ALNYLAM PHARMACEUTICALS, INC. Overview
We are a global commercial-stage biopharmaceutical company developing novel therapeutics based on RNA interference, or RNAi. RNAi is a naturally occurring biological pathway within cells for sequence-specific silencing and regulation of gene expression. By harnessing the RNAi pathway, we have developed a new class of innovative medicines, known as RNAi therapeutics. RNAi therapeutics are comprised of small interfering RNA, or siRNA, and function upstream of conventional medicines by potently silencing messenger RNA, or mRNA, that encode for disease-causing proteins, thus preventing them from being made. We believe this is a revolutionary approach with the potential to transform the care of patients with genetic and other diseases. To date, our efforts to advance this revolutionary approach have yielded the approval of two first-in-class RNAi-based medicines, ONPATTRO® (patisiran) and GIVLAARI® (givosiran). Our research and development strategy is to target genetically validated genes that have been implicated in the cause or pathway of human disease. We utilize a lipid nanoparticle (LNP) or N-acetylgalactosamine (GalNAc) conjugate approach to enable hepatic delivery of siRNAs. For delivery to the central nervous system, or CNS, and the eye (ocular delivery), we are utilizing an alternative conjugate approach. Our focus is on clinical indications where there is a high unmet need, early biomarkers for the assessment of clinical activity in Phase 1 clinical studies, and a definable path for drug development, regulatory approval, patient access and commercialization. We continue to execute on ourAlnylam 2020 strategy of building a multi-product, global, commercial biopharmaceutical company with a deep and sustainable clinical pipeline of RNAi therapeutics for future growth and a robust, organic research engine for sustainable innovation and great potential for patient impact. Based on our accomplishments to-date, we are confident we will achieve ourAlnylam 2020 goals by the end of 2020. Specifically, our broad pipeline of investigational RNAi therapeutics is focused in four Strategic Therapeutic Areas, or "STArs:" Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. We now have two marketed products that are within the Genetic Medicines STAr, ONPATTRO and GIVLAARI. ONPATTRO is approved by theUnited States Food and Drug Administration , or FDA, for the treatment of the polyneuropathy of hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, in adults and has also been approved in theEuropean Union , or EU, for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy,Japan for the treatment of transthyretin, or TTR, type familial amyloidosis with polyneuropathy, and in several additional countries. Regulatory filings in other territories are pending and additional filings are planned for 2020. GIVLAARI is approved by the FDA for the treatment of adults with acute hepatic porphyria, or AHP, and inMarch 2020 , GIVLAARI was granted marketing authorisation by theEuropean Commission , or EC, for the treatment of AHP in adults and adolescents aged 12 years and older. InJuly 2020 , we received marketing authorisation approval for GIVLAARI inBrazil for the treatment of AHP in adults. We have also filed a marketing authorisation application, or MAA, for givosiran (the non-branded drug name for GIVLAARI) inSwitzerland and additional regulatory filings are planned for 2020 and beyond. We have six late-stage investigational programs, advancing toward potential commercialization. These programs include our wholly owned programs: givosiran for the treatment of adolescent patients with AHP, lumasiran for the treatment of primary hyperoxaluria type 1, or PH1, patisiran (the non-branded drug name for ONPATTRO) for the treatment of transthyretin amyloidosis, or ATTR amyloidosis, with cardiomyopathy, and vutrisiran for the treatment of ATTR amyloidosis. Inclisiran for the treatment of hypercholesterolemia and atherosclerotic cardiovascular disease, or ASCVD, is being advanced by our partner, The Medicines Company (acquired by Novartis AG inJanuary 2020 ), or MDCO, and fitusiran for the treatment of hemophilia is being advanced by our partner Sanofi Genzyme, the specialty care global business unit of Sanofi. InDecember 2019 , we reported positive topline results from our ILLUMINATE-A Phase 3 clinical trial for lumasiran, our investigational RNAi therapeutic targeting glycolate oxidase, for the treatment of PH1, and inApril 2020 , based on the positive ILLUMINATE-A data, we submitted a New Drug Application, or NDA, which was accepted by the FDA and granted Priority Review. The FDA has set an action date ofDecember 3, 2020 under the Prescription Drug User Fee Act, and has indicated that they are not currently planning an advisory committee meeting as part of the NDA review. Additionally, inMarch 2020 , we submitted an MAA for lumasiran with theEuropean Medicines Agency , or EMA, which has been validated by the EMA. Lumasiran was