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

Good morning. My name is David Lebowitz. I'm 1 of the biotechnology analysts at Morgan Stanley. Before I get going, let me just read you the important disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please please reach out to your Morgan Stanley sales representative. I'd like to welcome you all once again to the 43rd NASDAQ Investor Conference, and I'm happy to have with me, from Alnylam Pharmaceuticals, CFO, Jeff Poulton. Jeff, thank you very much for being here. I guess before we get started, could you just give us a topline overview of Alnylam Pharmaceuticals, it's really a unique company, it's a platform-based company. You've had 3 drugs approved within the last 2 years, which is really quite remarkable. You have a unique technology called RNA interference could you tell us about the history, where it's come from and where it's going?

Absolutely. Thanks, David. It's nice to be here with you today. You're right about Alnylam as a platform company. And I think it's sort of the truest definition of the word, it's a platform company. The company was founded in 2002 and has been pioneering a new class of medicine called RNAi therapeutics. And that's based on Nobel prize winning science that allows the company to essentially silence any gene in the genome and turn off the production of disease-causing proteins. And the company has made a huge amount of progress here relatively recently in terms of of that platform now starting to bear fruit in the way of approved drugs. And you mentioned it that in the last 2 years roughly, the company has now had 3 approvals, where we've got 3 drugs in the market, the first being ONPATTRO, for hereditary ATTR amyloidosis for patients with polyneuropathy. And that's a drug that in the most recent quarter delivered $82.5 million in revenue, and we've got more than 1,150 patients on that drug around the world today. So we've really created an initial global commercial infrastructure to support the launch of ONPATTRO. The second drug was GIVLAARI that was approved about a year ago at this time for acute hepatic porphyria and in the most recent quarter, that drug delivered a little north of $16 million in revenue. We're launched in the U.S. and now just starting to launch outside the U.S. And then the third drug, which has been approved in the last several weeks, is called OXLUMO, and this is for primary hyperoxaluria type 1, another ultra-orphan rare disease opportunity. And we're anticipating that we might have a fourth drug very soon in the market as well, which would be inclisiran now, but via, which is Alnylam technology that's now being marketed and sold by Novartis. So hopefully, very soon will be. And what's unique about that opportunity is that's in a much more prevalent patient opportunity for hypercholesteremia, which sort of talks about a little bit of perhaps the direction that you'll see Alnylam going now based on our pipeline. And what we have in the pipeline is also exciting, also all based on RNAi therapeutics. We have more than 12 drugs in the pipeline today in a range of types different of diseases, both continuing in that sort of rare direction, but also now in more prevalent, more common disease areas which we're really excited about. And the last thing that I would say is, from a financial perspective, the company is in very strong shape with its balance sheet. That's based on a pretty creative financing deal that we did earlier this year with Blackstone. That was a $2 billion deal anchored off of selling 50% of the future royalties on inclisiran for $1 billion. And then there's a debt facility, $750 million debt facility, credit facility that's part of that. There was a small equity investment and then it's some R&D financing. So the importance of that is we believe that, that financing now creates enough cash to bridge us to being a self sustainable, profitable company. So that should mean no more dilutive equity financings from the company. So we are in a great place today. I think we think we're in a unique position in terms of the power of the platform and the ability to continuously -- continue to churn out new drugs that drive continuous top line growth and value creation for shareholders. So I'm really excited to be here at Alnylam.

What is it about RNAi that allows it to be applied to such a wide range of diseases? Just, I guess, in broad terms, what does the technology actually do?

Yes. I mean, I mentioned earlier that what it does is it allows us to turn off disease-causing proteins. And that's exactly what's -- in terms of the first 3 drugs that we've brought to market is what the drug is doing. It's stopping the production in the body of a protein that's causing a particular disease. And when we're able to get a genetically validated target and demonstrate knockdown of that particular protein, we're very confident in the ability scientifically to bring that drug through to the market, which is why, from a platform perspective, if you look at the probability of success that the company has had since inception, when it brings a drug into the market, and advances that through to Phase III, we've had a very high success rate in doing that. And again, that's the power of the platform that I think is a lot of companies talk about being a platform company. This really is a platform company, and it's exciting.

So ONPATTRO lead drug approved 2018, could you tell us about TTR amyloidosis as a disease and where does ONPATTRO fit?

