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Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY)

Alnylam and Genzyme Discuss Alliance to Develop and Commercialize RNAi Therapeutics in Asia

October 22, 2012 08:00 am ET

Executives

Cynthia Clayton - Vice President, Investor Relations and Corporate Communications

John Maraganore - Chief Executive Officer

David Meeker - President and CEO of Genzyme

Laurence Reid - Senior Vice President, Chief Business Officer

Barry Greene - President and Chief Operating Officer

Akshay Vaishnaw - Executive Vice President and Chief Medical Officer

Mike Mason - Vice President Finance and Treasurer

Analysts

Geoff Meacham - JPMorgan

Alan Carr - Needham & Company

Stephen Willey - Stifel Nicolaus

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Alnylam Pharmaceuticals Conference Call to Discuss the New Alliance with Genzyme. There will be a question-and-answer session to follow. Please be advised that the call is being recorded at the company's request.

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

Cynthia Clayton

Good morning, everybody. I am Cynthia Clayton, Vice President, Investor Relations and Corporate Communications at Alnylam.

With me today are John Maraganore, our Chief Executive Officer, Laurence Reid, our Senior Vice President and Chief Business Officer, and Barry Greene, our President and Chief Operating Officer. I am also very pleased to welcome David Meeker, President and CEO of Genzyme, who is also on the line with us this morning. In addition, Akshay Vaishnaw, Executive Vice President and Chief Medical Officer and Mike Mason, our Vice President of Finance and Treasurer, are here and available for Q&A.

During today's call, John will provide an overview of the agreement we just announced with Genzyme for the advancement of our TTR program in Japan and other Asian-Pacific territories.

David will share with you the significance of this alliance for Genzyme, Laurence will review the terms of the deal in more detail, Barry will review our milestones and goals, and we will then turn the call over to you for your questions.

Before we begin, I would like to remind you that this call will certain 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 obligation to update such statements.

I will now turn the call over to John.

John Maraganore

Thanks, Cynthia, and welcome everyone, and thank you for joining us this morning. We are very pleased to announce this morning that we have formed a strategic alliance with Genzyme, a Sanofi company to develop and commercialize RNAi therapeutics targeting transthyretin for the treatment of transthyretin-mediated amyloidosis in Japan, and other Asia-Pacific countries.

As you will hear from David and Laurence in just a moment, Genzyme will advance the ALN-TTR program with their proven capabilities in the Japanese and broader Asian market, very importantly, Alnylam maintains all otherwise consistent with our plans to develop and directly commercialize this potential breakthrough medicine in North and South America, Europe and the rest of world.

As most of you are aware, ATTR is a devastating hereditary, and often fatal disease caused by mutations in the transthyretin gene. ATTR happens to have a high prevalence in Japan and other Asia-Pacific regions, and we believe this alliance will put us in a position to bring this therapy to patients in Japan sooner and to reset market faster.

As the lead program in our Alnylam 5x15 product strategy, we our ALN-TTR program as a key part of building Alnylam for the future. Accordingly, we are very excited to form this alliance with Genzyme, clearly the industry innovator and leader in bringing orphan drugs to patients that need.

We believe the clinical data we have generated to-date with ALN-TTR02 establish new industry milestones as we continue to advance RNAi therapeutics to patients and we are very pleased to have Genzyme as a partner for ATTR in Japan and Asia in that effort.

I'll now turn the call over to David, who will share with you his thoughts on the collaboration and what this opportunity means for Genzyme. David?

David Meeker

Thank you, John. Good morning, everyone. So, it's a real pleasure to be here with the team from Alnylam to discuss this new collaboration focused on the commercialization and development of ALN-TTR for Japan and Asia. This is a truly unmet medical need, and this is a true innovative approach to addressing that unmet need.

In this collaboration, Genzyme and Alnylam intend to maximize the value of ALN-TTR worldwide by developing the program in all categories of amyloid-mediated, including familial amyloid polyneuropathy, or FAP as well as familial amyloid cardiomyopathy, or FAC and senile systemic amyloidosis, or SSA.

