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Executives

Cynthia Clayton – Senior Director, IR and Corporate Communications

John Maraganore – CEO

Akshay Vaishnaw – SVP, Clinical Research

Patty Allen – VP, Finance and Treasurer

Barry Greene – President and COO

Stuart Pollard – VP, Scientific and Business Strategy

George [ph]

Analysts

Simos Simeonidis – Rodman & Renshaw

Josh Schimmer – Leerink Swann

Andrew Vaino – Roth Capital Partners

Steven Willey – Stifel Nicolaus

Pamela Bassett – Cantor Fitzgerald

Kay McKay [ph] – Charter Capital

Alnylam Pharmaceuticals, Inc. (ALNY) Q2 2010 Earnings Call Transcript August 4, 2010 4:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals conference call to discuss the second quarter 2010 activities and financial results. 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 afternoon. I'm Cynthia Clayton, Senior Director of Investor Relations and Corporate Communications at Alnylam. With me today are John Maraganore, our Chief Executive Officer; Barry Greene, our President and Chief Operating Officer; Akshay Vaishnaw, Senior Vice President, Clinical Research; and Patty Allen, Vice President of Finance and Treasurer. In addition, Stuart Pollard, Vice President, Scientific and Business Strategy is also on the call and will be available for Q&A.

So those of you participating in today's call, the slides we have made available for the webcast can also be accessed by going to the investor’s page of our website, www.alnylam.com. During today's call as outlined in slide two, John will provide some introductory remarks and provide general context. Akshay will provide a summary of our clinical and preclinical research and development activities. Patty will review our financials and guidance, and Barry will summarize our business highlights and goals. We will then open the call for your questions.

Before we begin, I would like to remind you that this call will contain remarks concerning Alnylam's future expectations, plans and prospects, which constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in our most recent quarterly report on file with the SEC.

In addition, any forward-looking statements represent our views only as of the date of this recording and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statement. I will now turn the call over to John.

John Maraganore

Thanks, Cynthia. Welcome and thanks to everyone for joining us this afternoon. I will refer you to slides four and five during my introductory comments. These are indeed exciting times for RNAi therapeutics as an increasingly robust pipeline of RNAi therapeutic products of entering and emerging from our efforts.

And the field stands at the frontier of generating key human proof of concept data across the number of programs. Of course, Alnylam leads this effort. The data that we aim to obtain as they emerge will provide further and continued validation of RNAi therapeutics as a whole new class of innovative medicines, which is very important objective in (inaudible).

Our development programs are steadily progressing through human clinical trials and during the second quarter we made a number of significant advancements which Akshay will detail for you shortly. At a high level, these milestones included the presentation of preliminary data from our Phase I ALN-VSP study for liver cancer at the ASCO annual meeting in June.

Initiation of our Phase I Study for ALN-TTR01 in patients with transthyretin-mediated amyloidosis or ATTR and continued enrollment of patients in our ALN-RSV01 Phase IIb study in RSV-infected adult lung transplant patients.

It's very exciting to be sitting to be sitting throughout the (inaudible) with a pipeline that now includes three promising RNAi therapeutic programs in clinical development. The important progress that we have made in the past several months reflects our evolution into an even more robust and more advanced clinical stage company.

We are extremely proud of the growth that we have achieved on this front and, of course, this growth in advancement will only continue. Now, in parallel with our clinical progress, this past quarter and recent period is also notable for our continued advances in delivery of RNAi therapeutics.

We believe that our continued advances in delivery define Alnylam's overall scientific leadership in the RNAi therapeutics field, which in turn translates to leadership in clinical development and leadership in partnerships. We also continue to make very strong scientific progress on our Alnylam biotherapeutics efforts, having known shown that this technology is broadly impactful and also that it is scalable.

Turning to the business front, the notable achievement during the period was the new microRNAi therapeutics partnership between Regulus and Sanofi-Aventis. We are very proud of this alliance, the second partnership that we have done this year. Barry will discuss this in more detail momentarily but I think it’s noteworthy that Alnylam can now count major alliances with most of the world's top pharmaceutical companies including Novartis, Roche, Takeda, Medtronic and through Regulus, GSK and Sanofi-Aventis.

We have great relationships with all of these companies and in fact many others where we have ongoing business discussions. I think it is fair to say that these existing and future relationships will continue to drive success in Alnylam's business execution, both in terms of access to key capabilities from our dedicated partners and also for continued access to funding.

Indeed, as a reminder, Alnylam has earned about $750 million to date from these alliances and has been a cash flow positive business on a cumulative basis since inception, something which is extremely rare in biotech. And we aim to build on this track record for the future.

