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

Hi, everybody, and thank you for joining us today. Our first meeting today of this morning is with John Maraganore, the CEO of Alnylam, and I hope I'm not destroying his name too much. RNAi technology has been one of our topics of interest for a really long time. One of those areas where the science and companies actually is ahead of the science in the academia. And John and his team have been one of the leading organizations in this deal. So John, thank you very much for taking the time and joining us today.

Thank you, Ronny. It's great to be here.

And John, why won't you take a few minutes and introduce Alnylam to those of us who have not been as exposed to the name before?

Yes, happy to do that, Ronny. Well, Alnylam is the leading company in advancing RNAi therapeutics as a whole new class of medicines. Alnylam really has been the pioneer in doing this. And that's best indicated by the fact that we brought 4 RNAi therapeutic products to the market, which we're very proud of. This includes ONPATTRO, GIVLAARI, OXLUMO, which we're directly commercializing on a global basis, but also Leqvio, which is being commercialized by our partners at Novartis. That field is currently approved in the EU. What's exciting about all these medicines that we've been able to bring to market is that we believe that they're truly transformative medicines for patients. These are medicines that we believe have been life-changing for the patient communities that we serve. So clearly, the commercial story behind Alnylam, which is the newer part of our story since 2018, is off to a terrific start and we're really proud of where that's going. In addition, we have a portfolio of over a dozen programs in active clinical development. This includes vutrisiran, which is in registration. That is, if approved, likely to be our fifth RNAi therapeutic that we bring to market. And then also, we have some important life cycle management programs with our ONPATTRO and vutrisiran programs to open up the ATTR amyloidosis opportunity for Alnylam with wild-type ATTR, if those studies are positive. And also notably, within our clinical portfolio, we have some important prevalent disease programs, including a program in hypertension and NASH. Now in addition to the clinical portfolio, we -- the third leg of the stool, as I'd like to refer to it, is really the preclinical effort with an organic product engine for sustainable innovation, something which is really unique in biotech to have an organic source for sustained medicines going into the clinic. We have been delivering 2 to 4 INDs per year. By the end of '25, we expect to have 4 or more INDs per year. And within this basket, is included an important preclinical program, ALN-APP, which targets amyloid precursor protein which is about to go into the clinic. Now all of this, Ronny, is encapsulated with our Alnylam P5x25 strategy that we announced earlier this year, which really marks Alnylam's transition toward a top biotech over the next 5 years.

So let's start with this, essentially, the transition you're now going to. You have been an R&D company. You begin to commercialize in the orphan market, which is actually seems to be not too much of a transition for R&D companies because you're dealing mostly with physician scientists on the other side. We're now talking about expanding that beyond targeting tertiaries, research centers and going into a broader treater population as far as some of your ideas for primary care. In terms of the organization, in terms of what you need to have, what are the pieces that are missing that you're currently trying to build?