previously granted an accelerated assessment by the EMA. Based on our expertise in RNAi therapeutics and broad intellectual property estate, we have formed alliances with leading pharmaceutical and life sciences companies to support our development and commercialization efforts, including Regeneron Pharmaceuticals, Inc., or Regeneron, MDCO, Sanofi Genzyme, Vir Biotechnology, Inc., or Vir, and Dicerna Pharmaceuticals, Inc., or Dicerna. InMarch 2020 , we announced an expansion of our exclusive licensing agreement with Vir for the development and commercialization of RNAi therapeutics for infectious diseases to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19. InApril 2020 , we further expanded our collaboration with Vir to include up to three human host factor targets relating to susceptibility to coronaviruses, for use in connection with the treatment, palliation, diagnosis or prevention of SARS-CoV-2 and other diseases caused by coronaviruses. 27 -------------------------------------------------------------------------------- Table of Contents InApril 2020 , we and Dicerna formed a development and commercialization collaboration on investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin deficiency-associated liver disease, or alpha-1 liver disease. In addition, inApril 2020 , we and Dicerna entered into a Patent Cross-License Agreement, pursuant to which each party agreed to cross-license its respective intellectual property related to our lumasiran and Dicerna's nedosiran investigational programs for the treatment of primary hyperoxaluria. InApril 2020 , we entered into a strategic financing collaboration with certain affiliates ofThe Blackstone Group Inc. , orBlackstone , to accelerate our advancement of RNAi therapeutics. In connection with the collaboration,Blackstone will provide us up to$2.00 billion in financing, including$1.00 billion in committed payments to acquire 50% of royalties and 75% of commercial milestones payable to us in connection with sales of inclisiran, up to$750.0 million in a first lien senior secured term loan, and up to$150.0 million towards the development of vutrisiran and ALN-AGT, subject to completion of a definitive agreement. As part of the strategic financing collaboration,Blackstone also purchased an aggregate of$100.0 million of our common stock. We have incurred significant losses since we commenced operations in 2002 and expect such losses to continue for the foreseeable future. As ofJune 30, 2020 , we had an accumulated deficit of$4.09 billion . Historically, we have generated losses principally from costs associated with the establishment of late-stage clinical and commercial capabilities, including global commercial operations, research and development activities, acquiring, filing and expanding intellectual property rights, and selling, general and administrative costs. While we believe 2019 was our peak net loss year, and believe the funding provided by our strategic financing collaboration withBlackstone should enable us to achieve a self-sustainable financial profile without the need for future equity financing, we expect to continue to incur annual net operating losses for the foreseeable future as we expand our efforts to discover, develop and commercialize RNAi therapeutics. We also anticipate that our operating results will fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods. We currently have programs focused on a number of therapeutic areas and as ofJune 30, 2020 , we are generating net revenue from product sales for two marketed products, ONPATTRO and GIVLAARI. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products and/or successfully market and sell ONPATTRO, GIVLAARI or any other approved products in the future. A substantial portion of our total revenues in recent years has been derived from collaboration revenues from strategic alliances with Regeneron, Sanofi Genzyme and MDCO. In addition to revenues from the commercial sales of ONPATTRO and GIVLAARI and potentially from sales of future products, we expect our sources of potential funding for the next several years to continue to be derived in part from existing and new strategic alliances, which may include license and other fees, funded research and development, milestone payments and royalties on product sales by our licensees, as well as funding due or available to us under our strategic financing collaboration withBlackstone . The COVID-19 Pandemic InMarch 2020 , theWorld Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic, which continues to spread throughout theU.S. and worldwide. We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the current COVID-19 pandemic. We are continuing to monitor the global pandemic and spread of COVID-19 and plan to continue taking steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic. The spread of COVID-19 has caused us to modify our business practices, including implementing a global work from home policy for all employeeswho are able to perform their duties remotely and restricting all nonessential business travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the patients we serve and other business partners in light of COVID-19. At this time, we cannot predict when certain restrictions that are in place to protect our employees can be safely reduced or will no longer be needed. Given the fluidity of the COVID-19 pandemic and the uncertainty on whether a second wave of the COVID-19 pandemic will occur later in calendar year 2020 or 2021, we do not yet know the full extent of the impact of COVID-19 on our business operations. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19. We will continue to work diligently with our partners and stakeholders to continue supporting patient access to our approved medicines, advancing our product candidates under regulatory review as well as in our clinical studies to the extent safe to do so for patients, caregivers and healthcare practitioners, and ensuring the continuity of our manufacturing and supply chain. For additional information related to the actual or potential impacts of COVID-19 on our business, please read Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q. 28 -------------------------------------------------------------------------------- Table of Contents Research and Development Since our inception, we have focused on drug discovery and development programs. Research and development expenses represent a substantial percentage of our total operating expenses, as reflected by our broad pipeline of clinical development programs, which includes multiple programs in late-stage development. Our broad pipeline, including two approved products and multiple investigational RNAi therapeutics across all stages of development, is focused in four STArs: Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. Commercial Products and Late-Stage Clinical Development Pipeline The chart below is a summary of our commercial products and late-stage development programs as ofAugust 5, 2020 . It identifies those programs for which we have received marketing approval, those programs for which we have received Breakthrough Therapy Designation from the FDA, the stage of these programs and our commercial rights to such programs: [[Image Removed: alny-20200630_g1.jpg]] Early-Stage Clinical Development Pipeline The chart below is a summary of our early-stage development programs as ofAugust 5, 2020 . It identifies those programs in which we have achieved human proof-of-concept, or POC, by demonstrating target gene knockdown and/or additional evidence of activity in clinical studies, the stage of these programs, and our commercial rights to such programs, as well as programs which we believe could result in an IND or CTA filing in 2020: 29
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During the second quarter of 2020 and recent period, we reported the following
updates from ONPATTRO and GIVLAARI commercialization and our late-stage clinical
programs:
Commercial
ONPATTRO
•We achieved ONPATTRO global net product revenues for the second quarter of 2020
of $66.5 million , and continued progress with market access efforts with recent
launches in Spain and Italy .
GIVLAARI
•We achieved GIVLAARI global net product revenues for the second quarter of 2020
of $11.0 million , received marketing authorization approval for GIVLAARI in
Brazil , and continued progress with market access efforts with a launch in
Germany .
Late-Stage Clinical Development
•We continued to advance the development of patisiran for the potential
treatment of the cardiomyopathy of both hereditary and wild-type ATTR
amyloidosis, and continued enrollment in the APOLLO-B Phase 3 study in ATTR
amyloidosis patients with cardiomyopathy.
•We submitted an MAA for givosiran in Switzerland and Israel .
•We continued to advance lumasiran for the treatment of PH1:
•Completed the rolling submission of an NDA to the FDA and submitted an MAA to
the EMA, with both applications now accepted;
•Presented complete results from the ILLUMINATE-A Phase 3 study;
•Continued treating patients in ILLUMINATE-B, a global Phase 3 pediatric study
of lumasiran in PH1 patients less than six years of age with preserved renal
function, and remain on track to report topline results in mid-2020; and
•Continued enrollment in the ILLUMINATE-C Phase 3 study of lumasiran for the
treatment of advanced PH1 in patients of all ages.
•We continued to advance vutrisiran, a subcutaneously administered
investigational RNAi therapeutic in development for the treatment of ATTR
amyloidosis:
•Continued treating patients in the fully enrolled HELIOS-A Phase 3 study of
vutrisiran in hATTR amyloidosis patients with polyneuropathy, and remain on
track to report topline results in early 2021;
•Received Fast Track Designation from the FDA for the treatment of the
polyneuropathy of hATTR amyloidosis; and
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•Continued enrollment in the HELIOS-B Phase 3 study in ATTR amyloidosis patients
with cardiomyopathy.