On the organizational front, our successful culture was recognized once again as we were named to the scientist magazine's 2010 best places to work in the industry. The success of Alnylam depends on our people and we pride ourselves on attracting the best in the field. As such, we were excited to expand our management team this past quarter with two new appointments including Laurence Reid as Senior Vice President and Chief Business Officer and Ken Koblan as Vice President and Distinguished Alnylam Fellow.

In addition, one of our leading scientists, Rachel Meyers was promoted to the role of Vice President of Research where she will be responsible for heading our RNAi development immunology and viral disease efforts.

So to wrap up my introductory remarks across all key dimensions of Alnylam, people, scientific leadership, clinical pipeline, IP leadership and business execution, we believe that we are leading the advancement of RNAi therapeutics as a whole new class of innovative medicines and also building a very important company.

We are confident that are our activities and overall strategy will reward our shareholders and we thank you for your continued commitment in this regard. With that, I’ll now turn the call over to Akshay for a review of our clinical activities, our pipeline and our scientific progress. Akshay?

Akshay Vaishnaw

Thanks, John and hello everyone. As John mentioned during the past quarter we made significant advancements across our pipeline activities and in our scientific leadership efforts. Starting with ALN-VSP, we are continuing to make progress with our Phase I multi-center, open-label, dose-escalation trial.

This is an important study and to our knowledge, it’s one of the most comprehensive clinical trials every conducted with a systemically delivered RNAi therapeutic product and probably the most extensive experience with an RNAi therapeutic in cancer. Specifically, this study is designed to enroll approximately 55 patients with primary and secondary liver cancer.

Patients are divided across eight potential dose levels ranging from 0.1 to 1.7-milligram per kilogram. The primary objective is to evaluate the safety, tolerability and pharmacokinetics of intravenous ALN-VSP including demonstration of the maximum tolerated dose. In June, we were pleased to present preliminary clinical data from the trial at the 2010 ASCO meeting.

On slide seven, you can see that the study results from the initial 19 patients in the first four days demonstrated that ALN-VSP was well-tolerated in most patients. Also results from pharmacokinetic measurements demonstrated preliminary evidence of biological activity based on DCE-MRI measurements. DCE-MRI is a measurement of blood flow through the tumor and is known to be a sensitive measure of possible anti-angiogenic effects.

As you know, our ALN-VSP drug product contains less RNAi, the anti-VEGF, the mediator of angiogenesis in tumors. The Phase I ALN-VSP study has not yet reached the maximum tolerated dose and so we are still continuing to enroll patients with dose escalation.

We also announced today the initiation of a multi-center, open label extension study of ALN-VSP in patients who have completed the dosing cycles in the Phase I study and are deemed to have stable disease or better. We look forward to providing updates on the progress with the ALN-VSP program and expect to do so in the coming months.

We’ve also made important progress with our ALN-TTR program for the treatment of our ATTR. Indeed we initiate the phase I randomized blinded zero controlled dose escalation study of ALN-TTR 01 in patients which is summarized on slide eight.

The study is currently being conducted in Portugal, Sweden and the U.K. and is designed to enroll approximately 28 patients. The primary objective of the study is to evaluate the safety and tolerability of a single dose of intravenous ALN-TTR 01 in ATTR patients with patients being enrolled into five sequential cohorts of increasing doses ranging from 0.01 to 0.4 milligram per kilogram.

In addition, we also believe we have an opportunity to assess the preliminary human proof of concept based on measurements of serum TTR levels in patient samples. We already enrolled several patients in this trial and we will update you on potential timing for completion as the study continues to advance.

As we turn to slide nine, in April we presented a new preclinical data from our ALN-TTR program at the international symposium on amyloidosis, sharing for the first time the treatment with ALN-TTR 01 can result in the regression of preexisting of pathogenic TTR deposits in peripheral tissues including dorsal root ganglion, sciatic nerve, stomach and the intestines.

The potential for ALN-TTR 01 to affect regression of TTR amyloid deposits is a very important preclinical finding extending our previous results showing that ALN-TTR 01 can prevent TTR in that positioned when administered in a prophylactic regimen. We are very encouraged by the pre-clinical data, we’ve achieved today by this program which we believe point to the breakthrough potential of an RNAi therapeutic strategy in ATTR and look forward to providing you with updates on this Phase I trial as it progresses.

