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Executives

Cynthia Clayton – Vice President-Investor Relations

John Maraganore – Chief Executive Officer

Clive Meanwell – Chairman and Chief Executive Officer, The Medicines Company

Michael Mitchell – Head-Global Communications, The Medicines Company

Analysts

Marko Kozul – Leerink Swann

Adnan S. Butt – RBC Capital Markets

Geoff C. Meacham – JPMorgan Securities LLC

Biren Amin – Jefferies & Co., Inc.

Michael G. King – JMP Securities LLC

Steve Byrne – Bank of America Merrill Lynch

Megan Dow – MLV & Co.

Joseph Schwartz – Leerink Swann

Neera Dahiya Ravindran – Piper Jaffray, Inc.

Omar Rifat – ISI Group Inc.

Omar Saad – ISI group

Mark Monane – Needham & Company

Alnylam Pharmaceuticals, Inc. (ALNY) Discussion of The Medicines Company and Alnylam Strategic Alliance to Develop and Commercialize ALN-PCS Conference Call February 4, 2013 8:30 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Medicines Company and Alnylam Pharmaceuticals Conference Call to discuss their new alliance. There will be a question-and-answer session to follow. Please be advised that this call is being taped at the Company’s request.

I would now like to turn the call over to Alnylam.

Cynthia Clayton

Good morning everyone. I’m Cynthia Clayton, Vice-President Investor Relations and Corporate Communications at Alnylam. With me today from Alnylam are John Maraganore, Chief Executive Officer; and Laurence Reid, Senior Vice President, and Chief Business Officer; also in the room and available for Q&A are Barry Greene, President and Chief Operating Officer; and Mike Mason, Vice President Finance and Treasurer.

Our colleagues of the Medicines Company are also on the line, and I will turn it over to them for introduction, Michael.

Michael Mittel

Thanks Cynthia. And I’m Michael Mitchell, Head of Global Communications for The Medicines Company, and with me today are Clive Meanwell, our Chairman, and Chief Executive Officer who will provide some prepared remarks, and joining us for the Q&A on the phone are David Kallend, Global Medical Director for our Lipid program and Herman Kempen, Senior Director for our Lipid Franchise. Also Ray Russo our Vice-President along the Chest Pain Pathway, and Glenn Sblendorio, our President and CFO, and Head of our New Business Ventures.

Before we begin, I’d like to remind you that this call will contain remarks concerning the Medicines Company’s and Alnylam future expectations, plan 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 quarterly reports on file with the SEC. In addition any forward-looking statements represent our views only as the date of this reporting and should not relied upon as representing our views as of any subsequent date, we specifically disclaim any obligations to update such statements.

And with that I’ll turn it back over to John Maraganore. John.

John Maraganore

Thanks, Michael. Welcome everyone and thanks for joining us this morning. We are very please to announced that we’ve formed an exclusive global strategic alliance with The Medicines Company to develop and commercialize RNAi therapeutics targeting PCSK9 for the treatment of hypercholesterolemia.

As all of you are aware cardiovascular disease and in particular coronary artery disease leading to heart attacks remains the leading cause of mortality worldwide, with elevated LDL-cholesterol a major modifiable risk factor. New strategies are clearly needed to significantly and rapidly reduce LDL-C and prevent acute cardiovascular events that result from the rupture of cholesterol rich plaque.

As a key regulator of the LDL receptor, liver-expressed PCSK9 is one of the most important and best validated new targets in molecular medicine today for the treatment of hypercholesterolemia. PCSK9 is a protein that regulates LDL receptor levels on hepatocytes; gain-of-function human mutations in PCSK9 are associated with hypercholesterolemia while loss-of-function mutations are associated with lower levels of LDL cholesterol and it markedly reduced risk of cardiovascular disease.

ALN-PCS is an RNAi therapeutic that access a PCSK9 synthesis inhibitor reducing intracellular and extracellular levels of PCSK9, which results in lower levels of plasma LDL-C. We believe that the ALN-PCS program holds great promise for the development of a significant therapeutic option for patients with hypercholesterolemia, and that the unique mechanism of action for ALN-PCS could provide a differentiated and potentially best-in-class strategy for PCSK9 antagonism.

Specifically and is compared with monoclonal antibodies targeting PCSK9, ALN-PCS blocks both intracellular and extracellular levels of PCSK9. Further the very wide variation in plasma levels of PCSK9 in humans means that fixed doses of an antibody may represent an over dose for some patients, and yet be inadequate in others instead by blocking PCSK9 synthesis with an RNAi therapeutic we can provide the right dose for all patients.

This new alliance with The Medicines Company unites two organizations with the share culture and commitment innovation. For Alnylam this partnership enables the enhancement of ALN-PCS, an important program within our Alnylam 5x15 product development in commercialization strategy, which is focused on RNAi therapeutics targeting genetically validated disease genes.

In my view in past experience there could be no stronger partner for our program than The Medicines Company, which has demonstrated industry wide leadership in the advancement of cardiovascular medicines to patients and remarkable success in the strategy of in licensing, developing, and commercializing great two products.

For example when The Medicines Company introduced Angiomax to the market, they essentially sidelined the efforts of Merck, Merck, Eli Lilly and Schering-Plough with their antiplatelet drugs, and then all readying to launch. More recently when AstraZeneca decided to enhance their engagement programs with U.S. hospitals for their antiplatelet drug Brilinta. They turn to The Medicines Company for help.

