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

Hey, everybody. It's Alethia Young. I cover large cap, small, mid-cap biotech here at Cantor. Happy to have Alnylam Pharmaceuticals here with me. I have Jeff Poulton, who's the CFO of the company, and we'll do a fireside chat for 30 minutes. And we're going to just dive right on then since you guys have a lot of stuff going on.

I guess just one, which is a common question that's popped up, is just you have some commercial products. And just talk a little bit about the COVID impact on the business for ONPATTRO and GIVLAARI. And maybe some of the similarities and differences of COVID impacts between those 2 programs and different indications.

Sure. Welcome. It's nice to be here. Let me remind you, first, what we shared on our Q1 call, which was really kind of the onset of the pandemic and the assumptions that we made about how the pandemic would progress and impact our business for the year. We assumed the second quarter would be the pandemic phase, the most significant impact on the business. Q3 would become a recovery quarter and Q4 would then become the new normal. I think at this point, that's still a good framework for us to use to think about impact on the business. On that Q1 call, when we updated on our ONPATTRO guidance for the year, we reduced our ONPATTRO guidance at the midpoint by about 5% from what we had put out pre-COVID. And we expected in the second quarter, again, the pandemic phase, that we would see up to 10% reduction versus Q1 revenues for ONPATTRO. We actually had a pretty good quarter, all things considered. The revenue from ONPATTRO globally turned out flat versus Q1. So better than we had anticipated. The results, U.S., international were different. The business outside the U.S. grew 16% versus Q1. So really strong performance. What we found is the health care systems outside the U.S. did a better job in terms of continuity of care for patients. So we didn't see much impact on patient compliance outside the U.S. I'll get to the U.S. in just a second. We also saw continued sort of strong growth from new markets. So Italy and Spain and Europe were very strong in the quarter. And then in Japan, which has been, frankly, a real strong market for us since it launched at the end of 2019, continue to grow and in the second quarter became our second largest market in terms of dollar sales for ONPATTRO. In the U.S., the results were different. We were down 13% in Q2 versus Q1. 8% of that 13% was inventory. So just you get ebbs and flows in terms of inventory. We had a reduction in inventory in the channel by about a week, down to 1.5 weeks in Q2. I expect that we'll see some increase in the channel before the end of the year because that's at the lower end of what we would expect our distributors to carry. The other part was a 4% decrease in demand, and this was specifically COVID-related in the U.S. And that was primarily due to adherence compliance that was reduced because we actually added patients onto therapy across all regions, including the U.S., but we did see a 4% reduction in demand. And so this was patients skipping doses, patients that had to skip doses as we were changing their site of care. A lot of patients wanted to move to home care, and sometimes that can take some time to get done. So that was the biggest impact on the business in the U.S., was reduced compliance. The good thing is just coming out of Q2 and into Q3, we were seeing improvements in a number of metrics. One was compliance, it certainly gotten better, coming out of the second quarter. And we were also seeing significant improvements in genetic testing. In the second quarter, we saw pretty significant reductions in genetic testing through Alnylam Act, which we have data on. As we've moved into Q3, we're moving back towards the levels that we were at in January, pre-pandemic. GIVLAARI, a little bit of a different story. Obviously, we're very much in launch mode with GIVLAARI. So it got approved late last year in the U.S. Effectively, the launch started in Q1 in the U.S. So we got one quarter under our belts with a traditional launch before we moved into virtual mode in Q2. The results were good in Q2 relative to Q1. We did $5 million roughly in Q1. In Q2, we did $11 million, and we did add a couple of markets in Europe for the first time to GIVLAARI; in the second quarter, Germany; and then a number of patients with named patient sales, probably the most noteworthy being France. It wasn't similar to GIVLAARI -- or to ONPATTRO in terms of reduced compliance because, frankly, we were just getting patients started on therapy. And this is a different kind of drug, right? This is a subcu drug, once a month, and patients are taking this to avoid attacks, which can get them needing to go into the hospital to treat the attacks. So these are pretty motivated patients to get the injection once they get on the drug. The impact was really more about the new patient diagnosis and getting patients through the health care system and getting them on the drug. Without question, what was going on with the health care systems negatively impacted GIVLAARI in Q2 as it relates to that. Obviously, we grew quarter-over-quarter. We're very much in launch mode. So it's hard to quantify what the impact of that was. Again, like ONPATTRO, as we were exiting Q2, we were seeing a nice recovery, particularly in genetic testing, which should be a good sign for new patient flow and getting more patients on therapy. I'd say one other similarity across both drugs was the -- just the impact on the sales teams. We've largely -- entirely virtual in the second quarter. As we moved out of the second quarter, we started to return to the field. It's not fully back in the field, but market-by-market, slowly but surely, more face-to-face interactions are starting to occur.

