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Alnylam Posts Q4 Loss as R&D Spending Offsets Revenue Jump, Offers New Details on Alliances

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Alnylam Pharmaceuticals this week reported a loss for the fourth quarter as growing operating costs, primarily related to its research and development activities, more than offset a strong increase in revenues.

Still, officials said the company remains well-positioned to weather the financial storm battering many of its peers in the biotechnology sector.

As of Dec. 31, the company had $513 million in cash, and recently paid off approximately $4 million in debt, Alnylam Vice President of Finance Patty Allen said during the fourth-quarter financials conference call.

"This is simply an unprecedented time in our industry where most biotech companies are focused on one [thing] and only one thing, and that is survival," Alnylam CEO John Maraganore said during the call. "We are extremely fortunate … to be in a completely different position — a position focused on growth and execution on our business plan [that is] bolstered with over half a billion [dollars] in cash."

In addition, Alnylam stands to receive significant payments from collaborators Novartis and Roche should either of those companies choose to exercise certain options under their arrangements with Alnylam, according to newly disclosed deal terms.

In 2005, Novartis signed a three-year RNAi drug-discovery and -development deal with Alnylam to collaborate on the optimization of RNAi drug candidates in therapeutic areas identified by Novartis (see RNAi News, 9/9/2005).

The companies said at the time that the agreement called for Novartis to pay Alnylam roughly $56.8 million in cash and stock purchases, and take what was at the time a 19.9 percent stake in the RNAi shop. Additional terms were not disclosed.

During this week's call, Alnylam President and COO Barry Greene said that under the deal, the companies are working on 30 exclusive targets, and that Novartis has the option to add 10 more targets in exchange for additional payments to Alnylam. "As Novartis advances these programs, Alnylam is entitled to receive milestones totaling up to $75 million per RNAi therapeutic product," Greene said.

In addition, Novartis' option to non-exclusively license Alnylam's RNAi platform for its own in-house drug-development programs may be exercised up until the end of the partnership for $100 million plus milestones and royalties on products developed using the gene-silencing technology, he noted.

Novartis recently extended its alliance with Alnylam for a fourth year, until October 2009, and has the option to extend it for a fifth.

Greene also disclosed new details about Alnylam's 2007 RNAi drug-discovery deal with Roche, which included Roche's acquisition of a non-exclusive license to use Alnylam's RNAi technology in four therapeutic areas and the purchase of its German subsidiary (see RNAi News, 7/20/2007).

When that arrangement was announced, Alnylam said that it received $274 million for the platform license, as well as $15 million for the subsidiary, Alnylam Europe. Roche also paid $42 million for about 1.95 million Alnylam shares.

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Greene said during the conference call that Alnylam is eligible to receive $100 million in milestones, in addition to royalties, "for each therapeutic target that Roche develops." In addition, Roche has the option to expand the number of therapeutic fields in which it may use Alnylam's technology from four to 22, in exchange for $50 million per field, he added.

Roche's option, however, precludes targets that have already been licensed exclusively by Alnylam to other partners and is subject to a Novartis option for first refusal on new targets Alnylam wishes to partner.

"Regarding our existing relationships with Novartis and Roche, the key point here is that as we help them succeed in advancing RNAi therapeutics to patients, Alnylam can benefit very significantly in future payments and royalties," Greene said.

Q4

For the fourth quarter, Alnylam posted a net loss of $9.4 million, or $0.23 per share, versus a year-ago profit of $1.7 million, or $0.04 per share.

Fourth-quarter revenues, meanwhile, surged to $24.4 million from $18.2 million in the same period the year before.

Allen said the revenue rise was "largely attributable" to Alnylam's partnerships with Roche, which generated $14 million during the period, and with Takeda Pharmaceutical, which yielded $5 million in the quarter.

"Revenues from the fourth quarter also included $5 million of expense reimbursement and amortization revenues from Novartis, the National Institutes of Health, the Department of Defense, Biogen Idec, InterfeRx research reagents and services license fees, and other sources," she added.

Operating expenses in the quarter jumped to $32.2 million from $21.1 million, an increase driven primarily by a roughly $9.3 million increase in R&D spending to $24.9 million.

Allen said that the higher R&D costs stemmed from license fees associated with the company's intellectual property portfolio, including the recent acquisition of the IP estate of now-defunct expressed RNAi firm Nucleonics, as well as continued development of clinical candidates and investments in drug-delivery collaborations.

Alnylam also recorded $3.9 million in fourth-quarter expenses related to Regulus Therapeutics, a microRNA drugs joint venture formed with Isis Pharmaceuticals in 2007 (see RNAi News, 9/13/2007). Costs associated with that business cost Alnylam $900,000 in the same period the year before.

At the end of 2008, Alnylam had $513 million in cash, "significantly exceeding our original 2008 guidance of greater than $390 million in cash and our largest year-end cash number ever," Allen said.

She noted that the cash position excludes $20 million in upfront payments Alnylam received last month under its alliance with Cubist Pharmaceuticals for the respiratory syncytial virus drug ALN-RSV01 (see RNAi News, 1/15/2009).

Additionally, she said Alnylam continues to defer $15 million in upfront payments from its June 2008 deal with Japanese drug maker Kyowa Hakko Kogyo for the Asian rights to ALN-RSV01 "until we can determine our last deliverable to Kyowa" (see RNAi News, 6/19/2008).

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Looking ahead, Allen said that Alnylam expects to end 2009 with more than $435 million in cash and zero debt, with a net operating loss of between $35 million and $45 million. The company also expects to begin amortizing the $20 million from Cubist over seven years, which equals about $700,000 per quarter, she said.

"We expect to see a moderate increase in R&D expenses in 2009 … compared to 2008 as we prudently invest in our pipeline," Allen said. "Of course, non-cash stock-compensation expenses and other items may lead to lumpiness in R&D expenses from quarter to quarter."

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