01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Alnylam Pharmaceuticals (ALNY) enters 2010 as a clinical-stage RNAi therapeutics developer with no approved products and no product revenue.
Its 2009 results show revenue of $100.5 milliona from research collaborators (up from $96.2 million), operating expenses of $148.6 million, and a net loss of $47.6 million, or $1.14 per share. Accumulated deficit stands at $299.8 million, and the company held $435.3 million in cash, cash equivalents and marketable securities at year-end. Roughly 57% of 2009 revenue came from Roche, with Takeda at 22% and Novartis at 10%, so revenue concentration is high.
The pipeline is the main value driver. ALN-RSV01 for RSV has started a Phase IIb trial in lung transplant patients, with ALN-RSV02 in pediatric patients being co-developed with Cubist. ALN-VSP (liver cancer) is in Phase I, and ALN-TTR01 (ATTR) is expected to enter Phase I in the first half of 2010.
ALN-PCS (hypercholesterolemia) was named the next clinical candidate. Novartis's integration option, a $100 millionb payment, could be a significant revenue event but is uncertain.
Key risks include the unproven RNAi approach, reliance on collaborators for funding and commercialization, ongoing patent litigation with Whitehead, MIT and UMass (trial expected June 2010), and a cash burn that rose sharply in 2009 (operating cash flow of -$72.1 millionc). Management says current resources should fund planned operations for at least the next several years, though it may need additional capital sooner than expected.
02—Key points
Key Highlights
- 2009 net revenues from research collaborators of $100.5M (vs. $96.2M in 2008), driven by the full-year Takeda alliance and a Roche development milestone; net loss widened to $47.6M ($1.14/share) from $26.2M.
- Cash, cash equivalents and marketable securities of $435.3M at 12/31/2009, down from $512.7M, with operating cash outflow of $72.1M in 2009 versus $65.5M of inflow in 2008.
- Deferred revenue of $271.8M ($81.9M current, $189.9M long-term) provides a significant pool of future recognizable revenue from Roche, Takeda, Kyowa Hakko Kirin and Cubist.
- Lead program ALN-RSV01 started a Phase IIb trial (76 patients) in February 2010, primary endpoint BOS incidence, following a Phase IIa where BOS was 7.1% vs. 50% for placebo in a small exploratory analysis.
- Clinical pipeline expanding: ALN-VSP in Phase I for liver cancer, ALN-TTR01 IND filed for ATTR with Phase I planned for 1H 2010, and ALN-PCS named the next clinical candidate for hypercholesterolemia.
- Revenue concentration is high: Roche accounted for 57% of 2009 collaboration revenue and Takeda for 22%; Novartis's alliance ends October 2010 unless its integration option is exercised ($100M payment).
- Material litigation: Alnylam and Max Planck v. Whitehead, MIT and UMass over the Tuschl I patent applications; trial expected June 2010 and no liability accrued.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $100.53M$96.16M | +4.5% |
| R&D Expenses | $108.73M$96.88M | +12.2% |
| Operating Expenses | $148.64M$124.00M | +19.9% |
| Operating Income | -$48.11M-$27.84M | −72.8% |
| Net Income | -$47.59M-$26.25M | −81.3% |
| EPS (Basic) | $-1.14— | — |
05—Questions
Frequently Asked Questions
Does Alnylam have any approved products or product revenue?
No. The company states it has not developed or sold any products and does not expect product revenue in the foreseeable future. Revenue comes from collaborations, government contracts and licensing, and the company expects to keep incurring net losses over the next several years.
How much cash does Alnylam have and how long will it last?
At December 31, 2009, Alnylam had $435.3 million in cash, cash equivalents and marketable securities. Management believes this, together with expected alliance cash flows (Novartis, Roche, Takeda and Cubist), will fund planned operations for at least the next several years. It also warns it may need significant additional funds sooner than expected, which could mean dilutive equity raises or collaboration terms that give up rights.
What is the main near-term catalyst for investors?
The Phase IIb trial of ALN-RSV01 in adult lung transplant patients, which started in February 2010, is the key near-term readout. Its primary endpoint is reduction in new or progressive bronchiolitis obliterans syndrome. Results from the earlier small Phase IIa were encouraging but not powered to show clinical outcomes, so the Phase IIb data will be pivotal. The ALN-TTR01 Phase I start in 1H 2010 is another milestone.
What are the biggest risks to the business?
Key risks include the unproven nature of RNAi therapeutics, including delivery challenges and off-target and interferon effects; dependence on collaborators such as Roche, Takeda, Novartis and Cubist, any of which can terminate or compete; concentration of revenue in a few partners; patent litigation and oppositions in Europe; and the early stage of the pipeline, where clinical failure is common. Stock price volatility and potential class-action exposure are also flagged.
Could Novartis's relationship create upside or downside?
Novartis, which owns about 13.3% of Alnylam, has a collaboration term through October 2010 and an integration option. If exercised, Novartis would pay $100 million and gain non-exclusive rights to integrate Alnylam's RNAi IP, which would substantially boost revenue. However, Novartis could then become a competitor in the same diseases, and it has greater resources. If it does not exercise the option, revenue from this alliance is expected to decline after the collaboration ends.
06—Continue