Turning to our most advanced program, we are also continuing to advance our Phase II B study of ALN-RSV01 in RSV infected adult lung transplant patients. The primary study end point is reduction in the instruments of neuroprogressive box, a life threatening complication of RSV infection that results in approximately 50% mortality within three to five years of onset.

As you know, this multi-centered global randomized double blind placebo controlled study (inaudible) up to 76 patients randomized in a one-to-one ratio drug to placebo and is active in over 30 sites worldwide.

The study is progressing well and has enrolled double-digit numbers of patients. As we enter the northern hemisphere RSV season into the full and early winter, we expect to have greater clarity on timing for completion of the study and will update you at that time.

So as you can see on slide 10, we now have three promising RNAi therapeutics currently enrolled in clinical trials, which reflects the substantial progress we have made in the advancement of our pipeline over the past several months. We’re also very encouraged by the continued advancement of our pre-clinical programs including ALN-PCS for hypercholesterolemia and ALN-HTT for Huntington’s disease which we’re developing in collaboration with Medtronic.

Both of these programs, in addition to our second generation ALN-TTR 02 program are candidates for IND filings in 2011. Clearly, we continue to make strong and industry leading progress in translating the science of RNAi into a novel class therapeutics that we think will treat disease and impact patients in a fundamentally new way.

(inaudible) we also made important contributions during the quarter towards further advancing the delivery of RNAi therapeutics. This remains a continued area of focus and asset at Alnylam. In collaboration with Max Planck and AlCana, we published new research describing key mechanisms related to the systemic delivery of RNAi therapeutics using LMPs.

These are really very important date and we actually believe that they are favored by our friends and colleagues and the journal of molecular therapy represents one of the most important pieces of science on RNAi therapeutics ever published. Moreover, the new data demonstrate targeting strategies for the delivery of RNAi therapeutics and highlights potential targeting approaches for delivery to tissues and cell types beyond the liver.

In addition, we continued to expand on the key advances with systemic delivery of RNAi therapeutics stemming from our collaborations with scientists at MIT, AlCana, Tekmira and the University of British Columbia through publications in PNAS and nature fine technology.

In fact, just starting today, many of our scientists in collaborate are attending a major scientific conference in Vancouver and are collectively presenting 12 posters in oral presentation. So you can expect to hear some very important additional progress very soon indeed.

And finally, I think it’s quite notable that our scientists continue to distinguish themselves with excellence in leadership through the publication of papers and peer reviewed journals as you can see on slide 22 – on slide 12. If fact, we’ve already published 19 papers this year, exceeding our goal of 15 or more papers by the year's end.

I'm very pleased that we are also starting to see papers emerge from our clinical studies as well. Many of these add other recent accomplishments are highlighted in further detail in our press release we issued this afternoon. And with that, I’ll turn the call over now to Patty for review of the financials from the quarter.

Patty Allen

Thanks Akshay. Good afternoon. I will keep my comments brief so please look at our release for additional detail. Also please refer to slide 14 in our deck. I'm happy to report that we continue to maintain an extremely strong financial profile.

At the end of the second quarter, Alnylam had cash, cash equivalents and total marketable securities of $396.9 million and zero debt, providing us with continued financial flexibility and allowing us to invest prudently in our development pipeline, our efforts in delivery and the overall scientific platform.

Our net cash position remains in the top 15 across the entire biotech industry and of course, this position may strengthen further should Novartis exercise their adoption license for our technology in the months to come. Importantly, we also continue to have no write-offs related to our cash and fixed income portfolio to date.

In addition, we achieved one of our highest revenue quarters to date. Our GAAP revenues for the second quarter were $26.6 million. As you know, the continued amortization of upfront payments from the strategic alliances we have formed accounts for a significant and recurring portion of our quarterly GAAP revenues.

This quarter also includes the recent $1.9 million payment from Regulus related to the Sanofi-Aventis alliance. The $1.9 million was received in cash in July after the end of Q2. Related to expenses, I will once against compare results from this quarter to Q1 of this year, which I believe is more informative.

R&D expenses were $28.1 million in the second quarter, compared to $24.7 million in the first quarter of 2010. As expected, the ramp up in R&D expenses this quarter includes expenses associated with the advancement of our clinical programs including ALN-RSV01. ALN-VSP and ALN-TTR01.

I would continue to expect to see this higher level of R&D expenses for the remainder of 2010 as we now have three programs in active clinical trials. Our G&A expenses were $10.1 million in the second quarter, compared to $11.2 million in the first quarter of 2010.

The decrease this quarter is due primarily to lower professional services fees primarily legal fees related to our litigation. I expect to see our G&A expenses continue to be a bit bumpy from quarter to quarter until the precise timing of the trial related to our ongoing litigation is known.

