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

Good day, and thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss Roche partnership. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to the company. Please go ahead.

Good morning. I'm Christine Lindenboom, Senior Vice President of Investor Relations and Corporate Communications at Alnylam. With me today on the phone are Yvonne Greenstreet, Chief Executive Officer; Pushkal Garg, Chief Medical Officer; Evan Lippman, Chief Corporate Development and Strategy Officer; and Jeff Poulton, Chief Financial Officer; Tolga Tanguler, our Chief Commercial Officer, is also in the room and available for Q&A. For those of you participating via conference call, the accompanying slides can be accessed by going to the Events section of the Investors page of our website investors.alnylam.com/events. During today's call, as outlined on Slide 2, Yvonne will offer introductory remarks and provide general context for the deal. Pushkal will discuss our Zilebesiran program and the opportunity to address unmet needs in hypertension with RNAi therapeutics. Evan will go over the terms of the collaboration agreement, and Jeff will review financial implications for Alnylam. I'd like to remind you that this call will contain remarks issuing Alnylam's future expectations, plans and prospects, which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent periodic report on file with SEC. In addition, any forward-looking statements represent our views only of the date of this recording and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to Yvonne. Yvonne?

Thanks, Christine, and thank you, everybody, for joining the call today. We're absolutely thrilled this morning to discuss the announcement of our new global strategic collaboration with Roche for the development and commercialization of Zilebesiran, our investigational RNAi therapeutic for the treatment of hypertension. This partnership aims to realize the full potential of Zilebesiran to address significant unmet medical needs in patients with hypertension by combining Alnylam's leadership in developing RNAi therapeutics with Roche's global commercial footprint, regulatory expertise and proven track record of successfully launching innovative medicines. Now hypertension is a highly prevalent disease, with over 200 million people affected by primary hypertension in just the 7 major markets. And despite the widespread availability of treatments to manage the disease, there remains a critical need for new, differentiated therapies that can provide tonic control of blood pressure and improve adherence with the potential to improve outcomes. Through this partnership, we believe we have a remarkable opportunity to bring forward a transformative program with the potential to disrupt the global treatment paradigm for hypertension, a therapeutic area that has lacked meaningful innovation for decades. And through this arrangement, we intend to progress a robust development plan for Zilebesiran, generating cardiovascular outcomes data prior to launch, thereby optimizing the commercial opportunity. As to the other partnerships, we've aimed to retain significant product rights, while balancing that with highly attractive financial [indiscernible]. We believe this new partnership with Roche very much achieves that goal. The combination of an upfront payment, potential for substantial near-term milestones, favorable development cost sharing and co-commercialization economics will enable investments across our broad pipeline in the years to come and supports the advancement of Alnylam P5x25 goals. This is a very important aspect of this transaction. given our recent achievement of first-in-human knockdown of a gene in the CNS using RNAi therapeutics, we're driving ever more closely to significantly expanding our ability to treat a wide range of diseases both in and out of liver, in patient populations, but small and large. We believe our ability to invest in and pursue these opportunities will bring much needed innovation to diseases with unmet medical needs, creating value for many years to come. This deal underscores the strategy behind 1 of 3 key long-term growth drivers for Alnylam, our expansion beyond solely rare diseases to include treatment for prevalent indications as well. And as we discussed previously, we believe the pharmacological features of RNAi therapeutics are uniquely suited for the treatment of chronic prevalent diseases where durable effects could enable infrequent dosing to maximize adherence, and where clamped pharmacology creates the potential for improved efficacy and outcomes. As Evin will discuss later, realizing that potential will require us to smartly scale many aspects of our operations. And we believe this partnership with Roche offers the financial and structural resources to continue to build on our Alnylams leadership in RNAi therapeutics. With that, let me now turn the call over to Pushkal, who will further discuss the unmet needs in hypertension and our Zilebesiran program, which is the cornerstone of this exciting new partnership. Pushkal?

