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ALNY > SEC Filings for ALNY > Form 10-Q on 3-Nov-2011All Recent SEC Filings

Show all filings for ALNYLAM PHARMACEUTICALS, INC.

Form 10-Q for ALNYLAM PHARMACEUTICALS, INC.


3-Nov-2011

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Without limiting the foregoing, the words "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," "continue," "target," "goal" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us up to, and including, the date of this document, and we assume no obligation to update any such forward-looking statements to reflect events or circumstances that arise after the date hereof. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain important factors, including those set forth below under this Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," Part II, Item 1A - "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. You should carefully review those factors and also carefully review the risks outlined in other documents that we file from time to time with the Securities and Exchange Commission, or SEC. Overview
We are a biopharmaceutical company developing novel therapeutics based on RNA interference, or RNAi. RNAi is a naturally occurring biological pathway within cells for selectively silencing and regulating the expression of specific genes. Since many diseases are caused by the inappropriate activity of specific genes, the ability to silence genes selectively through RNAi could provide a new way to treat a wide range of human diseases. We believe that drugs that work through RNAi have the potential to become a broad new class of drugs, like small molecule, protein and antibody drugs. Using our intellectual property and the expertise we have built in RNAi, we are developing a set of biological and chemical methods and know-how that we apply in a systematic way to develop RNAi therapeutics for the treatment of a variety of diseases.
Our core product strategy, which we refer to as "Alnylam 5x15," is focused on the development and commercialization of innovative RNAi therapeutics for the treatment of genetically defined diseases. Under our core product strategy, we expect to progress five RNAi therapeutic programs into advanced stages of clinical development by the end of 2015. As part of this strategy, our goal is to develop product candidates with the following shared characteristics: a genetically defined target and disease; the potential to have a significant impact in high unmet need patient populations; the ability to leverage our existing RNAi delivery platform; the opportunity to monitor an early biomarker in Phase I clinical trials for human proof of concept; and the existence of clinically relevant endpoints for the filing of a new drug application, or NDA, with a focused patient database and possible accelerated paths for commercialization. We intend to focus on developing and commercializing certain products arising from this core product strategy on our own in the United States and potentially certain other countries. We intend to enter into alliances to develop and commercialize other core products both in the United States and in other global territories. We currently have four core programs in clinical or pre-clinical development: ALN-TTR for the treatment of transthyretin-mediated amyloidosis, or ATTR; ALN-PCS for the treatment of severe hypercholesterolemia; ALN-HPN for the treatment of refractory anemia; and ALN-APC for the treatment of hemophilia. As part of our core product strategy, at or around the end of 2011, we expect to designate one additional RNAi therapeutic candidate targeting a genetically defined disease.
While focusing our efforts on our core product strategy, we also intend to continue to advance additional development programs through existing or future alliances. We have three partner-based programs in clinical or pre-clinical development, including ALN-RSV01 for the treatment of respiratory syncytial virus, or RSV, infection, ALN-VSP for the treatment of liver cancers and ALN-HTT for the treatment of Huntington's disease, or HD.
Our most advanced core product development program, ALN-TTR, targets the transthyretin, or TTR, gene, for the treatment of ATTR, a hereditary, systemic disease associated with severe morbidity and mortality caused by a mutation in the TTR gene that leads to the extracellular deposition of amyloid fibrils. In July 2010, we initiated a Phase I clinical trial for ALN-TTR01, a systemically delivered RNAi therapeutic. ALN-TTR01 employs a first-generation lipid nanoparticle, or LNP, formulation. The Phase I clinical trial for ALN-TTR01 is being conducted in Portugal, Sweden, the United Kingdom and France, and is a randomized, blinded, placebo-controlled dose escalation study. As a result of favorable safety data to date, we received regulatory approval to extend this Phase I clinical trial with additional dose cohorts up to 1.0 mg/kg, increasing enrollment from 28 to up to 36 patients. The primary objective is to evaluate the safety and tolerability of a single dose of intravenous ALN-TTR01. Secondary objectives include characterization of plasma and urine pharmacokinetics of ALN-TTR01 and assessment of pharmacodynamic activity based on


