Alnylam Pharmaceuticals, Inc. (ALNY) Earnings Call Transcript & Summary

Thank you, everyone. My name is Gena Wang. I am mid-cap biotech analyst at the Barclays. I first hope everyone stay healthy, and I would like to thank all the participants, investors, companies and especially our event team and the corporate access team who made this virtual health care conference possible. With that, I would like to introduce our next speakers from Alnylam, Jeff Poulton, Chief Financial Officer; and also Josh Brodsky, also the leader of the IR team. I will hand over to you, Josh, maybe for the introduction remarks. I just wanted to remind investors, you have to physically click the slide in order to view the slides, and I'm pretty sure Alnylam team will remind everyone on the page they are on. Okay. With that, I'll hand over to you, Josh.

Terrific. Thanks so much, Gena, and good afternoon, everyone. Again, my name is Josh Brodsky. I'm Director of Investor Relations here at Alnylam. And thanks to you Gena and to the rest of the conference organizers. I understand these were kind of tricky circumstances. We're very pleased to be able to participate despite the circumstances. I'll make a few introductory remarks, and then I'll hand it over to Jeff Poulton, our CFO, to review our financial results and commercial results, and then we'll go into our Q&A with Gena. So if we advance to Slide 2, just to remind you, we will be making forward-looking statements, and you can feel free to review our most recent SEC filings for a full review of risk factors. Now on Slide 3. I think as most of you know, Alnylam has been the leader in advancing RNAi therapeutics as a brand new class of innovative medicines. This is what we've been seeing and will be focused on since our founding in 2002. Of course, this is an approach where we silence disease-causing genes by silencing and targeting the messenger RNA upstream of those disease-causing proteins. This is based on Nobel Prize winning science, and Alnylam has been proud to be the pioneers in translating RNAi from that Nobel Prize winning science into human clinical studies, being the first to demonstrate positive human proof of concept, also achieving positive Phase III data now from 4 unique Phase III programs. And of course, on to the market where we have multiple products and plan to advance multiple more that can impact patients globally. If we advance to Slide 4, you'll see that our reproducible and modular approach that we've taken to developing these medicines has enabled us to build out the pipeline that you see here, currently consisting of 10 programs in active clinical development across 4 different strategic therapeutic areas. Two programs are currently commercial, ONPATTRO and GIVLAARI, and of course, we'll spend time discussing that later on. We have 6 programs that are in Phase III development, and we do have a number of earlier-stage pipeline programs that will continue to advance as well. And then finally, in that column on the right, where it discusses our commercial rights, you'll appreciate that in a majority of these programs, we've elected to retain global commercial rights where Alnylam will commercialize these programs globally on our own, and in a few other select instances, we've chosen to partner these programs, where our partner will advance the program through late stages of clinical development. And then if successful onto the market, and importantly, in these cases, Alnylam still stands to benefit significantly via attractive economics. So now let's advance to Slide 5, and I'll hand it off to Jeff to review our commercial and financial results.