Thanks, Yvonne, and good morning, everyone. This is an exciting day for our Zilebesiran program and for our ability to maximize the potential of this innovative medicine. We believe Zilebesiran has the potentially to substantially lower the risk of cardiovascular morbidity and mortality by providing better control of high blood pressure. It's well recognized that hypertension is a highly prevalent disease with over 200 million people with primary hypertension in the 7 major markets. Unfortunately, despite widespread availability of therapies to manage the disease, over 80% of hypertensive patients are not at their target blood pressure goal. Furthermore, increased cardiovascular risk is exacerbated by variability of blood pressure control, inadequate nighttime control and poor adherence to therapy. All of these factors contribute to a substantial risk of cardiovascular events, making hypertension the #1 preventable cause of cardiovascular morbidity and mortality and highlighting the critical need for new, differentiated therapies that can provide tonic control of blood pressure over extended periods of time. Zilebesiran is an investigational GalNAc-conjugated small interfering RNA, targeting the hepatic production of angiotensinogen, or AGT, the most upstream product of the renin angiotensin system. The renin-angiotensin pathway is 1 of the key regulatory systems underlying blood pressure control, and in essential hypertension, this system can become inappropriately activated. Therefore, blocking the production of angiotensin with Zilebesiran essentially removes the key upstream factor needed to activate the renin angiotensin system. And given his durable pharmacology, to potentially provide both consistent and effective blood pressure control as well as improved medication adherence. You may have seen the Phase I data on Zilebesiran were published this past week in the New England Journal of Medicine, along with an expert commentary and these data really highlight Zilebesiran's transformative potential. We observed over 90% dose-dependent knockdown of AGT that was sustained for at least 6 months after a single subcutaneous dose. This translated into robust reductions in both systolic and diastolic blood pressure with tonic control over 24 hours and excellent durability that resulted in over 20 millimeters of systolic blood pressure reduction at 6 months after a single injection. We believe these attributes offer a highly differentiated profile from all existing antihypertensives, including currently available oral RAS inhibitors. Across all parts of the study, Zilebesiran treatment was shown to be generally well tolerated, with no treatment-related serious adverse events or instances of hypotension requiring intervention. As you know, we are conducting the cardia Phase II clinical program to further evaluate Zilebesiran in its potential profile in hypertension. This clinical profile includes 2 studies: Cardio 1, which is a double-blind placebo-controlled study to evaluate the effects of Zilebesiran as monotherapy in close to 400 patients with mild to moderate hypertension. The study is designed to identify the best dose and regimen to advance into pivotal trials. Enrollment in Cardio 1 was completed in December 2022, and we expect to report top line results in mid-2023, with full results at a future medical conference. Cardio II is a double-blind placebo-controlled study in patients with uncontrolled hypertension. This study is focused on evaluating the safety and efficacy of Zilebesiran when added to each of the 3 most common classes of antihypertensives, the angiotensin receptor blocker olmesartan, the calcium channel blocker, amlodipine, and the diuretic, indapamide. I'm delighted to announce today that enrollment has been completed with 672 patients enrolled. We now expect top line results in early 2024. As part of today's announcement, we also want to share important updates to Zilebesiran's clinical development plan. As we've always said, we believe that Zilebesiran has the potential to reduce cardiovascular morbidity and mortality in uncontrolled hypertensive patients at high CV risk. These are patients for whom the urgency to treat is the greatest, and we believe this innovative therapy has a significant role to play in this population by helping more patients achieve blood pressure targets, maintain tonic control and mitigate the adherence challenges that are well known with current standards of care. To realize this full potential of an innovative therapy like Zilebesiran, we believe it's critical to launch the product with a robust and comprehensive data set. To that end, we plan to conduct a large cardiovascular outcomes trial as the pivotal trial for approval, which we believe, if successful, would enable the greatest uptake at launch, remove barriers to access and ultimately maximize the impact for patients, providing the most compelling value proposition right out of the gate. We'll have more details to share in the future, but at a high level, the CVOT would enroll hypertensive patients at high CV risk. And the primary endpoint would be a composite MACE type endpoint that includes endpoints such as CV death, nonfatal stroke or MI and heart failure hospitalizations. In addition, in order to most efficiently design the CVOT study, we've also decided to amend the Phase II cardiac program to include another study, Cardio III, which will be a multi-agent combination study looking at Zilebesiran versus placebo in patients with uncontrolled hypertension at high CV risk on at least 2 other antihypertensive therapies. We see this as an important stepping stone to characterize in the blood pressure effects and safety in this intended target population and to helping us efficiently design and power the CVOT. We will share further details about the design of Cardio III at a future date, where we expect the study to initiate in 2024. I want to close by stating how excited I am by this partnership with Roche. Throughout our discussions with them, it's clear that they share our vision for Zilebesiran as a potentially transformative agent for the management of hypertension in patients at high CV risk and to bring that innovation to patients around the world. With that, let me hand it over to Evan to describe the structure of the collaboration in more detail. Evan?