The charge of $3.9 million related to our ownership of Regulus this quarter was higher than usual as we recorded our 49% share of the net losses incurred by Regulus, which included approximately $3.8 million for payments due to Alnylam and to Isis related to the Sanofi-Aventis alliance in mid-June 2010.

I would expect to see this line item decrease for the remainder of 2010 as these were one-time charges and Regulus will begin to record the revenues from the Sanofi alliance in Q3. With respect to guidance for 2010, we expect that our cash position at the end of the year will be greater than $325 million excluding the potential payment from Novartis, should they decide to execute their adoption license in the coming months. This wraps up our financial highlights and I will now turn the call over to Barry.

Barry Greene

Thanks, Patty, and hello everyone. As John discussed earlier the strength of our partnerships is critical to our business and remains a key driver of future value creation. We had an exciting quarter on the business front, notably we announced a global strategic alliance between Regulus and Sanofi-Aventis, who discovered, developed and commercialized microRNAi therapeutics. This landmark alliance, the third major partnership for Regulus represents the largest microRNAi partnership to date valued over $750 million and we will initially focus on the therapeutic area of fibrosis.

As you can see looking at slide 16, Regulus received a $25 million upfront fee and additionally we’ll receive a $10 million future equity investment subject to mutual agreement on company evaluation as well as annual research support for three years with the option to extend two additional years.

Regulus is also eligible to receive pre-clinical and development milestones as well as milestones in royalties on product sales. Regulus and Sanofi-Aventis will collaborate initially up to four microRNAi therapeutic targets and Sanofi-Aventis will also receive an option for broader technology alliance with up to plus $50 million in addition to milestones of royalties that could provide Sanofi with access to Regulus microRNAi platform technology and a defined number of product licenses.

As Patty mentioned earlier, our licenses each received a payment of $1.9 million from Regulus as a result of this alliance. This represents 7.5% of the $25 million upfront payment from Sanofi-Aventis to Regulus. In addition, we are eligible to receive a similar percent of potential future success based milestone payments from this alliance.

We are particularly excited about this collaboration because of the continued recognition it brings to the area of microRNAi therapeutics and Regulus unquestionable leadership position within the industry. We continue to own a significant piece of Regulus, approximately 50% today and the new alliance with Sanofi, as well as earlier alliances with GlaxoSmithKline allows us to build value in Regulus with no foreseeable need for funding over the next several years and therefore no significant dilution of our ownership position.

Further on the Alnylam partnering front, we are pleased to have Novartis purchase an additional 55,000 shares of our common stock for approximately $1 million in accordance with their contractual right and opportunity to maintain their ownership interest in Alnylam at 13.4%.

Now, as our partnership success is the result of our scientific progress it is also dependent on our dominant IP position and we need a number of key additions to our IP estate during the past quarter. As you can see turning to Slide 17, so far in 2010 we have 28 new patents issued or granted in countries around the world with 16 secured in the second quarter alone. This puts us well on track to exceed our goal of 30 or more patent grants in 2010.

We’re particularly proud of these successful outcomes from the European appeal board on the Kreutzer-Limmer '945 which covers RNA immediate by double standards RNA’s with a length of 15 to 49 base pairs. We are pleased with the new U.S. issuances in the giant all and Manoharan II patent families, since these have very broad claims.

All told, our IP estate remains dominant in the field and continues to be required by all companies developing RNAi therapeutics. Of course, we also recognize that our IP technology should be made available on a non-profit basis with efforts aimed at tackling the neglected diseases in the world's poorest countries.

In this regard, we are pleased to announce that MIT and South Africa's technology innovation agency joined GlaxoSmithKline, Alnylam and BBGH in expanding the pool for open innovation. We’ve also made progress on expanding value creating applications of our RNAi beyond the therapeutic pipeline of RNAi therapeutics that actually I have described.

Specifically as noted on Slide 18, another area of considerable progress for us is our Alnylam bio-therapeutics efforts where we are advancing the applications of RNAi technology to transform the manufacturing of biologics, reduces in clear area of leverage research. In June, we presented new data describing the discovery of novel delivery look it’s more NDLs that efficiently deliver SRNAs to manufacturing so on with Protein-G sounding activity resulting in improved protein quality.

We also demonstrated the ability of scaling this delivery of SRNAs at least 40 liters. This is a very significant step up in scale as it pertains to the ultimate applications of this technology at about 100 plus liters scaled.