Amyloid-mediated transthyretin disease an endemic disease in Japan with a significant number of patients carrying the V30M TTR mutation, which leads to onset of FAP, so working close collaboration with Alnylam, Genzyme will lead the development in commercialization in Japan and the broader Asian market should Alnylam decide to partner ALN-TTR in other parts of the world, Genzyme retains a wide approach negotiation to become that partner.

We have been very encouraged by Alnylam's progress with their ALN-TTR program and are excited by the potential for this best-in-class innovative drug candidate to make a real difference in the lives of patients with ATTR. The results to-date demonstrate impressive clinical activity and support advancement of this promising therapeutic into pivotal studies and toward the market.

As we work to build our internal pipeline through research and development, and through external collaborations, this will be a very strong addition to that pipeline and we look forward to working with Alnylam on this important program.

So, I'll now turn the call over to Laurence, who can provide you with some additional specifics. Laurence?

Laurence Reid

Thank you very much for joining us this morning, David. Good morning to everybody else on the line. As you know, ATTR is a devastating often fatal disease that is going to affect approximately 50,000 people worldwide. It's associated with a very significant morbidity, a mean life expectancy of 5 to 15 years from symptom onset.

Alnylam's ALN-TTR program currently includes ALN-TTR02, which is in a Phase II clinical trial, and ALN-TTRsc, a subcutaneously administered RNAi therapeutic in late stage pre-clinical development.

Recently, we posted clinical results from our Phase I trial with ALN-TTR02. Specifically, we demonstrated the administration of ALN-TTR02 is the robust knockdown of serum TTR protein levels of up to 94%. Knockdown of TTR is going to be rapid, dose dependent, durable and specific after just a single dose. The drug was generally safe and well tolerated in this Phase I study.

With respect to the Alnylam, Genzyme will advance the ALN-TTR program in the Japanese and broader Asian market, including Korea, Australia and China, while we at Alnylam maintain our plans to develop and directly commercialize this potential breakthrough medicine in the U.S., Europe and rest of the world.

Genzyme will make an upfront cash payment of $22.5 million to Alnylam. In addition, new agreement includes success based development milestone payments totaling $50 million and tiered royalties that are expected to yield an effective rate of mid-teens to mid-twenties on Genzyme's sales of ALN-TTR products in their territory. The royalties in this agreement represent an attractive way for Alnylam to participate in the success of the product in Japan and other Asian countries.

Indeed, given our confidence in ALN-TTR's potential, we view such a royalty weighted deal with an industry leader in the Asian market as a highly valuable and attractive proposition from Alnylam. Overall, we are very excited to form this alliance with Genzyme, we believe that as a result of this new alliance, ALN-TTR will get to patients in Japan, and the other Asia-Pacific countries sooner and our drug will reach that market much faster.

With that, I'll turn it over to Barry.

Barry Greene

Thanks, Laurence, and good morning, everybody. As you heard, we and Genzyme are extremely excited about partnering our ATTR program in Japan and other Asia-Pacific territories. We've long admired Genzyme's commitment to innovation and leadership in bringing novel products to the market for the treatment of rare diseases. This collaboration follows what has been a very exciting and extremely productive year to-date for Alnylam.

Highlights include the demonstration of RNAi clinical activity in men in several of our programs such as TTRs, we've talked about, ALN-PCS for the treatment of severe hypercholesterolemia, ALN- VSP for the treatment of liver cancers and ALN-RSV01 for the treatment of respiratory syncytial virus. These data matter and have significantly enhanced the industry's interest in RNAi therapeutics. In addition to this new Genzyme partnership, we earlier this year formed the collaboration with Ascletis, the advancement of ALN-VSP in China, and with Monsanto in the agricultural arena.

We continue to have very encouraging partnership discussions in other areas as well, and it is clear that the biopharmaceutical industry has renewed interest in RNAi therapeutics as quite strong and very exciting. In the meantime, we remain on track to meet our goals for the remainder of the year and into 2013. Including, advancing ALN-TTR02 to the current Phase II trial with data in 2013, and the goal of starting our pivotal trial in 2013, we intend to file an IND for ALN-TTR subcu by the end of 2012 with data in 2013, also filing an IND for ALN-AT3 in 2013, a subcutaneously administered program for the treatment of hemophilia.

