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ALNY > SEC Filings for ALNY > Form 10-Q on 5-Nov-2012All Recent SEC Filings

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Form 10-Q for ALNYLAM PHARMACEUTICALS, INC.


5-Nov-2012

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 expressly disclaim any 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 in this Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as under 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 a variety of diseases.

Our core product strategy, which we refer to as "Alnylam 5x15," is focused on the development and commercialization of novel RNAi therapeutics for the treatment of genetically defined diseases with high unmet medical need. Under our core product strategy, we expect to have five RNAi therapeutic programs in clinical development, including programs in advanced stages, on our own or with one or more collaborators, 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. Our core programs currently in clinical or pre-clinical development are: ALN-TTR for the treatment of transthyretin-mediated amyloidosis, or ATTR; ALN-AT3 for the treatment of hemophilia; ALN-PCS for the treatment of severe hypercholesterolemia; ALN-HPN for the treatment of refractory anemia; and ALN-TMP for the treatment of hemoglobinopathies, including beta-thalassemia and sickle cell anemia. We intend to focus on developing and commercializing ALN-TTR and ALN-AT3 on our own in the United States and potentially certain other countries, and we intend to enter into alliances to advance our ALN-PCS, ALN-HPN and ALN-TMP programs.

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 May 2012, we reported final clinical results from our ALN-TTR01 Phase I, multinational clinical trial showing that ALN-TTR01 was generally safe and well tolerated and resulted in statistically significant lowering of both wild-type and mutant TTR serum levels in ATTR patients. ALN-TTR01 employs a first-generation lipid nanoparticle, or LNP, formulation and the ALN-TTR01 Phase I clinical trial has provided proof-of-concept data for the program.

We are advancing ALN-TTR02 as our lead product candidate in our ALN-TTR program. ALN-TTR02 uses the same small interfering RNA, or siRNA, as ALN-TTR01, but is formulated in a proprietary second-generation LNP with the MC3 lipid. In July 2012, we reported clinical results from our ALN-TTR02 Phase I clinical trial, which was conducted in the United Kingdom as a


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randomized, single-blind, placebo-controlled, single-ascending dose study, which enrolled 17 healthy volunteer subjects. The primary objective of the study was to evaluate the safety and tolerability of a single dose of ALN-TTR02, with subjects being enrolled into five sequential cohorts of increasing doses ranging from 0.01 to 0.50 mg/kg. Secondary objectives of this study included the characterization of pharmacokinetics of ALN-TTR02 and the assessment of clinical activity as measured by effects on serum TTR levels through at least day 56 following a single dose. Preliminary data from this study show that administration of ALN-TTR02 leads to robust knockdown of serum TTR protein levels of up to 94%; the overall results were highly significant (p<0.00001 by ANOVA). Suppression of TTR, the disease-causing protein in ATTR, was found to be rapid, dose dependent, durable and specific after a single dose, with a nearly 80% level of TTR suppression sustained at one month with a single dose. Serum TTR levels were measured by an enzyme-linked immunosorbent, or ELISA, assay and also by a turbidometric assay method. Based on the significantly improved efficacy of ALN-TTR02, we have no further development plans for ALN-TTR01.

ALN-TTR02 was found to be generally safe and well tolerated in this Phase I clinical trial, consistent with our broader clinical experience with LNP-formulated siRNAs. There were no serious adverse events or discontinuations in the study related to ALN-TTR02 and there were no significant adverse events associated with ALN-TTR02 up through 0.30 mg/kg. A moderate acute infusion reaction was observed in one subject receiving ALN-TTR02 at 0.50 mg/kg who was able to complete dosing with slowing of the infusion rate. There were no laboratory abnormalities, including no changes in liver function tests, cytokines or C-reactive protein.

In June 2012, we reported the initiation of a Phase II clinical trial of ALN-TTR02. The Phase II clinical trial is designed as an open-label, multi-center, multi-dose, dose-escalation trial expected to enroll approximately 20 ATTR patients. Patients are being enrolled into cohorts of increasing doses and will receive ALN-TTR02 once every four weeks for two cycles. The primary objectives of this clinical trial are to evaluate the safety and tolerability of multiple doses of ALN-TTR02 and to measure clinical activity based on serial measurement of circulating serum TTR levels.

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, or FAP. In April 2011, the European Commission officially designated ALN-TTR01 as an orphan drug. This designation also applies to ALN-TTR02. In addition, in June 2012, we reported that the United States Food and Drug Administration, or FDA, provided Orphan Drug Designation to ALN-TTR02 as a therapeutic for the treatment of FAP.

