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

Hi, everyone. Welcome to our fireside chat with Alnylam, and I'm pleased to have with me today Jeffrey Poulton, CFO of Alnylam. Jeff, thanks for joining us for the session.

It's great to be here, Joel. Thanks a lot. I've been with Alnylam for about a year now as the CFO. Very excited about the company and its prospects. It's the leading RNAi company in the space. It's been at it since 2002 in developing this technology. And today, it's a multiproduct global commercial company. 2 commercial products today, potentially 2 more commercial products by the end of the year, 1 which would be our product to commercialize, and 1 inclisiran in the hands of Novartis. More than 10 products in the clinic and a true platform company in terms of the ability to invest in itself organically and drive long-term growth and value. So a very well-positioned company, very interesting, excited to talk more about it today.

Yes. That sounds terrific, Jeff. And it sounds like a really -- breadth, it's grown from this RNAi platform to a company that spans now from commercialization all the way to a robust preclinical work as well. I guess could you tell us more about how you think about the key objectives for Alnylam going forward and some of the largest areas of focus?

Yes. Certainly, a major focus for the company right now is commercialization. We're new to that in the last 2 years. I think we've proven that the technology and the platform works. So the science is valid. What we're doing now is very much focused on delivering value as we get those products into the market. So that's a big focus for us. It's a big focus for investors. And ultimately, that puts us financially on a pathway towards profitability and self-sustainability. And that's a key goal for us as well. That's one that we've about fairly frequently in the last year. We haven't yet determined or put a target date yet out when we think we'll reach that sustainability profile. But what we have said is we think 2019 represents our peak non-GAAP operating loss year. And we started to demonstrate that with our Q2 results, where we showed improvement year-over-year. And I think we'll do that sequentially for the years ahead.

Great. So I've been paying attention to Alnylam for a while. As you know, I just initiated coverage earlier this week of Alnylam. And I think one of the things that struck me as we took a closer look is how Alnylam has some drugs with every 6 months dosing, which is quite unusual. And I mean, it seems -- I think maybe from a patient's perspective, could feel almost more like receiving a vaccine than receiving a typical drug, even though it's got a sound technology. So I guess I'm curious, from you, we've seen it with inclisiran, there's been talk about moving this to TTR. What are the implications of being able to dose every 6 months in terms of development and commercialization?

You're exactly right, that you are seeing and hearing more talk about less frequent dosing from Alnylam. That starts with inclisiran, obviously, which I mentioned in my introductory remarks, is the -- in the hands of Novartis, and that's an every 6-month dosed product. With the TTR franchise, we have now recently started to talk about the development work that we've got ongoing there for a subcu program that, to date, had been focused on quarterly dosing. We think there's -- it's possible that we could move that to every 6 months as well. And then also with our early-stage program, ALN-AGT, which is in Phase I today. We've talked about that as quarterly or even less frequently, likely every 6 months. I think from a patient perspective, the impact of this could be profound in terms of burden of treatment to have a once every 6-month subcu injection. I agree with you in terms of the reference to vaccine-like. That's something that we've heard from others as well. So with the burden of treatment being very low, it means very good things, or should mean very good things from a patient adherence and compliance perspective, which then correspondingly should lead to good outcomes for patients that are adherent to therapies. And we think that's a -- could be a key differentiator for us from a commercial standpoint. Ultimately, if we're successful in bringing these drugs through the clinic and into the market. And ALN-AGT is a really good example of that. Hypertension is the #1 cause of CV risk. And what you see in the market today with the standard of care is you see patients that are really not very adherent. It's like 50% or less are noncompliant on current standards of therapy. So if we could bring a drug like ALN-AGT to market that would have potentially a once every 6-month dosing clamped pharmacology, that would really improve patient adherence. That could be a game changer in that space. So this is important for us going forward for sure.