In short this is a team with a proven track record, with whom we can truly collaborate to advance ALN-PCS as a major new medicine.

With that, I’d like to turn it over to Clive. Clive?

Clive Meanwell

Well, thanks very much John and good morning to everyone. It is a pleasure to be online with John and his colleagues from Alnylam to announce and discuss a global strategic alliance. This is a unique and exciting opportunity for us to work closely with the company that is leading the translation of RNAi as a new class of innovative medicines for the treatment of genetically defined diseases.

We believe that Alnylam and The Medicines Company will constitute a new and prominent force combined developing and potentially commercializing RNAi therapeutics targeting PCSK9 for the treatment of hypercholesterolemia.

Our customers at present kind of 2,500 leading hospitals worldwide that deliver around 80% of acute and sub-acute management of higher risk coronary artery disease. These are also increasingly the sense that investigate, and direct the management of patients with higher risk atheromatous disease, such patients require sophisticated diagnostics including coronary angiography, intracoronary ultrasound and MRI. They also require on the spot treatment option such as PCI and cardiac surgery.

Just as the management decisions for ACS have migrated from cardiology offices to multidisciplinary teams in hospitals, so two we believe will the major decisions made related to disease modifying therapies for high risk atherosclerosis patients. As resource allocations for patient management become increasingly constrained, so decision makers need to become more selective, and a lot more sophisticated that puts the hospital team notably the interventional cardiologist at the center of decision making. This fundamental trend can particularly be anticipated when it comes to high volume interventions, such as a potentially disease modifying treatments of PCSK9 synthesis inhibition reducing bad cholesterol to levels not previously feasible, and ApoA-1 Milano or MDCO-216 elevating good cholesterol levels, and reverse transport capacity, which are also unprecedented.

For us these two approaches lowering LDL-C, and enhancing HDL-C remained the most important target for coronary artery disease today. They have the potential of making a very positive impact on patients with risk of stroke, and peripheral artery disease as well as coronary disease.

John describe the practical fit between our firms, a technology leader Alnylam is able to lead and undertake the next steps of pre-clinical manufacturing in Phase I. II clinical development following that positive preliminary clinical results in the treatment of severe cholesterolemia. First shown in 2012, when they demonstrated that this therapeutic achieved robust silencing of PCSK9, and reductions of over 50% in LDL-C.

At The Medicines Company we focused on large and later stage Phase II, III clinical trails in coronary artery disease patients and also on commercial scale manufacturing and distribution. Furthermore this is a market that we know particularly the high risk segment while we may anticipate PCSK9 synthesis inhibition can have the greatest initial impact on value.

In addition to the merit capabilities of our firms business with Alnylam the deal make sense for us strategically. We are growing business today driven by our marketed products Angiomax, Recothrom, Cleviprex, ready-to-use Argatroban and ten other acute care injectable products.

We’ve recently announced positive Phase III trial results with Cangrelor and oritavancin augmented our medium-term growth prospects, further by acquiring the IONSYS post-operative analgesia product.

And of course this alliance with Alnylam now adds PCSK9 inhibition trial longer term ambition along side our ApoA-1 Milano or MDCO-216 compound. It’s important to note the agreement keeps our short-term priorities focused on late stage assets while Alnylam will continue to perform early stage development funded by the financial arrangements. It is also too important to note that at The Medicines Company, we are rapidly building what we believe is a world class team for lipid mediated disease modification programs. The team includes a number of people on this call, David Kallend M.D. who joined us recently, David led programs in the clinic for CRESTOR with AstraZeneca for Dalcetrapib at Roche and advice Genentech on their PCSK9 program.

Also with us is Herman Kempen, Phd who has led research and drug discovery teams in the area of lipids and atherosclerosis for 18 years, published 90 papers in her several patents in the field.

And of course, we were also fortunate to have Ray Russo who has over 25 years in the industry including deep experience in commercializing cardiovascular and particularly dyslipidemia compounds such as Zetia and Vytorin when he was at Schering-Plough, and where Ray was Global Vice President of cardiovascular marketing, a key figure in the joint venture with Merck. Combined those two products, Zetia and Vytorin achieved global peak sales in excess of $5 billion.

With global rights to the PCSK9 program and to ApoA-1 Milano, we believe we have the best shot at making a major difference in arterial disease, and the opportunity to live up to that purpose, which is to save lives, alleviate suffering, and improve the economic efficiency of leading hospitals.

We expect greatest initial health and the economic impact, maybe anticipated among patients with vulnerable plaque, those who are resistant to current treatments or who have particularly aggressive hypercholesterolemia. Beyond these specialized, but nevertheless, large numbers of patients, we may anticipate broadening of disease modification approaches to even larger global markets with time.

In any event, disease modification, which can reduce the risk and incidents of death myocardial infarction, strokes, peripheral arterial occlusion, and the need for a culinary other end of vascular or major surgical interventions is likely to unlock enormous financial value for healthcare systems and support attractive revenue and profitability goals.

Taken together, PSK9 and ApoA-1 Milano puts us in to a potentially leading position in this field, and we look forward to working with our colleagues at Alnylam for whom we have great affinity and admiration based upon earlier encounters, particularly around Angiomax, which of course was invented by John.

Through this collaboration, we’ll make every effort together maximize the value of the ALN-PCS program, and to explain the basis of the collaboration. But further Laurence Reid, Senior Vice President and Chief Business Officer of Alnylam will now review some specifics for the agreement. Over to you, Laurence.