Yes. No, that's a great question, Ronny. And let me start by just framing the opportunity a little bit. And we're very excited about this transition of the company beyond rare diseases. Very importantly, we're not going to move away from rare diseases. We have a number of portfolio programs that will stay in the rare disease space. But we are -- we do think there's a very important opportunity for expanding RNAi therapeutics into more prevalent chronic diseases. And this has been really presaged by Leqvio, which is the product that Novartis has brought to market. It's an Alnylam innovation. It is -- has been approved in Europe for the treatment of hypercholesterolemia and mixed dyslipidemia, obviously, an incredibly prevalent disease. But what's really important about the Leqvio story is the fact that they were able to demonstrate a truly impressive effect on LDL cholesterol, a very encouraging safety profile, really indistinguishable from placebo, just really highlighting the safety features of RNAi therapeutics, which makes it amenable to these prevalent type of opportunities, but very importantly, the durability of effect. So with Leqvio, they're able to achieve an over 50% reduction of LDL-cholesterol with a buying annual dosing regimen. So almost a vaccine-like approach for the treatment of hypercholesterolemia, which is really exciting. And there are many aspects of that, which really help on the access side as well because these would be HCP-administered drugs, part of a Part B reimbursement program, which would be, I think, a favorable place to be from an overall market access perspective as well. Now we have a number of assets that are in prevalent disease opportunities right now. This includes ALN-AGT for the treatment of hypertension. That's about to start Phase II. That's a program that we do intend to commercialize on our own. It includes a program with Regeneron, targeting NASH, ALN-HSD and a preclinical program that we'll bring into the clinic later this year in the area of gout. Your question is a good one on how do we think about commercializing products in this space? And I'll start by saying the whole commercialization model is going to change. This includes the type of agreements that, for example, Novartis formed with the NHS around Leqvio, a true private -- public-private partnership approach to bring medicines that really address public health issues to patient populations that are at risk. We believe that, that can be expanded in the U.S. as well with major provider systems in this country. So the typical approach of saying, okay, we have to have thousands of boots on the ground to address these prevalent disease opportunities, especially when they represent public health matters and public health issues is, I think, a model that will change significantly. Obviously, in the future, if we need to get additional boots on the ground, we can form a promotional agreement with a larger pharmaceutical company, but we don't need to do that at this point, and we certainly intend to commercialize a product like ALN-AGT directly given the fact that we'll be building up a cardiology-based sales and marketing effort to support, if successful, our wild-type ATTR market expansion.

Okay. So there's kind of a natural synergy for you specifically in the cardiology specialist office. I understand that.

Yes.

The other -- there are 2 more things that you -- since you brought up. I want to talk a little bit about this issue of shifting drugs from the pharmacy-distributed product to the physician-administered product. Because in a way, there are 2 things that happen. First, you do create additional cost for the health care system because there's going to be some sort of an administration fee and the physician office fee that will take place. Rent at 6 months, that doesn't feel like too much. But second, you're going to have to take a group of physicians and convince them it's not -- it's medically significantly better or financially advantageous to use this. And at the same time, you are going to have to deal with payers, whether they are commercial because I guess the age of hypertension or hypercholesterolemia is not all Medicare population or it's maybe half or so Medicare population. And the second one being you do have Medicare Advantage plan, which are now 40% of the Medicare market. So how do you do it was that tension because my discussions with payers in the United States were not -- they were immediately suspicious of this idea. Might be they'll accept it, but they had some suspicions immediately that jump to their heads about what was being happening here. So please?

Yes. Look, I mean, the benefit of a physician-administered drug that is very infrequently administered once every 6 months, is that you can achieve a level of patient adherence to medicine which is fundamentally different than what you have with orally administered drugs or even self-administered drugs that are given subcutaneously very frequently. And the benefit of that, Ronny, is really -- for the healthcare system, is really quite important. We know, for example, that over 50% of patients that receive a prescription for hypertension medicine, within one year, stop taking that medicine. And yet, we know that hypertension is the #1 modifiable risk factor for cardiovascular morbidity and mortality. So while you can look at the cost of administration as being increased by virtue of approaches like this, the overall cost of the system by improving adherence and therefore improving outcomes at a population level is fundamentally better. And so we think that's the balance that has to be made at the end of the day. We like the balance in terms of how it provides better results for patients, if patients stay adherent to their therapies.

So there are 2 things. Obviously, there is the issue of the misincentives along the way, right, because you're taking money out of one pocket, moving to the other and there's no rebates. The PBMs don't see the cost, but the MCOs do. So there's a whole list of heads that are here. But you're really dependent on this actually increasing adherence, okay? So there are 2 things that I kind of want to push on this. First of all, I can see this happening in the U.K. context, where there's more of a centralized authority. It's tough to do in the U.S. market. And second, there is clearly an effort by CMS to push for a follow-on of non-combined patients in diabetes and hypertension, there's now pools of money being directed that way. They're now companies being built to take advantage of this. So there clearly is an effort there. And I'm just wondering if these efforts advantage you or disadvantage you because, obviously, the adherence of the self-injected product might go up as well.