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measurements of circulating TTR serum levels. In January 2011, The Committee for Orphan Medicinal Products of the European Medicines Agency adopted a positive opinion for ALN-TTR01 designation as an orphan medicinal product for the treatment of familial amyloidotic polyneuropathy, one of the predominant forms of ATTR. In April 2011, the European Commission officially designated ALN-TTR01 as an orphan drug. In parallel with the development of ALN-TTR01, we are also advancing ALN-TTR02 utilizing a proprietary second-generation LNP formulation.
Our second core product development program is ALN-PCS. ALN-PCS employs a proprietary second-generation LNP formulation, specifically using the MC3 lipid. We are developing ALN-PCS, a systemically delivered RNAi therapeutic, for the treatment of severe hypercholesterolemia. ALN-PCS targets a gene called proprotein convertase subtilisin/kexin type 9, or PCSK9, which is involved in the regulation of LDL receptor levels on hepatocytes and the metabolism of LDL cholesterol, or LDL-c, which is also commonly referred to as "bad cholesterol." In September 2011, we initiated a Phase I clinical trial for ALN-PCS in the United Kingdom. The Phase I clinical trial is a randomized, single-blind, placebo-controlled, single-ascending dose study, intended to enroll approximately 32 healthy volunteer subjects with elevated baseline LDLc. The primary objective of the clinical trial is to evaluate the safety and tolerability of a single dose of ALN-PCS, with patients being enrolled into five sequential cohorts of increasing doses ranging from 0.015 to 0.25 mg/kg. Secondary objectives include characterization of plasma and urine pharmacokinetics of ALN-PCS, and assessment of pharmacodynamic effects of the drug on plasma PCSK9 protein and LDLc levels measured from serial blood samples prior to and following dosing.
We have designated ALN-HPN as our third core product development program. ALN-HPN is a systemically delivered RNAi therapeutic targeting the hepcidin pathway, a genetically validated gene pathway in iron homeostasis, for the treatment of refractory anemia. Anemia of chronic disease, or ACD, occurs in patients with end-stage renal disease, cancer and chronic inflammatory disease. ACD patients who are refractory to erythropoiesis-stimulating agents and intravenous iron define a condition of refractory anemia for which there is substantial unmet need. Pre-clinical studies with a small interfering RNA, or siRNA, targeting hepcidin demonstrated the ability to silence the gene and increase serum iron levels. ALN-HPN also employs a second-generation LNP formulation. We are currently conducting additional pre-clinical studies of ALN-HPN.
We have designated ALN-APC as our fourth core product development program. ALN-APC is a systemically delivered RNAi therapeutic targeting protein C, a genetically defined target, for the treatment of hemophilia. Protein C is expressed exclusively in the liver, circulates in plasma and defines a key natural anticoagulant pathway. Activated protein C (APC) inactivates factors Va and VIIIa, both proteins in the blood coagulation pathway, resulting in reduced thrombin generation. ALN-APC provides a pharmacologic strategy to reproduce the human genetics observed with co-inheritance of prothrombotic factors in hemophilia. RNAi silencing of protein C is expected to increase thrombin generation in hemophilia patients thereby reducing the frequency of bleeding. Preclinical studies of an siRNA targeting protein C showed dose-dependent silencing of the protein C mRNA. Further, administration of the siRNA resulted in marked reductions in protein C plasma levels. We are currently conducting additional pre-clinical studies of ALN-APC.
As noted above, while focusing our efforts on our core product strategy, we also intend to continue to advance additional partner-based development programs, including ALN-RSV, ALN-VSP and ALN-HTT, through existing or future alliances.
In February 2010, we initiated a multi-center, global, randomized, double-blind, placebo-controlled Phase IIb clinical trial to evaluate the clinical efficacy as well as safety of aerosolized ALN-RSV01 in adult lung transplant patients naturally infected with RSV. Patients are being randomized in a one-to-one drug to placebo ratio. The primary endpoint of this clinical trial is a reduction in the incidence of new or progressive bronchiolitis obliterans syndrome, or BOS, a potentially life-threatening complication in lung transplant patients. During 2010, we amended the protocol of this clinical trial to perform an interim analysis, blinded to us and investigators, which could expand enrollment from 76 to up to 120 patients. The interim analysis will be performed when 75% of patients are evaluable for the BOS endpoint at six months. We have formed collaborations with Cubist Pharmaceuticals, Inc., or Cubist, and Kyowa Hakko Kirin Co., Ltd., or Kyowa Hakko Kirin, for the development and commercialization of RNAi products for the treatment of RSV. Under our agreement with Cubist, we are developing ALN-RSV01 for adult transplant patients at our sole discretion and expense and Cubist has the right to opt into collaborating with us on ALN-RSV01 in the future. In December 2010, we and Cubist jointly made a portfolio decision to put the development of ALN-RSV02, a second-generation compound for the pediatric population, on hold.
In August 2011, we announced the completion of a Phase I clinical trial for ALN-VSP, which was our first systemically delivered RNAi therapeutic to enter clinical development. ALN-VSP is comprised of two siRNAs, one targeting vascular endothelial growth factor, or VEGF, and the other targeting kinesin spindle protein, or KSP, and employs a first-generation LNP formulation. We are developing ALN-VSP for the treatment of liver cancers, including both primary and secondary liver cancers. This Phase I clinical