Furthermore, these NDLs showed no measurable adverse effects on cell density or viability, it’s really tremendous progress to-date. Further, we’re pleased to welcome Daniel Anderson, Charles Cooney, and Bob Langer to our Alnylam biotherapeutic scientific advisory board. The world renowned scientific leaders will be a critical asset, as we continue to advance this technology.

All told, we’re very excited about Alnylam biotherapeutics and the opportunity it gives us to us expand and accelerate the applications of RNAi in medicine and we believe it could start to have a anything significant impact on Alnylam's overall business profile in the near future.

Now, to review your goals over the next 12 months let us turn to Slide 19. We expect to have four RNAi therapeutic programs in clinical development and advance additional preclinical RNAi and microRNAi therapeutic programs including proprietary programs and partnership based programs.

Continue advancing and developing novel delivery solutions for the systemic delivery of RNAi therapeutics. Before, we expect to form additional new alliances across our efforts that are Alnylam, Regulus, Alnylam biotherapeutics and through potential formation of new ventures, all of which could provide near term potential for value creation.

We also expect to further scientific leadership intellectual property position. And finally we will finish 2010with greater than $325 million in cash excluding the potential payment of $100 million from Novartis should they decide to execute to adoption license in the coming months.

We believe our industry leading partnerships, intellectual property position and financial stability continued to position Alnylam as a leader in the development of RNAi therapeutics and we expect to only strengthen this position further in very exciting ways throughout the rest of the year.

With that, I’d like to turn the call back over to the operator for your questions. Jennifer?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Simos Simeonidis from Rodman & Renshaw. Please proceed.

Simos Simeonidis – Rodman & Renshaw

Hi, guys, thanks for taking the question.

John Maraganore

How are you, Simos?

Simos Simeonidis – Rodman & Renshaw

I am good. How are you?

John Maraganore

Very good. Thank you.

Simos Simeonidis – Rodman & Renshaw

I just have a quick one more for you, Barry and Patty, John. As you’re looking at your P&L and with spending about, in the mid-hundred millions per year roughly the past couple of years and if assuming that you get the Novartis with $100 million upfront payment, you roughly would have about three years worth of cash and now that you are maturing you’re running into the issue that the traditional biotech’s have when they go into clinical development as you have successfully done with three and in a few months four programs in the clinic, I guess the question is do you see a potential shift in terms of your spending or do you, towards maybe flock in morning – on your development programs. And do you – are you thinking that you’re going to continue to be spending at the current rate?

John Maraganore

Simos, thanks for the question. Look the horizon that we are building for this company is a very significant horizon from the standpoint of our cash balances and as you know, we expect to continue to raise, earn funding through existing partnerships as well as future partnerships. You commented on the Novartis adoption license payment which could happen. And that is $100 million but there are obviously other partnerships that we will do going forward that continue to provide very significant funding for the business. So, the business model that we have shown to date has actually been on a cumulative basis a cash flow positive business in biotechnology. Pretty unusual in our industry as I think you would agree for a company that’s still in development stages, not on the market with products. So we hope and aim to continue that profile going forward as a way of funding our business, funding our pipeline, advancing our medicines while retaining significant share of product opportunities within at least the U.S. market. And that’s a strategy, we’re executing on, we’re confident that we can continue to do it and obviously, that’s the aim and focus of our efforts at the company. Barry or Patty, anything more to stay?

Barry Greene

Just, I mean, just to slightly expand on that and Simos, thanks for the question. The idea is to develop a robust pipeline of product opportunities as Akshay walked through and based upon how we’re looking at our expense profile, our revenue profile with current partners, we see the current balance sheet we have which is extensive and we haven't given formal guidance on this lasting way beyond the three or four years you suggested. And we have value creating opportunities of current un-partnered assets, future deals that we have highlighted as well as Alnylam biotherapeutics, all of which we are look at to bring in revenue that funds our pipeline.

Simos Simeonidis – Rodman & Renshaw

Sounds great. Thanks for taking the question.

John Maraganore

Right. Thanks, Simos.

Operator

Your next question comes from the line of Josh Schimmer from Leerink Swann. Please proceed.

Josh Schimmer – Leerink Swann

Hey, thanks for taking the question. I guess, either for John or Akshay. I was sort of, looking around and seeing some of the work of microRNAi mutations in schizophrenia, I am wondering whether first of fall, that’s a target for Regulus, any of your programs ongoing. And also wondering what other work is ongoing internally or externally to identify and really definitively link other microRNAi mutations with specific disease states? Thanks.