Yes, I'm happy to do that. It's -- you're right that we got into the market 2 years ago. And let me just explain. The label that we've got, and then we can talk about the disease and the opportunity for us to expand the label and get into an even larger part of the market. So we're -- we are the labeled indication for ONPATTRO is for hereditary ATTR and for patients with polyneuropathy. That's the indication that we've got today. And the hereditary population in ATTR is roughly 50,000 patients globally. And patients present with both polyneuropathy and cardiomyopathy, roughly, we think half of that 50,000 are patients that would be polyneuropathy patients. And that's the space that we're competing in today. And that's where we've been for the last 2 years. And I mentioned earlier, I think we've made really good progress from a commercial standpoint. We did $82.5 million in revenue in Q3. We are launched globally now. We're in all the major markets in Europe. We've had really good success in Japan as well. And so that -- this has allowed us to establish that initial commercial infrastructure. But there's also an opportunity to get into a much broader part of the market, and we're working on that with clinical studies. And so the cardiomyopathy part of the market, both in the hereditary and in the wild-type part of the market and the wild-type part of the market is really the much larger part of the market. We think there's several hundred thousands at a minimum of patients. So 6x what there are in in the hereditary part of the market. So we're very focused from a development standpoint on developing both ONPATTRO to get us into that part of the market, but also vutrisiran, which is a -- would be a new drug. Which would be a subcu administered drug, ONPATTRO's is an IV administered drug. So we have 2 Phase III clinical studies, 1 on ONPATTRO to get into the cardiomyopathy part of the market, wild-type part of the market as well as for vutrisiran. And we think long term, if we're successful in developing both of those drugs, and we're optimistic about that for a variety of reasons. That this is really an anchor commercial franchise for the company that could really set us up in terms of scale and profitability. This is very important for us. So we're excited about that. And again, I'm happy to talk more about some of the dynamics that we're seeing in the marketplace as well as we get into further questions.

Sure. So there are multiple trials. There's the APOLLO-B trial, which is ONPATTRO in cardiomyopathy, and that's for the infusion based drug. And then on the subcu side, subcutaneous side for vutrisiran, there is HELIOS-A, which is polyneuropathy. And there's HELIOS-B, which is for the hereditary cardiomyopathy and the wild-type cardiomyopathy. What -- I guess, is the relative status of these various trials? And when might we actually see data?

Yes. So you had that all right, which is good because it sort of can be difficult to sort of keep all of this straight. But let me start with, first, with HELIOS-A. Because that's the next 1 up in terms of data. So that's the study for vutrisiran, which is, again, a subcu version to treat polyneuropathy patients. And that's a study that's fully enrolled that we anticipate early next year to get the data from that pivotal study. So that's -- relatively soon we'll have that data and that would allow us, again, in the same population that ONPATTRO is in today to now bring a subcu, a more convenient product to those patients. And this is, right now, it's being studied as a once a quarter subcu injection. But we've talked about the possibility now of also looking at once-every-6-month subcu injection for vutrisiran. And we're working with regulatory authorities to to define the path forward for that. So that's up next. Again, you'll hear about that relatively early next year. And then the other 2 studies, APOLLO-B, which is patisiran, so ONPATTRO, and that's in the cardiomyopathy setting. And that's a study that's being actively enrolled today. It's a study that ultimately will enroll 300 patients. That was impacted earlier this year by the pandemic. We had initially had targeted by the end of the year to complete enrollment in that study. And because of the -- some of the delays and slowdown in patient enrollment, particularly in the second quarter, we pushed that out to next year now in terms of when we'll complete enrollment. The good news is there as we've come out of the second quarter where the health care systems really largely shut down for anything other than dealing with COVID. We've seen a nice sort of bounce back, and we've seen some nice improvements in enrollment. So we're really confident about the ability to get that study fully enrolled next year. And that's then a 12-month study and the primary endpoint is the 6-minute walk test. And so that's the -- that was the quickest way, we thought, to get into the cardiomyopathy part of the market is to take patisiran, ONPATTRO and run this study. With the 12-month endpoint. So that -- again, we anticipate completing enrollment next year, and then we would have data on that study in '22. The other study is HELIOS-B, and that's, again, now back to vutrisiran, the subcu version, and that's focused again on the cardiomyopathy patients, both hereditary and wild-type in that study. That's a bigger study and a longer study. We're looking to enroll 600 patients in that study, and that's got an outcome endpoint or cause death and CV hospitalization as the as the endpoint, which is really important in this particular space, given Pfizer's drug that's in the market that has an outcome-based endpoint as well. So we'll get that with HELIOS-B. There's also -- and that's a 30-month study. So it's a longer study because of the nature of the endpoint. We do have the opportunity for an interim analysis, and we would intend to sort of to take that opportunity. We haven't talked about the specifics yet of what that might look like and not prepared. Frankly, I think we're going to learn a lot from APOLLO-B that might inform exactly what the interim analysis looks like. But we're ultimately optimistic about the entire portfolio. And as I said earlier, I think it's really important that given the size of this opportunity that we think it really represents that anchor commercial franchise for the company. So we're excited about the ongoing development, and we look forward to turning the cards over here sequentially, as we've talked about.