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trial was a multi-center, open label, dose escalation study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of intravenous ALN-VSP in patients with advanced solid tumors with liver involvement. We completed enrollment in this clinical trial during the first quarter of 2011 and reported study results in June 2011. ALN-VSP was administered to 41 patients at doses ranging from 0.1 to 1.5 mg/kg and was generally well tolerated. As of November 2011, three patients with disease control were continuing to receive therapy in an extension study. Results from pharmacodynamic measurements provide evidence of biological activity, and biopsy data demonstrate both tissue levels of ALN-VSP and also human proof-of-concept for an RNAi mechanism of action. We intend to partner our ALN-VSP program prior to initiating a Phase II clinical trial.
A third partner-based development program is ALN-HTT, an RNAi therapeutic candidate targeting the huntingtin gene, for the treatment of HD, which we are developing in collaboration with Medtronic, Inc., or Medtronic. In November 2010, we and Medtronic entered into an agreement with CHDI Foundation, Inc., or CHDI, under which CHDI has agreed to initially fund approximately 50% of the costs of this program up to the point at which an investigational new drug application, or IND, can be filed with the United States Food and Drug Administration, or FDA, or a comparable foreign regulatory filing can be made.
We also continue to work internally and with third-party collaborators to develop new technologies to deliver our RNAi therapeutics both directly to specific sites of disease, and systemically by intravenous or subcutaneous administration. We have numerous RNAi therapeutic delivery collaborations and intend to continue to collaborate with government, academic and corporate third parties to evaluate different delivery options.
We believe that the strength of our intellectual property portfolio relating to the development and commercialization of siRNAs as therapeutics provides us a leading position with respect to this therapeutic modality. This includes ownership of, or exclusive rights to, issued patents and pending patent applications claiming fundamental features of siRNAs and RNAi therapeutics as well as those claiming crucial chemical modifications and promising delivery technologies. We believe that no other company possesses a portfolio of such broad and exclusive rights to the patents and patent applications required for the commercialization of RNAi therapeutics. Given the importance of our intellectual property portfolio to our business operations, we intend to vigorously enforce our rights and defend against challenges that have arisen or may arise in this area.
In addition, our expertise in RNAi therapeutics and broad intellectual property portfolio have allowed us to form alliances with leading companies, including Isis Pharmaceuticals, Inc., or Isis, Medtronic, Novartis Pharma AG, or Novartis, Biogen Idec Inc., or Biogen Idec, F. Hoffmann-La Roche Ltd, or Roche, Takeda Pharmaceutical Company Limited, or Takeda, Kyowa Hakko Kirin and Cubist. We have also entered into contracts with government agencies, including the National Institute of Allergy and Infectious Diseases, or NIAID, a component of the National Institutes of Health, or NIH. We have established collaborations with and, in some instances, received funding and expertise from, major medical and disease associations, including CHDI. Finally, to further enable the field and monetize our intellectual property rights, we also grant licenses to biotechnology companies for the development and commercialization of RNAi therapeutics for specified targets in which we have no direct strategic interest, under our InterfeRxtm program, and to research companies that commercialize RNAi reagents or services under our research product licenses.
We also seek to form or advance new ventures and opportunities in areas outside our primary focus on RNAi therapeutics. For example, we have presented data regarding the application of RNAi technology to improve the manufacturing processes for biologics, including recombinant proteins and monoclonal antibodies. We are advancing these applications of RNAi technology in an internal effort referred to as Alnylam Biotherapeutics. We have formed, and intend to form additional, collaborations through this effort with third-party biopharmaceutical companies. In addition, we recently announced our progress on VaxiRNA, an RNAi technology derived from our Alnylam Biotherapeutics initiative, for the enhanced production of viruses used in the manufacture of vaccine products. In October 2011, we entered into a VaxiRNA collaboration with GlaxoSmithKline, or GSK, for influenza vaccine production. Additionally, in 2007, we and Isis established Regulus Therapeutics Inc., or Regulus, a company focused on the discovery, development and commercialization of microRNA therapeutics. Because microRNAs are believed to regulate whole networks of genes that can be involved in discrete disease processes, microRNA therapeutics represent a possible new approach to target the pathways of human disease. Regulus has formed collaborations with GSK, and Sanofi to advance its efforts. Given the broad applications for RNAi technology, in addition to our efforts on Alnylam Biotherapeutics, VaxiRNA and Regulus, we believe new ventures and opportunities will be available to us.
To date, a substantial portion of our total net revenues has been derived from collaboration revenues from strategic alliances with Roche, Takeda, Cubist and Novartis, and from the United States government in connection with our development of treatments for hemorrhagic fever viruses, including Ebola. We expect our revenues to continue to be derived primarily from existing alliances, new strategic alliances, new government and foundation funding and existing and new license fee revenues.