Laurence Reid

Thank you. Clive. Good morning, everybody. In 2012, Alnylam completed the Phase I trial of ALN-PCS02 in healthy volunteer subjects with elevated baseline LDL-C. Those results showed that administering a single intravenous dose of our drug in the absence of concomitant lipid-lowering agents such as statins, resulted in statistically significant and durable reductions of PCSK9 plasma levels of up to 84% and lowering of LDL-C of up to 50%. ALN-PCS02 was shown to be generally safe and well tolerated in the study, and there are no serious adverse events related to study drug.

We’ve also presented pre-clinical data from our ALN-PCS program demonstrating potent knockdown of the PCSK9 target gene with an ED50 of less than 0.3 mg/kg after a single subcutaneous dose.

This potency level enables subcutaneous dosing in humans at an injection volume of 1 ml or less and with an expected dose frequency of once every once two weeks. We and The Medicines Company intend to collaborate on the further development of the ALN-PCS Program, which includes both ALN-PCS02 and IV administered RNAi therapeutic, which has completed the Phase I trial, as I mentioned, and ALN-PCS, subcutaneously administered RNAi therapeutic currently in the pre-clinical development.

While funded by The Medicines Company, Alnylam will continue the program for an estimated one to two years, and we’re going to complete during that time certain pre-clinical and Phase I clinical studies. The Medicines Company will then lead and fund the developments from Phase II forward and commercialize product out of the ALN-PCS program as when successful.

Under the terms of the agreement, Medicines Company will make an upfront cash payment of $25 million to Alnylam. Alnylam may also receive potential development in commercial milestone payments of up to $180 million. Finally, Alnylam will be eligible to receive scaled double digit royalties of global product sales for ALN-PCS product.

Overall, the Medicines Company and Alnylam share the objective to get this drug to patients. We believe this alliance is ideally structured to enable that by leveraging our organizations’ respective strengths and that successful outcome will realize the very significant value for both parties.

Regarding the impact of this transaction on our financial profile, we plan to announce our fourth quarter and year-end 2012 results this Thursday afternoon and we will discuss our 2013 financial guidance at that time.

With that I am going to turn the call back over to John for to have the Q&A. John?

John Maraganore

Yeah, thanks Laurence and Stephanie, I think we are now opened for Q&A

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Marko Kozul from Leerink Swann. Your line is open.

Marko Kozul – Leerink Swann

Hi good morning. Congratulations to both companies on the partnership.

John Maraganore

Thanks Marko.

Marko Kozul – Leerink Swann

Thanks. Maybe first question, can you talk a little bit about how you envision initial and potentially longer-term positioning of both PCS02 and PCS subcutaneous?

John Maraganore

Sure. Clive, do you want to comment on that?

Clive A. Meanwell

Yeah, I think that – yeah, I will. From our perspective, we would like to see the product positioned in places where we can create the most economic value as well as the biggest healthcare impact, and that’s generally been our approach at the firm. I think there is a number of groups within the LDL-C population that sit within the statins world, clearly developing the drug for everyone who takes a statin, right off the bat is not something we're planning to do together. But clearly, statin intolerance, patients at very high risk due to acute coronary syndrome history and perhaps patients who can’t reach Gulf or some other regions may well for us be the place to start.

We have a policy at the company of going up to the situations where we can create so called economic dominance, meaning improved outcomes at the same or lower cost of the healthcare system, and I think you are going to see is leveraging the incredible potential attributes of this product in those areas first.

Marko Kozul – Leerink Swann

Clive, it sure did. Maybe just a follow-up. Do you foresee both compounds being directed initially towards the same indication or diverging them early on towards different subpopulations?

John Maraganore

Yeah Marko I think what Clive said, I think we are going to be advancing both programs and then provide better developmental guidance later in the year for the programs, and I think you’ll get a better sense of how we plan on advancing the effort at that time. So for now, we're really focusing on both programs, moving them ahead and we'll provide better developmental guidance later in the year.

Marko Kozul – Leerink Swann

Thanks, John. Congrats on the partnership.

John Maraganore

Great, thank you.

Operator

Our next question comes from Adnan Butt from RBC Capital Markets. Your line is open.

Adnan S. Butt – RBC Capital Markets

Good morning and thanks for taking my question. I guess my question is, is the product candidate differentiated and does it even need to be differentiated? Can you comment on the class and potential market as a whole? And then secondly, what are the next development steps on Alnylam's front and what's the timeline there? Thanks.

John Maraganore

Yeah, let me take that and then Clive, you can chime in. I mean clearly, we are blocking the synthesis of PCSK9, which is mechanistically differentiated from the antibodies are blocking the action of PCSK9 directly with the LDL receptor. And so by blocking PCSK9 synthesis, we have many theoretical advantages, which we will aim to bear out in clinical studies. And one advantage is the fact that we're blocking both intracellular and extracellular levels of PCSK9, both of which are known to be involved in regulating LDL receptor expression on the hepatocyte surface. And so we believe that we can have a more complete effect on blocking PCSK9 activity.