Thanks, Pushkal. Good day, everyone. As Yvonne mentioned, Alnylam and Roche formed a new alliance to develop and commercialize Zilebesiran, an RNAi therapeutic in development for the treatment of hypertension. We're excited that this transaction will enable the pursuit of uphold and comprehensive development and commercialization plan, potentially disrupting the current hypertension paradigm globally to allow this innovative therapeutic to achieve its full patient potential. The partnership combines Alnylam's leadership in RNAi therapeutics with Roche's global commercial footprint and proven track record of successfully launching innovative medicines. Operationally, through this arrangement, Alnylam and Roche will share responsibility and co-commercialize Zilebesiran in the U.S. and with profit split equally 50-50. Roche obtained exclusive rights to solely commercialize Zilebesiran outside the U.S., for which Roche will pay Alnylam low double-digit tiered royalties on sales of Zilebesiran. Alnylam will lead all development in U.S. regulatory activities through the initial NDA submission. Alnylam and Roche will split development costs on a 40-60 basis. In other words, Alnylam will cover 40% of the development costs with Roche responsible for the remaining 60%. Let me now review additional economics associated with the collaboration. This agreement has a total potential devalue of up to $2.8 billion, including upfront development, regulatory and sales milestones. This is a significant transaction where Alnylam maintains future benefit from sharing equally in U.S. profits. Roche will pay Alnylam an upfront cash payment of $310 million. Alnylam is also eligible to receive additional substantial near-term development milestones, which assists with our portion of clinical spend. The combination of a strong upfront payment, the potential to receive significant near-term milestones, having an active U.S. co-commercialization and a favorable R&D cost-sharing arrangement will further enable us to invest across our robust and high-yielding pipeline with investigational RNAi therapeutics, while also enabling us to advance our Alnylam P5x25 goals. So I'd like to provide some additional context on this partnership. First, we believe this new alliance with Roche has the potential to drive enormous impact for patients. Alnylam brings deep expertise in RNAi therapeutics and a demonstrated track record of developing innovative and differentiated medicines in areas of high unmet medical need. Roche provides the benefits of -- to Alnylam of a best-in-class partner with global commercial presence, regulatory expertise and a proven history of innovating and commercializing medicine for patients worldwide. They have a history of entering new markets through innovative modalities and developing blockbuster products. We believe Roche's extensive global footprint across 60 countries will enable Zilebesiran to reach more patients more quickly, accelerating our commercial ramp globally. This has the potential to disrupt the global treatment paradigm for hypertension. We and Roche are committed to positioning Zilebesiran as a foundational therapy for hypertension. And through this partnership, we'll be advancing a development plan that includes CV outcomes as well as potentially evaluating meaningful subpopulations for the most optimal market-ready label and the life cycle management plan. Secondly, the collaboration framework allows Alnylam to invest in late-stage development, regulatory and commercial capabilities. As the leading RNAi therapeutics company, we are maintaining leadership of global development and U.S. regulatory activities. At the same time, the equal commercial partnership structure in the U.S. allows us to invest in cardiovascular sales force to further expand our reach and strengthen our capabilities, building upon our TTR expertise. Finally, this transaction further establishes the foundation for Alnylam's continued expansion into more prevalent indications, an important growth driver for our business. The cost sharing mechanism of this partnership enables significant continued investment across our entire robust pipeline, which spans rare and prevalent diseases. The expansion of our regulatory, clinical and commercial capabilities can be leveraged for the future advancement of additional wholly owned programs. I'm now going to turn it over to Jeff for some perspective on the accounting associated with this transaction. Jeff?

