10-QPeriod: Q2 FY2008

ALNYLAM PHARMACEUTICALS, INC. Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 8, 2008For Securities:ALNY

Summary

Alnylam Pharmaceuticals, Inc. reported its financial results for the quarter ended June 30, 2008. The company demonstrated significant revenue growth, driven primarily by its strategic alliances with Roche and Takeda, which contributed substantially to deferred revenue. Despite strong revenue performance, Alnylam continued to invest heavily in research and development, leading to an increase in operating expenses. The company's cash position remains robust, bolstered by upfront payments from its major collaborations, providing ample liquidity to fund ongoing operations and product development. Key strategic developments include the initiation of new alliances with Takeda and Kyowa Hakko, expanding the company's reach and potential for future revenue streams. Alnylam's lead RNAi therapeutic candidate, ALN-RSV01, continues in Phase II clinical trials, with positive early results. The company's focus on RNAi technology and its strong intellectual property portfolio position it for continued growth in the emerging field of RNA therapeutics.

Key Highlights

  • 1Significant increase in total net revenues, up to $23.8 million for the quarter, driven by alliances with Roche and Takeda.
  • 2Robust cash and cash equivalents balance of $247.5 million as of June 30, 2008, up from $105.2 million at year-end 2007.
  • 3Strengthened strategic partnerships with new license and collaboration agreements with Takeda (May 2008) and Kyowa Hakko (June 2008).
  • 4Continued heavy investment in Research and Development, with expenses increasing 57% year-over-year for the quarter to $29.6 million, reflecting pipeline expansion and technology development.
  • 5ALN-RSV01, the company's lead RNAi therapeutic candidate, is progressing through Phase II clinical trials with reported positive early results.
  • 6Total deferred revenue stands at $349.7 million as of June 30, 2008, representing significant upfront and milestone payments from collaborators yet to be recognized as revenue.

Frequently Asked Questions

Alnylam's primary source of revenue is from research collaborators through strategic alliances and licensing agreements. Revenue recognition, particularly from upfront and milestone payments in these alliances (like Roche and Takeda), is often deferred and recognized over the estimated service period (e.g., straight-line over 5 or 7 years) due to the complexity of the deliverables and the inability to reasonably estimate the level of effort required, following EITF 00-21 guidance.

Alnylam maintains a strong liquidity position, with $247.5 million in cash and cash equivalents as of June 30, 2008. This healthy balance is significantly bolstered by substantial upfront payments received from its major strategic alliances, particularly with Roche and Takeda. The company believes its existing resources and expected cash flows from current alliances are sufficient to fund operations for at least the next several years.

Alnylam's most advanced program is ALN-RSV01, an RNAi therapeutic for RSV infection, which is in Phase II clinical trials. The company also has pre-clinical programs for ALN-VSP (liver cancers), ALN-PCS (hypercholesterolemia), and ALN-HTT (Huntington's disease). Significant R&D investment is also directed towards developing RNAi delivery technologies, both for direct and systemic delivery.

The Takeda alliance, signed in May 2008, involved upfront and near-term technology transfer payments totaling $150 million, with $100 million received in June 2008. These payments are being recognized as revenue over seven years. The Kyowa Hakko agreement, signed in June 2008, included a $15 million upfront cash payment for the exclusive license of ALN-RSV01 in Japan and other Asian markets, with revenue recognition currently deferred due to an inability to estimate the performance period.