The second property, which we think is actually quite important and I highlighted that in my prepared remarks is the fact that there's a very wide variation in PCSK9 levels in humans, well over fivefold-type variation in human subjects, and these levels are also markedly increased when patients take statins, so it turns out that when an antibody is administered, it's administered at a dose that really is addressing the mean levels of PCSK9 in the population and is probably therefore, an overdose for patients that have very low levels of baseline PCSK9, and is likely an under dose for patients that have elevated levels of PCSK9. And based on the mechanism of actions of RNAi therapeutic blocking the synthesis of PCSK9, we are essentially getting a consistent pharmacologic effect across the entirety of the variation that one sees in baseline PCSK9 level, so we essentially provide the right dose to all patients.

Again, these two features are important mechanistically. We'll see how they bear out clinically, but clearly, we believe that there is promise for this approach to be a best-in-class strategy for PCSK9 antagonism across the entirety of the field.

Clive, do you want to comment any further?

Clive A. Meanwell

Well, I would like to build on what you said a little; the way you've explained it to me, which, over the years, you've taught me a lot of science John, but it’s the difference between turning off the faucet and mopping up the water. Here, we're turning off the faucet is my understanding. That make sense to me at least, that’s kind of how I get it. But I am also impressed by Adnan by the fact that this could potentially be a very low volume subcutaneous injection given – as Laurence had mentioned, once every one to two weeks or possibly over longer periods. And that to me makes it quite attractive at a pragmatic level as well as the incredible science, and the timing that John's talking about, and I think those kinds of differentiating factors do make a big difference in patient compliance and acceptability of products.

Adnan Butt – RBC Capital Markets

And if I can just remind you that – can you just remind us, please, what the next steps are on the Alnylam front and will the $25 million payment cover pretty much all of the development costs up to Phase II?

John Maraganore

Yes, Adnan. The answer is yes, they will cover that and first and foremost and secondly, in terms of the next steps, we are going to be advancing in conducting certain preclinical and following that clinical studies with the program. We will update people later in the year in terms of what the specific next steps are, but at this current time we will be advancing both the IV formulation as well as the subcu form of the drug, and conducting certain transitional activities that are necessary as we aim the drug toward Phase II clinical, but we will provide more guidance on that later in the year.

Adnan Butt – RBC Capital Markets

I'll jump back in queue. Nice deal. Thanks.

John Maraganore

Thanks, Adnan.

Operator

Our next question comes from Geoff Meacham from JPMorgan. Your line is open.

Geoff C. Meacham – JPMorgan Securities LLC

Hey guys, congrats on the collaboration.

John Maraganore

Thanks Geoff.

Geoff C. Meacham – JPMorgan Securities LLC

Just a general question. I know, John, you mentioned you were talking later on about development beyond Phase II. But maybe with several competitors running more outcomes-type of studies, what's the higher level of view of the size and scope of the trials that you think beyond Phase II? The follow-up is, how is this contemplated in the agreement?

John Maraganore

So let me turn that over to Clive. Clive, would you like to handle that or maybe David will look to handle that.

Clive A. Meanwell

Yeah, I think I might ask David to comment in a moment. I think as John said earlier, it is a little premature to get too ahead of ourselves here, because I think a lot of the questions we need to address is probably with the regulatory agencies around the world.

As we get out of Phase I and Phase II and start thinking about what it really takes to convince ourselves and our colleagues and the agencies that knocking down LDL- C this way is likely to be effective and save relative to knocking down LDL-C by established means such as statins. Obviously, if they see that as being an overlap and I think certainly, the epidemiologists do and many of the clinicians do, and if they can be proven with a monoclonal safety that that’s not an issue. then I think there may be opportunities for limited approvals based on our bandwidth clinical trials, but I think ultimately, somebody is going to have to do the outcomes clinical study, and I’m fine if Sanofi, Amgen, Novartis and Roche and even Pfizer want to do that. and we’ll hopefully see results as they come in. So David, you’ve worked extensively in this field, major lipid programs at AstraZeneca and at Roche, interacting with the Genentech team. I mean what are your thoughts about in general term? I mean we don’t know the specifics yet going forward, and what is going to take?

John Maraganore

Thank you, Clive. good morning everybody, I think as Clive said at the beginning, we need to have discussions with the regulators to understand what is required to get the new class of compounds out to the market. Seeing what’s clearly said, we know from previous therapies, LDL cholesterol is a very robust [transthyretin] in terms of its impact on cardiovascular risk. We know the patient populations that aren’t adequately treated in terms of their lipid levels. We know that we should aim to get patients with a recent acute coronary syndrome in LDC-C less than 17. even in the most recent studies, only the half the patients have achieved that type of levels. So given the unmet need, any question comes down to whether we need outcomes, whether it’s an ongoing outcome, a study at the time of approval and that will also depend on the safety profile of these therapies moving forward through the benefit risk will be a key point and really distracted with the regulators and come up with a final plan for getting to the market.

Geoff C. Meacham – JPMorgan Securities LLC

Gotcha.

John Maraganore

So Geoff, does that answer your question?

Clive Meanwell

I know it’s more general, maybe than you’re looking for, but…

Geoff C. Meacham – JPMorgan Securities LLC

No, it makes sense.

Clive Meanwell

Yeah.

Geoff C. Meacham – JPMorgan Securities LLC

All right. Thanks.

John Maraganore

I think just one comment Geoff, I think obviously we have great confidence in The Medicines Company’s abilities, the one that you have studies, and I’ve seen what they’ve done with Angiomax is pretty impressive.

Geoff C. Meacham – JPMorgan Securities LLC

Yep, okay.