Yes. Well, look, I think it'd be great if the adherence to self-injected products or self-administered products goes up as well. I don't think it will ever get to the level that it should be at and what the level that can be achieved with an HCP-administered product running at the end of the day. Again, it does rely on a very infrequent dose administration approach, which is enabled by the RNAi pharmacology. So RNAi has opened up that biannual dosing approach, which is very unique, and it really almost makes it vaccine-like for the management of these very prevalent diseases. So I don't think even with efforts to improve adherence with pharmacy benefit approaches, I don't think you're ever going to achieve the level of adherence that could be done with a very simple, biannual, low volume, well-tolerated subcutaneous injection.

So quick -- so if we think about that gap, call it, 70% compliance or 50% compliance with a monthly subcu injection, how much of that gap do you think you can close?

Well, I mean, if it's 50%, 70% with a monthly subcu injection, I think we can get asymptotically closer to 100%. I mean, obviously, nothing is going to ever get to 100%, but we can make a big dent in that gap.

Interesting. So you think the majority -- you think that the main reason of noncompliance is just this issue of I don't want to take my -- I'm still going to see my physician, but I don't feel like taking my drug this month, why forget [indiscernible] do you think that's the major reason?

Out of body, out of mind. These are generally drugs that are treating silent diseases. Silent diseases that can lead to irreversible/mortal consequences, but they're silent diseases. And so patients don't feel compelled to necessarily be adherent. But if they're seeing their physician twice a year, and they're getting a drug as part of that physician visit, it could be a game-changer from an adherence standpoint.

Got it. So let's talk the other side of that coin. You have a bunch of physician-administered drugs today, ONPATTRO being the main one. But during the epidemic, we've seen a large surge of home infusion of those products. That creates an interesting dynamic. The physicians that treat the patients, obviously, make a very large margin over a product, at the price of, [ let's say ], $100,000 if they get 6% to 8%, depends on who the payer is for it, and now suddenly that money disappeared because it went to a specialty pharmacy. And on the other hand, the payers were quite happy with this because they weren't paying the 6% to 8% to the physician in the office. And frankly, if it was in the hospital and the hospital usually double the cost that is charged to the insurance. And now that the epidemic is unwinding, there's a room for those guys to come back and not have the home treatment. But both the patients themselves and certainly, the insurance wouldn't mind so much if they continue to have the home administration. So help me out in terms of those dynamics because they're really fascinating. What happened during the epidemic, what's happening now and how do you project this forward?

Yes. Well, let's just talk about the U.S. market. It's a little bit different.

Sure, yes. Specifically, U.S. Yes.

Yes. But let's talk about the U.S. market because that's where the dynamic exists. We had, after the start of the pandemic, so if we looked at our 2019 home infusion numbers in the U.S. and then where we ended up at the end of 2020, we ended up going from about less than 10% at the beginning of 2020 to about 20% at the end of 2020. So a significant increase, about 1/5 of our infusions are given in the home for ONPATTRO. And by the way, the other drugs we have are given subcutaneously, ONPATTRO is the only infused drug. So let's keep that in mind as well. But ONPATTRO infusions went up from 10% to about 20%. So not a huge increase but a pretty important increase. Our focus has always been on what's best for patients? How do we help the patient? Obviously, through the pandemic, many patients were reticent to go to a major hospital to get their infusion. In some cases, we were able to find infusion centers for the patients so that they can go to a closer infusion center and feel more comfortable with that as well. But then also, we opened up home infusion as well. So our team was very focused on really supporting the patient community through all this so that they're treatments could be taken place at the appropriate sites of care. And we continue to see extremely high adherence rates of our ONPATTRO therapy, over 90%, even during the pandemic. So Q2 was a bit harder last year and there were some skip doses and issues there related to shifting sites of care for patients. But ultimately, we got through it. And we do think that, that is the right answer for patients. Now other than that, Ronny, there are so many complicated economic factors and we don't really comment on them so much because they're complex at the end of the day. There's definitely a dynamic, as you say, for physicians wanting to administer these drugs. We understand that dynamic in the U.S. market. At the end of the day, we try to do what's right for patients, first and foremost.

So you are -- I believe that cost of ONPATTRO is around $450,000 per annual treatment.