That's great. And I guess maybe to follow-up on that. From a technology standpoint, do you foresee that -- I mean is this something that Alnylam is kind of mastering in the way that it could be applied to every single program across the board? Or is it unique in some way or maybe some programs will have this every 6-month dosing and others won't? Or maybe it's kind of works for liver-specific but may not work for the neuro that you're developing? This could be other -- I'd be curious to hear more from you on that.

Yes. I mean we definitely expect we could see it in extrahepatic tissues as well. In fact, one of the reasons we're so excited about our CNS and ocular pipeline relates to the potency and durability of RNAi therapeutics. Just like we've seen in the liver, we're seeing similar types of effects in the CNS and the ocular space. Earlier this year, we presented preclinical data from nonhuman primates out of our ALN-APP program, which we expect will be the first CNS program to enter the clinic next year. And these data showed highly durable knockdown of the APP protein in the cerebrospinal fluid of primates for up to 6 months after a single-dose administration. So we think these results do support a biannual or -- perhaps even less frequent dosing regimen for an RNAi therapeutics in the CNS, if this holds up in clinical trials. So it would be a major advance in the field.

That sounds really interesting to have the low frequency dosing in neuro and maybe just kind of comparisons there to inclisiran that while it -- that the trials were done every 6 months, if you look at the PK/PD, it seems like it had an effect for over a year or more. So it's really exciting to see more about that.

Great.

So maybe switching gears a little bit. On the most recent earnings call, it was discussed how Q3 would be a recovery quarter from COVID moving on from the peak impact in Q2. Can you tell us more about -- is that still in line with what you're seeing?

Yes. Let me just sort of take you back through the sort of the sequence of events and how we've guided the market given the pandemic situation. On our Q1 earnings call, which was really sort of at the onset of the pandemic, we reduced our guidance for the year for ONPATTRO, the midpoint by about 5%. And we provided to the market the framework that we use to develop that revised guidance around the pandemic. And that assumed that Q2 would be the pandemic phase, where we would see the most significant impact on our business, and we further articulated that we thought we could see ONPATTRO down 10% from a revenue standpoint in Q2 versus Q1 in that pandemic phase. And then we anticipated Q3 would be a recovery phase, and Q4 would be new normal. Then sort of fast forward to our Q2 results call, we actually had good results. We were flat for ONPATTRO, Q2 versus Q1. So better than we had anticipated in terms of the guidance that we provided on the Q1 call. There was some different performance, U.S. versus ex U.S., and I think we'll probably get to that later in our conversation today. So I'll hold comments on that specifically. But on the Q2 call in terms of our guidance given the strength of the Q2 result, again, which was better than we had anticipated, and based on what we were seeing in the market as it relates to the pandemic, we upgraded our guidance on the Q2 call. We had reduced it to $270 million to $300 million on the Q1 call, and we bumped it to $280 million to $300 million on the Q2 call. And one of the things that we talked about is, as we were coming out of Q2 and entering Q3, that we were starting to see early signs that we were moving into a recovery phase. And I would say there were 3 or 4 things that we were seeing that gave us that confidence. One is that from a sales rep perspective, we were starting to see the opportunity to move out of the virtual setting and start to move into face-to-face interactions with physicians. This was obviously very variable by country and within the U.S. by state, but we were starting to see that, and that's continued. We were starting to see improvements in patient adherence, and this was particularly in the U.S. that was most impacted in the quarter by the pandemic in terms of patients missing or skipping infusions for a variety of reasons. That started to improve as we enter the third quarter. And then genetic testing. So we offer a free genetic testing program in the U.S. and in Canada. So we have data in terms of the number of those tests that are ordered and run on a quarterly basis. And we saw a pretty significant drop off on those metrics in the second quarter, but had started to see that recovering early in the third quarter, and that's continued. We're not all the way back to where we were pre pandemic, but we've made a lot of headway since the end of the second quarter. And then lastly, I think we were just seeing more confidence in the health care systems in general. We're starting to open up again as we entered the third quarter. I mean for a large part of the second quarter, particularly in the U.S., we saw the health care systems for things other than COVID that were largely shut down. That started to improve as we entered Q3. So I think we were confident about that sort of path we were on, which is what enabled us to upgrade our guidance on the Q2 call. So, so far, so good, I would say.

