Alnylam Pharmaceuticals(ALNY) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Alnylam reported a $147.8 million net income in Q3 2023, a significant turnaround from a prior year loss, with total assets increasing to $3.84 billion and a narrowed nine-month net loss Condensed Consolidated Balance Sheets The balance sheet highlights an increase in total assets to $3.84 billion by September 30, 2023, while the total stockholders' deficit slightly widened Condensed Consolidated Balance Sheet Highlights (In thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,033,024 | $866,394 | | Total current assets | $2,985,452 | $2,692,247 | | Total assets | $3,839,073 | $3,546,359 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $949,785 | $767,915 | | Convertible debt | $1,019,809 | $1,016,942 | | Liability related to the sale of future royalties | $1,355,009 | $1,292,204 | | Total liabilities | $4,004,939 | $3,704,582 | | Total stockholders' deficit | ($165,866) | ($158,223) | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) The statement of operations shows a $147.8 million net income for Q3 2023, a significant improvement from a $405.9 million net loss in Q3 2022 Statement of Operations Summary (In thousands, except per share amounts) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $750,530 | $264,306 | $1,388,574 | $702,383 | | Net product revenues | $313,153 | $232,267 | $895,186 | $632,654 | | Net revenues from collaborations | $427,472 | $29,297 | $469,778 | $64,267 | | Total operating costs and expenses | $536,663 | $522,346 | $1,554,345 | $1,298,841 | | Income (loss) from operations | $213,867 | ($258,040) | ($165,771) | ($596,458) | | Net income (loss) | $147,753 | ($405,920) | ($302,372) | ($923,663) | | Net income (loss) per share - diluted | $1.15 | ($3.32) | ($2.43) | ($7.62) | Condensed Consolidated Statements of Cash Flows Operating activities generated $134.0 million in cash for the nine months ended September 30, 2023, a significant improvement from cash usage in the prior year Cash Flow Summary for the Nine Months Ended September 30 (In thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $133,951 | ($409,296) | | Net cash (used in) provided by investing activities | ($95,694) | $309,265 | | Net cash provided by financing activities | $132,903 | $362,316 | | Net increase in cash, cash equivalents and restricted cash | $166,654 | $253,236 | Notes to Condensed Consolidated Financial Statements The notes detail the company's strategic goals, product revenue breakdown, key collaboration agreements, and ongoing patent litigation - The company's strategy, Alnylam P5x25, aims to transition it to a top-tier biotech company by the end of 2025 by delivering transformative medicines for rare and prevalent diseases[27] Net Product Revenues by Product (In thousands) | Product | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | ONPATTRO | $81,589 | $144,950 | $275,540 | $435,387 | | AMVUTTRA | $148,680 | $25,229 | $382,584 | $25,229 | | GIVLAARI | $54,148 | $45,659 | $159,953 | $126,086 | | OXLUMO | $28,736 | $16,429 | $77,109 | $45,952 | | Total | $313,153 | $232,267 | $895,186 | $632,654 | - In July 2023, Alnylam entered into a strategic collaboration with Roche for the joint development of zilebesiran, an investigational treatment for hypertension. The agreement included a $310.0 million upfront payment to Alnylam, which was recognized as revenue in Q3 2023[43][45][48] - Under the collaboration with Regeneron, Alnylam earned a $100.0 million milestone in Q3 2023 for achieving certain criteria in the early clinical development of its CNS program, ALN-APP. A cumulative catch-up adjustment of $65.0 million was recognized in net revenues from collaborations[49] - The company is involved in ongoing patent infringement lawsuits filed in March 2022 against Pfizer/BioNTech and Moderna, seeking damages related to the use of Alnylam's biodegradable cationic lipid technology in their respective mRNA COVID-19 vaccines[102][103][232] Management's Discussion and Analysis of Financial Condition and Results of Operations Management highlights significant Q3 2023 revenue growth from AMVUTTRA and the Roche collaboration, leading to net income and a strong cash position to fund the 'Alnylam P5x25' strategy Overview Alnylam, a commercial-stage biopharmaceutical company, focuses on RNAi therapeutics with five marketed products and aims for top-tier biotech status by 2025 - Alnylam is a commercial-stage biopharmaceutical company focused on RNAi therapeutics, with five marketed products: ONPATTRO, AMVUTTRA, GIVLAARI, OXLUMO, and the partnered product Leqvio (inclisiran)[107] - The company's 'Alnylam P5x25' strategy aims to transition it into a top-tier biotech company by the end of 2025 through sustainable innovation and strong financial performance[107] - In October 2023, the FDA issued a Complete Response Letter (CRL) for the supplemental New Drug Application (sNDA) for patisiran (ONPATTRO) for the treatment of ATTR amyloidosis with cardiomyopathy, stating that clinical meaningfulness was not established[107] Results of Operations Total revenues surged by 184% in Q3 2023, primarily driven by collaboration revenue and strong AMVUTTRA sales, while operating costs increased moderately Revenue Breakdown (In thousands) | Revenue Source | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Net product revenues | $313,153 | $232,267 | 35% | | Net revenues from collaborations | $427,472 | $29,297 | >500% | | Royalty revenue | $9,905 | $2,742 | 261% | | Total revenues | $750,530 | $264,306 | 184% | - The substantial increase in collaboration revenue for Q3 2023 was primarily due to recognizing $310.0 million from the new Roche agreement and a $65.0 million cumulative catch-up adjustment from a milestone achieved under the Regeneron collaboration[132] - Net product revenue growth was driven by the strong launch of AMVUTTRA, which saw sales increase by 489% YoY in Q3 2023. This was partially offset by a 44% YoY decline in ONPATTRO revenue, largely due to patients switching to AMVUTTRA[129][130] Operating Costs and Expenses (In thousands) | Expense Category | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Cost of goods sold | $79,473 | $36,507 | 118% | | Research and development | $253,179 | $245,371 | 3% | | Selling, general and administrative | $199,175 | $235,859 | (16)% | | Total operating costs and expenses | $536,663 | $522,346 | 3% | - Cost of goods sold as a percentage of net product revenues increased from 15.7% in Q3 2022 to 25.4% in Q3 2023, primarily due to an inventory impairment for ONPATTRO following the negative regulatory decision for its cardiomyopathy indication[134][135] Liquidity and Capital Resources Net cash from operating activities significantly improved to $134.0 million for the first nine months of 2023, supported by strong cash reserves - Net cash provided by operating activities for the first nine months of 2023 was $134.0 million, a significant improvement from the $409.3 million used in the same period of 2022. This was primarily due to the $310.0 million upfront payment from Roche and stronger cash receipts from product sales[145][146] - Management believes that its cash, cash equivalents, and marketable securities of $2.41 billion as of September 30, 2023, along with expected revenues, will be sufficient to fund operations for at least the next 12 months[150][179] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no significant changes to its financial market risks, primarily related to interest rates, since the end of 2022 - There have been no significant changes to the company's financial market risk exposures, mainly interest rate risk, as of September 30, 2023, compared to December 31, 2022[151] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of September 30, 2023, and concluded they were effective at a reasonable assurance level - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[152] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[153] PART II. OTHER INFORMATION Legal Proceedings The company refers to Note 13 of its financial statements for a discussion of material pending legal proceedings, primarily patent infringement lawsuits against Pfizer/BioNTech and Moderna - For details on material legal proceedings, the report refers to Note 13 of the financial statements, which discusses patent infringement lawsuits against Pfizer and Moderna[155] Risk Factors The company faces significant risks including commercialization challenges, a history of losses, dependence on collaborators, regulatory hurdles, intense competition, and ongoing patent litigation - The commercial success of approved products is not guaranteed, and the company may be unable to expand indications, as exemplified by the FDA's Complete Response Letter (CRL) for patisiran's sNDA for cardiomyopathy in October 2023[169] - The company has a history of significant operating losses, with an accumulated deficit of $6.87 billion as of September 30, 2023, and may not achieve or maintain profitability[170] - Alnylam is dependent on strategic alliances with companies like Roche, Novartis, and Regeneron for development, commercialization, and funding, and the failure of these partners to perform could harm the business[182][184] - The company faces intense competition from large pharmaceutical companies and other firms developing RNAi, antisense (e.g., Ionis), and other novel drug technologies, which could render its products obsolete or noncompetitive[237][239] - Alnylam is involved in significant intellectual property litigation, including lawsuits against Pfizer and Moderna for patent infringement related to mRNA COVID-19 vaccines, which could incur substantial costs and divert management attention[232] - The Inflation Reduction Act of 2022 (IRA) introduces Medicare price negotiation, which could impact future revenues. The company decided not to pursue a Phase 3 trial for vutrisiran in Stargardt Disease to avoid losing the single-orphan exemption for AMVUTTRA from these negotiations[217] Other Information During Q3 2023, two directors adopted Rule 10b5-1 trading plans for the potential sale of company common stock, setting pre-determined conditions for share sales - Director Michael W. Bonney established a Rule 10b5-1 trading plan on August 10, 2023, to sell up to 30,000 shares of common stock between November 2023 and December 2024, subject to price conditions[252] - Director David E.I. Pyott established a Rule 10b5-1 trading plan on August 11, 2023, to sell up to 32,450 shares of common stock between November 2023 and November 2024, subject to price conditions[253] Exhibits This section lists the exhibits filed with the Form 10-Q, including the Collaboration and License Agreement with Roche and Genentech, and officer certifications - Key exhibits filed include the Collaboration and License Agreement with F. Hoffmann-La Roche Ltd. and Genentech, Inc., and officer certifications pursuant to the Securities Exchange Act of 1934[255]