•Inclisiran continued to advance under our partner, MDCO (which was acquired by
Novartis AG in January 2020 ), and is undergoing review for approval in the U.S.
and EU.
•Our partner, Sanofi Genzyme, continued enrollment in the ATLAS Phase 3 program
for fitusiran in patients with hemophilia A or B with and without inhibitors,
with topline results expected in the first half of 2021.
There is a risk that any drug discovery or development program may not produce
revenue for a variety of reasons, including the possibility that we will not be
able to adequately demonstrate the safety and effectiveness of the product
candidate. Moreover, there are uncertainties specific to any new field of drug
discovery, including RNAi. The success of ONPATTRO, GIVLAARI or any other
product candidate we develop is highly uncertain. Due to the numerous risks
associated with developing drugs, including those risks associated with the
COVID-19 pandemic, we cannot reasonably estimate or know the nature, timing and
estimated costs of the efforts necessary to complete the development of any
potential product candidate or indication, or the period, if any, in which
material net cash inflows will commence from any approved product or indication.
Any failure to complete any stage of the development of any potential products
or any approved product for an expanded indication in a timely manner or
successfully launch, market and sell any approved product, including ONPATTRO
and GIVLAARI, could have a material adverse effect on our operations, financial
position and liquidity. A discussion of some of the risks and uncertainties
associated with completing our research and development programs within the
planned timeline, or at all, and the potential consequences of failing to do so,
are set forth in Part II, Item 1A below under the heading "Risk Factors."
Strategic Alliances
Our business strategy is to develop and commercialize a broad pipeline of RNAi
therapeutic products directed towards our four STArs. As part of this strategy,
we have entered into, and expect to enter into additional, collaboration and
licensing agreements as a means of obtaining resources, capabilities and funding
to advance our investigational RNAi therapeutic programs.
Our collaboration strategy is to form alliances that create significant value
for ourselves and our collaborators in the advancement of RNAi therapeutics as a
new class of innovative medicines. Specifically, with respect to our CNS/Ocular
Disease pipeline, in April 2019 , we entered into a global, strategic
collaboration with Regeneron to discover, develop and commercialize RNAi
therapeutics for a broad range of diseases by addressing disease targets
expressed in the eye and CNS, in addition to a select number of targets
expressed in the liver. In July 2020 , Regeneron exercised its
co-development/co-commercialization option on our first CNS-targeted development
candidate, ALN-APP, an investigational RNAi therapeutic in development for the
treatment of hereditary cerebral amyloid angiopathy and autosomal dominant
Alzheimer's Disease, which we will lead.
With respect to our Cardio-Metabolic pipeline, in March 2013 , we entered into an
exclusive, worldwide license with MDCO (acquired by Novartis AG in January 2020 )
pursuant to which MDCO was granted the right to develop, manufacture and
commercialize RNAi therapeutics targeting PCSK9 for the treatment of
hypercholesterolemia and other human diseases, including inclisiran. In March
2018 , we entered into a discovery collaboration with Regeneron to identify RNAi
therapeutics for nonalcoholic steatohepatitis, or NASH, and potentially other
related diseases, and in November 2018 , we and Regeneron entered into a
separate, fifty-fifty collaboration to further research, co-develop and
commercialize any therapeutic product candidates that emerge from these
discovery efforts. In April 2020 , we entered into a development and
commercialization collaboration with Dicerna to advance investigational RNAi
therapeutics for the treatment of alpha-1 liver disease.
With respect to our Hepatic Infectious Disease pipeline, in October 2017 , we
announced an exclusive licensing agreement with Vir for the development and
commercialization of RNAi therapeutics for infectious diseases, including
chronic hepatitis B virus, or HBV, infection. In March 2020 , we announced an
expansion of our exclusive licensing agreement with Vir to include the
development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the
virus that causes the disease COVID-19. In April 2020 , we further expanded our
broad multi-target existing collaboration for the development and
commercialization of RNAi therapeutics for infectious diseases to include up to
three additional targets focused on host factors for SARS-CoV-2, including
angiotensin converting enzyme-2, or ACE2, and transmembrane protease, serine 2,
or TMPRSS2.