We are also advancing ALN-TTRsc, which utilizes our proprietary GalNAc-siRNA conjugate delivery technology and subcutaneous dose administration, into clinical development. Pre-clinical studies have shown that once-weekly dosing with ALN-TTRsc enables robust and sustained silencing of TTR over a multi-week period. We believe that ALN-TTRsc has the potential to provide product differentiation and expansion in the ATTR indication.

In October 2012, we announced that we and Genzyme Corporation, or Genzyme, entered into a license and collaboration agreement pursuant to which we granted to Genzyme an exclusive license in Japan and the Asia-Pacific region, known as the Genzyme territory, to develop and commercialize specified RNAi therapeutics targeting TTR for the treatment of ATTR and other human diseases. We retain all development and commercialization rights worldwide outside of the Genzyme territory. The Genzyme agreement is described below under the heading "Strategic Alliances."

Our second core product development program is ALN-AT3 for the treatment of hemophilia. In July 2012, we presented data comparing robust RNAi-mediated silencing of protein C, or PC, and antithrombin, or AT, two natural anticoagulant proteins. These results included studies performed to identify the optimal endogenous anticoagulant target and delivery modality for further RNAi therapeutic development in hemophilia. These studies showed that AT, an endogenous inhibitor of thrombin generation, is the optimal anticoagulant target and we have now designated ALN-AT3, an RNAi therapeutic targeting AT, as the development candidate for our hemophilia program. ALN-AT3 utilizes our proprietary GalNAc-siRNA conjugate delivery approach enabling subcutaneous administration with the potential for a once-weekly or twice-monthly dosing regimen. In pre-clinical animal models of hemophilia, administration of ALN-AT3 resulted in increased thrombin generation demonstrating proof of concept for this novel strategy. Based on these results, we are no longer advancing ALN-APC, an RNAi therapeutic targeting PC.

Our third core development program is ALN-PCS for the treatment of severe hypercholesterolemia. In April 2012, we reported clinical data from our Phase I clinical trial of ALN-PCS. ALN-PCS employs the same proprietary second-generation LNP formulation, specifically using the MC3 lipid, as ALN-TTR02. We are developing ALN-PCS 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.

The Phase I clinical trial was conducted as a randomized, single-blind, placebo-controlled, single-ascending dose study in healthy volunteer subjects with elevated baseline LDL-c (greater than 116mg/dL). The primary objective of the study was to evaluate the safety and tolerability of a single dose of ALN-PCS. Secondary objectives included assessment of pharmacodynamic effects of the drug on plasma PCSK9 protein levels and evaluation of clinical efficacy as measured by LDL-c levels. A total of 32 subjects were enrolled into six sequential dose cohorts ranging from 0.015 to 0.400 mg/kg in a three-to-one randomization of drug to placebo.


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In this study, administration of ALN-PCS resulted in rapid, dose-dependent and durable reductions in LDL-c of up to 50% relative to baseline and placebo, with a statistically significant mean reduction of 41% (p<0.01) at the 0.400 mg/kg dose level. In addition, ALN-PCS administration resulted in rapid, dose-dependent and durable knockdown of PCSK9 protein levels in plasma of up to 84% relative to baseline and placebo, with a statistically significant mean reduction of 68% in the highest dose group of 0.400 mg/kg (p<0.0001). There was also a dose-dependent increase in the proportion of subjects who achieved "target" levels of LDL-c of less than 100 mg/dL (p<0.05). We believe the effects of a single dose of ALN-PCS support a once-monthly dose administration regimen for future studies.

ALN-PCS was shown to be safe and well tolerated in this study and there were no serious adverse events related to study drug administration. There were no drug-related discontinuations and no liver enzyme elevations. There was also no significant change compared to baseline in levels of high-density lipoprotein, or HDL, also referred to as "good" cholesterol, consistent with the phenotype observed in human PCSK9 loss-of-function mutations. We plan to partner our ALN-PCS program prior to initiating a Phase II clinical trial.

Our other two core development programs, ALN-HPN for the treatment of refractory anemia and ALN-TMP for the treatment of hemoglobinopathies, including beta-thalassemia and sickle cell anemia, are in pre-clinical development. We plan to partner each of these programs prior to initiating a Phase I clinical trial.

As noted above, 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. We have three partner-based programs in clinical or pre-clinical development, including ALN-RSV for the treatment of RSV, ALN-VSP for the treatment of liver cancers and ALN-HTT for the treatment of HD.