John Maraganore

That’s a great question, Josh. So I'm aware of that paper that you’re referring to that came out relatively recently and it is exciting piece of emerging biology on microRNAi and disease likes schizophrenia, microRNAi biology right now is one of the most active areas of scientific and clinical research in the world. And these microRNAis as you are well aware of being found to be either mutated or dis-regulated across a broad range of different human diseases and it’s increasingly becoming validated in that regard. Now, regarding schizophrenia, that’s not a specific program at Regulus today, but, because of the IP estate that we built at Regulus and the scientific and technology leadership that we established, we’re very frequently contacted and approached by major academic groups around these types of findings.

And if fact, we have become in many ways the partner of choice to work with these academic groups to provide them with tools and approaches that can help them understand the potential applications of microRNAi therapeutics in these very important disease states. So, you know in this case we weren't involved specifically because we can't be involved with everything; there is obviously a need for levels of focus as well within the company. The company's predominantly focused today on its efforts in HCV infection with mirror-122, its efforts on mirror-121 in liver fibrosis and other fibrotic diseases, as well as its efforts with immune biology collaboration with GSK but it keeps its eyes very active on other therapeutic areas and therapeutic indications and very frequently collaborates with academic leaders in the world around those type of application and again because of the IP position that Regulus is in and also its scientific leadership position is the, frankly the place to go in that regard. I mean, Akshay, do you have any further comments now? Josh, did that answer your question?

Josh Schimmer – Leerink Swann

I think that did. Terrific. Thanks so much, John.

Operator

And your next question comes from the line of Andrew Vaino from Roth Capital Partners. Please proceed.

John Maraganore

Hi, Andrew. Hello?

Andrew Vaino – Roth Capital Partners

Hi, yes, I just had a question from the RSV 02 study?

John Maraganore

Yeah. So RSV 02 is still preclinical. You mean the RSV 01 study and RSV infected lot of lung cell patients.

Andrew Vaino – Roth Capital Partners

I am trying to sense of when you expect to begin any clinical study of RSV 02.

John Maraganore

Well, we haven’t guidance on that it’s still an active program with Cubist and we’re still moving it forward so but we haven't given any specific guidance at this time on that specific program.

Andrew Vaino – Roth Capital Partners

Okay. And then on the VSP program, do you have any inclination based on your preclinical data, as to what the effective minimum effective dose would be?

John Maraganore

You know, we have obviously done work in animal tumor models, Andrew and it is – we believe that the dose levels with telemetric scaling that we’re using in man will allow us to get to those comparable dose levels based on the animal responses, where we saw, very significant antitumor effects in Orthotropic tumor models and also in transgenic tumor models, but in tumor (inaudible) models in mice. But, it’s very important to keep in mind, is I am sure you appreciate that those type of model systems are really imperfect specially in cancer and that’s why going as we have into the real test system which is the patient is a critical step forward and I am thrilled with over learning from the ALNBSP program and we look very much forward to updating you guys in the coming months on some of the updated progress, since SASCO and it will be important I think for our overall efforts.

Andrew Vaino – Roth Capital Partners

Great. Thank you.

John Maraganore

Thank you.

Operator

(Operator Instructions) Your next question comes from the line of Steven Willey from Stifel Nicolaus. Please proceed.

Steven Willey – Stifel Nicolaus

Hi, good afternoon.

John Maraganore

Hey, Steven? How are you?

Steven Willey – Stifel Nicolaus

I am fine, doing well, thank you. Quick question, now that we have seen kind of the last piece of the Isis and the Genzyme data today, just wondering if your thoughts around PCSK9 have changed at all with respect to the pace at which that and which that program moves forward?

John Maraganore

Yeah. No, we have always been excited about PCSK9 as a target for the treatment of severe hypercholesterolemia and believe that for many reasons and this is – these are judgment calls that very smart people can have their brilliant opinions on so I'm not in any way, shape or form trying to say anything negative about ApoB as a target but we think PCSK9 is a better target.

And the reason for it at the end of the day is because the genetics – the human genetics validate PCSK9 as really being an ideal target for the advancement of novel therapies for the reduction of LDL cholesterol. And it is a different mechanism than ApoB. But I was very pleased to see the data from Isis today and I'm encouraged by where they can go with that program. But it is a big patient population that is ultimately available for this type of new therapies that, obviously is going to leave a lot of room for multiple players and PCSK9, we think is a great target.

Steven Willey – Stifel Nicolaus

Is there anything you have seen preclinically to suggest that you may not see the transient transaminase spikes and therapeutic that increase that we are seeing with ApoB? Is that target specific or do you think it’s more of a function of just the liver being a clearance organ?