With respect to our Genetic Medicine pipeline, we formed a broad strategic
alliance with Sanofi Genzyme in 2014. In January 2018 , we and Sanofi Genzyme
amended our 2014 collaboration and entered into the Exclusive License Agreement,
referred to as the Exclusive TTR License, under which we have the exclusive
right to pursue the further global development and commercialization of all TTR
products, including ONPATTRO, vutrisiran and any back-up products, and the
ALN-AT3 Global License Terms, referred to as the AT3 License Terms, under which
Sanofi Genzyme has the exclusive right to pursue the further global development
and commercialization of fitusiran and any back-up products. In April 2019 , we
and Sanofi Genzyme agreed to further amend the 2014 Sanofi Genzyme collaboration
to conclude the research and option phase and to amend and restate the AT3
License Terms to modify certain of the business terms.
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Critical Accounting Policies and Estimates
Liability Related to the Sale of Future Royalties
In April 2020 , we entered into a purchase and sale agreement with Blackstone ,
prompting our adoption of a new accounting policy associated with the liability
related to the sale of future royalties. Please read Note 1 and Note 5 to our
condensed consolidated financial statements included in Part I, Item 1,
"Financial Statements (Unaudited)," of this Quarterly Report on Form 10-Q for a
discussion of the policy and the accounting implications of this agreement,
respectively.
Our critical accounting policies are described in the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section of our
Annual Report on Form 10-K for the year ended December 31, 2019 , which we filed
with the SEC on February 13, 2020 . There have been no significant changes to our
critical accounting policies since the beginning of this fiscal year other than
with respect to the liability related to the sale of future royalties described
above.
Results of Operations
The following data summarizes the results of our operations:
Three Months Ended June 30 , Six Months Ended June 30 ,
(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change
Total revenues $ 103,962 $ 44,714 $ 59,248 133 % $ 203,438 $ 78,008 $ 125,430 161 %
Operating costs and expenses
8 % $ 612,455 $ 503,067 $ 109,388 22 %
Loss from operations $ (198,859) $ (236,271) $ 37,412 (16) % $ (409,017) $ (425,059) $ 16,042 (4) %
Total other income $ 20,956 $ 17,750 $ 3,206 18 % $ 49,468 $ 25,318 $ 24,150 95 %
Net loss $ (179,229) $ (219,481) $ 40,252 (18) % $ (361,450) $ (401,396) $ 39,946 (10) %
Discussion of Results of Operations
Revenues
Total revenues consist of the following:
Three Months Ended June 30 , Six Months Ended June 30 ,
(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change
Net product revenues $ 77,533 $ 38,231 $ 39,302 103 % $ 149,471 $ 64,522 $ 84,949 132 %
Net revenues from collaborations 26,429 6,483 19,946 308 % 53,967 13,486 40,481 300 %
Total $ 103,962 $ 44,714 $ 59,248 133 % $ 203,438 $ 78,008 $ 125,430 161 %
Net product revenues
Net product revenues consist of the following, by region:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except
percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change
United States $ 40,929 $ 28,192 $ 12,737 45 % $ 83,399 $ 46,952 $ 36,447 78 %
Europe 25,357 10,039 15,318 153 % 46,523 17,570 28,953 165 %
Rest of World (primarily
Japan) 11,247 - 11,247 N/A 19,549 - 19,549 N/A
Total $ 77,533 $ 38,231 $ 39,302 103 % $ 149,471 $ 64,522 $ 84,949 132 %
Net product revenues consist of the following, by product:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except
percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change
ONPATTRO $ 66,535 $ 38,231 $ 28,304 74 % $ 133,199 $ 64,522 $ 68,677 106 %
GIVLAARI 10,998 - 10,998 N/A 16,272 - 16,272 N/A
Total $ 77,533 $ 38,231 $ 39,302 103 % $ 149,471 $ 64,522 $ 84,949 132 %