Operator

Our next question comes from Biren Amin from Jefferies. Your line is open.

Biren Amin – Jefferies & Co., Inc.

Yeah. Thanks guys for taking my question. I guess my first question is what data are required for the go/no go decision to start Phase II? And Clive, do you believe that the Phase II would be similar to the Amgen program which has, I think, enrolled north of 2,400 patients?

John Maraganore

So Biren, let me comment on the first part. we haven’t given the specifics on it, but obviously what we want to do is enable our friends at The Medicines Company to enter into a robust Phase II study. So in general, in terms of what you might expect is that we will have completed additional Phase I studies with our drug in a multi-dose format that enables MedCo to proceed robust Phase II study, that’s very general terms. And then I’ll turn over the second question to Clive.

Clive Meanwell

And Biren, I’ll say this. Having learned a lot about clinical trials on the NEUPOGEN program from colleagues at Amgen in a similarly exciting partnership that I was part of, I would never second guess their clinical development skill. So I’ll pump on that one for now and just say that we’ll be looking at everybody’s ideas and coming up with what we think is right for this particular compound.

Biren Amin – Jefferies & Co., Inc.

Okay. And then maybe if I could just have a follow-up, I think the companies certainly believe in the mechanistic differentiation of this program versus the monoclonal antibody approach, but when I look at the Phase I LDL reduction in healthy volunteers and just to a cross comparison, it seems that the LDL reduction with this program is on par with others. Why do you think we haven’t seen a clinically differentiated profile with this program, at least in early clinical trials?

John Maraganore

Well, our studies so far have been single-dose studies compared to multi-dose studies for the other drugs. So I think it’s a little bit premature yet in that regard. I’ll also add that our studies to-date have been done in the absence of statin co-administration, which where we believe that there could be some important mechanistic aspects of PCSK9 synthesis inhibition. the other comment I’ll make is, PCSK9 is expressed in other tissues in the body. and so it will be important to see how the safety profile for the antibodies emerges over time with our technology, we have a very liver-specific antagonism of PCSK9 synthesis. And we believe that that may also have an important attribute that will bear out. So we’ll have to see how it eventually plays out, but clearly, we are seeing pharmacologic effects that we believe are at least on par with the antibodies and mechanistically believe that there could be important differentiation moving forward.

Biren Amin – Jefferies & Co., Inc.

Okay, thanks.

John Maraganore

To add to what John says, I’m very impressed with the relatively short-lived experience with these targets, and first, recognized as important not until about 2006. and so there is an enormous amount of effort going on in the industry, which we plan to go to school on, watching our colleagues move other programs forward. I think being a fast follower is something we are comfortable with, and look forward to watching the rapidly emerging data from these other programs in the meantime.

Biren Amin – Jefferies & Co., Inc.

Terrific.

Operator

Our next question comes from Michael King from JMP Securities. Your line is open.

Michael G. King – JMP Securities LLC

Can you hear me?

John Maraganore

Yes.

Michael G. King – JMP Securities LLC

And let me add my congratulations as well. I just wanted to follow up on some of the other previous questions. So John, you’ve had responded to previous question regarding the fact that PCS has not been studied in conjunction with statins and I just wonder if you could talk about whether or not that’s going to be done now, and whether that’s going to be a part of the Europe clinical obligation to the partnership, and then I had a follow-up question for Clive.

John Maraganore

So Mike, I mean we certainly will be testing the drug and evaluate the drug in the next set of Phase I studies in a study that includes that. So obviously that’s the logical – one of the logical next steps for the program.

Michael G. King – JMP Securities LLC

All right, okay. And then I wonder if when you think about the program from a regulatory point of view, I wonder if do you believe that there’s a possibility that if the other, let’s say the antibodies, set a precedent where incremental LDL reduction does indeed result in clinical benefit of some magnitude, that the fast followers, as you put it, will be only held to the standard of LDL reduction? Or do you have – do you expect that you’ll have to do an outcome study no matter what? The question is what’s your base case assumption and what is the upside in that and does that upside affect your economics to the partnership?

Clive Meanwell

Thanks, John. And good morning, Mike.

Michael G. King – JMP Securities LLC

How are you, Clive?

Clive Meanwell

All right. So look, they’re the general comments at this stage, but I think you obviously lacking whacking at the right question, Mike. I think that general view as a firm that’s very focused on high value indications is that we are very content to begin our work with John, going off to places where statins don’t work. I’m putting it late terms in a way either, because they can’t be used or they used with maybe clinical evidence with the side effects and intolerance. Now whether or not, this is going to become the next LIPITOR plus, I think that that’s to be established, and it may be that regulators around the world would find the first question relatively straightforward, because of the alternatives not being so great.

But the second question, should we add this to a statin, that’s a formal complicated question and knocking down PCSK9 this way or that way, that may elicit different kinds of responses from regulators. so just because, you have a monoclonal antibody that had an outcome of trial on top of statins, let’s hope for the best there with the monoclonal programs, that doesn’t necessarily mean that talk you’d be similarly comfortable with a fast follower, non-clinical outcome trial with RNAi silencing approach.

So I don’t think we can make those assumptions right now, Mike. I think we can probably make reasonable guesses in intolerance and specific situations that agencies might recognize the importance of LDL-C lowering, and if there’s no other way to do it, and maybe a bit more permissive. but I don’t think we can lump everything together, and say every study will, in terms of outcomes can be establishing one approach and then it will get a free pass for everything else. I don’t think that will happen. But again, I think we need to start interacting with these experts in agencies and in the clinical community and figure this out.