Do you think that some of the change of virtual -- I talked about it with a couple of companies, do you think it's kind of here to stay as far as how -- when markets came around the…

Yes, I do. I mean, I think there certainly will be more of a balance, and hopefully, I think, more skewing towards in person. But I don't think this is ever going to go away. I think we're going to continue to see this being part of the way we market, in detail, these drugs going forward.

And just working the ONPATTRO, has the launch kind of -- has it been -- I'm going to say, I don't know -- I know it definitely hadn't been worse. But has it been as good as your expectations or potentially better than you guys' expectations?

Well, I joined the company a year ago, and they launched 2 years ago. So I'll tell you what I think and what I know based on the experience that the company's had. I think it's exceeded the company's expectations. I mean Alnylam was founded in 2002 and is the leader in RNAi technology and had been focused on the science up until 2018. And so that was its sort of first foray into the commercial world. And so I think if you take a step back and look at what the company has accomplished in the 2 years since we've launched the drug, I'd say it exceeded expectations. And it starts, number one, with building a great team. Company hired really well, hired people across the world to help commercialize this product in countries around the world that have a lot of experience. They've done this rare disease-type products at other companies. So that was number one, what we've done is built a great team. We've got more than 1,000 patients on commercial drug now. And that's been a steady continuous build. And I think you'll see that continue as we move forward, typical sort of rare disease fashion. It's about disease education, patient finding, patient diagnosis. That's where we are with this therapy today. Very successful track record so far in terms of access and reimbursement in the U.S., we're at 98%-plus patients that would be prescribed the drug would have access to it. That's almost unheard of. It's almost 0 headwinds from an access and payer perspective in the U.S. And less than 2 years after launching the drug in Europe, we've got access and reimbursement secured in all the major markets in Europe. So the company's done a fantastic job from an access and reimbursement perspective. We built significant global commercial infrastructure as well in this 2-year period. So the product is now being sold in approximately 20 markets around the world, and there's more to come. And that infrastructure that the company's invested in is now leverage-able for GIVLAARI and hopefully, lumasiran when that gets approved. And then I would say the patient experience, I think, has been very positive. One great way, I think, to assess that with a drug like this, it's an IV-infused drug every 3 weeks, so pretty big burden on these patients. Pre-COVID, we -- since launch, we had adherence rates of 90% or greater. And I think that's a fantastic indicator that when the patients get on this drug, they stay on the drug because it's making them feel better. And then lastly, I would say the company is very well positioned to continue to grow, expand the label and continue growth in the TTR space on -- over the next 5-plus years. And so looking back at all of that, a fantastic start, I think, for Alnylam into becoming a commercial company.

And can you quantify, like it was about 90% adherence, I guess, pre-COVID, but like when you [ map ] that, can you quantify like kind of what -- how many percentage points or broadly speaking, how many…

It's hard to put a precise figure on it. But again, we grew patients in every region around the world. We ended Q1 with 950 patients roughly on therapy. And Q2, it was more than 1,050. And that included growth in the U.S. And as we were talking about the Q2 performance in the U.S. previously, I said on a pure demand basis, we were down 4%. So we grew patients, but we were down 4%. So that tells you compliance was impacted by 5% to 10%, at least, I would say, to give you that kind of result. Again, good news is that we've seen recovery in that. It's moving back in the right direction in Q3.

Was it just as simple as people couldn't make it to the infusion center?