Excellent. Now when you look at all these, you have these different trials and then you have -- you'll have 2 drugs in the market. And then there's also there's also going to be Pfizer's drug, which is a stabilizer on the market. How does this dynamic ultimately shake out? How do physicians choose between ONPATTRO versus vutrisiran, number one? And is there a choice? Or is there a combination when they look at vutrisiran versus VYNDAQEL?

Yes. I mean, the first thing I would say is, as we think about this market opportunity as a market growth story rather than a market share story sort of long term, a good analog that we like to point to is the MS market, and it's not a winner-take-all scenario. There's multiple drugs, multiple modes of action. We think this is a market that's going to develop in a similar way. And again, this is a large market opportunity, hundreds of thousands of patients. And I don't think we really know how many patients are out there. There are sort of very wide estimates, but I'm probably giving you the low end. So we think there's -- this is a large opportunity. And we think if we're successful in developing the portfolio of drugs that we've already talked about that given the profile of the drugs that we'll have, potentially a once a quarter or once every 6-month subcu injection that we would be in a position to have a meaningful slice of the pie here. Maybe I'll talk a little bit about the existing dynamics that are in the market. Actually, before I talk about the existing dynamics, just a question about ONPATTRO, patisiran and then vutrisiran, assuming that we have both drugs in the market and how might that work with both drugs. We think there's going to be a place likely for both drugs. We see patients that are on ONPATTRO today where there's a very high satisfaction with the drug. This is an every 3-week IV-infused drug. And in spite of that, we're seeing adherence and compliance rates that are north of 90%. So the drug works. That tells you the drug works and the patients are feeling better on the drug. And the clinical data that we have in polyneuropathy suggests a reversal of the disease. And so patients are feeling better. So there's likely going to be patients that will stay on that because they've gotten comfortable with that regimen, and they feel better and they don't want to switch. My guess is that for for all new patients, when they come on therapy, that there's a high percentage that are going to pick vutrisiran, just given the more convenient nature of the dosing. But we think that both drugs will stay on the market. Maybe a little bit about the dynamics that we're seeing in the market today. It's interesting with tafamidis in the U.S., we don't actually have overlapping labels. We're not competing with Pfizer today. They've got the cardiomyopathy label. We've got the hereditary label for polyneuropathy. And what we're seeing in the U.S., actually, as a result of this disease, which is multi systemic and impacts -- some patients have both cardiomyopathy and polyneuropathy complications is we're seeing a fair amount of combination use with the 2 drugs, given that they're not -- they don't have overlapping labels. We did some market research that we talked about on our Q2 call that indicated between 15% and 30% of physicians are going down that path of combination use today and that they indicated that, that would increase to as high as 60% over time. So we are seeing that dynamic in the U.S. and we are able to get reimbursement for ONPATTRO, even if patients are on tafamidis as well, ONPATTRO is a Medicare Part B drug, I should say. And tafamidis is a Part D drug, and that's probably 1 of the reasons why that facilitates patients getting on both and getting reimbursed. Outside the U.S., the dynamics are actually different. Tafamidis outside the U.S., many years ago, did get approved in the same setting that ONPATTRO's in. So patients with the polyneuropathy form of the disease. And what we've seen outside the U.S. is a significant amount of the business that's come on to ONPATTRO has been switch business from tafamidis. And so if you look at the clinical results in polyneuropathies, the patients on tafamidis are progressing, right? They're getting worse. It slows the progression of the disease, but they're getting worse. And I talked about ONPATTRO reversing the disease and actually showing improvements. So half the business that we've had outside the U.S. has been switched from tafamidis and half have been sort of treatment-naive patients. So that gives you a little sense of some of the dynamics that we're seeing in the marketplace today.

That was very helpful. Let's jump on to OXLUMO. Just got approved. How is it going? I know it's early.