Hello, everybody. This is Jeff Poulton. Wish we were all together in Miami today, but we'll make the best of the situation. On Slide 5, this reflects the full year results that we reported in early February for 2019. On the left, reflects the revenues for the year by quarter, $166 million for the full year. Quarter-by-quarter, we generated at least 20% -- or greater than 20% growth versus the prior quarter. Focusing on Q4 for just a second. Strong patient growth across all markets where we're launched was the driver of the revenue growth. And in particular, we had very strong results in our international markets. You can see we delivered $20 million in revenue in those markets, which represented 61% growth versus Q3. Significant driver of growth there were new market launches in both the U.K. and Japan, which came online right at the end of Q3. So had first full quarter of results in Q4. And for Japan, we've talked about repeatedly that we see this as a very, very strong market for us with ONPATTRO, and we expect to exit 2020 with that being our second largest market. On the right, you see the corresponding commercial patient detail by quarter. So we exited the year with more than 750 patients on therapy and one -- including patients that remain in the EAP program as well as patients on patisiran that are in clinical trials. We have more than 1,000 patients today on therapy. So we're very pleased with that. And we look forward to future growth in 2020 through new patient finding, additional geographic expansion and evidence-generating activities. So if you move to the next slide, this reflects the 2020 financial guidance that we also gave on the year-end call. Starting at the top. So this was the first year as a company that we have provided forward-looking product sales guidance for ONPATTRO. It was launched in the second half of 2018. So the guidance for this year now is $285 million to $315 million. The midpoint of that reflects 80% growth versus 2019. We did not give guidance -- 2020 guidance for GIVLAARI given that it's our initial commercial launch year. Skipping down to the operating expense guidance for 2020. So the combination of non-GAAP R&D and SG&A, we expect to invest between $1.025 billion and $1.125 billion. The midpoint of that reflects 12% growth versus 2019, which is significantly below the 31% growth that you see there that we experienced in 2019. So that moderating growth in operating expenses reflect discipline in our approach to capital allocation and the initial benefit of operating leverage from the commercial infrastructure that we've developed to support ONPATTRO and now GIVLAARI, and in the future, hopefully, lumasiran as well. And last comment is on the cash runway. So we ended 2019 with a little bit more than $1.5 billion in cash on the balance sheet, which we think will support company operations for multiple years. So we're in a good spot there. So moving to Slide 7. So this slide focuses on our transition towards a self-sustainable financial profile as a top priority. The 2 key elements of that are: First and most importantly, top line revenue growth from the 2 products that we've gotten in the market and potentially many more to come. More on that in just a second. So that's -- a real focus for us is to make sure that as we launch these drugs, that we're maximizing that revenue curve. And then secondly, the variable that will impact timing to profitability is the investment in operating expenses. I talked about the moderating growth on the prior slide. So we've committed that 2019 is our peak loss year. And as we get better visibility on top line revenue growth as we move forward, we'll also have better visibility on our specific profitability horizon. But to be clear here, this is not a question of if we're going to be a profitable, self-sustainable company, but it's really an optimization of when and how to make the biggest impact for patients and build the greatest value for shareholders. So moving to Slide 8. This just gives you a snapshot of where we are commercially, not only today with 2 commercialized products, ONPATTRO and GIVLAARI, but also where we expect to be in the next 12 to 24 months. And you can see, assuming regulatory approvals, that we expect to launch 4 additional potentially transformative medicines, including lumasiran for primary hyperoxaluria type 1; vutrisiran, which would, in this case, is enrolling in Phase III and would expand -- and it'll be a new sort of delivery for hereditary patients with polyneuropathy, subcu version once a quarter dosed; and then partnership programs that we got with inclisiran now with Novartis for hypercholesteremia and fitusiran with the Sanofi for hemophilia. All of these products could be in the market in the next 12 to 24 months. So creates the potential for a remarkable commercial profile for the company for the foreseeable future. So if we can move to the next slide. So a little bit now on goals that the company established back in 2015, which I think it's worth reflecting on. And this is a slide that has some animation. So you might need to click through this with me. So these were goals that were established back in 2015 for 2020. And now that we're almost at the tail end of this 5-year period, where -- it's safe to announce that we expect to exceed the original guidance that we gave. We expect to be in 4 strategic therapeutic areas rather than 3. We expect to have 4 marketed products, as I just talked about on the prior slide, rather than 3. Expect to have 14 clinical programs, including 6 in late-stage development. So we think this creates a profile that has rarely been achieved in biotech. So moving to the last slide, Slide 10. So as we look at the company today and where we're going over the next 5 to 6 years, I think the important message here is we see the opportunity to build a top 5 biopharma, bringing transformative medicines to patients around the world, and growing with innovation, excellence and responsibility. And we'll do this in medicines for both rare and common diseases. And we're committed to this future for Alnylam and believe we're now strongly positioned to realize it. And that completes the prepared remarks, Gena. And so I think Josh and I are both standing by here to take your questions.

Thank you, Jeff and Josh. Maybe I will start with ONPATTRO launch and the guidance. For 4Q, we saw pretty strong growth in Europe, but somewhat flat in the U.S. So for 2020 guidance, that's like $285 million to $315 million. Is 4Q '19 U.S. revenue a good comp for 2020 runway? And where do you see major driver for 2020 ONPATTRO revenue growth?

Yes. So thanks for the question. So let me just recap again the guidance of $285 million to $315 million. That's global guidance. We did not break out guidance between the U.S. and ROW markets. So the midpoint of that $300 million represents 80% growth versus 2019. We expect revenue growth to come from new patient finding, geographic expansion and additional evidence-generating activities. In the U.S., it will be driven by new patient finding, and we do expect continuous growth in the U.S. across the year. We did comment on the call that we do expect that growth outside the U.S. will be stronger than in the U.S., and that's really driven by timing of pricing and access and reimbursement outside the U.S. It's taken longer than in the U.S., which is pretty standard. And so there's a majority of markets outside the U.S. that were only partial years in 2019 of revenue that will get a full year impact from. And we'll also get new markets coming online in 2020 for the first time outside the U.S. But we do expect continued growth in the U.S. There's a number of factors that sort of give us confidence in that. Our efforts to continue to increase education and diagnosis through all of our commercial and medical activities. The genetic screening program that we run that's continuing to identify more appropriate patients for ONPATTRO. The really terrific results that we've had on the reimbursement and access side in the U.S. with the approach that we've taken with value-based agreements that's resulted in 99% of Americans being able to get reimbursed with ONPATTRO if it's prescribed today, and about 80% of patients that will have 0 co-pay for the drug, and the remaining 20% having an average co-pay of about $2,000. So we're pleased with what we accomplished in 2019 with the drug both in the U.S. and outside the U.S., and expect that we'll continue to see growth to achieve that guidance that we gave for 2020.