In September 2012, we reported complete results from an international multi-center, randomized, double-blind, placebo-controlled Phase IIb clinical trial with ALN-RSV01 for the treatment of RSV infection in lung transplant patients. RSV infection in lung transplant patients represents a significant unmet medical need due to the risk of developing new or progressive bronchiolitis obliterans syndrome, or BOS, an irreversible loss of function in the transplanted lung associated with approximately 50% mortality within five years. The primary endpoint of the study was the incidence of new or progressive BOS at 180 days after RSV infection. The clinical trial enrolled 87 patients who were randomized in a one-to-one, drug-to-placebo ratio. Based on local study site diagnosis of RSV infection, a total of 45 patients were randomized to receive ALN-RSV01 and 42 patients were randomized to receive placebo, defining the overall intent-to-treat study cohort, or ITT. Following central laboratory testing by PCR analysis, 10 patients could not be confirmed as infected for RSV; these patients happened to include nine patients randomized to receive placebo and one patient randomized to receive ALN-RSV01. Accordingly, a total of 77 patients (placebo, n=33; ALN-RSV01, n=44) comprised the "intent-to-treat," or ITTc, analysis population. Baseline characteristics were generally well balanced between treatment groups. The study did not achieve the primary endpoint of reduced BOS in an ITTc analysis of confirmed RSV infected patients (p=0.058), but achieved statistically significant reductions in prospectively defined analyses of ITTc patients with their "last observation carried forward," with a p-value of 0.028, and of ITTc patients treated "per protocol," with a p-value of
0.025. In all analyses, ALN-RSV01 treatment was associated with a clinically meaningful treatment effect, with a reduction of over 50% in the incidence of day 180 BOS as compared with placebo. These results confirmed the findings from our Phase IIa clinical trial of ALN-RSV01 in the same clinical setting. Following discussions regarding the results of this study with both U.S. and European regulatory authorities, we plan to determine appropriate next steps, if any, for our ALN-RSV program.

ALN-RSV01 was found to be generally safe and well tolerated in the study, with a comparable incidence of reported adverse events in placebo and study drug treatment arms. There were three deaths in the study, two in placebo and one in ALN-RSV01, all of which were determined to be unrelated to treatment.

In June 2012, we announced results from the extension study of our Phase I clinical trial of 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. The Phase I clinical 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.


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The extension study included patients enrolled in the ALN-VSP Phase I clinical trial who achieved stable disease or better after four months of treatment; patients were eligible to continue on the extension study until disease progression. The main objectives included continued evaluation of safety and tolerability and assessment of disease response. Seven of 37 patients (18.9%) evaluable for response went onto the extension study. At the time of enrollment, six patients had stable disease and one had an unconfirmed partial response. For these patients treated on both the Phase I clinical trial and extension study, the average length of time on treatment was 10.5 months, with a range of five to 23 months. The results from the extension study demonstrated disease control lasting more than six months in the majority of patients treated on the extension study, including one complete response in an endometrial cancer patient who had multiple liver metastases. In this study, chronic dosing of up to 23 months with ALN-VSP was found to be generally safe and well tolerated.

In July 2012, we formed a strategic collaboration with Ascletis Pharmaceuticals (Hangzhou) Co., Ltd., or Ascletis, a privately held US-China joint venture pharmaceutical company, for the development of ALN-VSP. Under the agreement, we have granted Ascletis exclusive rights to develop and commercialize ALN-VSP in China, including Hong Kong, Macau and Taiwan. Ascletis' initial focus will be on advancing ALN-VSP into a Phase II clinical trial for the treatment of hepatocellular carcinoma. Under the agreement, Ascletis is required to pay us development and commercial milestone payments and royalties on net sales in the Ascletis territory, if any. We retain all rights to develop and commercialize ALN-VSP in the rest of the world. We may use the data generated in China by Ascletis under this strategic collaboration for development of ALN-VSP in the rest of the world and Ascletis may potentially receive sublicense payments based on any such future partnerships.

In July 2007, we entered into an amended and restated collaboration agreement with Medtronic, Inc., or Medtronic, to pursue the development of RNAi therapeutics for the treatment of neurodegenerative disorders using implantable infusion systems. ALN-HTT is an RNAi therapeutic candidate targeting the huntingtin gene, for the treatment of HD, which we have been developing in collaboration with Medtronic under this agreement. In November 2010, we and Medtronic entered into an agreement with CHDI Foundation, Inc., or CHDI, under which CHDI agreed to initially fund approximately 50% of the costs of the ALN-HTT program up to the point at which an investigational new drug application, or IND, can be filed with the FDA, or a comparable foreign regulatory filing can be made.