Yes. I mean, we're excited. I mean, this is an ultra-orphan disease, and this is the sort of first therapeutic option that the patients would have. And so it's always an exciting time in a company when you're bringing, frankly, hope to patients that desperately need that. And this is a little bit unique too from the first 2 drugs that we brought to market, but this is a disease that impacts children, pediatric patients. And and we've got -- the label allows us to market and sell the drug to the sort of full age range here that we're dealing with. So we're certainly excited about the opportunity to to help these patients. We're very early. Obviously, we just got approval in the U.S. in the last couple of weeks. So I don't have much that I can share in the way of commercial progress yet, certainly on the year-end call, we'll be prepared to share that kind of information. But just in terms of the disease itself in terms of the size of the opportunity, it's similar, I think, to give lari AHP, which we've talked about as a $500 million plus commercial opportunity, we talk about this in a similar way of $500 million plus commercial opportunity. There's -- diagnosis rates in this disease are 50% or less. Fortunately in the pediatric setting when kids are having kidney stones, which is what happens here, this is a situation where the liver overproduces oxalate, which then gets builds up in the kidney and ultimately can result in kidney stones and then ultimately, an end stage renal disease. But when you have a young child that's having kidney stones, the index of suspicion for PH1 is pretty high. So the diagnosis rates there are better. For those where the onset is later in life, it's a little bit more challenging to identify the patients. But we think that diagnosed prevalence for patients that have not had a liver transplant, which is the only option before approval of OXLUMO would be a transplant. There's probably somewhere between 1,000 and maybe 1,700 patients in the U.S. and Europe today. And again, we think we're at about a 50%, roughly a 50% diagnosis rate. So those numbers will likely climb as our disease awareness efforts kick in. And then also, we anticipate launching in areas outside of the U.S. and Europe. But we think about this as, again, a $500 million plus opportunity. I would anticipate, just in terms of the pace of the launch, GIVLAARI is a sort of a great analog or benchmark to look at in terms of how that's flowed over the course of the year. The initial focus is in the U.S. and in Europe, where we're now also approved, we actually got approved just before we did in the U.S. We'll first launch in Germany and France, and then over time, we'll sequentially add other markets, not only in Europe but outside of Europe. So we're excited about it. I think this is a drug that could have a significant impact on the course of this disease.

So the sales team for GIVLAARI and OXLUMO, is this -- are these the same sales reps that are going out? Is there a full overlap given the small nature of the indications? I guess, how different are the efforts for these 2 different -- for these 2 drugs?

Yes. I mean, in general, let's just focus on the U.S. for now. We do have separate sales teams for each of the 3 drugs. Now these are all rare diseases and the second and third drugs are ultra orphan. So really small patient population. So the size of the sales teams is relatively modest in the U.S., but they all do have different call points. And so that's the reason for different sales teams. And we think that focus is important. Outside the U.S., we do things a little bit differently, where we do have reps that are sort of carrying these products, multiple products in their bag, as they like to say, in terms of how it's getting promoted. But in the U.S., we have separate sales teams. But outside of the field customer-facing sales teams, we're able to leverage a lot of the rest of the commercial infrastructure across the different products that we've got. So this would be things like the market access teams. The patient services teams that work very closely with these patients to get them on therapy and sort of navigate the maze of insurance-related issues and insight of care. So a lot of the rest of the commercial infrastructure is leverageable. And that's 1 of the things that we talk about as a company from a financial perspective, that we expect that you'll start to see is a fair amount of operating leverage. I mean, the company, initially when it was preparing to launch ONPATTRO, the first drug really built commercial infrastructure that wasn't just for 1 drug, but frankly was there to support 3 drugs over a fairly short period of time. And so there was a lot of build in the last 2 to 3 years, which I think was the right strategy, and that was building out global infrastructure. Now that we've got that foundation laid, I think you'll see more modest growth in SG&A. And as hopefully, that topline is really taking off with 3 drugs in the market. And that's ultimately how we get to profitability, which is another thing that we've talked about as a priority for the organization. And so so there is some leverage here, for sure. Again, and the sales teams are small. And we think in the U.S., in particular, it was important to have separate teams that are very focused to drive the success of these drugs. So that's where we are today.

Now GIVLAARI, OXLUMO, and to a lesser extent, the ATTR franchise are smaller rare diseases. Inclisiran, that's going to be a lot larger. How do you juxtapose? What should we look for there?