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We have incurred significant losses since we commenced operations in 2002 and expect such losses to continue for the foreseeable future. Historically, we have generated losses principally from costs associated with research and development activities, acquiring, filing and expanding intellectual property rights and general administrative costs. As a result of planned expenditures for research and development activities relating to our drug development programs, including the development of drug delivery technologies and clinical trial costs, extension of the capabilities of our technology platform, including through business initiatives, continued management and growth of our patent portfolio, collaborations and general corporate activities, we expect to incur additional operating losses for the foreseeable future.
Although we currently have programs focused on a number of therapeutic areas, we are unable to predict when, if ever, we will successfully develop or be able to commence sales of any product. Our sources of potential funding for the next several years are expected to be derived primarily from new and existing strategic alliances, which may include license and other fees, funded research and development and milestone payments, government and foundation funding, and proceeds from the sale of equity or debt. In July 2011, we filed a shelf registration statement with the SEC for an indeterminate number of shares of common stock and/or other securities, up to an aggregate of $150.0 million, for future issuance.
We anticipate that our operating results will fluctuate for the foreseeable future and, therefore, period-to-period comparisons should not be relied upon as predictive of the results of future periods. Research and Development
Since our inception, we have focused on drug discovery and development programs. Research and development expenses represent a substantial percentage of our total operating expenses. Under our core product strategy, we expect to progress five RNAi therapeutic programs into advanced stages of clinical development by the end of 2015. While focusing our efforts on our core product strategy, we also intend to continue to advance additional partner-based development programs through existing or future alliances.
In addition, we continue to work internally and with third-party collaborators to develop new technologies to deliver our RNAi therapeutics both directly to specific sites of disease, and systemically by intravenous or subcutaneous administration.
There is a risk that any drug discovery or development program may not produce revenue for a variety of reasons, including the possibility that we will not be able to adequately demonstrate the safety and efficacy of the product candidate. Moreover, there are uncertainties specific to any new field of drug discovery, including RNAi. The successful development of any product candidate we develop is highly uncertain. Due to the numerous risks associated with developing drugs, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of, or the period, if any, in which material net cash inflows will commence from, any potential product candidate. These risks include the uncertainty of:
our ability to discover new product candidates;

our ability to progress product candidates into pre-clinical and clinical trials;

the scope, rate of progress and cost of our pre-clinical trials and other research and development activities, including those related to developing safe and effective ways of delivering siRNAs into cells and tissues;

the scope, rate of progress and cost of any clinical trials we commence;

clinical trial results;

the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

the terms, timing and success of any collaboration, licensing and other arrangements that we may establish;

the cost, timing and success of regulatory filings and approvals or potential changes in regulations that govern our industry or the way in which they are interpreted or enforced;

the cost and timing of establishing sufficient sales, marketing and distribution capabilities;

the cost and timing of establishing sufficient clinical and commercial supplies for any product candidates and products that we may develop;


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limits on our ability to research, develop, or manufacture our product candidates as a result of contractual obligations to third parties or intellectual property held by third parties;

the costs associated with legal activities, including litigation, arising in the course of our business activities and our ability to prevail in any such legal disputes; and

the effect of competing technological and market developments.

