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

Hello, everyone, and thank you for joining H.C. Wainwright 23rd Annual Global Investment Conference. My name is Patrick Trucchio, and I'm a Senior Biotech Analyst at H.C. Wainwright. Although we are virtual this year, we are confident we're going to be able to provide value to you with more than 850 companies presenting at this conference as well as through your interactions during one-on-one meetings. H.C. Wainwright is a full-service investment bank dedicated to providing corporate finance strategic advisory and related services to public and private companies across multiple sectors and regions. We have a total of 19 senior publishing analysts and over 560 companies covered across all sectors. Please visit hcwco.com for more information. From a logistics standpoint, please make sure to reference your virtual conference online portal that provides your individual links to your meetings and all presentations. Please join us for corporate presentations and panels that will be available live and streaming on September 13 and September 15. With that said, have a productive and enjoyable day, and I'd like to introduce our next presenter. It's my pleasure to welcome CFO, Jeff Poulton, of Alnylam Pharmaceuticals, a leading global biotech pioneering the development and commercialization of RNA interference for RNAi therapeutics and a variety of rare and common disease, including ATTR amyloidosis, acute hepatic porphyria, primary hyperoxaluria type 1, hypercholesterolemia and hypertension among many, many others.

So maybe just to start, Jeff, if you could give us an overview of the Alnylam RNA interference platform, where it's been, where it is today and where have to be in the future?

Thanks a lot, Patrick. Great to be here with you. I wish it was in person, but we'll make the best of it. Yes, and thanks for the intro. You sort of hit the nail on the head. We are the leading RNAi therapeutics company in the world today. And this is based on about a 20-year journey to get to this point. And it started in the late '90s with Nobel prize-winning science that led to the formation of Alnylam in the early 2000s. And I would say for the first 10 years or so of the company sort of typical challenges in drug development. And the real focus and the biggest challenge was on delivery. And ultimately, the company sorted that out after about 10 years and a lot of money. And the sort of the initial solution was LNP technology. That's since evolved into GalNAc conjugate technology, which has improved upon the original solutions. And so once that issue was solved, again at about the 10-year mark, then the company got serious about drug development, which has put us where we are today, and you mentioned it in the introduction. We've got 4 commercial products that are in the market based on Alnylam's technology. Three of those, which are our drugs that we're commercializing on our own: ONPATTRO for hereditary amyloidosis, GIVLAARI for acute hepatic porphyria and OXLUMO for primary hyperoxaluria type 1. And I think we'll talk more about those therapies throughout our session today. And then the fourth is a product that's in the hands of Novartis, Leqvio, that was developed by the Medicines Company based on our technology. And so those are the 4 products that we've got in the market today. And then taking a look at the pipeline that we've got, we've got a very sort of fulsome pipeline as well, all based on the RNAi platform technology. We've got about a dozen clinical programs in development today across a range of diseases. And we've got about 25 preclinical programs in development today and across a range of potential tissue types, right? And again, I think we'll talk about more -- about that as we go through. I think the things to think about for the future that may be evolving a new at Alnylam, one, I would say is sort of an increasing focus on more common diseases. The first 3 products that are in our hands that are in the market are rare diseases. And we think now based on where the technology is and for the safety that's been demonstrated in the profile of these products, particularly around durability, sort of infrequent dosing, that they're quite well positioned to be successful in more common prevalent diseases. So you see that in our pipeline now, and again, I think we'll talk about that more as this continues. And then secondly, and I already mentioned it is, we are now starting to explore tissues outside the liver. We've signed a partnership agreement with Regeneron a couple of years ago that's focused on developing RNAi therapies for CNS and ocular tissues, and we anticipate entering the clinic with our first CNS program later this year or early next year. So that's something to stay tuned for as well. I think if we can sort of demonstrate proof of concept there, that opens up a whole new area for us to explore new medicines. So that's the summary of kind of where we've been and where we are today and maybe where we're going.

Yes. That's a great overview. And so just if you could maybe provide a recap of the P5x25 strategy which was introduced earlier this year?