Yes. And 1 thing I would say, before I start is, we actually think about the -- we don't think of -- even though the ATTR franchises is -- it's in a rare disease. We think about it differently in terms of the size of the potential. Certainly, as we would get into the wild-type part of the market, you're talking hundreds of thousands of patients. And so we do think about that as a franchise and that being an anchor commercial franchise for the company in terms of the size of that. Obviously, that needs to play out in terms of these studies reading out. But that -- we do think about that way. You're right, however, sort of pivoting to inclisiran that this is the first RNAi therapeutic that will enter a much more prevalent disease area. And we anticipate, hopefully, approvals on that here relatively soon before the end of the year in both the U.S. and Europe, and we're very excited about that opportunity. We think the clinical data that, frankly, I'm sure Novartis waited to see before they made the move on the Medicines Company, supports the fact that this should be a very effective and safe drug in a very broad, prevalent sort of populationw with these. And again, the clinical data in terms of the impact on LDL-C was was 50% lowering, but probably importantly, for us, for the platform on the safety side. I mean, you saw placebo like safety in those studies as well, which really, I think increased our confidence in the platform and the ability for this platform and this therapeutic modality to be used in much broader patient populations. And you're starting to see that now in our pipeline that we've got other things that are advancing that would be in more prevalent diseases. And obviously, more significant commercial opportunities with more prevalent diseases.

And as far as fitusiran, any update on the hold?

No. I mean, obviously, this is a program that's in the hands of Sanofi. And so they're probably the company that can give you the most detail. But I'll just summarize what we're aware of, what they've told the market. So there's nothing new here is that they had a couple of nonfatal thrombotic SAE events in patients in this study, and they voluntarily chose to stop enrollment and stop dosing in the studies. It's not a platform-specific issue. This is a target-specific issue, which is -- I mean, if you look in -- if you look across the drugs that are in this space, this is not unusual, in the hemophilia space, to have drugs that do have thrombotic events. So we're cautiously optimistic that this is something that Sanofi will work through, and we're waiting to hear what the next steps are in the program. I know that this is a program clearly that Sanofi has been pretty enthusiastic about. They've talked about it as 1 of the real priorities that they've got in the innovative part of their portfolio. And -- so let's see. Let's let this play out. And hopefully, they'll get these things restarted, and they'll get this to the market. Just to remind you of the economics that we've retained in this drug, it's going to -- Sanofi's, it's in their hands now to sort of get this to the market and then commercialize it. We've -- the economic interest that we've retained is royalties on future sales of fitusiran in the 15% to 30% range, and that's tiered based on different sales levels.

Now I guess the last question is just if you think about the future of the company, clearly, more of in the future, while the past as we talked about, was more of the ultra-rare and, I guess, the medium rare. Going forward, we're looking more towards, broadly indicated, on larger scale diseases and specialty diseases. How does that change the organization? How does the organization need to evolve as you move in that direction?

Yes. I mean, you're right. And we've touched on that a couple of times is that we do have a number of programs in our pipeline now that would be much broader opportunities from a prevalence perspective. And the hypertension program is 1 that's starting to get more focus and attention externally, and that's a program that we've shared some Phase I data in -- at AHA recently and really encouraging data in terms of knockdown and then impact on blood pressure lowering. And this could be a very similar opportunity to inclisiran in terms of the benefit and value that a drug like this could bring to a very broad patient population in terms of the clamp pharmacology, the tonic control of blood pressure lowering the very infrequent potential dosing quarterly or subcu. It could really have a significant impact on this kind of a population. And so we're enthusiastic about developing this. But we do get a lot of questions about if you're successful in advancing that, how do you think about that commercially? And our view is that, that would be a drug that we would plan to take forward commercially. Timeline-wise, if we're successful in doing that, it's highly likely that we would have a larger presence in the cardiac -- cardiologist office if we're successful in the TTR space and getting into the wild-type part of the market. So we could leverage some of what we've built with TTR, hopefully. The real question is whether or not we would have -- it would be optimal for us to do it completely on our own or potentially bring in a partner to get more boots on the ground in terms of maximizing the commercial potential of a drug like that. And I think that's something that I don't have an answer to yet, but that's something that as we advance the program, that's something that we would certainly assess, and we'll do what's best for the drug and for patients. And if it means bringing in a partner then we would do that.

Excellent. And we have run-up against the end of our time. Thank you so much for sitting down with us today.

Thanks. It's good to be here with you.

Cheers. Bye-bye.