Great. That's very helpful. Jeff, do you expect any seasonality for 1Q?

No. And that was a question that we got on the year-end call. We don't, and we know that, that sometimes happens with drugs, certain drugs, sometimes in the U.S., given sort of renewal around insurance, but we don't expect that. We've got -- because this is a rare disease drug, we've got close connections with the patients through our patient assistance program. And so we're actively working with patients on any issues that they might have with insurance as the calendar started 2020. So we're not expecting any sort of seasonality or headwinds in Q1.

Okay. Great. I will stick with ATTR franchise and ask a few pipeline questions. So for HELIOS-B trial, 30% of patients will be on background tafamidis. Do you expect an initial quick uptake, but then slowdown in enrollment once you reach 30% of the population?

Yes. Great. Thanks. This is Josh. So with HELIOS-B, which is our vutrisiran Phase III trial with cardiovascular outcomes as the primary endpoint, we're not guiding on enrollment time lines or the pace of enrollment for that matter. It is being conducted in some countries where tafamidis is not yet available. And we do have that up to 30% allowance for patients entering the trial to be on background tafamidis at baseline. And then those patients are allowed to come off tafamidis during the trial if they choose. And then also -- sorry, I think you asked about allowance for patients to begin tafamidis. So we do allow tafamidis drop ins. We would want to ensure that there is appropriate balance in the 2 trial arms as we're stratifying for tafamidis use at baseline. We'd also ensure that if any patients come onto tafamidis at any point during the trial that they are appropriately balanced between the 2 arms.

Okay. So -- Josh, so like if you allow patients to be on tafamidis halfway through trial. So would that be considered 30% of population or above 30%?

So again, up to 30% at baseline. The numbers could increase mid-trial, and we would make sure that from a randomization standpoint, we would potentially increase or reestimate the sample size to ensure that there is appropriate balance between the 2 arms because that would affect study powering. In order to ensure that the study is appropriately powered, we do want to make sure that there are appropriate numbers in each arm to ensure balance of patients on tafamidis.

So how would you adjust that?

There's something that's built into the stats plan, and I'm not a statistician. So I'm probably not wanting to articulate that and go into that in detail. But it's something that we have accounted for, and we'll have to make those necessary adjustments if needed.

Okay. So which means the trial size could be adjusted upside?

Yes, potentially, and there is room for that, and that has been built into the plan.

Okay, okay. Great. I see. And in so far, the stats is not powered to detect statistical significance of 30% patients on tafamidis? Is that right?

Yes. So again, the stats plan has taken into account that expectation, that up to 30% of the enrolled patients would be on stabilizers. Now the trial is powered to detect a statistically significant difference in the composite outcome of all-cause mortality and recurrent CV hospitalization, which is going to be at 30 months.

Okay, okay. Great. So now switch gear to GIVLAARI. So for GIVLAARI launch, wondering maybe, Jeff, do you have any additional color you can provide for the initial 13 start forms? Any launch progress or dynamics you've seen so far?