John Maraganore

We’ll certainly take every opportunity, Mike to stand on the shoulders of giants to be to the extent that they exist out there…

Michael G. King – JMP Securities LLC

Thanks. Clear answer to a very hypothetical question.

John Maraganore

Great. Thanks, Mike.

Michael G. King – JMP Securities LLC

Bye-bye.

Operator

Our next question comes from the Steve Byrne from Bank of America. Your line is open.

Steve Byrne – Bank of America Merrill Lynch

Clive, if you think about this product longer-term and assuming that the clinical development program is successful, what would you anticipate as the structure of a sales force to market and promote this drug? What kind of synergies would you expect with your currently, acute care sales force?

Clive Meanwell

Well, thanks, Steve. That’s a very promising question. I like that question. As I mentioned in my prepared remarks, we have watched and participated in the dramatic shift in who makes decisions about patients who are at risk of getting a clot in their coronary arteries in the last five to seven years. that decision-making authority moved out of the straight cardiology office and primary care arena where we only had a few drugs available. Now into these hospital teams and the reason is that hospital teams have the technology to select the right patients, and that technology most include sophisticated imaging, which is not available in most doctor’s offices, in fact, usually not available in any. so I’m talking about angiography as the gold standard, still I’m talking about MRI, CT scanning and of course, intravascular ultrasound. These are necessary semiinvasive imaging technics.

Now why is that important Steve, is because pharmacy benefit managers who eventually have to agree to pay for all this stuff, they want to know that the patients likelihood of benefiting both clinically and economically is real. And they’re going to want to be assured that the decision to put a patient on to one of these very sophisticated new disease modifying agents where costs may be on the high side.

They want to make sure it’s a value based pricing decision, value based treatment decision. So we don’t see this arena going away from the hospital. we see it coming towards the hospital and that’s why we see it as an adjacency, the long answer to the question and the bottom line is, we don’t see this is a massive increase in selling effort at the beginning. now, we’ve been talking about hypotheticals on the call, and perhaps it’s a little too hypothetical for me to guess what kind of selling resources you might need. If this ever did become a treatment on top of an alongside statin. So that’s a dream scenario that right now, I’d have to regard as a very high class and a very hypothetical question.

Steve Byrne – Bank of America Merrill Lynch

And another hypothetical for John, and that is, do you have a hunch as to how your cost of goods for an RNAi therapy would compare to monoclonal antibody?

John Maraganore

Steve, we think that on a mg per kg basis, we think that it’s pretty comparable. And so we are dosing in some of our programs at doses that are lower than what the antibodies are giving. So in terms of the cost basis for it, we think there is certainly comparative growth for other what we’re administering. But I think obviously how that relates to value will ultimately be played out with our clinical studies, later stage clinical studies, but we feel constrained for the most parts so how we think about that.

Steve Byrne – Bank of America Merrill Lynch

Okay, thank you.

Operator

Our next question comes from Megan Dow from MLV & Co. Your line is open.

Megan Dow – MLV & Co.

Hi everyone. Congratulations on the deal.

John Maraganore

Thanks, Megan.

Megan Dow – MLV & Co.

Quick question on – it seems that there are some synergies between 216 and PCSK9. And I was wondering if you could comment on how you envision these two products being positioned together or in tandem in the future? And how you’re thinking about broadening your disease program above and beyond the familial hypercholesterolemia?

John Maraganore

So that’s a going question for Clive.

Clive Meanwell

Thanks, John. Let me take it back with certainly I think neither we know, John’s team see this is a drug only for familial hypercholesterolemia, I think that would be under leveraging this amazing technology very much. So I think we’re certainly excited to go beyond FH as to it’s relative use compared to ApoA-1 Milano, again, I’m back to my mask and forceps level of understanding. With ApoA-1 Milano, what we’re trying to do is augment the reverse cholesterol carrying capacity of the body with a turbocharged version of HDL.

That’s basically what ApoA-1 Milano is. It’s also a mutated version of a cholesterol transport particle. And we’ve seen from studies that were done by others, that can lead to rather substantial plaque regression in a very short period of time, particularly in acute patient who has ACF.

Now obviously, to maintain or further press that improvement in patient status, something like the Alnylam technology would then kick in very nicely. So I could see these approaches either being used together or sequentially to drive up reverse cholesterol transport from the arteries and to drive down LDLC which tends to transport bad cholesterol to the arteries. And that’s about as far as my science goes. But I actually want to comment more on that, John. But I think it’s a very exciting mirror image of each other.

John Maraganore

I’d like – you handled that brilliantly.

Clive Meanwell

Thank you, John.

Megan Dow – MLV & Co.

Excellent. Thanks gentlemen. Have a nice day.

John Maraganore

Thanks, Megan.

Operator

Our next question comes from Joseph Schwartz from Leerink Swann. Your line is open.

Joseph Schwartz – Leerink Swann

Hi, thanks and congratulations to everyone on the deal.

John Maraganore

Thank you.

Joseph Schwartz – Leerink Swann

John, I was intrigued by your comments about the differentiated mechanism of ALN and PCS, and also your comments that the way that antibodies are being dosed or may be some patients that are over dosed, and could get to very low levels of LDL and PCSK9 which is expressed in various tissues and yours is liver specific. Are there certain dose limiting toxicities or exaggerated pharmacology that you’re contemplating is being a risk with the other approaches?

