base line for these patients, as well as every six months. But the patients come on in a staggered way. So not everybody comes on day one, and then we have a uniform six month point. So we're going to want to make sure that we have everybody's data at six months to report on, and that means that it's not going to be six months from now given the study has just started but rather it will be a little bit later than six months from now. So that from an overall guidance and color standpoint is important. The other comment I will make is we want to make sure that when we do this six month read out, these data will have to be scrubbed and we want to be thoughtful about not torturing our clinical organization with frequent scrubbing of the datasets for the outside world. So we do want to do it at least once a year, because we think it's important for accrual and investigators and patients to see how the study is going. But doing it more frequently than that would frankly be a big tax on our clinical organization, when they are trying to be very focused on our Phase III trial. So that's really the dynamic around that. I mean Akshay do you want to add on that from a color standpoint?

No I think you got it covered John.

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

Patisiran, I like it. Real quick, two housekeeping questions, looking forward to the data next week but with respect to your guidance Mike that R&D would be down on a stock comp basis in the fourth quarter, is the pure R&D up or down or where should that be going directionally, because that even had a pretty significant step up obviously with all the clinical progress that you guys are making backing out the stock comp.

So that will be going up, obviously with the start of the Phase III in the fourth quarter. I mean expenses obviously they vary quarter-to-quarter depending on timing of CMC et cetera. We're backing up the stock comp. Yes, yes will see a slight increase in the fourth quarter.

Thank you. Our next question comes from Michael King of JMP Securities.

I got a couple quick ones. First I was wondering if you guys could talk a little bit more about exploratory biomarkers in the - I’m talking about AT3 that was just presented, the anti-fibrosis data and some of the biomarkers, maybe tell us a little bit more about how the genesis there off and what you were hoping to prove with those?

You want to handle this Akshay?

Yes. So if I go through right my [indiscernible] and exploratory biomarkers on the ALN-AAT liver fibrosis program right.

AAT I am sorry. JMP Securities: AAT I am sorry.

Yes so alpha-1 antitrypsin deficiency is associated with reduction of that proteinase inhibitor in the peripheral blood that then accelerates neutral [indiscernible] mediated disease in the lungs resulting in [indiscernible]. Now the mutation and generally there is a single mutation that results in disease in the majority of patients, over 90 patients, because of the so-called BLE, the point mutation at position 384. That leads to production of protein but miss folded protein that is on track in the endoplasmic reticulum of the cell and that miss folded protein then causes effect on the parasitic death and an eventual psycho [ph] peptide cirrhosis and sadly liver failure and death in many of these patients. Not all of the AAT patients get risk by many do and our hypothesis that reducing the expression of the AAT protein in the parasite in the liver of these patients will lead to significant improvement and from an exploratory view point the things we can monitor as being very powerful and this the interesting mouse model where we shared the data over the weekend. You can look the AAT level in the livers of these patients, you can do [indiscernible] pre and post and at least from the mouse work in terms of view point of the extra, potentially a very powerful indicator of efficacy in this context. The other thing that is very characteristic of these patients is [indiscernible] accumulated on the livers on histology urination [indiscernible] you see focal [indiscernible] which are [indiscernible] and if you see those globules PAS positive, you’ve got GAT [ph]. So we will also be counting the number of PAS positive globules. And reduction in [indiscernible] data would be a very powerful indicator of efficacy in a devastating [indiscernible].

And then in plasma we will still be able to measure some of this GAT [ph] protein is still secreted and so we will be able to measure the knockdown of the plasma or a serum GAT in addition to these liver biopsy type results. So multiple biomarkers that we will be able to read out. As you know one of our criteria in any of our programs is that we have these type of biomarkers early in development to be able to assess clinical activities.

Right I guess I was asking more about like core 182 and the PTPRC, because it seems like you have got much more profound reductions in the AAT and in the tumors, but these biomarkers don’t seem to change. They’re stat sick but visually they don’t seem to change as impressively? JMP Securities: Right I guess I was asking more about like core 182 and the PTPRC, because it seems like you have got much more profound reductions in the AAT and in the tumors, but these biomarkers don’t seem to change. They’re stat sick but visually they don’t seem to change as impressively?

Yes no you are right and I fact there is a whole array of these experimental biomarkers relating to fibrosis. We continue to study them and we will certainly be incorporating them in the context of the studies that we do and we will also be engaging with the regulators in the discussion around them. As you know there is no single biomarker or [indiscernible] biomarker there that have been sufficiently validated to lead to an approval of the trial. The also radiologic approach is so, [indiscernible] using ultrasound based approaches is also being abreacted. So certainly we will be incorporating all of that, more news to come as we talk to regulators but why I am focused on the Patisiran side, as John mentioned is that that’s the heart of the disease and we think we have a very powerful argument that if we have attack AAT levels in the circulation in those parasites, reduce these globules, that’s going to be very powerful as it is.

And direct evidence relating to this…

And then follow up a strategic question. I guess picking up where Geoff Meacham left off, although I don’t know what conference he is talking about. Is there something in January? I don’t know what that is about. You might want to get this information out a lot sooner than that but anyway the just sort of from a… JMP Securities: And then follow up a strategic question. I guess picking up where Geoff Meacham left off, although I don’t know what conference he is talking about. Is there something in January? I don’t know what that is about. You might want to get this information out a lot sooner than that but anyway the just sort of from a…

[Indiscernible] as you conference.

Yes, right, well he’s got dyslexia. The strategic question I have is you have got a wealth of programs here. So how do you start to think about how do you manage the programs, just sort of order into clinic doesn’t seem like it is always going to be the most efficient capital efficient or fastest to market. So has again the growth in the number of programs caused you to rethink how they get developed and along what timelines and what criteria you use to advance et cetera? JMP Securities: Yes, right, well he’s got dyslexia. The strategic question I have is you have got a wealth of programs here. So how do you start to think about how do you manage the programs, just sort of order into clinic doesn’t seem like it is always going to be the most efficient capital efficient or fastest to market. So has again the growth in the number of programs caused you to rethink how they get developed and along what timelines and what criteria you use to advance et cetera?

Yes Mike and yes I mean obviously we have spent quite a bit of time on this topic and obviously get a lot of input from our advisors and our board on this and we have a clear set of objectives. Again we will highlight them in January of next year but we are going to have multiple IMVs next year. You already know that is one of our goals we have talked about AS1 and PCSK9 INDs next year and obviously we are going to be in Phase III next year with not only Patisiran but also with TTRsc and then we’ll be progressing our hemophilia program through its Phase I trial next year. But these are all being invested in in a matter that’s consistent with the opportunities that we think are the most valuable. So for example our C5 program will be one of our higher priority programs because we believe that that target and our approach to that target can be very, very attractive for a wide range of complement-mediated diseases and in some ways it’s a target that is not only genetically validated but it’s pharmacologically validated with [indiscernible]. But we factor all of this into our portfolio, thinking in resource allocation, plans and planning exercise, which we do every year, in fact we’re in the midst of it right now to really nail down what the plan is for next and you’ll see the benefits of that in early January at some meeting that we might be at.

Thank you. I am not showing any further questions in the queue. I’d like to turn the call back over to management for any further remarks.

Well, thanks everyone. I mean I think it’s pretty clear that we continue to lead the advance of the RNAi therapeutics to patients and we’re very proud of our scientific, clinical and business accomplishment. We’re excited about where things are going and we look forward to sharing with you some of our progress in the weeks and months to come. Thank you. Bye-bye.

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