CALCULATION OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
|
Title of each class of
securities to be registered
|
|
Amount
to be
registered(1)
|
|
Proposed
maximum
offering price
per unit
|
|
Proposed
maximum
aggregate
offering price(1)
|
|
Amount of
registration fee(2)
|
Common Stock, par value $0.01 per share
|
|
5,750,000
|
|
$71.87
|
|
$413,252,500
|
|
$47,895.97
|
|
|
(1)
|
Assumes exercise in full of the underwriters option to purchase up to 750,000 additional shares of Common Stock.
|
(2)
|
Calculated in accordance with Rule 457(r) under the Securities Act of 1933, as amended. This Calculation of Registration Fee table shall be deemed to update the Calculation of Registration Fee
table in the registrants Registration Statement on Form
S-3
(File
No. 333-217688)
in accordance with Rules 456(b) and 457(r) under the Securities Act of 1933,
as amended.
|
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-217688
Prospectus Supplement
(To Prospectus dated May 5, 2017)
5,000,000 Shares
Common Stock
We are offering 5,000,000 shares of our common stock.
Our common stock trades on the NASDAQ Global Select Market under the trading symbol ALNY. On May 23, 2017, the last reported sale price
of our common stock on the NASDAQ Global Select Market was $74.87 per share.
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
Total
|
|
Public offering price
|
|
$
|
71.87
|
|
|
$
|
359,350,000
|
|
Underwriting discounts and commissions
|
|
$
|
0.74
|
|
|
$
|
3,700,000
|
|
Proceeds, before expenses, to us
|
|
$
|
71.13
|
|
|
$
|
355,650,000
|
|
We have granted the underwriter an option for a period of 30 days from the date of this prospectus supplement to purchase up to an
additional 750,000 shares of our common stock at the public offering price, less the underwriting discounts and commissions, solely to cover over-allotments, if any.
Sanofi Genzyme, one of our existing stockholders and collaboration partners, had the right to purchase directly from us, in a concurrent private placement, up to the number of shares needed to maintain its current
ownership percentage of our common stock of approximately 12 percent, at the public offering price. On May 24, 2017, Sanofi Genzyme exercised this right and indicated its intent to purchase 297,501 shares of common stock directly from us. This
sale of common stock to Sanofi Genzyme will not be registered as part of this offering, though it will be consummated simultaneously with and subject to the closing of the public offering. We refer to this transaction as the concurrent private
placement. Please read the section in this prospectus supplement entitled Underwriting for more information.
We estimate the expenses of
this offering, excluding underwriting discounts and commissions, will be approximately $500,000.
Investing in our common stock involves risks. See
Risk factors
beginning on page
S-8
of this prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
The underwriter expects
to deliver the shares to purchasers on or about May 30, 2017.
Sole book-running manager
Barclays
May 23, 2017
Table of contents
i
About this prospectus supplement
This document consists of two parts. The first part is this prospectus supplement, which describes the specific terms of this common stock offering and
also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference herein. The second part, the accompanying prospectus, provides more general information. Generally, when we refer to this
prospectus, we are referring to both parts of this document combined. To the extent there is a conflict between the information contained in this prospectus supplement and the information contained in the accompanying prospectus or any document
incorporated by reference therein filed prior to the date of this prospectus supplement, you should rely on the information in this prospectus supplement; provided that if any statement in one of these documents is inconsistent with a statement in
another document having a later datefor example, a document incorporated by reference in the accompanying prospectusthe statement in the document having the later date modifies or supersedes the earlier statement.
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is
incorporated by reference herein were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation,
warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the
current state of our affairs.
We have not authorized anyone to provide any information other than that contained or incorporated by reference
in this prospectus supplement, the accompanying prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any
other information that others may give you. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus supplement and the
accompanying prospectus in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer or solicitation of an offer in such jurisdiction. The information contained in this prospectus supplement or the accompanying
prospectus, or incorporated by reference herein is accurate only as of the respective dates thereof, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus or of any sale of our common stock. It is important
for you to read and consider all information contained in this prospectus supplement and the accompanying prospectus, including the documents incorporated by reference herein and therein, in making your investment decision. You should also read and
consider the information in the documents to which we have referred you in the sections entitled Where you can find more information and Incorporation of certain information by reference in this prospectus supplement and in
the accompanying prospectus.