Yes. So Alnylam has a history of putting out a set of 5-year goals. And I would say unlike most companies that put out long-term goals, they aren't just aspirations. These are actually goals that we anticipate meeting or exceeding. And if you went back and looked at the last 2 sets of 5-year goals that the company put in the market, Alnylam did just that. They exceeded those goals. And so I think that's an important sort of context as we talk about the strategy that we put out earlier this year. And what it really does is it outlines our plan to bring transformational medicines to patients around the world while delivering exceptional financial performance. And in so doing, we think it will position the company as a top-tier biotech. And there's 5 elements to it. We call it the p to the 5th by 25. And the 5 Ps are patients. The goal is to have over 0.5 million patients on Alnylam RNA therapeutics globally. And that would include programs that are marketed by our partners, including Novartis and Leqvio. Products. We expect to have 6-plus marketed products in rare and prevalent diseases on the market by the end of the period. Pipeline. We talked about where we were today just a minute ago by across the period, we expect to have over 20 clinical programs with 10 in late stages. And the engine in terms of introducing new programs into the pipeline, we expect to be at 4-plus per year -- 4 plus INDs per year by the end of the period. Today, we're at 2 to 4. Performance. So now we've got a couple of financial metrics. Performance, we anticipate delivering 40% or greater compounded annual top line growth across the 5-year period. So that speaks to where we are from a commercial perspective and the growth ahead. And then lastly, profitability. And the goal here is to achieve sustainable non-GAAP profitability within the period. We haven't specified a specific year, but we're committed to achieving that across the period at some point.

Yes. Yes. No, and the -- sort of, P5x25 strategy is off to a great start. I mean you have the product launches are exceeding expectations. You have the key pipeline compounds advancing ahead of schedule. So I have a couple of questions that I'd like to throw your way. So just, I guess, what is Alnylam's secret sauce to the extent that you can reveal that? Do you have the best people? Is it this vertically integrated organization? How have you put this together? Is it to draw on the platform? You have that clinical success rate over 60%. How have you been so successful, particularly in the last 3 years? And why should investors have confidence that will continue?

It's a really good question, and I think it's what makes Alnylam unique. We certainly have a fantastic team, right? You can't have a successful company without the right people. I believe that we have that. But I think the thing that really differentiates Alnylam and enables that kind of performance that you just referenced is, it's the power of the platform. We are a true platform company, and we're leveraging that RNAi technology that we talked about in the introduction. And there are certain attributes of that profile that allow us to create really great medicines that have high impact on patients. And I would highlight those as durable effects that enable infrequent dosing to maximize adherence. Clamped pharmacology, which creates the potential for improved efficacy and outcomes and established safety profile now based on all the clinical work that we've done, including partners that have done clinical work, including the medicines company on tens of thousands of patients. So there's a high level of confidence in the safety of the platform now. And then lastly, I'd also say the approach that the company has taken to market access has been pretty unique in terms of some of the things that we've put in place around risk sharing that it really enabled fantastic access to the medicines that we've got. So that profile which is enabled by the platform that we've got, I think, really creates that opportunity for exceptional performance. And then the last thing I would say is the approach that the company takes to selecting the targets that move forward into clinical development. The first thing is, is they're all based on genetically validated targets, which our view is that significantly improves the chances of success. And then secondly, we use biomarkers in the work that we do, which allows us fairly early on to assess the sort of likelihood of success of these programs. And it's those combination of things as well as the power of the platform that I think has led to the types of probability of success that we've delivered that are certainly well ahead of the industry norms.

Yes. And so previously, you mentioned that ONPATTRO, GIVLAARI and OXLUMO are all off to better-than-expected starts. And I think as we all see that, and then we all are also keeping a close eye on vutrisiran, which at least in our model, drives the revenue ramp following the potential approval in hATTR amyloidosis with polyneuropathy in 2022 and then cardiomyopathy a few years later. And the we talked to have from the start, been very enthusiastic about vutrisiran. So should we view vutrisiran as being the cornerstone of the commercial effort starting around the second quarter of next year? Or is it really more of an all of the above strategy on the commercial front?