We plan on partnering our ALN-PCS program prior to start of Phase II and advancing other Alnylam 5x15 programs toward the clinical with partnerships we aim to form and forming additional partnerships on programs and technology.

In summary, I think it's clear that we are executing on our goals of driving important, innovative RNAi therapeutics to patients in need.

With that, I will turn it over to the operator for your questions. Shania?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Your first question comes from the line of Geoff Meacham with JPMorgan. Please proceed.

Geoff Meacham - JPMorgan

Hi. Good morning, guys. Thanks for doing the call. Question here, I guess, I just want to be clear on the path to market in Japan, so after the Phase II data that you guys have next year, is the plan to go into a pivotal in Japan directly or go to traditional route, which is the comparability study in Japanese patients, and I have a follow-up.

John Maraganore

That's a great question. Let me have Akshay, first address the question. And then, David, if would like to comment as well, that would be great, but maybe Akshay, you can begin.

Akshay Vaishnaw

Yes. That obviously is a very, very important question, and there are two approaches. The orthodox, the older approach was to do a comparability study looking at Japanese origin patients compared to occasion patients across the number of parameters PK, safety and other things. And even more advantageous approach is to actually involve Japanese territory into pivotal study for any effort like the TTR effort that would lead to potentially parallel approval day at the same timeframe that we get approval in U.S. Europe and rest of the world.

Now, we've formed this very exciting collaboration as we acknowledge Genzyme are the leaders in this space, in rare diseases especially so in Japan, and I think we are going to work very closely with them and figure out the optimal path, but I am sure David would has some thoughts as well.

John Maraganore

Yes. David, would you like to comment?

David Meeker

No. I think, actually you made the key points which is, we will work closely with the Japanese authorities. From the beginning what was about this program was the opportunity to be involved in thinking about the global development as we focused on local development needs on pan-Asia-Pacific area. So, Geoff, to your question, I am not sure at this point which of those two paths we will take, but it's nice to have an option.

Geoff Meacham - JPMorgan

Got you. Okay. And just a follow-up, maybe if you could help put some more granularity on the numbers of patients from your market research in Japan. Thanks.

John Maraganore

Yes. Absolutely. Akshay, would you like to handle it?

Akshay Vaishnaw

Yes. Sure. Again, our Japanese colleagues through Genzyme and reading the lips should we have a pretty good grasp, and of course it's one of the very attractive things about this deal, there are probably 500 to 1,000 FAP patients, so those are the patients with the polyneuropathy. In our conservative estimate from the literature from the most prevalent mutation V30M is at least 350 FAP patients with V30M alone, and then there are 10 other mutations in the TTR gene that would be identified in Japan. So, clearly, there is a very sizable opportunity and that's not counting the cardiomyopathy element which David emphasized in his passage of the call. And, with the aging population in Japan, we've already started learning from the TTR investigators that not only is there an important number of patients in the FAP space, but also in the SSA space, which they are increasingly recognizing.

John Maraganore

And, just to add to that Geoff, I mean obviously was very attractive is our ability to now access those patients and bring this medicine to those patients. We believe and are very convinced will happen much more rapidly than if we had done this on our own, so it's obviously very powerful to be working with Genzyme in this dimension.

Akshay Vaishnaw

I think, one of the other things, and David, maybe you are the best person to help us learn about this is, Genzyme has been very successful once a fair piece of proof from orphan disease in Japan to get harmonized and rapid uptake through the entire population very quickly, so penetration appears to be rapid in Japan. Is that right, David?

David Meeker

Yes. Again, depending on the disease, but I think what's attractive here is, there is a high level of awareness. It is endemic, if you will, in the Japanese population, so we are not starting at zero, which is sometimes the case for the rear disease.

Geoff Meacham - JPMorgan

Okay. Thanks.

John Maraganore

Geoff, I hope that helps your question.

Geoff Meacham - JPMorgan

It does. Thanks.

John Maraganore

Great.