Yes. I'm probably not going to give you new information beyond the 13 start forms, but I'll give you a little bit of qualitative color, I think. So we got the approval in the U.S. just before Thanksgiving. So it was about 6 weeks that we had post-approval before the end of the year. We ended up with 13 start forms, just a couple of hundred thousand in revenue, which represented initial stocking. The feedback that we're getting from the field, I would say, is quite positive, both from physicians and patients. One of the things that I think is encouraging is that the sourcing of those start forms and where they're coming from, there's actually a nice balance between the porphyria sort of treatment centers of excellence as well as physicians out in the local community that have submitted those early start forms. And I would say that's a very encouraging sign that we're already seeing some of those local community physicians identifying patients and wanting to get their patients on GIVLAARI. The other thing that's encouraging, as I'd say, things are off to a good start with Ironwood. So this is the co-promotion partner that we've got for GIVLAARI. We're leveraging their field team, their GI field team, that's about 160 reps in the U.S., and there's a small fixed fee that we pay on that. And then really where they make their money is if they are identifying patients that ultimately get on therapy, that we'll pay a mid-teens royalty for that. And that would be an SG&A expense for us. So that's a really good success-based deal. And I think early indications are that's going to be a successful partnership. We'll have more detail on that on the Q1 call. And then lastly, I would say, the feedback that we're getting from payers as we're in the process of working with the commercial payers to get contracts in place with the VBAs, and now the prevalence-based adjustment that we've added to sort of the VBA construct that we use for ONPATTRO has been very well received. And so that prevalence-based adjustment is -- this is an ultra-orphan disease, small number of patients. We took that into account when we priced the drug. And so what we're giving payers certainly around is, if there are more patients than the prevalence estimates that we use to price the drug, in their plan, when they would go above that number on therapy, that there would be discounts that would kick in above that point. That seems to be very well received, and we think it's going to result in very good access for patients regardless of the severity of the disease that they have, which we think was very important for this product. So -- so far, so good, and we look forward to providing a lot more detail on a quarterly basis as we start to provide more information on sales results. Just last comment, as we just recently announced that we got approval in the EU as well. And so we're now in the preparation phase to launch the drug there. Initially, that will occur in Germany, I would expect that in Q2, and followed by France this year as well.

Okay. Jeff, I mean, when should we start to expect meaningful revenue contribution from U.S. and also Europe?

Yes. I mean we -- again, we didn't provide revenue guidance for GIVLAARI for the year, but we will expect to start seeing meaningful revenue from Q1 onwards, and we look forward to providing a lot more detail on the Q1 call in terms of what you should expect. I would say, some similar kind of detail that we provided on ONPATTRO, which was start forms, which we think is a good leading indicator for demand in the U.S. for a period of time until more meaningful revenue kicks in. We'll certainly provide that probably for at least the first couple of quarters as well as commercial patients on therapy. We'll continue to provide that kind of detail for GIVLAARI as well. So more to come here quite soon on GIVLAARI.

What will be your thoughts on the pricing in Europe?

We're not commenting on that yet. It's early days. But in terms of approach, I think the approach that we would take in terms of list price is, what we did with ONPATTRO, we would expect to have a fairly tight sort of band there. But more to come as we make progress. We're early days.

Okay. Great. And then quickly on lumasiran. So what are the key strategies you can apply to increase patient diagnosis? And in 3,000 to 5,000 U.S., EU patients, how many already diagnosed?

Yes. It's a good question. There's a few things that we're doing that I would say are learnings that we've taken from the ONPATTRO launch. And now, obviously, with the GIVLAARI underway, we're going to do some similar things. One thing is that we have opened up an EAP, an early access program in the U.S. And so we're actively working to get patients identified and get them into that program. Secondly, we'll have an Alnylam Act program in place, like we do for GIVLAARI and ONPATTRO, which allows us to support genetic testing to identify and get these patients diagnosed. That would be part of the approach that we'll take with lumasiran. And then I would say, all of the other things that are typical in an ultra-orphan launch from a medical education perspective are things that we'll do to increase education of the right physicians to identify patients more quickly. So again, more to come on that as we progress with the regulatory filing both in the U.S. and in the EU.

Great. So I know we are running out of time, just quick -- quickly, one last question regarding financials, also for Jeff. I think you also showed us on the Slide 7, the path to self sustainability. So wondering, 2020, although the growth in terms of a noncash, non-GAAP burn of the cost, actually the growth is slower than 2019, but the absolute number is still higher than 2019. So should we still -- for 2021, should we expect cash burn to decline over time or stay flat in 2021 and forward?

Yes. I mean, look, we're -- we've committed to as part of our guidance that we've talked about 2019 as a peak operating loss year. And so going forward, we expect to see improvement in that. I would say, operating income should be a reasonable proxy for cash flow. So we should start to see reductions in cash burn as we move forward as well. And again, just a reminder, we've got $1.5 billion of cash on the balance sheet at the end of 2019. So we think based on current operating plans that we've got multiple years of cash runway on the current balance sheet. Hopefully, that answers your question, Gena.

Okay. Maybe do you think the current cash can support you until you reach to profitability?

We're not saying that. At this point, we don't know how much additional cash may be required to get the profitability. I think the good thing is, from a financing perspective, we'll have additional optionality in terms of how we might want to bolster the balance sheet to support operations if the current $1.5 billion is not enough to get us to profitability. We talked about things like the possibility of monetizing the inclisiran royalty as one approach to do that. So it's good that we've got multiple options so that we can pick the most efficient, the most cost-effective way to do that if and when we decide it's time.

Great. Thank you very much, Jeff and Josh.

You're welcome.

Thanks, Gena.

All right. Take care.

Thank you. Thank you, everyone. This concludes our call.