John Maraganore

With the other approaches? I mean, I think that clearly you may have just inadequate LDL lowering, for example in patients that have very high levels of baseline PCSK9 which may even be elevated further with the co-administration of staff.

So you may not get to target in some of those patients, which really is the desired pharmacologic effect of administering an antibody. It’s really not just the lower LDL to get patients into target.

And so, if a patient has elevated PCSK9, and is unable to get a target with an antibody, we believe our approach would enable that patient getting to target based on the consistent effect that we see independent of baseline PCSK9 levels. And so I think these are real pharmacologic benefit from our approach in those types of patients.

And then of course, to get an antibody to deal with the patients that have very high levels of PCSK9 may require doses of drug that can’t be dealt with in subcutaneous volumes of injection of one and less. And so that would then require intravenous administration of the antibodies as compared to the subQ approach that we think will be enabled by our technology going forward.

So very interesting opportunities, we think based on the mechanism of action differentiation, and again in this very hot deal, the PCSK9 antagonism, we are the only approach that is differentiated from all the other approaches that are out there right now.

So we like that and it’s early for the antibodies relatively speaking, surely early for us as well. But the clinical data will bear itself out, and we’ll see how that looks over the years to come.

Joseph Schwartz – Leerink Swann

Okay, great. Thanks for the clarification.

John Maraganore

Yeah. Thanks, Joe.

Operator

Our next question comes from Neera Dahiya Ravindran from Piper Jaffray. Your line is open.

Neera Dahiya Ravindran – Piper Jaffray, Inc.

Hi, good morning. And may I begin by just saying congratulations John, and the team on the deal and for choosing such a fine partner in the Medicines Company to develop your PCSK9 program. Most of my questions have already been answered. So I have one which may fall into your hypothetical or premature arena.

Now that the Medicines Company has transdermal drug delivery system as a result of the Incline acquisition, could you please comment on whether this would be applicable to PCS, the subcutaneous formulation, and if so, are there any plans for development on plans?

John Maraganore

I’ll make some comments, then Clive you should make some comments as well. I mean, certainly that is a potential opportunity. And the chemical nature of the sRNA would enable – would be favorable for the technology, at least as I understand that the Medicines Company has obtained. So with something which I think is opened to be explored at this point. Clive, you have anything to add to that?

Clive Meanwell

Well, I thought you handled that brilliantly, John. Years ago, you and I, John talked about this distal bivalirudin, and eventually it concluded that it wouldn’t be viable because of the volumes and the shear mass of bivalirudin that’s needed to knock out thrombin.

Here, I think what’s kind of more promising is, you’ve got a very potent molecule which is used at very low mass. And so it does come into the realm of possibility nearer, and certainly something which as we go forward will be looking at with John’s team. The chemical characteristics seem to be in the right direction, and the volume characteristics make it feasible.

We don’t have limitless right to iontophoresis. We do need to consult with our friends and colleagues with J&J about new uses of the technology. But generally, those – it’s kind of restrictive relationship, and it’s certainly within the realms of possibility.

Neera Dahiya Ravindran – Piper Jaffray, Inc.

Great, thank you.

John Maraganore

All right, thank you.

Operator

Our next question comes from Omar Rifat from ISI Group. Your line is open.

Omar Rifat – ISI Group Inc.

Hi, guys. Thanks for taking my question.

John Maraganore

Sure.

Omar Rifat – ISI Group Inc.

I have three main things to ask. First, so what percentage of the secondary prevention market will be covered by your target Phase III indications, and are you developing this program in general as an IV to subQ switch? That’s one. Second, on safety side, what do we know about the LFT profile at the 0.4 mg for kick dose as well as what is the role steroid free medication in the Phase I trial?

And then finally, Clive, long term R&D spend, should we still expect 19% to 20% of revenues? Thanks.

John Maraganore

Okay. So let me – those are great questions. Let me handle parts of the first two. So on the first question, let me just – well, I forgot the first part of the question again. What was it again (inaudible).

Clive Meanwell

Percentage of the secondary market?

John Maraganore

Yeah. I’ll let Clive address that. But there is a second part.

Clive Meanwell

IV to subcutaneous.

John Maraganore

Yeah. So on the IV to subQ switch, it’s our expectation that will be ultimately advancing these programs forward, and very likely proceeding ultimately with the subQ approach, which we view to be favorable for this market. We don’t really view it as some IV to subQ switch per setting, okay.

So the second question you asked is on the IV drug. At 0.4 mg/kg, it was completely clean on any volume within the Phase I study. Now that was a single dose study. But we know in other programs that we’ve advanced, in multi-dose studies that we don’t see systematic changes in LFTs whatsoever inside as we perform.

So we feel that we’ve got a very clean safety profile. Certainly with the second generation formulations as in the case, because we have a very wide therapeutic index with first generation lipid nano particles.

And then regarding steroid free med, that is something which is specific to the IV formulation and something which is not being used with the subQ approach which is another advantage of the subQ approach going forward.

So then Clive, I think, you have two questions, the first and secondary prevention and then the third specific to Medicines Company.

Clive Meanwell

Yeah. Thanks for leaving me the easy one, John. So I think we first need to agree on what we mean by the secondary prevention market. When you asked that question, I’m assuming you mean those patients who come into hospital with some kind of major events an ACS event, a heart attack, a stroke or some kind of peripheral arterial blockage, and then put on to heavy weight therapies to avoid future events.