Great. So yes, that's a lot of great thoughts on commercialization, and glad to hear the rebound. Are you able to add anything more on clinical trials and how they were impacted by COVID and if you're seeing everyone there as well?

Yes. It's a good question. I'm glad you asked that. We -- if I go back again to the Q1 earnings call, we were seeing impact on -- largely on clinical trial enrollment was the biggest concern that we had. And we did for one specific study, APOLLO-B, reflect on the Q1 call that we were going to see a delay in terms of completion to enrollment. We had previously anticipated that, that would occur by the end of this year. And we pushed that into 2021. So we definitely were -- and we did see an impact on enrollment across a lot of our studies during the quarter. The good news is, like with what I articulated about recovery on the commercial side of the business, we saw the same impact in -- on the clinical trial side. We did start to see operations open back up and we saw an improvement in clinical trial enrollment in the quarter as well.

That's great. So I guess, let's switch gears and dive down and take a closer look on some of the commercial and pipeline agents. Maybe starting with ONPATTRO. You talked about that a little bit in your recent COVID remarks. And Q2 was flat for -- and I think actually, U.S. sales, we saw a very slight decline. But I guess why that was notable and I bring it up is it seems like, at least overall, there is a growth in a number of patients on drug. I think one of the things that's mentioned on the Q2 call about that was there was decreased inventory in channel and then reduced patient adherence. Are those types of things that are kind of unique to a COVID dip? Or do you anticipate there could be more longer term structural things?

Yes. Good question. Let me give you, so again, sort of the big picture performance for the quarter. So I mentioned earlier that we -- that the revenue results for ONPATTRO for Q2 were flat versus Q1. So we did $66.5 million in Q2, $66.7 million in Q1. That was again better than we had anticipated when we guided the market at the onset of the pandemic. We thought that results might be down 10% in the quarter. From a patient perspective, we grew in the quarter in spite of the pandemic. So we -- in Q1, on our Q1 results call, we had more than 950 patients on commercial therapy at the end of Q1. And on our Q2 call, we were more than 1,050. So we grew during the quarter, and that was across all regions. In spite of being flat, we did grow patients. So again, there were variable results geographically. So let me talk about that for just a second. Our international markets grew 16% in Q2 versus Q1, and our U.S. results were down 13% in Q2 versus Q1. First, on the ex U.S. side, very strong performance. I would say, in general, what we found is the health care systems in terms of continuity of care for patients dealt with the pandemic in the second quarter better than what we saw in the U.S. And that's reflected in those results. We had strong growth both in Europe and in Japan. In Europe, that growth was driven notably by a couple of markets that were relatively newly launched. And so that was Italy and Spain. We saw strong results in the quarter. And in Japan, which has really been a strong growth market for us since the second half of 2019, that growth continued. Japan has been a standout market for us in terms of performance. And again, I think we'll have an opportunity to talk about that more in just a second. On the U.S. side, the 13% reduction, you mentioned it in your question, there was really 2 key variables there that caused that. One is patient compliance was reduced in the quarter, which was, again, not a surprise to us given the guidance that we had provided. And given the patient population that's on ONPATTRO, which is typically an older patient population, so at higher risk from the pandemic. So with that reduced compliance, we just saw patients that decided that they didn't want to go get their every-3-week IV infusion at times. Or in some cases, we were transitioning patient's site of care. We were trying to move as many patients to home care as we could, for obvious reasons, during the pandemic. And sometimes, when that transition is occurring from one side of care to another, you can have patients that miss doses. So that was one aspect of the U.S. performance in the quarter. The other aspect was a reduction in inventory in the channel. We reduced the inventory in the channel by about a week. So we ended the quarter with about 1.5 weeks of inventory in the channel, which is on the lower end for what I would expect. We have distribution agreements in place with our distribution partners that stipulate that they need to hold between 1 and 3 weeks of inventory in the channel. So we're at the lower end of that now. I would expect that you'll see some increase in that in the second half of the year. In terms of whether or not any of those results in the quarter are things that I -- are concerned, reflect kind of the new normal, I think the answer is no. Certainly on the patient compliance front, pre the pandemic, we had patient compliance for ONPATTRO that was north of 90%, which is really remarkable for a drug that's an every-3-week IV-infused drug that you have 90% compliance. I think what that reflects, number one, is these are patients that are pretty sick. And number two, that the result that they're having with the drug is consistent with what we saw in the clinic and that they're feeling better, and they want to stay on the drug. I anticipate that as we work through the recovery and move into the new normal phase, that we'll turn back to patient compliance at that same level. So I do think this was a temporary issue that was brought on by the pandemic that won't recur. Again, the other thing that will help that is a lot of the work that we did to move patients to the home care setting, both in the U.S. and outside the U.S. during the pandemic. As it relates to the inventory, that's something that ebbs and flows and will continue to do so. Again, because we've got agreements with our distribution partners that stipulate how much they can hold. It's going to vary within a pretty small window. So I don't think that as we get bigger, I don't think that, that's something that will maybe have the same impact in terms of percentage growth or decline quarter-over-quarter, but just because of the tightness of that, of those agreements, that we've got with our distribution partners. So hopefully, that answers the question.