I'd say it's probably a little bit of both, to be honest with you. When I talked early on about the profile of the company, we've got 3 medicines that are all -- have come into the market in the last 3 years or so. So all of those are at very early stages, and we see them contributing to growth pretty significantly for the foreseeable future. So let me start first with what we -- our ultra orphan products. So for acute hepatic porphyria, we've got GIVLAARI and for primary hyperoxaluria type 1, we've got OXLUMO. We've talked about the -- what we see as the commercial potential of both of those drugs being in that $500 million-plus per year sort of peak revenue range. And I think based on the early experience that we've had in the market with both of those products, I don't think we've learned anything that sort of changes our view of that. So those products are going to contribute to growth. But I think it's fair to say that in terms of growth that we think we're going to deliver over the next 5-plus years and what the market expects from Alnylam as well, that the TTR franchise as a whole really should be that what I would describe as an anchor commercial franchise for the company. And so we do expect that's where the majority of the growth is going to come over the next 5-plus years. And so let's focus on vutrisiran for just a second and talk about where we are with vutri. We announced the results for the HELIOS-A study a short while ago based on 9-month data. Fantastic data. We filed in the U.S. now. And we've got a PDUFA date in the U.S. next April. So April of '22, we hopefully, knock on wood, expect that we'll get an approval for vutrisiran, and we'll be able to take vutrisiran into the market at that point. Based on the HELIOS-A study, this is studying vutrisiran in that same patient population that ONPATTRO is currently labeled for, which is the hereditary part of the market and for patients with polyneuropathy. We do think that when we launch, it expands the opportunity for our TTR franchise, even though it's going to be in the same population that we're in with ONPATTRO right now. And that's really around the benefits of vutrisiran, particularly as it relates to convenience. We'll launch with a once-a-quarter subcu new dosage and that compares to ONPATTRO, which is an every 3-week IV-infused drug. And we're doing some work now to also extend that dosing to once every 6 months. And so we think that profile will be highly attractive to patients and physicians around the world and think it expands the overall opportunity in polyneuropathy. Ultimately, the real unlocking of the potential of the franchise is with the 2 Phase III studies that we've got ongoing, 1 in vutrisiran and ONPATTRO, which is APOLLO-B, which reads out next year. And these are -- this is a cardiomyopathy study in both the hereditary and the wild-type settings. And HELIOS-B, which is a study for vutrisiran in that same patient population. And just given the size of the wild-type part of the market, which is multiples larger than the hereditary part of the market, that's really critical to sort of really completely unlocking the potential of the TTR franchise. So we very much look forward to those readouts over the coming years.

Yes, for sure. And I think one of the things that we try to kind of work through is just how that franchise is going to evolve and develop as you have these additional data readouts and you get these additional approvals in additions to the label. And there is -- there are a few puts and takes that I wanted to talk through. The first one is just kind of around the anticipated pricing differential between ONPATTRO and vutrisiran. And then as well, differences in that pricing when you expand the label to include cardiomyopathy for each drug. And then separately, with the partnering considerations, the royalty payments on vutrisiran. So how does that collectively -- how does that -- those puts and takes, how does that impact the revenue ramp?