Yes. Some of it was patients wanting to change site of care and move more to home care. So we doubled the number of patients roughly in the U.S., pre-COVID, versus where we are today that are on home infusion. Same thing outside of the U.S. and sometimes when you're making that shift in site of care, that causes a delay and a missed infusion. And there were other situation, frankly, I think where patients just decided with what was going on, particularly in the U.S. with the shutdown, where they didn't want to leave their home to get their infusion. And these are, by and large, elderly patients that are on this drug. So in terms of risk to the virus, these were probably higher risk types of patients. And so we saw some of that, certainly, in the second quarter.

Okay. And is it a good thing, though, maybe, that people are under home care than going to an infusion over the long term, do you think?

Yes. I mean it will be interesting to see how this plays out going forward. We went -- pre-COVID in the U.S., we were about 10%, 9%, I think, is the exact number that was on home care. So pretty modest, and we're approaching 20% now. Pre-COVID, with 2/3 of our patients on Medicare and pre-COVID Medicare patients were not eligible for home care, so we had 10% of ineligible, 30% that were on home care. During COVID, there were ways that Medicare patients were able to get on home care. So I don't know longer-term exactly what to expect, if we should expect that we'll see that increasing over time or not. It's something certainly that we'll monitor closely, but we did see a pretty big increase in demand for it in the pandemic phase.

And just talk about the guidance for ONPATTRO, the changes that you've made over the year.

Yes. So we gave guidance for the first time -- top line guidance for the first time as a company in February for ONPATTRO. And we guided to $285 million to $315 million for the year. And then we came back on the Q1 call a couple of months later, obviously, with a lot of different things happening. And we reduced the guidance down to $270 million to $300 million, again midpoint to midpoint, that's a 5% reduction. Obviously, a huge amount of unknowns at that point. We talked about that earlier. We guided that Q2, in particular, we thought would be 10% down versus Q1. We did better than that, which we've -- I've already articulated. So we were flat versus Q1. And on the Q2 call, we bumped the guidance slightly. We took the lower end up. So we increased it from $270 million to $300 million, to $280 million to $300 million off the back of a stronger Q2. And based on early signs to the recovery that we were seeing, I talked about compliance improving, I talked about genetic testing starting to come back. I think just in general, we saw -- and we've seen this throughout the third quarter that the health care systems seem to be adapting better. It's not that the virus has been eradicated. We've seen it throughout the U.S., mostly in the south and the west through the third quarter, that there's been spikes. But we haven't seen the health care system shutting down the way they did in Q2, even in those places where the virus has spiked. So I think, again, that initial framework that I talked about, where Q3 would be a recovery phase and Q4 would transition to new normal and beyond that, again, knock on wood, but so far, so good in terms of what we've been seeing.

Do you have any changes in payer mix?

Very little, which is something, obviously, I think that a lot of people were concerned about, and we kept a close eye on. For ONPATTRO, I think I mentioned earlier, we're about 65% are Medicare patients in the U.S. and there's a mix of yet remaining 35%, but it's primarily patients with commercial insurance. I would say immaterial changes in payer mix through COVID. GIVLAARI is a little bit different. We're still early, so that could still, I think, be evolving, but we're a higher percentage of patients on GIVLAARI that are on commercial insurance. It's a younger patient population. So we're probably 60% commercial there. And then the remaining is a mix, Medicare and Medicaid, primarily. But again, we're just getting started there, and we haven't really seen much of an impact or change in payer mix. So neither product at this point seems to have been impacted.

And then do you guys -- I mean, I know Barry talks about it a lot, TTR kind of being similar to multiple sclerosis over time, just kind of keeps growing and growing. I mean, is that like a sentiment that you would echo? Like how do you think about this [ one ]?

I think that's a good way to think about it. The other thing that we think about, and I think this is how people think about the MS market, too. It's a market growth story and not a market share story. I think that's the case with TTR. I think we probably don't even fully appreciate the true size of the market today. And the more drugs, the more companies that we have in the space educating, we're going to see that market expand. We're seeing that already. I think that's consistent with what happened in MS over the years. There's not going to be a winner take all here. There's going to be multiple players, we think, with successful franchises. We think we're going to be one of those. We think we're very well positioned in the long term to be in a really strong position here. And it's a space that we already see significant innovation. And I think that's what we saw and continue to see with MS as well. So I think the parallels there do make some sense. Yes, I agree with Barry.