32-------------------------------------------------------------------------------- Table of Contents Net product sales increased during the three and six months endedJune 30, 2020 , as compared to the same periods in the prior year, as a result of the continued, global expansion of ONPATTRO, in addition to sales generated from our second marketed product, GIVLAARI, following commercial launch in theU.S. in November andDecember 2019 , respectively, and initial European launch of GIVLAARI in the second quarter of 2020. We expect net product revenues to increase for the twelve-month period endingDecember 31, 2020 , as compared to the same period in 2019, as we continue to add new patients onto ONPATTRO and GIVLAARI therapy, as well as launch our approved products into additional markets, assuming regulatory approvals. Net revenues from collaborations Net revenues from collaborations consist of the following: Three Months EndedJune 30 , Six Months EndedJune 30 , (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change Regeneron$ 15,413 $ 700 $ 14,713 2,102 %$ 34,916 $ 700 $ 34,216 4,888 % Vir 6,448 1,091 5,357 491 % 12,964 2,019 10,945 542 % MDCO 3,878 - 3,878 N/A 4,938 1,745 3,193 183 % Sanofi 373 4,383 (4,010) (91) % 373 8,500 (8,127) (96) % Other 317 309 8 3 % 776 522 254 49 % Total$ 26,429 $ 6,483 $ 19,946 308 %$ 53,967 $ 13,486 $ 40,481 300 % Net revenues from collaborations increased during the three and six months endedJune 30, 2020 , as compared to the same periods in the prior year, primarily due to an increase in revenues recognized in connection with our collaboration agreement with Regeneron. We expect net revenues from collaborations to increase for the twelve-month period endingDecember 31, 2020 , as compared to the same period in 2019, primarily due to increased reimbursable activities and milestones under our collaborations with Regeneron and Vir. Operating Costs and Expenses Operating costs and expenses consist of the following: Three Months EndedJune 30 , Six Months EndedJune 30 , (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change Cost of goods sold$ 19,929 $ 4,326 $ 15,603 361 %$ 33,231 $ 7,673 $ 25,558 333 % Research and development 154,996 163,890 (8,894) (5) % 324,567 293,017 31,550 11 % Selling, general and administrative 127,896 112,769 15,127 13 % 254,657 202,377 52,280 26 % Total$ 302,821 $ 280,985 $ 21,836 8 %$ 612,455 $ 503,067 $ 109,388 22 % Cost of goods sold. Cost of goods sold includes the cost of producing and distributing inventories that are related to product revenues, costs related to sales of product supply under our collaboration agreements, third-party royalties and amortization of licensing rights. Based on our inventory policy, we record costs associated with the manufacturing of our products as research and development expense until we determine it is probable that these costs will be recovered through commercial sale (zero-cost inventory). Cost of goods sold increased during the three and six months endedJune 30, 2020 , as compared to the same periods in the prior year, due to the increase in third-party royalties and sales of capitalized inventory. During the three and six months endedJune 30, 2020 , product sold and recognized as revenue was substantially from capitalized inventory, whereas during the three and six months endedJune 30, 2019 , all units of product sold and recognized as revenue were zero-cost inventory. We will continue to sell our zero-cost inventory of GIVLAARI throughout 2020. We anticipate variability in our cost of goods sold as a percentage of net product revenues due to the timing of manufacturing runs and utilization and the depletion of zero-cost inventories, as well as future product launches. We expect that cost of goods sold will increase for the twelve-month period endingDecember 31, 2020 , as compared to the same period in 2019, primarily as a result of an expected increase in net product sales as well as the sale of capitalized inventory. 33
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Three Months Ended June 30 , Six Months Ended June 30 ,
(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change
Compensation and related $ 49,314 $ 35,310 $ 14,004 40 % $ 97,477 $ 71,687 $ 25,790 36 %
Clinical trial and manufacturing 44,527 52,046 (7,519) (14) % 101,052 86,647 14,405 17 %
External services 18,277 17,078 1,199 7 % 35,938 30,608 5,330 17 %
Facilities-related 17,701 13,178 4,523 34 % 33,402 25,405 7,997 31 %
Stock-based compensation 15,790 15,282 508 3 % 31,839 31,407 432 1 %
Lab supplies, materials, and other 9,387 10,765 (1,378) (13) % 22,446 19,432 3,014 16 %
License Fees - 20,231 (20,231) (100) % 2,413 27,831 (25,418) (91) %
Total $ 154,996 $ 163,890 $ (8,894) (5) % $ 324,567 $ 293,017 $ 31,550 11 %
For the three months ended June 30, 2020 , the decrease in research and
development expenses, as compared to the same period in the prior year, was
primarily related to the following:
•Decreased license fees due to the execution of our collaboration agreement with
Regeneron in April 2019 ; and
•Decreased clinical trial and manufacturing expenses associated with material
manufactured for clinical trials.