Yes. Let me just talk through some of that. I mean it's a little bit early to provide specifics on pricing, but I can talk in generalities to sort of give you a flavor for how we're thinking about it. So that -- again, that first decision point, hopefully, will be next to April, which is the PDUFA date that we've got for vutrisiran for that hereditary PN population. And again, that's the same population that we're in today with ONPATTRO. And if you look at the data from HELIOS-A, I would say it's very similar, if not slightly better than the data that we had that supported the approval of ONPATTRO. So similar label, similar patient population. My expectation is we're likely going to have similar pricing there. Probably the more interesting question though is I talked about APOLLO-B and HELIOS-B, again, knock on wood, hopefully, those are successful and support filing and ultimately, approval for both ONPATTRO and vutrisiran in the cardiomyopathy part of the market, that's sort of a different story than relative to the hereditary part of the market. I mentioned the size differential. We think there's roughly 50,000 hereditary patients in the world and maybe half of those would be appropriate -- would be PN patients, would be appropriate for ONPATTRO or vutrisiran. In the wild-type part of the market, the estimates are probably conservative at 200,000 to 300,000, so much larger, right? And if you look at the stabilizer that's labeled for the cardiomyopathy wild-type market, the pricing is about half what the pricing is in the hereditary part of the market today. So our expectation is, assuming we've got good clinical data that supports approval in that patient segmentation, that we're going to have to look at lower pricing. Exactly how we sort of design that and get there, I think, is an open question, but certainly, I think we're of the view that we're going to have to have a lower price just given the size of the opportunity. I think your last question was about really more about sort of maybe gross margins, vutrisiran versus ONPATTRO. And you're right, the vutrisiran will have a higher royalty burden than ONPATTRO does. And that's related to the royalty that we'll owe Sanofi on global sales of vutrisiran, which ranges anywhere from 15% to 30% and it sort of ramps up as sales ramp on the product. So it will have a higher royalty burden. One of the -- but an offset to that is the cost to manufacture the product. It will have a lower cost of manufacturing than ONPATTRO will. Now that benefit is not enough to offset the higher royalty burden completely. So we're probably looking at margins that are 10 points lower than what we'll have on ONPATTRO. But again, our view is that what vutrisiran does to the overall franchise in terms of the significant growth opportunity that it creates, on an absolute dollar gross margin basis, there's no question in our minds that it will increase the area under the curve.

Yes. That makes a lot of sense. That's really helpful. So then how should we think about over time the overall franchise? How would it shift from ONPATTRO with vutrisiran on the market? Would it be a gradual shift, and then maybe quicker to vutrisiran? Because I know patients aren't necessarily keen once they're stable to shift. So is it more new patients, all the new patients beyond vutrisiran? Or how should we think about that?

I think what you described is probably right. And I think there's going to be a place for both of these products. And one of the things that sort of amazed me about the performance of ONPATTRO over the years, given that it's an every 3-week IV-infused drug, which is a pretty significant burden for a patient is the adherence that we've seen or the compliance, I should say, which is the percentage of times that patients are showing up to get that medicine every 3 weeks. It's been 90%-plus, which is really high for a drug that profile. And I think what that speaks to is that patients are feeling better on the therapy. So it's sort of a long way to say, I think there's going to be some stickiness on ONPATTRO even when we launched vutrisiran. So I'm not expecting a dramatic sort of switch scenario where you're going to see ONPATTRO eroded right away. I think there will be some switch, but growth of vutrisiran more quickly is going to be based on new patients that come on therapy. I would imagine that new patients that are coming on therapy when they have a choice between ONPATTRO and vutrisiran, a very, very high percentage are going to choose vutrisiran, just given the convenience of the dosing.

Yes. So if we look really far ahead, have the potential by annual or annual dosing of vutrisiran with a broad label, it include hereditary and wild-type ATTR amyloidosis, that implies that we have the positive outcome in HELIOS-B, the cardiomyopathy study. So I'm wondering if there are small molecules, there's antibodies in development. Do you think vutrisiran would be considered the best across class compound as a frontline compound in ATTR amyloidosis by 2025?

Well, we think so. I mean we've talked a lot about it already, but there's a couple of things that I think hold promise for it to be that kind of a profile, best-in-class profile. Again, one is the convenience of the medicine, right? We're talking once a quarter and hopefully, we'll be transitioning that to once every 6 months. Some people like to describe that as almost vaccine like. And certainly, a twice a year simple subcu injection would align very nicely with sort of planned visits to see your physician. So really convenient. And I think relative to what the other profiles are of drugs that are either in the market today are being developed, I think we would stand out from that perspective. And then secondly, I think, look, there's still plenty of opportunity. There's still a lot of unmet need in this space, and we think we're going to have a very efficacious product. Certainly, if you look at the clinical data that supported the approval of ONPATTRO and the data that we've got on vutrisiran in the hereditary patient population, we've stabilized or even actually reversed the disease, showed improvement in patients. And so -- look, if we can deliver a strong clinical profile similar to that in the broader patient population then we have reasons to be confident about that, look, I do think that this is a best-in-class kind of profile.