Any failure to complete any stage of the development of any potential products in a timely manner could have a material adverse effect on our operations, financial position and liquidity. A discussion of some of the risks and uncertainties associated with completing our projects on schedule, or at all, and the potential consequences of failing to do so, are set forth in Part II, Item 1A below under the heading "Risk Factors." Strategic Alliances
A significant component of our business plan is to enter into strategic alliances and collaborations with pharmaceutical and biotechnology companies, academic institutions, research foundations and others, as appropriate, to gain access to funding, capabilities, technical resources and intellectual property to further our development efforts and to generate revenues. We also seek to form or advance new ventures and opportunities in areas outside our primary focus on RNAi therapeutics.
To generate revenues from our intellectual property rights, we also grant licenses to biotechnology companies under our InterfeRx program for the development and commercialization of RNAi therapeutics for specified targets in which we have no direct strategic interest. We also license key aspects of our intellectual property to companies active in the research products and services market, which includes the manufacture and sale of reagents. Our InterfeRx and research product licenses aim to generate modest near-term revenues that we can re-invest in the development of our proprietary RNAi therapeutics pipeline. At September 30, 2011, we had granted such licenses, on both an exclusive and non-exclusive basis, to approximately 20 companies.
Since delivery of RNAi therapeutics remains a major objective of our research activities, we also look to form collaboration and licensing arrangements with other companies and academic institutions to gain access to delivery technologies. For example, we have entered into agreements with Tekmira Pharmaceuticals Corporation, or Tekmira, the Massachusetts Institute of Technology, or MIT, The University of British Columbia, or UBC, and AlCana Technologies, Inc., or AlCana, among others, to focus on various delivery strategies. We have also entered into license agreements with Isis, Max Planck Innovation GmbH (formerly known as Garching Innovation GmbH), or Max Planck Innovation, Tekmira, MIT, Cancer Research Technology Limited, or CRT, Whitehead Institute for Biomedical Research, or Whitehead, Stanford University, or Stanford, The University of Texas Southwestern Medical Center, or UTSW, as well as a number of other entities, to obtain rights to intellectual property in the field of RNAi.
Finally, we seek funding for the development of our proprietary RNAi therapeutics pipeline from the government and foundations. For example, in 2006, the NIAID awarded us a contract to advance the development of a broad spectrum RNAi anti-viral therapeutic against hemorrhagic fever virus, including the Ebola virus, which contract ended in December 2010.
Roche Collaboration Agreement. In October 2011, Arrowhead Research Corporation, or Arrowhead, announced its acquisition of RNA therapeutics assets from Roche, including our license and collaboration agreement with Roche.
UBC/AlCana Delivery Collaboration. Our research agreement with UBC and AlCana entered into in July 2009 is focused on the discovery of novel lipids, such as the MC3 lipid, employed in second-generation LNP formulations for the systemic delivery of RNAi therapeutics. Pursuant to the terms of the research agreement, we were funding collaborative research over an initial two-year period, and in July 2011, we exercised our right to extend the collaborative research and our funding for a third year, through July 2012. The collaborative research is being conducted by our scientists, together with scientists at UBC and AlCana.
Under the research agreement, we have exclusive rights to all new inventions relating to the delivery of oligonucleotides and other nucleic acid constructs, as well as sole rights to sublicense any resulting intellectual property to our current and future collaborators. UBC and AlCana are eligible to receive up to an aggregate of $1.3 million in milestone payments from us for each licensed product (as defined in the research agreement) directed to a particular target (as defined in the research agreement), together with single-digit royalty payments on annual product sales.
Concurrent with the execution of the research agreement, we also entered into a supplemental agreement with Tekmira, Protiva Biotherapeutics Inc., a wholly-owned subsidiary of Tekmira, or Protiva, UBC and AlCana, which contains additional terms regarding the intellectual property rights arising out of the research agreement. Pursuant to the terms of the supplemental agreement,


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each of Tekmira and Protiva has the right to use new inventions under the research agreement for its own RNAi therapeutic programs that are licensed under our InterfeRx program and would be required to pay milestones and royalties to UBC and AlCana in connection with such use.
Pursuant to the terms of the supplemental agreement, each of Tekmira and Protiva waived all prohibitions and restrictions on certain former Tekmira employees who are now working at UBC and AlCana in connection with their . . .

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