Operator

Your next question comes from line of Marko Kozul with Leerink Swann. Please proceed.

Unidentified Analyst

Good morning. This is Irene in for Marko. Congratulations on new the news today and thanks for taking the question. Can you give us a sense of what ALN-TTR02 Genzyme may have had in making the decision to forge the partnership? In other words, did they have up-to-date data from the ongoing open-label Phase II trial?

John Maraganore

Let me answer that first and then we can hand it over to David. So, the ongoing trial is certainly worth everything that's going on with the program and that obviously includes the recruitment of our patients into that study, which is the Phase II study, so they are very aware of all the information, they are very aware of the entirety of the data package in general and one of the things obviously in any partnership with a larger biotech or pharma partners is, obviously, there is extensive review of all aspects of the program. David, anything to add from your perspective to that?

David Meeker

No. I mean, as you said with any valuation, two key issues safety and efficacy, and we have had as you say the access to everything you have, and the thing that really excites us and we think that this technology is uniquely suited if you will to address this particular disease with its liver orientation, so RNAi targeted to deliver and the efficacy very robust admittedly in the early studies, but I think when we make decisions around what's most attractive, we are looking for one strong biology which this has. And then secondly, I am a proof of principle, which I also think this has and the use of RNAi across a number of different indications also gives us more robust sense for the safety than we might have where there is only one indication being pursued.

Unidentified Analyst

Thank you very much. And, can you give us a sense of how this partnership might impact some of your expense items such as R&D?

John Maraganore

Well, Mike, you want to comment on that?

Mike Mason

Sure. I don't think there is really any change, where Genzyme will control the development in Japan, and we'll continue to pursue our programs here and on our 5x10 program, so really no change.

Unidentified Analyst

Thanks for taking the question.

Mike Mason

Great. Thank you.

Operator

(Operator Instructions). Your next question comes from the line of Alan Carr with Needham & Company. Please proceed.

Alan Carr - Needham & Company

Thanks for taking the questions. Can you on, you mentioned earlier that there are some rights for Sanofi outside Asia. They have a right of first negotiation, if you can comment a bit more on that. Then also, how much experience or clinical experience is there with RNAi in Japan?

John Maraganore

Those are great questions. Laurence, why don't you handle the first question? Then Akshay, you can follow-up on the second.

Laurence Reid

Yes. I think, we've covered that so that you understand, Alan, what we've structured with Genzyme, what we said this morning is that Genzyme has the right of first negotiation to be our partner in other parts of the world outside APAC territory if indeed we choose to take a partner outside that territory. And, as John said, I mean our commitment currently is to develop commercialized in all remaining parts of the world. (Inaudible). Mean talent but there are no change of control aspect with that. In other words, our value (Inaudible) our asset here is something which is preserved in the context of things that could occur in the future. While that's not anybody's intention, so that's an important element, so it's really an explicit right of first negotiation related to our intention seek a partner in a different part of the world, okay? We are obviously logically we made (Inaudible) for Genzyme to be our partner if we were looking for partnering in any other part of the world.

John Maraganore

Akshay, the first part of the second question.

Akshay Vaishnaw

Yes. Alan, obviously extensive awareness, but through the medical and scientific community now really that's reflected in the literature. We formed a number of academic collaborations with research [ including the TTR] group. Getting to more expensive awareness, I think you are aware that we had prior deals with Takeda and have been carried across the platform and respectively. First, I think both in the academic and biotechnology, which is very good appreciation in fact technology and when David said when he and his colleagues and the senior leaders in Japan through our Phase I data, I think the proof of principle there establishing their minds this was the optimum as powerful disease and we feel very excited (Inaudible) Genzyme product.

Alan Carr - Needham & Company

Thanks. Then. David, can you comment on nucleic acid on (Inaudible), would Genzyme branch in that area?

John Maraganore

Yes. David?

David Meeker

Yes. We have always taken (Inaudible) technology that it's always been about and the need and then bringing the best possible technology to bear, so we have no product as you know, but we have looked at this technology, we've looked at it for CNS related applications. Big challenges are thinking about delivering how you do that, but we have a science group here who is quite familiar with RNAi.