It’s clearly a group of patients we would be very interested in, and obviously, it’s a large group of patients. The incidence worldwide is in the millions, and the prevalence is also high. However, and in addition of course, that’s the group where the LDL trials, I may ask David to comment, and maybe even Ray – have shown the most dramatic, should we say correlation between LDL cholesterol lowering or elevation and clinical outcomes.

So it’s clearly an area of interest. However, I think at this stage, to throw you out on a percentage of those patients, we think we should be going after – it’s such a broad topic frankly. And at this stage, it would be difficult to make a guess.

What I do want to say is that, someone who’s had an ACS event, a stroke or has already got predications it’s quite an intervention. That’s a very expensive patient to manage going forward. The lifetime disease burden and economic burden for that patient is enormous actually, enormous, almost unmeasurable.

And clearly that’s an area where drug or an approach such as PCSK9 knockdown could be hugely important. But it would have to be used as someone was talking about it earlier, with all the rest of the book being thrown at the patient, starting probably, possibly ApoA-1 Milano in some way, and then certainly anti-platelet agents and goodness knows what?

So that’s a very long winded way of saying, I don’t know the answer. It’s too complicated for me right now. I don’t know whether David or Ray, and I certainly would be happy for Ray to comment on that John, if we’ve got a moment left.

John Maraganore

Sure.

Clive Meanwell

David, should we start with you? How would you help Omar with the question probably better than I could?

David Kallend

Yes, it’s a very good question. It depends. Again, we will reach portion of the secondary prevention patients we consider. And when you consider that probably in the U.S. and Europe that’s around 200 million statin-eligible patients. If we look at those who have systematic CHD or coming in with an acute chronic syndrome is probably resting around 10% to 20% of those patients.

So we see large number of patients in terms absolute number. And these are certainly the patient categories where there is the biggest absolute risk reduction to be achieved given the high absolute risk.

So that’s clearly a key segment to approach with these therapies. And also of course with the ApoA-1 Milano, which would deal with the unfavorable in the initial treatment. So I guess an aspect is very exciting as both the PCSK9 and the Milano therapy for these high risk patients who require new therapies.

Omar Rifat – ISI Group Inc.

Ray, just to add your thoughts, there are obviously a very large number of patients, but also very complicated sub-segments or what do you think?

Ray Russo

Sure. I think you hit the nail on my head. For years, we tried to manage these high risk patients, and even with some fabulous therapies out there, many of them, a considerable portion either can’t achieve goal or can’t tolerate the therapies that are better out there.

We know even today upwards of 10% to 20% of patients can’t tolerate high dose of aggressive statins and those are folks, particularly the high risk patients that achieve the most benefit from aggressive LDL management.

So from my perspective, I’m excited about this. I see a huge opportunity in these high-risk patients to get a new treatment modality that I think that clinicians will be very excited about.

Importantly, these high risk patients are often treated in the best fashions in hospitals. So that’s why it’s a natural synergy for our current portfolio of products to have this as a complement in the long term future.

So I see big opportunity, a great synergetic bet with our current portfolio.

Clive Meanwell

And Omar, just to finish off with the other question, John asked me to address. Yes, we would still expect to include this within our 20% – approximate 20% R&D commitment over the coming years.

John Maraganore

Great. Omar does that answer your questions?

Omar Saad – ISI group

Yes, that’s super helpful. I think the whole question around secondary prevention really came up from the – Sanofi and Regeneron have put out slides on this thing, about 20 million worldwide patients that could be eligible for this, of which two-thirds is secondary prevention market.

So I was just trying to get a sense of where the target indications really lie of the two-thirds of 20 million worldwide number, but this is something I'll work on more as well. I'll follow-up later.

John Maraganore

Sure.

Clive Meanwell

I think we’ve got time for one more question operator.

Operator

Our final question comes from Alan Carr from Needham. Your line is open.

Mark Monane – Needham & Company

Hi, this is Mark on for Allen. Thanks for taking my question. I’m going through my list here, because lots of things have been covered. But I’m pretty sure that no one has asked about the milestones going forward at this $180 million. And if it has been, I apologize but can you comment a little bit on how these are going to be distributed? Are these developmental or commercial and are there any timing commitments for The Medicines Company in regards to that?

John Maraganore

Sure. So we’re not giving more granularity than saying that it’s a $180 million in development and commercial milestones. And that’s what we’ve agreed that we will disclose at this time. Laurence do you want to make any further comment other than what I just said.

Laurence Reid

That’s exactly right. I think obviously as the program moves forward, it will become more granular as those milestones approach.

John Maraganore

But clearly, they are success based, and as they typically are in these type of deals, and as they typically are in these types of relationships they tend to get bigger as the milestones that are achieved are more important from the overall value standpoint.

Mark Monane – Needham & Company

All right. Thanks very much guys, and congratulations.

John Maraganore

Terrific, terrific. So thanks everyone for joining the call this morning. This is obviously a very important collaboration. We’re thrilled to be working with the Medicines Company. We also are excited about the start to 2013, and look forward to sharing further prospects and updates with you in the months to come. Thanks everybody. Good bye.

Operator

Thank you ladies and gentlemen. That does conclude today’s conference. You may all disconnect and have a wonderful day.

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