Yes. So one of the thing that's interesting to us is how strong your ex U.S. revenues are, particularly for ONPATTRO. So I was wondering how should we think about the U.S. versus ex U.S. revenue opportunity for Alnylam?

Yes. This is another one of the things that I think has sort of differentiates Alnylam. We do have a very balanced mix of U.S. versus ex U.S. revenues today, not only with ONPATTRO, but I think ultimately with the other 2 products as well. And I think it has a lot to do with the profile of the products that we've brought to market. Again, rare or ultra-rare-type opportunities, highly innovative therapies with very compelling clinical profiles, that kind of drug, you have the ability, I think, to take around the world and be successful from an access and reimbursement perspective. And that's really what it enables ultimately you to have not just a U.S. business but a global business as well. And so that's what we've got, that's what's enabled us to develop the sort of very balanced U.S. versus ex U.S. profile that we've got. And that diversity is fantastic from a sort of a risk mitigation perspective. And we've actually already seen the benefits of some of that, particularly over the last 18 months is as the pandemic has sort of been raging in different parts of the world, there's been certain markets that have been more impacted and other markets less impacted. So it's been fantastic to have a portfolio like that to sort of address some of the risks associated with that situation that we've all been facing for the last 18 months. So that's something that we've built now and something that we're going to continue to leverage going forward.

Yes. So just to bring them back to the P5x25 strategy to hit the revenue guidance that you've presented or that you expect. We've talked about the 3 approved products. We talked about like Leqvio and then we have vutrisiran. Is it more about just now executing on clinical development of vutrisiran and then commercial launch of all of these products as we go forward? What are the critical elements that have to come together for you to say, yes, we're going to hit that -- we're going to hit our target?

Yes. To me, it's 2 things. It's continued commercial execution with the products that we've got in the market. And I've talked about the fact that these are all sort of in early stages. And so there's lots of room for growth for all 3 of these products, and they're all rare diseases. And so it's the sort of typical rare disease playbook where you're very focused on disease education and building awareness, so that there's the right suspicion that physicians have that they're finding these patients and diagnosing them and getting them on therapy. So that needs to continue. But the other really key thing that has to happen for us across the period is the success in the late-stage TTR program. So the APOLLO-B and the HELIOS-B sort of unlocking it, again, the larger wild-type part of the market is really important in terms of us achieving the long-term growth goals that we've got. And if you look at where the market expects the company to be from a consensus standpoint in 2025, it's clear the market expects that as well. And the market sort of consensus for combined product sales for Alnylam in 2025 is around $3 billion and about 70% of that is expected to come from the TTR franchise from a consensus perspective. So that clearly indicates that the market has confidence in our ability to get into the larger wild-type part of the market as well. So that's critical as well that we have success there from an R&D perspective.

So you mentioned, I think, earlier that there isn't necessarily a target for profitability, a targeted year. So that was kind of a question I had, but also just how do you balance that push for profitability versus clinical development and this constantly? You have a very large pipeline that's expanding.

It's a really good question, and it's a high-class problem to have. And I agree with what you're saying. I mean we've got success rates historically of drugs that enter the clinic to working their way through the regulatory process and getting the market sort of a 60% success rate, which is, again, multiples higher than the industry standard. So that's certainly is supportive of a lot of investment in R&D if we think we have the ability to drive therapies forward anywhere close to that kind of success rate. But we're also very committed to getting profitability. We think that's important. Really, ultimately, what we're looking to do is get to a place where we're independent of the capital markets needing to fund our operations going forward. So -- but we actually think we can do both. We think we can get the profitability across the period, which I've highlighted, but we've also highlighted what we expect to do from an R&D perspective across a period with that pipeline goal that we've got where we expect to sort of more than double the number of programs or about double the number of programs that we've got in clinical development to more than 20 by the end of the period, and we want to turn up the sort of the pace of the engine a little bit too. We're delivering 2 to 4 new INDs a year right now and the expectation at the end of this 5-year period is, we'll be at a pace of 4-plus per year. So we're going to continue to invest and grow investment in R&D across the period. But we think we can actually do that and achieve profitability. So we're going to do both, that's the plan.