Alan Carr - Needham & Company

All right. Thanks very much.

John Maraganore

Great. Thanks, Alan.

Operator

Your final question comes from the line of Stephen Willey with Stifel Nicolaus. Please proceed.

John Maraganore

Hey, Stephen.

Stephen Willey - Stifel Nicolaus

Hi. Good morning. Congrats on the deal.

John Maraganore

Thank you.

Stephen Willey - Stifel Nicolaus

Just a quick question, I know that you guys had announced that there were some key claims that were upheld in the Tuschl II patent in validate trial in Japan a couple of weeks ago.

John Maraganore

Yes.

Stephen Willey - Stifel Nicolaus

Had that been a bit of a bottleneck with respect to determining the (Inaudible)?

John Maraganore

No. I don't think so. It's obviously great that that was the outcome and the claims that were held were very broad consistent with the claims that had been granted to the Tuschl patent almost worldwide at this point in time.

You know, it's always good if a third-party you are trying to challenge intellectual property, it's always good to win the outcome of that, but that wasn't a gating item. At least from our perspective that depends on effort, so that is something which obviously we can clip ideas, but feel assure that patent is one of many strong elements of IP protection we have for this program in Japan.

Stephen Willey - Stifel Nicolaus

I guess, along those lines, is there any intellectual property related to LNPs that are currently filed in Japan at all?

John Maraganore

There are patent elements that are filed in Japan. I would have to have our patents to get the calls just go to go through what's been granted to-date and what's not been ramped today, but there certainly are elements that have been filed in Japan.

Stephen Willey - Stifel Nicolaus

Just lastly, you mentioned the interest in the earlier stage TTR opportunities that cardiomyopathy and SSA, I guess, what kind of preclinical work if any has been done and (Inaudible) now and is this deal now a wide kind of accelerate?

John Maraganore

Yes. Akshay, you want to comment.

Akshay Vaishnaw

Yes. Steve, I mean, the most important work that would accelerate and enable the FAC and SSA spaces really to go from (Inaudible) we have (Inaudible) clinical benefit. The linkage, which I think everyone expect a reduction, and beyond anything. We think up on.

Laurence Reid

Yes. I think the bottom line Steve is, (Inaudible) and we will be very aggressively pursuing not only FAP indication but also the cardiomyopathy indications, which are manifest both, in the familial amyloid cardiomyopathy, but also in the senile systemic amyloidosis, so this is very much in the plans and we'll update people on specifics on when trials might start. We'll give you an update in the beginning next year around those types of specifics, but clearly right now the focus is on completing the Phase II study that's ongoing in ATTR patients and then obviously progressing into our pivotal study, which we aim to start at the end of next year.

Stephen Willey - Stifel Nicolaus

And just a quick follow-up, so both, you and Genzyme would be pursuing pre-clinical lead identification candidate in these earlier indications or you would be sharing that information kind of on a going forward basis?

Akshay Vaishnaw

Yes. Steve, the ALN-TTR02, and in addition obviously to subcu program are the programs that will be used across aspects and all spectra of the ATTR indication.

Stephen Willey - Stifel Nicolaus

So, I guess, I phrased that incorrectly then. I guess, in terms of pursuing cardiomyopathy and SSA with TTR02, will those efforts from a preclinical perspective be pursued in parallel at both, Genzyme and Alnylam?

Laurence Reid

Yes. I mean, if there are any preclinical things to do, it will be done. It will certainly be done jointly. I think the point Akshay made earlier is that essentially at this point, the focus is really on clinical applications than pre-clinical.

Stephen Willey - Stifel Nicolaus

Perfect. Appreciate. Thank you.

Laurence Reid

Good. Thanks, Steve.

Operator

I will now turn the call over to Alnylam for the closing remark.

John Maraganore

Well, thank you, everybody, and thanks for joining us this morning for what we believe is a very important collaboration for the continued events of ALN-TTR in a very important geographic region with a terrific partner and we look forward to sharing further updates with all of you on the progress in the weeks and months to come.

Thank you and have a good rest of the day.

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