Partially offset by:
•Increased compensation and related expenses as a result of increased headcount
to support long-term strategic growth.
For the six months ended June 30, 2020 , the increase in research and development
expenses, as compared to the same period in the prior year, was primarily
related to the following:
•Increased compensation and related expenses as a result of increased headcount
to support long-term strategic growth;
•Increased clinical trials and manufacturing and lab supplies, materials and
other expenses as a result of increased preclinical and clinical services
related to the advancement of our early- and late-stage programs to support our
long-term strategic goals; and
•Increased facilities-related expenses as a result of costs recognized in
connection with placing portions of our cGMP manufacturing facility into
service.
Partially offset by:
•Decreased license fees related to the execution of our collaboration agreement
with Regeneron in April 2019 and regulatory milestones deemed probable in 2019.
During the three and six months ended June 30, 2020 and 2019, in connection with
advancing activities under our collaboration agreements, we incurred research
and development expenses, primarily related to external development and
manufacturing services. The following table summarizes research and development
expenses incurred, for which we recognize net revenue, that are directly
attributable to our collaboration agreements, by collaboration partner:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2020 2019 2020 2019
Regeneron $ 15,440 $ 991 $ 31,543 $ 991
Vir 4,795 471 6,879 1,130
MDCO 278 75 1,542 1,747
Sanofi 376 3,060 624 8,080
Total $ 20,889 $ 4,597 $ 40,588 $ 11,948
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Table of Contents Selling, general and administrative. Selling, general and administrative expenses consist of the following:
Three Months Ended June 30 , Six Months Ended June 30 ,
(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change
Compensation and related $ 48,141 $ 40,592 $ 7,549 19 % $ 94,970 $ 70,715 $ 24,255 34 %
Consulting and professional services 41,318 34,811 6,507 19 % 80,310 60,637 19,673 32 %
Facilities-related and other 20,472 22,045 (1,573) (7) % 42,883 39,797 3,086 8 %
Stock-based compensation 17,965 15,321 2,644 17 % 36,494 31,228 5,266 17 %
Total $ 127,896 $ 112,769 $ 15,127 13 % $ 254,657 $ 202,377 $ 52,280 26 %
For the three and six months ended June 30, 2020 , the increase in selling,
general and administrative expenses, as compared to the same periods in the
prior year, was primarily related to the following:
•Increased compensation and related and consulting and professional services
expenses as a result of increased headcount to support long-term strategic
growth and potential additional product launches in 2020 and thereafter, as well
as the continued commercialization of ONPATTRO and GIVLAARI.
We expect that research and development expenses combined with selling, general
and administrative expenses will increase for the twelve-month period ending
December 31, 2020 , as compared to the same period in 2019, as we continue to
develop our pipeline, advance our product candidates, including partnered
programs, into later-stage development, prepare regulatory submissions and
build-out of our global commercial infrastructure and field team to support
ONPATTRO, GIVLAARI and potentially additional product launches. However, we
expect that certain expenses will be variable depending on the timing of
manufacturing batches, clinical trial enrollment and results, regulatory review
of our product candidates and programs, and stock-based compensation expenses
due to our determination regarding the probability of vesting for
performance-based awards.