Do you got -- you guys sound pretty upbeat on GIVLAARI. I mean it's pretty early, but what's kind of driving that kind of positivity that you guys have? I mean is it something that you're seeing with initial uptake? Or kind of something else is going on?

It's a good start for sure. I think we're pleased with what we've seen so far. And just to sort of ground everyone, for those that aren't familiar, GIVLAARI is our RNAi therapeutic for -- that got approved last November for acute hepatic porphyria, which is an ultra-ultra-rare disease that's got an enormous burden for these patients. They have very painful attacks, typically GI-related that oftentimes put them in the hospital, a lot of isolation with the disease. In terms of size, we think 3,000 diagnosed and active patients between the U.S. and Europe, $500 million-plus market opportunity. I would say, classic rare disease space, where we're going to have to spend a lot of time and energy to educate and build awareness about the disease and suspicion of the disease. Right now, there's not much in terms of other therapeutic alternatives for these patients. So very focused on building disease awareness to drive this product long term and help as many patients as we can. But yes, I think we feel good about it. I mean that $500 million-plus opportunity, I think 2 quarters into it, I don't think we've seen anything that makes us believe any differently here.

Yes. I mean it seems like compliance and adherence, what's going on there? It must be pretty good, right? I feel like it's kind of scary if you go off that medicine based on the attacks people have.

Yes. I mean these are people that when they have these attacks of it, when they're severe, they can be life-threatening. And so these patients can end up needing to go into the hospital. So if you think about the pandemic, people -- the last thing people want to be doing is going into the hospital right now. This is a little easier product in terms of burden of care relative to ONPATTRO. This is a subcu. It's a once a month subcu, physician administered, but you can get it at home, and that's been a conversation that we've been having with these patients as they've been coming on to therapy is giving them their options in terms of site of care. And we have had patients that have elected to get it at home. So yes, again, a great drug in terms of the efficacy that we demonstrated in the Phase III study. We showed reduction of attacks versus placebo -- of mean reduction of about 75%. So in terms of impact on quality of life, really significant. And these are patients that really struggle, patients that are sick, really struggle with quality of life issues, in terms of holding a job, frankly, just being productive members of society, going to school, being a good parent, et cetera. And so anecdotally, we hear great stories about the impact that this drug can have on these patients' lives. And I think that's what makes being in this business so great.

So one of the factors about GIVLAARI, or at least the porphyria population, seems to be this diagnosis. Like some people don't know that it takes many iterations to the ER. Is that going kind of better than what you think? Are people a little bit more centralized through different positions than what you hypothesized?

Yes. It's a little early in terms of our disease education efforts, we've got a medical team that's out in the field, spending a lot of team -- a lot of time on disease awareness. We've got a sales team that's specific to GIVLAARI, and then we have a partnership with Ironwood in the U.S. And that partnership with Ironwood leverages their 160 GI reps, and that allows us to expand beyond what I would call the centers of excellence and really get into that community of GI physicians to help expand awareness there. We're 2 quarters into this, so we don't have a whole lot of data yet. But what's been interesting in terms of the early patients that we've gotten start forms on, that started therapy, is we've seen probably a better balance between those that are coming from those known sites of care in terms of centers of excellence versus what we've seen coming through some of the community physicians. And so maybe that's an indicator that early days, some of these things that we're doing around disease awareness are already having an impact. But this will be a -- this is a marathon, not a sprint with this kind of disease, and this is something that we'll continue to stay at quarter after quarter. And I think like with ONPATTRO, we've talked a lot about steady and continuous growth. I think that's what you're going to see here, and that's a good thing, right? And we'll see some of the same things we've seen with ONPATTRO in terms of kind of chunky growth outside the U.S. as we bring new markets online when we get access and reimbursement agreed. But yes, again, a great start, and we're optimistic here.

We have about 10 minutes, so I'm going to work through a couple of rapid fire topics. One, lumasiran. Just -- I want you to talk about with the PDUFA coming up in December, any kind of concerns, risk considerations in light of all these CROs that keep popping up all over the place? That's question one.