Thanks, Evan, and hello, everyone. I would like to make just a few brief remarks summarizing our preliminary assessment of the accounting for the collaboration from an Alnylam perspective. Starting first with the upfront payment, which will be recognized in collaboration revenue as our performance obligations within the collaboration are completed. The key performance obligations include advancing Zilebesiran through development, as Pushkal described earlier, as well as completing manufacturing tech transfer to Roche. Development milestones will be recognized in collaboration revenue as the development performance obligation is performed. Commercial milestones will be recognized as collaboration revenue when earned. For the global development cost share, Alnylam will book 100% of R&D expenses, with Roche's 60% reimbursement of development costs being recognized as collaboration revenue as the costs are incurred. For the 50-50 U.S. profit split, Alnylam's share of the profits will be recognized as collaboration revenue. Ex-U.S. royalties will be recognized as royalty revenue. And 1 final point of clarification on the collaboration, Roche will record 100% of global product sales associated with Zilebesiran. And with that, I'd like to turn it over to Christine, who will take us to Q&A. Christine?

Thank you, Jeff. Operator, we will now open the call for questions. [Operator Instructions]

[Operator Instructions] Our first question comes from Maurice Raycroft with Jefferies.

This is [ Farzin ] on for Maury. You've talked about potentially using Reverser to acutely reverse the effects of this RNA. Can you talk more about the developmental stage and timeless the clinic?

Pushkal, maybe that's one for you. It's about reversal and how are we thinking about that going forward, particularly with respect to the development plan?

Yes. Thanks. So reverse here is really an exciting opportunity that we have based on sort of advances in our RNAi platform to actually develop a way of forcing the impacts of the knockdown associated with an RNAi therapeutic, and we do have a reverse here in development for Zilebesiran. A couple of points I'll just mention. One, we've done an extensive amount of work showing that we have the -- sorry, pardon me. So we've done an extensive amount of work showing that, that's possible in vitro. In parallel, in the clinic, we've actually seen a really encouraging safety profile for Zilebesiran to date. And we're looking forward to expanding on that with the upcoming readouts from both K1 and K2. The reverse here is something that's part of the partnership with Roche, and we'll be announcing more details around that as we go forward in the development plan.

And Alnylam will be responsible...

Yes, and Alnylam will be responsible. Absolutely.

Okay, next question, please.

Our next question comes from Salveen Richter from Goldman Sachs.

When we look at Leqvios launch, there's been some challenges here. Can you just help us understand the dynamics around that and whether the Phase III cardiovascular outcomes trial being conducted earlier could help mitigate some of the aspects that are being seen in the market there and how difficult it is to build -- to create a buy-and-bill model in a cardiovascular landscape?