That's right.

So that is the price point where you have direct relationship with each one of your patients?

That is right. That's correct. The patient co-pays are very low because this is a Part B administered drug. Patients often have Medicare Advantage plans that enable very attractive lack of co-pays really, patients that are on commercial plans, we have a patient assistance program as well. So the -- about 80% of our patients have 0 co-pays associated with our...

Yes. That's -- pharma needs to do that to make sure that the drug continue to be administered. And the other question I have there. So essentially, you're not going to give me too much on how you guys are managing the tension between the physician group and the insurers, but let me just take another angle of this, which is the 340B angle. And roughly what percentage of your market is 340B?

Yes. Again, Ronny, we haven't given those specific numbers out publicly. But we clearly have 340B exposure within our portfolio without a doubt.

If I was a hospital, I would make sure every patient got be treated in 340B institution. Every oncology center in New York City is based -- is a 340B institution, although the city is not exactly the poor city in the United States. Maybe I could -- maybe you wouldn't mind to talk about the trend here. I mean there's been an expanding trend for 340B, some of the -- at least the primary care groups have been getting to the point where they act on this. What is -- what are you seeing in terms of the expansion of the use of 340B as a percentage of the overuse of the products? And especially for your subcutaneous products? And you were the Chairman of BIO. What is the direction the industry is going to take to -- well, that's -- firstly, we can talk about the trends, and then I'll have the follow-up.

Yes. I mean, Ronny, again, I'm going to disappoint you without -- with not being able to really get into a lot of the details here. As it relates to our business, I can only speak from a general sense that we are seeing more 340B utilization taking place. And from a BIO perspective, what I can say is, it certainly is a program whose expansion is a bit concerning to the industry. I don't think there's any secrets about that. And we certainly would like to make sure that the 340B program is appropriately used as it was originally designed to be used and not to expand economic value for hospital systems at the end of the day. So that's really probably all I can say now, Ronny.

Okay. So maybe I'll just do one last follow-up on this and say, how many years are we away on the current trend from this becoming an acute problem? Right now, it's around the edges. People get annoyed, it's unfair. But how far before the industry has to say, okay, well, this is becoming a top concern for us?

Well, there are many people in the industry that think it's a top concern now. So maybe we're at a tipping point, Ronny. I think clearly.

We're not too far off.

We're not too far off. That is correct.

Okay. So let's move on and move away from the economic side of the health care to the scientific side of health care. So you can't get deliver. It is very clear that neurology is a very important frontier. One of your peers have already delivered a drug, an RNA drug to the brain successfully and it has become a very good business for them. What do you guys need to do to be able to make this delivery, especially a subcutaneous administration as opposed to intrathecal? Where are we on that part of developing those capabilities?