Terrific. So can you discuss is management's compensation aligned with certain achievements, either with the P5x25 strategy or other? And what are the near and long-term components that investors should be aware of as it relates to these various metrics, including those that are part of the strategy?

Yes. It's a good question. And the way I'd answer it is for the officers of the company, our long-term equity part of our compensation package. Half of that are in performance share units. And so what that means is there are specific goals that have to be achieved from a business standpoint before vesting occurs of that equity. And those goals that are sort of tied to those performance share awards are very aligned with what shareholders would want and very aligned with the P5x25 goals that we talked about success clinically, success regulatory and success from a commercial standpoint. So I feel really good about the way the company has designed that sort of compensation.

Great. So I think we have time for 2 more questions. So something that does come up quite a bit, and we just had another gene editing event last week is, there's been this discussion around gene editing platforms and potential for those platforms to become viable competitors to ASO and RNAi platform. So how do we think about the competitive threat from the gene editing platforms and the potential maybe disruptive P5x25 strategy?

Yes. I mean, I think, first of all, in terms of potential impact from that by on P5x25 super unlikely from a timing perspective, just with how early that sort of the gene editing companies are in advancing their technologies. But thinking longer term, look, I think our view is that for most diseases, even in high unmet need settings, the availability of pharmacologically predictable, dose-dependent, reversible, safe and effective therapeutics, which we think describes our platform would, for the most for most patients and doctors would preclude the use of genome altering therapeutics that lack these properties. So our view is long term that we're in a very good position here. We don't see a significant threat of gene editing to our platform and to our business. So we feel good about that.

Great. And then just a last one here. If you can -- there's a lot going on in Alnylam. So if you can call out 2 or 3 maybe there are other more key events within Alnylam's control that you think investors must be aware of? These are events happening in the next 6, 12, 24 months or so, maybe 36 months that would tell us your strategy is on track. What would those be?

I'd probably pick -- I don't know if you can -- I can hold myself to 2 or 3. But let me give you a few. First one is by the end of the year, the 18-month HELIOS-A data that we intend to share with the market. And I think the real focus here will be on the exploratory cardiac data, right, as a potential read-through for APOLLO-B and HELIOS-B. So that will be by the end of the year. That's one. Second, we've talked about the PDUFA date for vutri next April in the U.S. And we expect to file in Europe by the end of the year as well. And so hopefully, European approval next year also. Then I would say APOLLO-B, which is again, the Phase III readout for patisiran and a cardiomyopathy patient population, top line data by middle of next year. Fourth, I would say would be the ALN-APP Phase I data, which will be our first program that goes into the clinic targeting CNS. So that will be a sort of big, not only for APP, but potentially more broadly from a CNS perspective. Fifth, I would say the Phase II data from our ALN-AGT or cemdisiran program. We're starting 2 Phase II studies this year. So I think, the readouts on both of those studies will be particularly important. And then lastly, I would say the initiation of our new clinical program that we've sort of recently announced, which is called TTRsc04. This would be a [former] to vutrisiran. And this is a platform that we think has even more extended duration, so it could be a once-a-year dosed product, better not become more than 90%. And that's a program that we expect to file an IND on by the end of next year. Those are the things I would highlight out through, let's say, the end of next year.

Terrific. Well, it does bring us to the end of our time. So thank you so much, Jeff, for the update. Alnylam is one of the great companies in the market today, really historic achievements. And it's always a pleasure to get the update from you and from the team. And I want to thank all of our presenters for taking part in what's been a very productive and informative series of presentations. We appreciate the time and effort that's gone into preparing them. We do hope our next conference will be one that we host in person rather than virtual. But we do appreciate everyone's flexibility and presence with us online this year. So thanks again to Jeff and the team at Alnylam and to everyone for attending the conference. Thank you from the H.C. Wainwright team.

Thanks, Patrick. Appreciate it.