Yes. No, that's kind of a great question. And I think it allows us to focus on really the primary rationale for us to collaborate with Roche with respect to Zilebesiran. Because our intent here is to make sure that we're able to maximize the value of Zilebesiran by being able to bring what we believe is going to be a game-changing opportunity to a large number of patients globally. And to do that, we think it's really important to have the most robust profile available to patients, prescribers and payers at launch to really allow them to truly understand the opportunity that Zilebesiran provides to potentially transform the outcomes of patients. And it also explains one of the reasons why we've decided to partner with Roche. We believe that they have very strong capabilities. They have a broad and robust global commercial footprint, together with a track record of bringing real innovation to patients. And again, Zilebesiran is an area where we think we're going to be able to transform the management of hypertension. Roche also brings to bear some impressive capabilities with respect to their go-to-market model. And I think maybe this is an opportunity for Tolga to specifically comment on some aspects of the Roche capabilities that we think will be particularly pertinent to achieving success with a product like Zilebesiran.

Thanks, Yvonne. Thanks, Salveen. Look, as Yvonne indicated, the potential for Zilebesiran is immense. And obviously, in this very competitive process, we were looking for a partner that will help us build the capabilities and partner with us in the right way. So if you look at the track record, of Roche, particularly in the U.S. with OCREVUS in MS, HEMLIBRA in hemophilia, they've done a phenomenal job of bringing new innovative treatments that are -- have the potential to be a game changer and to completely change the market dynamics. And that's what we're looking for, given the potential of Zilebesiran, we're looking for a partner who can actually have not just the playbook, but also would be able to approach the customer engagement model and in an innovative way through account management with the expertise buy-and-bill. And they really check all the boxes for us, and we're incredibly excited to really build this category given the potential and the high unmet medical needs in this particular disease area.

That's great, Tolga. And obviously, taking some of the learnings of the Leqvio launch, I think that really underscores the importance of being able to bring these capabilities to back in the marketplace.

Thank you for that question. Next question.

We have a question from Ritu Baral from TD Cowen.

Could you walk us through the structure of the commercial strategy development group in charge of the partnership, like the committee -- I'm assuming there's a committee. Could you walk us through sort of what committee make up between the 2 companies? How that's balanced, and sort of what aspects other than geography constitute Roche's lead on development of the commercial strategy?

Sure. We've been very encouraged actually, as we've been working with Roche over the last period. And I think what is particularly impressive is the shared vision that we have around the cardiovascular therapy area and specifically the opportunity we have with Zilebesiran to really change the paradigm of hypertension treatment. But Tolga, maybe you could go a little bit detail in terms of how we're thinking about working with them going forward.

Yvonne, as you indicated, this is like -- the partnership is like marriage and then what's really important is that we need to have the same exact mindset. And in this case, what we're really excited about is how they actually approach the account management with a single accountability, and how we actually build this market? Together with Roche, it's going to be dependent on working together as a joint steering committee in terms of commercialization, and make sure that we actually have the 50-50 partnership. And obviously, it's too soon to specifically discuss how that model is going to work. But what we're really impressed is the fact that we actually have a very similar vision about how to approach their account management, how to jointly target key customers and patients?

And maybe, Ritu, just the other point just to underscore the course of deal structure, therefore, allows us to to scale and build on the current capabilities that we have in the cardiovascular space. And working together with Roche, we can do this in a way that makes sense as we continue to build our U.S. capabilities, whilst, of course, ensuring that we deliver success with respect to TTR globally.

Got it. If I could squeeze 1 more in. Is there an equity portion?

All right -- Both of you -- common then, one more.

Is there an equity portion to the deal, especially at the upfront?

Yes. No, there's no equity portion. Robust economics, no equity portion.

Our next question comes from Paul Mattis from Stifel.

This is James on for Paul. Just a quick 1 around timing. When do you think you can get an outcome study started? And it sounds like you want the Cardio III data to help inform the design and powering of the outcome study. So just curious there. And is that commitment to outcomes data at all a result of regulatory discussions? Or is it purely a commercial consideration.

Pushkal, that one is for you, I think.

