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Alnylam Releases Q2 Results; Plans on Adding Strategic Alliance During 2005

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For the first time as a public company, Alnylam Pharmaceuticals announced its quarterly financial results. The company also provided the investment community with an overview of its expectations for upcoming quarters, including the formation of a strategic partnership and the naming of a second therapeutic program.

For the second quarter, Alnylam reported revenues of $131,000, derived primarily through its collaboration with Merck signed in September 2003 (see RNAi News, 9/12/2003).

“The initial $2 million payment from [the Merck] collaboration is being recognized as revenue over the estimated life of the contract,” Patty Allen, vice president of finance at Alnylam, noted during a Wednesday afternoon conference call with investors and analysts. She added that the $2 million initial payment received from Merck under the companies’ July ocular diseases collaboration (see RNAi News, 7/2/2004), as well as the $1 million received from Merck for reimbursement of prior research and development costs, are being handled similarly.

Operating expenses in the period jumped to $7.2 million from $3.3 million a year earlier, primarily due to a $2.4 million increase in second-quarter R&D spending to roughly $4.2 million.

“Research and development expenses were significantly higher in the 2004 period primarily due to research and development expenses of $1.3 million incurred by Alnylam Europe, for which there are no comparable amounts for the prior period; the $500,000 license fee incurred during the quarter under our [exclusive RNAi deal] with Isis [Pharmaceuticals] that was triggered as a result of the signing of the Merck ocular deal; and an increase in payroll and related expenses as we have expanded our R&D team,” Allen said (see RNAi News, 3/19/2004).

Alnylam reported a net loss in the second quarter of $7.7 million, up from $3.7 million in the year-ago quarter.

As of June 30, the company had cash, cash equivalents, and marketable securities totaling $46.1 million. In May, Alnylam completed its initial public offering of 5.75 million shares of common stock at $6 per share, netting about $30 million.

“Following our IPO … we finished our second quarter in a strong financial position, and have already made significant progress in both product development and on the business side,” John Maraganore, Alnylam president and CEO, said during the conference call. “We continue to be committed to our mission of building a leading product company founded on RNA interference.”

Looking Forward

Allen said that Alnylam expects its revenues to increase during calendar 2004 as the company begins to recognize revenues under its second collaboration with Merck. She also said that the company’s net loss, excluding “the effect of depreciation and amortization expenses, and non-cash compensation expenses,” will likely increase slightly.

“We project that we will end 2004 with approximately $30 [million] to $40 million of total cash and marketable securities,” Allen said. “As our work plans and collaborations with Merck advance, we will be in a position to give more extensive guidance for 2005 early next year.”

Alnylam COO Barry Greene said during the conference call that the company is “currently engaged in multiple business discussions on strategic alliances, InterfeRx [intellectual property licensing] partnerships, and technology licenses.” Subsequently, Alnylam anticipates signing at least one more “major strategic alliance … where Alnylam retains a significant portion of the long-term value of the program” before the end of 2005, he said.

The company also remains on track to begin phase I studies of an age-related macular degeneration therapy in the second half of next year, Greene said. Additionally, he said that a second therapeutic development program is expected to be announced in the second half of 2004, and that the company “is committed to starting multiple preclinical programs throughout 2005.”

In response to an analyst question during the conference call, Maraganore declined to provide specifics about likely candidates for the company’s second drug program. However, Greene noted that the company’s Parkinson’s disease work, being conducted in collaboration with the Mayo Clinic (see RNAi News, 10/31/2003), is proceeding apace, and that data from that program is set to be presented at the annual meeting for the Society of Neuroscience in October.

The Competition

Last week, Greene presented at the Banc of America Securities “New Products, New Paradigms in Healthcare” conference. While the majority of his talk focused on the Alnylam and the basics of RNAi for ophthalmic applications, Greene found the opportunity to mention the company’s two rivals in the age-related macular degeneration field.

Responding to a conference attendee question about Sirna Therapeutics, Greene noted that Sirna’s AMD program “is aimed at VEGF receptor-1,” as opposed to Alnylam’s program, which is targeting the VEGF pathway itself. He added that “VEGF receptor-1, in our minds, does not have the biologic rationality that going after VEGF itself does.”

Greene also pointed out that Acuity Pharmaceuticals is developing an RNAi-based treatment for AMD targeting VEGF, called Cand5, but that their siRNA is “a sequence that has, in our minds, not been optimized and not had chemical properties introduced to improve [it].”

Despite Alnylam’s stance on Acuity’s drug, Greene included in the slides from his presentation pictures from a published study examining the ability of Cand5 to inhibit choroidal neovascularization and control blood vessel leakage in the eyes of non-human primates.

“This is data ... that suggests the introduction of siRNA does, in fact, stop leakage,” Greene said, referring to the pictures, which were cited as coming from a study published in Retina. “This is data out of the University of Pennsylvania [and] it’s a good proof of concept on [Alnylam’s AMD] program advancing.”

The lead author of the Retina study was UPenn’s Michael Tolentino, who co-founded Acuity.

— DM

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