Yes, absolutely. Got it. And one of the things you mentioned in there was Japan being a strong source of revenue. And I think you've said previously that it's now the second largest market in the world for ONPATTRO. So I'm curious about that. And do you anticipate that maybe that's -- what do you attribute that to? Is it something specific about maybe TTR being so common in Japan? Or is it separate from that, where you might see Japan continually be a source of strong sales for other products?

Well, in general, I would say, not specific to ONPATTRO, Japan is an attractive market for rare disease products. It's got health care systems that do a good job of identifying and treating these patients. The pricing and reimbursement environment is attractive in Japan. So those things together make this an attractive market long-term for us, for ONPATTRO, as well as other drugs that we anticipate launching in Japan. GIVLAARI would be the next, likely sometime next year. As it relates to the specifics of ONPATTRO that have driven really strong performance, there are some unique attributes, I think, in Japan that have contributed to that. Number one is there's an endemic patient population and the genetic mutation that's most prevalent in Japan skews towards patients that have polyneuropathy complications. And so that's one aspect of it. The second aspect of it is tafamidis has been on the market in Japan as well as in Europe for treatment of patients that have the hereditary form of the disease with polyneuropathy. And in patients that are on tafamidis, based on the clinical trial results, progress on the drug. And so as we've got an approval in Japan for ONPATTRO, there's been a high demand from patients that have been on tafamidis that are wanting to switch to a new therapy that offers the possibility of something more efficacious. And so that's favorably impacted the performance in Japan as well as in Europe that we've had a fair amount of switching going on in addition to identifying treatment-naive in new patients that will come on to therapy. So that's helped the launch. All of that's helped the launch. And in the quarter, the second quarter, we actually did achieve -- the results in Japan for the quarter were the second highest behind the U.S. The other thing that I would say is we've got a great team in Japan. We've got a general manager that's an ex-Genzyme. And so really knows the rare disease space very well. Has hired a great team, and that's a team that seems to be firing on all cylinders for us.

That's great. So I guess, switching to your other commercial drug, GIVLAARI, that's a more recent approval than ONPATTRO. And I'm curious, could you tell us where things are in terms of the worldwide launch for that, comparing it with ONPATTRO? Has ONPATTRO reached most of the markets that you anticipate it to? And how does -- how far behind is GIVLAARI?