Yes, absolutely. Well, look, I mean, one of the exciting parts of the Alnylam story over the last couple of years, I mean, very sort of behind the scenes as we were launching our first products, was the fact that we have expanded delivery of the small interfering RNA molecules beyond the liver. Obviously, the liver was a remarkable achievement that we pioneered and the GalNAc conjugate platform that we built for liver delivery of sRNAs has been amazing. We also had pioneered lipid nanoparticles as well. But the GalNAc conjugate really has been very important. And we really applied that same conjugate-based approach for delivery of small interfering RNAs to different tissues, the CNS, the eye, the lung, and we have ongoing work to open up other tissues in the body. And I'm very, very encouraged about where that's going to go. I think that the delivery hurdles that this field, the RNAi therapeutics field had to address in the better part of the former decade has really now turned a corner. And for those reasons, we're very excited about what we're doing in the CNS. And we're about to have our first clinical program, ALN-APP go into the clinic. What we know now is that we've been able to achieve very robust knockdown of target genes, highly specific, well tolerated in preclinical species, including nonhuman primates. And what we see -- and this is by intrathecal infusion. And what we see is a broad distribution of these chemically conjugated, stabilized sRNA molecules through the spinal cord, into even deep regions of the brain. And we can measure knockdown, both by, obviously, terminal studies in these animals to look at mRNA silencing, but also by measuring cerebral spinal fluid for knockdown of target proteins of interest. And notably, in the ALN-APP program, which we've now -- we're now advancing toward an IND filing very shortly, we have been able to show 70% to 90% knockdown of amyloid precursor protein in cerebrospinal fluid. And when we look at specific regions of the brain in terminal experiments, we can see profound knockdown, obviously, in the spinal cord and even in deep regions of the brain, caudate regions, the putamen, other regions of the brain, we can see 60% to 70% knockdown within those regions of the brain. So we find this very encouraging. Obviously, the ability of targeting amyloid precursor protein at the mRNA level enables a knockdown not only of extracellular APP and a beta fragments that emerge from it, which is what drugs like aducanumab and the Lilly antibody are targeting, but we can also target intracellular APP and A beta fragments that, of course, also are known to cause pathology. And so it's a very differentiated approach. Our initial focus is really going to be on autosomal-dominant Alzheimer's disease. So the genetically defined form of the disease, where we believe the genetics really support -- very strongly support APP targeting. We're also going to look at cerebral amyloid angiopathy, which Ronny, you probably know is a vascular dementia due to amyloid precursor protein. And so these early studies will really be quite important. I think notably, even by virtue of the technology itself, we should have data in 2022, looking at knockdown of APP in cerebral spinal fluid in patients and that will be an important landmark event for the advancement of RNAi therapeutics into the CNS.

So there are 2 things that are kind of interesting here. I would -- I completely see why the generic form of the disease will be a great place to do the proof-of-concept to show that you're able to reach to knockdown. Like, especially can you take reasonably young, healthy individuals that are predisposed and show that you're able to reach your target here. I mean, I guess the question from me is whether this is the right population to target for a pivotal trial. Because then I would actually argue the sporadic population might be easier to demonstrate an efficacy on or at least you don't want to take the added risk of the genetic disease in terms of demonstrating efficacy. It seems like a tougher target than predisposed early -- population which is not APP mutant or active, I would say. Yes.

Yes. Ronny, data to inform. Let's see how the data emerge out of the Phase I study in the early -- and we're looking at some very innovative biomarkers as well, that are functional biomarkers that can be very informative. So let's see how that all emerges. Let's also see how the whole APP hypothesis and a beta hypothesis emerges here over the next maybe week. Then we can...

I'm not sure it will -- that will help you a lot.

Let's see how all that emerges, and then we'll go from there. But you may well be right, and it has certainly not escaped our iterations that sporadic forms of Alzheimer's might be, for many reasons, more interesting at the end of the day. But we're going to be informed by the data as we pursue this program. For now, the key thing to do is to show that we get robust reproduction of what we've done in nonhuman primates. And I have no reason to believe that we won't reproduce what we do in nonhuman primates because we've done that extensively in all of our other programs.

How -- well, obviously, I suspect you don't get cerebral edema as a result of this?

Well, not in primates, not in the nonhuman primates.

The -- you're not pulling the plaques out. So I don't think you're talking about that.

No.

How often is the delivery required?

Well, that's important, right? And this is where, again, the durability of the RNAi therapeutic mechanism of action is really impressive. I mean, in these primate studies that we've done, even after 6 months, we still see 70%, 90% reduction of amyloid precursor protein in the CSF. So I mean, we can imagine at least every 6 monthly, maybe less frequent, maybe annual. And that's, of course, as you know, it's incredibly important because routine and frequent intrathecal administration is not really going to be well tolerated by patients. And that's been probably one of the problematic challenges with the [indiscernible] platform. That has required more frequent administration.

Well, it doesn't seem like it's feasible even on a mass scale, even if every 6 months. I'm guessing -- the next obvious question is, how far are you from being able to deliver [ does effecting ] in the brain through subcutaneous administration?

Yes. I mean, we have some work going on there. I think we'll see, but it's early and...

A few years away?

Yes. Or infinity, I mean, let's be honest. I mean, delivering macromolecules across the BBB has been an objective in biotechnology since its inception in the '70s. So let's not -- we got to be realistic.