Yes. Thanks, James. So you're right. We're doing -- what we've decided to do is we think that's clearly in the best interest of patients and to ensure the optimal uptake of this medicine into the treatment paradigm, shape guidelines, ensure access, et cetera, and get this drug to the maximum number of patients to launch with the cardiovascular outcomes trial. Our collaborators at Roche share that same vision. And as part of that, as you noted, we are going to be doing an additional Phase II study Cardia III, which will help us really understand better in the target population what the blood pressure lowering effects are, and that will help us properly size that outcome study. So what I can say is that we expect that Cardio III will initiate next year in 2024. And within a couple of years after that, we would imagine kicking off the cardiovascular outcomes trial. We don't have more specific details yet, but we'll put more meat on the bones as we get more information. So that's what I could update you on now. And of course, we'll have ongoing discussions with our collaborators, with the regulators as we shape the development plan going forward.

[indiscernible] as many patients as we can. And of course, all this is built on the very impressive data set that we generated on Phase I studies that as we mentioned in to our introductory remarks of the first trial, there's an excess of [indiscernible].

Our next question comes from David Lebowitz from Citi.

Given the nature of the mechanism of Zilebesiran, how do you think the drug will ultimately fit in the paradigm? Is it as long-acting, which certainly it's convenience aspect, but doctors who prescribe these types of drugs are very used to titrating. And this drug doesn't really lend itself to titrating, so what's the strategy for managing that to limit potential risks of overshooting on blood pressure reduction?

Yes, Dave, thanks for the question. Look, we -- as I tried to outline in my introductory remarks, what's really Important to note here is where the unmet needs are in this disease space, and the challenges that currently patients and physicians face in terms of trying to manage blood pressure and particularly to reduce cardiovascular risk, which is the ultimate goal here. And that's because patients can't get to goal despite being on multiple therapies. There's tremendous variability in blood pressure control that happens day-to-day, week-to-week, month-to-month. And patients don't adhere to their therapies as well as we would like. All of those things independently -- and there's lack of nocturnal dipping. All these factors independently promote the risk of cardiovascular disease. And so the profile that we've seen emerging from the Phase I study that was just published in the New England Journal this past week, really show an incredibly differentiated approach. Now you're right that there's been an established paradigm of using once a day, twice a day acting medicines to treat this disease, but that hasn't gotten us out of this pickle. Those have been remarkable advances, but there's time for more innovation to kind of disrupt this paradigm. And that's what we're out to do is to actually transform the way this disease is managed. And ultimately, we think that's what's going to be required if we want to make a dent in the huge burden that is cardiovascular morbidity and mortality in the United States and around the world. So there's a lot for us to figure out along the way. But we, and our colleagues at Roche, are committed to investing in a development plan and educational activities, et cetera, to help change the way that this disease is treated.

Next question.

We have a question from Tazeen Ahmad from Bank of America.

I had a question at just about the timing of this particular deal. As you reiterated Cardio I and II, I guess, in the next couple of months, and Cardio II would be in the next several months. So we understand why it makes sense from Roche's perspective to want to lock this in early. But from your perspective, why was now the right time to sign a partner rather than perhaps waiting to see the data because mechanistically, this is highly likely to work. And I wanted to get your thoughts on why not wait until you see the full data sets read out?

Yes. No, that's a great question. And I think as we've sort of explained in our presentation through some of the Q&A, really if we want to maximize the opportunity with Zilebesiran, it requires the size and scope of a disease like hypertension. It really requires a partner like Roche, where we can move forward expeditiously to deliver a comprehensive development plan as Pushkal has outlined, and build the capabilities and infrastructure required to maximize commercial success. While in addition to doing this, we also focus on delivering success in the TTR franchise. So with great Phase I data in hand, we believe that now is the right time to partner so that we can move this program forward in a rapid, but also as comprehensive a fashion as possible to meet the needs in kind of an area which really hasn't seen any innovation for decades.

Our next question comes from Kostas Biliouris from BMO.