In connection with our January 2012 strategic corporate restructuring, we determined to align our resources to focus on our lead programs, ALN-TTR and ALN-AT3. In April 2012, as part of this alignment of resources, we exercised our option under the Medtronic agreement to opt-out of the 50-50 expense/profit share arrangement of the ALN-HTT drug-device development program and move to a royalty and milestone licensing structure.

Medtronic has the right to continue development of the ALN-HTT program. If Medtronic decides to continue the ALN-HTT program, it would assume responsibility for future development plans. We intend to transition the program to Medtronic, and intend to continue to supply ALN-HTT for the program, as well as provide technical support to Medtronic, as requested. If Medtronic continues the program, we would be compensated for the supply of ALN-HTT, and would be entitled to certain development milestone payments, as well as royalties on annual net sales, if any. We continue to be obligated to repay CHDI for our pro-rata share of funding received through the effective date of our opt-out, with interest, in the event that a product is ultimately commercialized from the funded research.

In addition, we and Medtronic may jointly agree to collaborate on additional product development programs for the treatment of other neurodegenerative diseases, which can be addressed by the delivery of siRNAs to the human nervous system through implantable infusion devices, under the amended and restated collaboration agreement, which remains in effect.


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We continue to work internally and with third-party collaborators with the goal of developing 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. Our intellectual property portfolio 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 estate have allowed us to form alliances with leading pharmaceutical 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 (which assigned its rights and obligations to Arrowhead Research Corporation, or Arrowhead, during 2011), Takeda Pharmaceutical Company Limited, or Takeda, Kyowa Hakko Kirin Co., Ltd., or Kyowa Hakko, Cubist Pharmaceuticals, Inc., or Cubist, Ascletis, Monsanto Company, or Monsanto, and Genzyme. We have previously entered, and in the future we intend to enter, into contracts with government agencies, including the National Institute of Allergy and Infectious Diseases, or NIAID, a component of the National Institutes of Health. We have also established collaborations with and, in some instances, received funding 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.

In August 2012, we announced that we and Monsanto entered into a license and collaboration agreement pursuant to which we granted to Monsanto a worldwide, exclusive, royalty bearing right and license, including the right to grant sublicenses, to our RNAi platform technology and intellectual property controlled by us as of the date of the Monsanto agreement or during the 30 months thereafter, in the field of agriculture. The Monsanto agreement also includes the transfer of technology from us to Monsanto and a collaborative research project. Under the Monsanto agreement, Monsanto will be our exclusive collaborator in the agriculture field for a ten-year period. The Monsanto agreement is described below under the heading "Strategic Alliances."

We also seek to form or advance new ventures and opportunities in areas outside our primary focus on RNAi therapeutics. Through an internal effort we refer to as Alnylam Biotherapeutics, we are advancing the application of RNAi technology to improve the manufacturing processes for biologics, including recombinant proteins and monoclonal antibodies. We have formed, and intend to form additional, collaborations through this effort with third-party biopharmaceutical companies. In October 2011, we entered into a collaboration with GlaxoSmithKline, or GSK, for influenza vaccine production, under our VaxiRNA™ platform, an RNAi technology developed under our Alnylam Biotherapeutics initiative, for the enhanced production of viruses used in the manufacture of vaccine products. Additionally, in 2007, we and Isis established Regulus Therapeutics Inc., or Regulus, a company focused on the discovery, development and commercialization of microRNA therapeutics. In October 2012, Regulus completed its initial public offering. 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.

In January 2012, our Board of Directors approved, and we implemented, a strategic corporate restructuring pursuant to which we reduced our overall workforce by approximately 33%, to approximately 115 employees. The goal of the restructuring was to align our resources to focus on what we believe to be our highest value opportunities, including a focus on ALN-TTR for the treatment of ATTR and ALN-AT3 for the treatment of hemophilia as our lead programs, while advancing other pipeline programs through existing alliances and new collaborations. We expect the reduction in personnel costs, along with other external costs, to result in savings of approximately $20.0 million in our 2012 operating expenses. During the three months ended March 31, 2012, we substantially completed the implementation of the strategic corporate restructuring and recorded $3.9 million of restructuring-related costs in operating expenses, including employee severance, benefits and related costs. We expect to pay substantially all of these restructuring costs during 2012. We do not expect to incur any additional significant costs associated with this restructuring.

We have incurred significant losses since we commenced operations in 2002 and expect such losses to continue for the foreseeable future. At September 30, 2012, we had an accumulated deficit of $444.8 million. Historically, we have generated losses principally from costs associated with research and development activities, acquiring, filing and expanding intellectual property rights and . . .

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