Total Other Income. For the three and six months ended June 30, 2020 , total
other income increased, as compared to the same periods in the prior year,
primarily due to unrealized gains in marketable equity securities of $45.5
million and $69.6 million , respectively, offset by $27.2 million of interest
expense due to the sale of future royalties.
Liquidity and Capital Resources
The following table summarizes our cash flow activities:
Six Months Ended June 30,
(In thousands) 2020 2019
Net loss $ (361,450)
65,094 77,567
Changes in operating assets and liabilities (85,135) 424,014
Net cash (used in) provided by operating activities (381,491) 100,185
Net cash used in investing activities (327,542) (186,750)
Net cash provided by financing activities 742,882 803,541
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(196) (3)
Net increase in cash, cash equivalents and restricted cash 33,653
716,973
Cash, cash equivalents and restricted cash, beginning of period
549,628 422,631
Cash, cash equivalents and restricted cash, end of period
Since we commenced operations in 2002, we have generated significant losses. As ofJune 30, 2020 , we had an accumulated deficit of$4.09 billion . As ofJune 30, 2020 , we had cash, cash equivalents and marketable debt and equity securities of$1.93 billion , compared to$1.54 billion as ofDecember 31, 2019 . Operating activities Net cash used in operating activities increased during the six months endedJune 30, 2020 , compared to the same period in 2019, primarily due to the receipt of$400 million inMay 2019 for the upfront payment associated with our strategic collaboration with Regeneron. In addition, cash used in operating activities during the six months endedJune 30, 2020 increased as a result of changes in working capital to support corporate growth. 35
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Table of Contents Investing activities Net cash used in investing activities increased during the six months endedJune 30, 2020 , compared to the same period in the prior year, primarily due to the purchase of marketable debt securities. Financing activities Net cash provided by financing activities decreased during the six months endedJune 30, 2020 , compared to the same period in the prior year, primarily due to proceeds of$400.0 million from our issuance of common stock to Regeneron inApril 2019 and$381.9 million received from ourJanuary 2019 underwritten public offering, offset by$500.0 million received from our sale of the MDCO royalty interest inApril 2020 and net proceeds of$151.5 million from the issuance of common stock in connection with stock option exercises and other types of equity during the six months endedJune 30, 2020 . Operating Capital Requirements We currently have programs focused on a number of therapeutic areas and, as ofJune 30, 2020 , have two globally marketed products, ONPATTRO and GIVLAARI. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products in the future. In addition, we anticipate that we will continue to generate significant losses for the foreseeable future as a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical and commercial capabilities, including global operations, continued management and growth of our intellectual property including our patent portfolio, collaborations and general corporate activities. Based on our current operating plan, we believe that our cash, cash equivalents and marketable debt and equity securities as ofJune 30, 2020 , together with the cash we expect to generate from product sales, and under our current alliances, as well as the funds due or available to us as a result of the strategic financing collaboration withBlackstone , will be sufficient to enable us to advance our long-term strategic goals for multiple years from the filing of this Quarterly Report on Form 10-Q. Although we believe the strategic financing collaboration withBlackstone will enable us to achieve a self-sustainable financial profile without the need for further equity financing, in the future, we may seek additional funding through new collaborative arrangements, public or private debt financings, royalty or other monetization transactions or a combination of one or more of these funding sources. Additional funding may not be available to us on acceptable terms or at all. Moreover, the terms of any additional financing may adversely affect the holdings or the rights of our stockholders. Contractual Obligations and Commitments The disclosure of our contractual obligations and commitments is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . InApril 2020 , we entered into a purchase and sale agreement withBlackstone , resulting in an initial recognition of$1.00 billion liability related to the sale of future royalties. Please read Note 5 to our condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q for a description of this agreement. As a result, we expect our contractual obligations through 2036 will increase from the amounts previously disclosed in our 2019 Annual Report on Form 10-K due to payments under this agreement. Recent Accounting Pronouncements Please read Note 2 to our condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (Unaudited)," of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.
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