Yes. Let me just first talk about the acute hepatic porphyria, which is what GIVLAARI has brought into the market for -- in terms of label and approval. It's a rare genetic disease that causes potentially life-threatening attacks and chronic manifestations that negatively impact quality of life. Oftentimes, patients that are having these attacks can end up being hospitalized, resulting in very sort of high-cost burden to the health care system. These patients that are really sick that are in and out of the hospital can cost between $400,000 and $650,000 a year to treat. In the Phase III study, that was the basis for the approval, GIVLAARI reduced the average attack rate in these patients by about 75%. So very strong efficacy results. In terms of the market size, we think there's about 3,000 patients that are diagnosed with active disease between the U.S. and the EU, and we do think this is a $500 million-plus peak revenue opportunity. We're very early days, obviously, with the launch of GIVLAARI. It got approved late in the fourth quarter of last year in the U.S., and we really effectively launched it in Q1, frankly, just ahead of the pandemic. So we got 1 quarter in the field before the pandemic hit. We had a pretty good Q2 in spite of the pandemic. In terms of revenue, we booked $11 million in revenue in Q2. That was versus $5 million in Q1. Again, in spite of the pandemic. We're at 85 cumulative start forms. That's just a U.S. metric through the end of the second quarter since launch. And we're at more than 100 patients that were on therapy, and that's a global number through the end of the second quarter. Largely, it's been U.S. driven to date, only, again, just with 2 quarters since launch. We did launch outside the U.S. in the second quarter in Germany and also in a few markets on the in-patient sales basis, including in France. I would expect over time that we're going to see the same kind of progression that we've seen with ONPATTRO in terms of new markets coming on to therapy. The U.S., sort of the anchor right out of the gate, but over time, we'll continue to add more patients in new markets across Europe and beyond that will help drive the growth of GIVLAARI over time. Just in terms of where we are with ONPATTRO in terms of that global infrastructure, and this was, frankly, a conscious decision that Alnylam made going back 2.5 years ago or so before it launched ONPATTRO. The company was really looking at multiple launches in a fairly short period of time, all in rare diseases. Again, we've got 2 of those in the market now and potentially a third by the end of this year, lumasiran, all in rare disease markets where Alnylam retained global control of the asset in terms of the ability to commercialize it. And so the company, very early, on decided that it was going to build global infrastructure to launch these products with ONPATTRO. And so ONPATTRO, clearly, is the furthest along in terms of the benefit of that global infrastructure and that investment that we've made. At the second quarter results, we're generating revenue for ONPATTRO in roughly 20 markets around the world today. And again, I would anticipate that, that will continue to increase. We've really built out Europe pretty effectively today for ONPATTRO. We've gotten approval and pricing and reimbursement in all the major markets in Europe in under 2 years, which is a pretty impressive accomplishment, I think. Typically, it takes companies longer to do that with these types of therapies. And we talked about Japan. We've got more growth probably to go in -- outside of Asia, adding additional markets over the next several years. And same thing in Latin America. We're approved for ONPATTRO in Brazil today. We don't yet have pricing and reimbursement. That will come sometime next year, but there's probably opportunity to grow beyond Brazil and Latin America as well. And so this is an important part of being a global commercial company, is that you've made investment to truly be global. And we've done a good job of that. We'll do more of it. GIVLAARI clearly has longer to go in terms of getting pricing and reimbursement. We've started that process in Europe, I mentioned Germany. The early conversations, I think, are going well for GIVLAARI. One noteworthy accomplishment is on the HTA front. In France, we got an ASMR score of II, which represents sort of a significant benefit to the patients based on the clinical data that was presented as part of that HTA. That's really unusual. I think in all of 2019, in France, there were only 2 drugs that received an ASMR score of II. So that reflects, I think, the clinical package that we've got. I referenced the very high treatment attack rate -- or prevention attack rate in the pivotal study. I think that bodes well, hopefully, longer term, in terms of pricing and reimbursement for GIVLAARI. So long-winded answer, but we've made a lot of progress, I think, globally, and that's an important part of our approach to commercializing these drugs.