When does Alnylam expect its first human clinical trial to begin, and for which program?

Alnylam expects to begin a clinical trial for its lead wet AMD product candidate (a VEGF-targeting siRNA) in the second half of 2005, and an RSV treatment trial in the first half of 2006. PD, SCI and CF programs are preclinical with no timing established.

How much cash does Alnylam have and how long will it last?

As of December 31, 2004, cash, cash equivalents and marketable securities totaled $46.0M. Management believes existing resources will fund planned operations through at least the end of 2006, though it may need significant additional capital earlier if clinical trials proceed faster than expected, and it expects to seek more funding through collaborations or public/private financings.

What were the main drivers of Alnylam's 2004 revenue and expense growth?

Revenue rose to $4.3M mainly from amortization of Merck upfront and license payments, a $2.0M Merck technology milestone, and net cost reimbursements under the Merck ocular collaboration. Operating expenses rose to $36.5M, led by a $5.5M Isis license fee within R&D, staffing growth (research headcount from 42 to 51), new Cambridge facility costs, and higher non-cash stock compensation.

What are the biggest risks to the investment thesis?

The core risk is that RNAi as a drug class is unproven: siRNAs must be shown to be stable, specific, non-immunogenic and deliverable to target tissues. Other risks include competition from approved and late-stage VEGF drugs (Macugen, Lucentis) and rival siRNA programs, possible patent invalidation of key Kreutzer-Limmer assets, dependence on partners, dilution from future equity raises, and the Lighthouse loan covenants restricting asset transfers.

Is Alnylam exposed to material legal or regulatory issues today?

The company stated it was not a party to any material legal proceedings. It does face patent opposition proceedings at the European Patent Office and Australian Patent Office against Kreutzer-Limmer patents. Regulators could also treat RNAi therapeutics as biologics rather than new drugs, which would change the approval pathway.

ALNY 10-K FY2004 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 30, 2005. Cited figures are marked; the original filing is the authoritative source.

Alnylam Pharmaceuticals (ALNY) filed its FY2004 10-K on March 30, 2005, describing itself as an early-stage biopharmaceutical company built around RNA interference (RNAi), with a strategy of pursuing 'Direct RNAi' drugs for localized diseases (wet AMD, RSV, Parkinson's, spinal cord injury, cystic fibrosis) and later 'Systemic RNAi' therapeutics.

The company has not yet commenced clinical trials for its lead candidates, which it expects to begin in 2H 2005 (AMD) and 1H 2006 (RSV). Financially, 2004 net revenues were $4.3 million^a (up from $0.2 million), against operating expenses of $36.5 million and a net loss of $32.7 million, or $2.98 per share. The accumulated deficit reached $63.0 million, and the company has never been profitable.

Liquidity improved substantially in 2004 due to a June IPO (5.75 million shares at $6.00^b, net proceeds about $29.9 million), a $10 million Series D investment from Isis, and a $5 million equity purchase by Merck. Cash, cash equivalents and marketable securities totaled $46.0 million at year-end, and management believes existing resources will fund operations through at least the end of 2006. Against this, the company carries about $7.2 million drawn on a Lighthouse equipment line of credit, faces potential dilution from future financings, and depends heavily on collaborations with Merck, Isis, Medtronic and CFFT for funding.

Key risks investors should weigh include the unproven nature of RNAi as a drug class (no siRNA therapeutic has been approved), the need to show siRNAs can be stable, non-immunogenic and delivered effectively, competition from Macugen, Lucentis, and two other siRNA VEGF programs at Acuity and Sirna, and patent uncertainty. In particular, two Kreutzer-Limmer patents face EPO and Australian opposition proceedings that could result in invalidation or narrowing. The company also reported that it was not party to material legal proceedings at filing.

02—Key points

Key Highlights

FY2004 net revenues of $4.3M (vs. $0.2M in 2003), largely from Merck collaboration amortization, a $2.0M Merck technology milestone and $1.8M in cost reimbursements on the ocular program.
Net loss widened to $32.7M ($2.98 per share) from $25.0M, driven by R&D growth to $24.6M and G&A of $11.9M; accumulated deficit is $63.0M.
IPO in June 2004 raised approximately $29.9M net; year-end cash and marketable securities were $46.0M, with management guiding runway through at least end-2006.
Lead programs: a VEGF-targeting siRNA for wet AMD (clinical trial expected 2H 2005, partnered with Merck) and an RSV program (clinical trial expected 1H 2006).
Broad IP estate: rights to over 150 Isis chemical-modification patents, exclusive rights to the Kreutzer-Limmer and Tuschl II patent families, though Kreutzer-Limmer faces EPO and Australian oppositions.
Strategic alliances with Merck (two agreements), Medtronic (up to $21M in potential equity investment), CFFT, and Isis ($10M equity investment and license terms) provide funding and validation.
Heavy reliance on collaborators and early-stage status: no products approved, no drug candidate yet in clinic, and the company has never been profitable.

03—Questions

Frequently Asked Questions

When does Alnylam expect its first human clinical trial to begin, and for which program?
Alnylam expects to begin a clinical trial for its lead wet AMD product candidate (a VEGF-targeting siRNA) in the second half of 2005, and an RSV treatment trial in the first half of 2006. PD, SCI and CF programs are preclinical with no timing established.
How much cash does Alnylam have and how long will it last?
As of December 31, 2004, cash, cash equivalents and marketable securities totaled $46.0M. Management believes existing resources will fund planned operations through at least the end of 2006, though it may need significant additional capital earlier if clinical trials proceed faster than expected, and it expects to seek more funding through collaborations or public/private financings.
What were the main drivers of Alnylam's 2004 revenue and expense growth?
Revenue rose to $4.3M mainly from amortization of Merck upfront and license payments, a $2.0M Merck technology milestone, and net cost reimbursements under the Merck ocular collaboration. Operating expenses rose to $36.5M, led by a $5.5M Isis license fee within R&D, staffing growth (research headcount from 42 to 51), new Cambridge facility costs, and higher non-cash stock compensation.
What are the biggest risks to the investment thesis?
The core risk is that RNAi as a drug class is unproven: siRNAs must be shown to be stable, specific, non-immunogenic and deliverable to target tissues. Other risks include competition from approved and late-stage VEGF drugs (Macugen, Lucentis) and rival siRNA programs, possible patent invalidation of key Kreutzer-Limmer assets, dependence on partners, dilution from future equity raises, and the Lighthouse loan covenants restricting asset transfers.
Is Alnylam exposed to material legal or regulatory issues today?
The company stated it was not a party to any material legal proceedings. It does face patent opposition proceedings at the European Patent Office and Australian Patent Office against Kreutzer-Limmer patents. Regulators could also treat RNAi therapeutics as biologics rather than new drugs, which would change the approval pathway.

04—Continue

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