01—Abstract
Summary
Summary of the 10-K filed March 2, 2009. Cited figures are marked; the original filing is the authoritative source.
Alnylam Pharmaceuticals' FY2008 10-K, filed March 2, 2009, shows an RNAi-focused biopharma that narrowed its loss sharply on the back of large collaboration payments.
Net revenues rose to $96.2 milliona in 2008 from $50.9 million in 2007, driven mainly by recognition of the August 2007 Roche alliance and the May 2008 Takeda alliance. Operating expenses fell 14% to $124.0 million, mainly because 2007 included $27.5 million of license fees tied to the Roche deal. The net loss narrowed to $26.2 million ($0.64 per share) from $85.5 million, and the company has never reported annual profitability.
The balance sheet is strong for an early-stage company. Cash, cash equivalents and marketable securities totaled $512.7 millionb at year-end 2008, up from $455.6 million, while deferred revenue of $330.0 million (mostly Roche, Takeda and Kyowa Hakko) means much of that cash is tied to future obligations to deliver services rather than being free cash. Management states the existing cash plus expected alliance cash should fund operations for at least several years, though it warns of possible dilution and earlier funding needs.
The pipeline is advancing but remains early. ALN-RSV01 (respiratory syncytial virus) is in Phase II, with a second trial started in April 2008 and new collaborations with Cubist (North America) and Kyowa Hakko (Asia) signed in 2008-2009.
ALN-VSP, a systemically delivered liver cancer candidate, received FDA IND clearance in January 2009, with Phase I expected in the first half of 2009. Investors should weigh the company's dependence on a few collaborators (Roche, Takeda, Novartis), which together made up most 2008 revenue, and the unproven nature of RNAi therapeutics, against a large, exclusive-looking patent estate that is under opposition in Europe.
02—Key points
Key Highlights
- Net revenues rose 89% to $96.2 million in 2008, reflecting Roche and Takeda collaboration revenue recognized over multi-year periods.
- Net loss narrowed to $26.2 million ($0.64 per share) from $85.5 million in 2007, which included $27.5 million in Roche-related license fees.
- Cash, cash equivalents and marketable securities of $512.7 million at December 31, 2008, up from $455.6 million, after $120 million in Takeda upfront and technology transfer payments.
- Deferred revenue of $330.0 million at year-end, which represents future obligations to collaborators rather than free cash.
- ALN-VSP (liver cancer) received FDA IND clearance in January 2009; Phase I expected to start in the first half of 2009.
- New RSV collaborations with Cubist (North America, $20.0 million upfront, up to $82.5 million in royalty-territory milestones) and Kyowa Hakko (Asia, $15.0 million upfront).
- Heavy collaborator concentration: Roche, Takeda and Novartis accounted for 57%, 13% and 12% of 2008 revenue, and Novartis owns 13.2% of common stock.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed March 2, 2009Financial Statements
| Revenue | $96.16M |
| R&D Expenses | $96.88M |
| Operating Expenses | $124.00M |
| Operating Income | -$27.84M |
| Interest Expense | $872K |
| Net Income | -$26.25M |
05—Questions
Frequently Asked Questions
Is Alnylam profitable, and how close is it to breakeven?
No. Alnylam has never achieved annual profitability and reported a 2008 net loss of $26.2 million, down from $85.5 million in 2007. The loss narrowed largely because collaboration revenue rose to $96.2 million, and the company expects to keep incurring losses for several more years as its programs advance.
How long can Alnylam fund its operations?
Management believes its existing cash, cash equivalents and marketable securities of $512.7 million, together with expected alliance cash from Novartis, Roche and Takeda, will be sufficient for at least the next several years. The company also warns that it may need significant additional funds earlier than expected, and that future equity raises would dilute stockholders.
What are the most advanced clinical programs?
ALN-RSV01 for respiratory syncytial virus is the lead program. It completed the positive GEMINI Phase II study in February 2008 (about a 40% reduction in infection rate versus placebo) and has a second Phase II trial ongoing in lung transplant patients. ALN-VSP, for liver cancer, received FDA clearance in January 2009 to start a Phase I trial.
What risks could most affect the stock?
Key risks include the unproven nature of RNAi therapeutics, which have never been approved; dependence on collaborators such as Roche, Takeda and Novartis, which can terminate or compete; patent oppositions in Europe against Kreutzer-Limmer and Tuschl II patents (some already revoked or under appeal); and the broader volatility of biotech stocks, which could trigger class action litigation. Novartis's 13.2% stake could also weigh on the stock if it sells.
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