John Maraganore

Well, we believe it is target specific and in all of our preclinical research when we targeted ApoB, you can generate Steatosis in the liver. And yet when you target PCSK9, there is absolutely no Steatosis in the liver and we published that research in some of our papers. So it’s our view that PCSK9 because of its role in up regulating LDL receptor when you and you were tagging nice pieces and you up regulated LDL receptor, you get better clear clearance of LDL cholesterol from the circulation, worded that for that Genet. And that mechanism of course validated by human genetics is why we are so excited about that target. Akshay, do you want to add anything?

Akshay Vaishnaw

No.

John Maraganore

Okay.

Steven Willey – Stifel Nicolaus

That’s helpful. And then maybe a quick question for Barry. The issuance of the disa Mori Patents earlier in July, does that have any impact on the way the Alnylam pay loads are designed?

John Maraganore

Zero.

Steven Willey – Stifel Nicolaus

Zero.

John Maraganore

Barry, want to add anything?

Barry Greene

Zero. And Steven, as I highlighted earlier our patenting state which we believe is dominant and required by all companies developing RNAi therapeutics that’s we are competing, just continues to get strengthened and continues to expand and the two new patents we highlighted today that John and Manoharan II patents are great examples of being incredibly broad patents that continue to enrich our patent stake and make it dominant.

John Maraganore

And let me just add one other thing, Steven. We still – data is a founder at Alnylam and we were obviously aware of that patent years ago and chose not to license it in because it wasn't worth anything from our perspective.

Steven Willey – Stifel Nicolaus

Okay. Thank you. And congrats on getting TTR to the clinic.

John Maraganore

Great. Thank you.

Operator

And your next question from the line of Pamela Bassett from Cantor Fitzgerald. Please proceed.

Pamela Bassett – Cantor Fitzgerald

Thank you. Thanks for taking my question and congratulations on all the progress.

John Maraganore

Thank you, Pamela.

Pamela Bassett – Cantor Fitzgerald

It looks like you are moving forward rapidly with the biotherapeutics opportunity and I'm wondering at what scale up levels does this become commercially interesting? You are at 40-liters now. How far can you go with it?

John Maraganore

Let me turn it over to Stuart to address that question.

Stuart Pollard

Hi, Pamela. That is a great question. The data that was referred to that was presented in San Francisco recently, as you already pointed out was at 40-liter scale and that is done inside – by reactor and in fact, in engaging some of the folks that John, Charlie Cooney and people like (inaudible), as well as contacts in industry that is the sort of scale that gets people very interested. As you know, manufacturing, biologics can go up to a 10-20,000-liter scale.

However, this is at a scale that is showing very robust RNA interferences and impact on critical pathways, as highlighted in that presented work and this is a scale that is hampering processing development and manufacturing folk’s interest. This is very encouraging and points towards applications at the scales of commercial manufacturing.

John Maraganore

And I think the other thing that is very encouraging about the data that I would just add, Pamela, is that it has been very reproducible as we have gone from, shake flask, small volume shake flask type volumes through – one liter volumes, three liter volumes and now 40-liter volumes. And the reproducibility of the knockdown data and the beneficial effects on cell growth characteristics and the consistency of the cell growth characteristics are super imposable across those scale and that’s very, very important.

Pamela Bassett – Cantor Fitzgerald

Should we be expecting commercial activity in this area?

John Maraganore

We certainly hope so. There is quite a bit of interest in it.

Pamela Bassett – Cantor Fitzgerald

What it the timeline?

John Maraganore

We are not going to give any specific timelines on those, but there’s quite a bit of interest in it and I'm sure you will see something, sometime reasonably soon.

Pamela Bassett – Cantor Fitzgerald

And is the first application yield or are there others that will be –

John Maraganore

George [ph], do you want to?

George

The applications are – I mean there is three sort of broadways of thinking about this. There is yield but importantly there is also quality and attributes of the product and as you know, as we increasingly – the regulators and manufacturers are demanding ever more quality and reproducibility and the ability to tailor things like first translation modification like drug consolation, is really as important as yield per se.

But one of the beauties of using RNAi is we can attack all of the pathways simultaneously or individually and allows for tailoring to not only improve things like yield, but also to maintain or even improve quality features of the product.

John Maraganore

And don't forget, Pamela that RNAi is an ancient antiviral mechanism and one of the issues that plagues the biologics manufacturing space is infection with adventitious viruses and that has very significant interest for players in the field.

Pamela Bassett – Cantor Fitzgerald

Yes. It does. So, are you – will you probably be doing individual deals that are customized for each manufacturing situation?

John Maraganore

Yeah, I think that is a – that is a strategy that we think has quite a bit of traction and quite a bit of appeal from a value standpoint and it allows to us very broadly partner the technology across the entire biotechnology industry in a way that can build significant near-term value to our overall business. And so, we do view the Abio opportunity as a relatively near-term way to have an impact with our technology in the commercial marketplace of existing medicines.

Pamela Bassett – Cantor Fitzgerald

What is next in terms of additional applications outside of therapeutics?

John Maraganore

Well, I mean –

Pamela Bassett – Cantor Fitzgerald

Or even within therapeutics.

John Maraganore

Sure.

Pamela Bassett – Cantor Fitzgerald

Just, I mean you in the past you talked about vaccines and stem cells. How are those programs progressing?

John Maraganore

Very nicely. I mean we think there is some very, very interesting applications in vaccines. As you know, we recently in licensed some technology from Mount Sinai and University of Queensland in Australia and we also think there is some very interesting applications in stem cells as well.

Pamela Bassett – Cantor Fitzgerald

And do you think we will see some of those programs progress as rapidly as the biomanufacturing?

John Maraganore

I think within reason I think you will see some progress there, yes. I think so.

Pamela Bassett – Cantor Fitzgerald

Okay. Great. And congratulations again on TTR.

John Maraganore

Thanks, Pamela.

Operator

And your last question comes from the line of Kay McKay [ph] from Charter Capital. Please proceed.

John Maraganore

Hi, Kay.

Kay McKay – Charter Capital

Hi. How are you guys doing?

John Maraganore

Very good.

Kay McKay – Charter Capital

My question is related to DSP and the extension study. Can you give us some more details even if just qualitative, how many more cycles can folks be on is there a limit or as long as they are doing well? And does it apply to how many of the doses that you thus far treated the first four or more?

John Maraganore

Great question. Akshay, why don't you take it?

Akshay Vaishnaw

So, just to recap on the design of the study that leads to the extension study, patients entered the Phase I study, they go through two cycles of treatment that is four doses. One dose every two weeks and at the end of that two month period they get reassessed and provided they have stable disease or better, they are invited to continue into the extension study. And when in the extension study they can stay on in perpetuity as long as stable disease or better is maintained and then periodically evaluated in the extension study clinically and by CT to establish evidence for stable disease or better.

So, that essentially is the makeup of how this works. And we are very excited today to announce the initiation of that extension study, clearly, individuals are getting across the line from the initial Phase I study, have stable disease or better and are into the extension phases now. As John said, overall, following on from the encouraging data we had at ASCO and the further progress we are witnessing, we are very excited about the program and we hope to update everyone later in the year. And at that time I'm sure we can give more details as to what proportion of patients are getting into the extension study and the doses at which that is occurring et cetera.

John Maraganore

Right. And as a reminder, thank you, Akshay. As a reminder, Kay, the other thing is keep in mind that these are patients that entered the study with very advanced stages of malignancy who have failed all other therapies, at least three other therapies. So these are patients that are traditional in Phase I oncology studies quite advanced in their disease. So we think it is encouraging that we have been able to open up the Phase I extension study.

Kay McKay – Charter Capital

A follow-up to that. How often are these extension patients then followed up? And then I guess another question, to what extent do you think you might be able to capture biopsy data in the event of mortalities?

John Maraganore

Okay. So, Akshay, why don't you take it?

Akshay Vaishnaw

As patients entered the extension phase they are reevaluated formally every two months with CT assessment, but clearly there are clinical evaluations ongoing but formally speaking every two months for evidence of progression of disease. And then we expect biopsies again, as we did at ASCO, I think we can reiterate that things are looking encouraging there. We are beginning to get biopsies from a significant proportion of patients and I think we weigh update folks later in the year, those will be some of the additional data we will be sharing. What are we learning from these biopsies? Clearly, good opportunity to look for Pharmacodynamic activity et cetera, so more to come there.

Kay McKay – Charter Capital

Okay. Great. We will look forward to that. Okay. Thanks, guys.

Operator

There are no further questions at this time. And we will turn the call over to John Maraganore for closing remarks.

John Maraganore

Thanks, Jennifer. So, thanks everyone for joining us on the call. As you can see, we made a lot of important progress since the beginning of the year and we are just getting started. We are excited about the rest of 2010. Lots of things going on and we are continuing our focus on our important mission of advancing RNAi therapeutics as a whole new class of innovative medicines. Thank you, again.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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