We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where
offers and sales are permitted. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the common stock in certain jurisdictions may be restricted by law. Persons outside the United States who come into
possession of this prospectus supplement and the accompanying prospectus must inform themselves about, and observe any restrictions relating to, the offering of the common stock and the distribution of this prospectus supplement and the accompanying
prospectus outside the United States. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any securities offered by this
prospectus supplement and the accompanying prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
Unless the context otherwise indicates, references in this prospectus to Alnylam, we, our, us, the Company and similar designations refer,
collectively, to Alnylam Pharmaceuticals, Inc., a Delaware corporation, and its consolidated subsidiaries. Alnylam is a trademark of Alnylam Pharmaceuticals, Inc. Our logo, trademarks and service marks are property of Alnylam. All other
trademarks or service marks appearing in this prospectus supplement are the property of their respective holders.
S-1
Special note regarding forward-looking statements
This prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein contain
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other
than statements of historical facts, that we include in this prospectus supplement, the accompanying prospectus and in the documents incorporated by reference into this prospectus supplement and the accompanying prospectus may be deemed
forward-looking statements for purposes of the Securities Act and the Exchange Act. We use words such as believe, expect, anticipate, may, could, intend, will,
plan, target, goal, anticipate, estimate, project, will, would and similar expressions to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. These statements appear throughout this prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying
prospectus and are statements regarding our current intent, belief or expectation, primarily with respect to our operations and related industry developments. Examples of these statements include, but are not limited to, statements regarding the
following: our views with respect to the potential for RNAi therapeutics; the progress of our research and development programs; our current and anticipated clinical trials and expectations regarding the reporting of data from these trials; our
expectations regarding potential product characteristics of, market size for, and the successful commercialization of, the product candidates we are developing; the timing of regulatory filings and interactions with regulatory authorities and our
ability to obtain and maintain regulatory approval, pricing and reimbursement for our products; the status of our manufacturing operations and the construction of our manufacturing facility; our progress in establishing a commercial and
ex-United
States infrastructure; our ability to manage our growth and operating expenses; our expectations regarding our STAr pipeline growth strategy and our Alnylam 2020 guidance for the advancement and
commercialization of RNAi therapeutics; our corporate collaborations, including potential future licensing fees and milestone and royalty payments; protection of our intellectual property; the outcome of litigation; the sufficiency of our cash
resources; the timing and likelihood of regulatory approvals; and our operations and legal risks. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in our forward-looking statements and, accordingly,
you should not place undue reliance on our forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those expressed or implied by these forward-looking statements,
including those discussed under Risk factors and elsewhere in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus.
Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to update any forward-looking
statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise.
In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
S-2
Prospectus supplement summary
This summary highlights information contained elsewhere in this prospectus supplement and the accompanying prospectus and in the documents we
incorporate by reference. This summary does not contain all of the information that you should consider before deciding to invest in our common stock. You should read this entire prospectus supplement and the accompanying prospectus carefully,
including the Risk factors section contained in this prospectus supplement and our consolidated financial statements and the related notes and the other documents incorporated by reference herein.
Alnylam Pharmaceuticals, Inc.
Our
business
We are a biopharmaceutical company developing novel therapeutics based on RNA interference, or RNAi. RNAi is a naturally
occurring biological pathway within cells for selectively silencing and regulating the expression of specific genes. Since many diseases are caused by the inappropriate activity of specific genes, the ability to silence genes selectively through
RNAi could provide a new way to treat a wide range of human diseases. We believe that drugs that work through RNAi have the potential to become a broad new class of innovative medicines, and that this potential new drug class is similar to the
opportunity created with other major biological discoveries such as recombinant DNA and monoclonal antibodies. Using our intellectual property and expertise, we are developing what we believe to be a reproducible and modular platform to develop RNAi
therapeutics for a variety of human diseases.
Our research and development strategy is focused primarily on the use of our proprietary
N-acetylgalactosamine,
or GalNAc-conjugate platform for delivery of small interfering RNAs, or siRNAsthe molecules that mediate RNAitoward genetically validated, liver-expressed target genes
involved in the cause or pathway of human diseases. We are also focused on clinical indications where there are high unmet needs, early biomarkers for the assessment of clinical activity in Phase 1 clinical studies, and a definable path for drug
development, regulatory approval, patient access and commercialization.
Specifically, our broad pipeline of investigational RNAi therapeutics
is focused in three Strategic Therapeutic Areas, or STArs: Genetic Medicines, with multiple product candidates for the treatment of rare diseases; Cardio-Metabolic Diseases, with product candidates directed toward genetically validated,
liver-expressed disease targets for unmet needs in cardiovascular and metabolic diseases; and Hepatic Infectious Diseases, with product candidates designed to address the major global health challenges of hepatic infectious diseases, beginning with
hepatitis B and hepatitis D viral infections. We are focused on advancement of our
Alnylam 2020
strategy for the development and commercialization of RNAi therapeutics as a potential new class of innovative medicines. Specifically, our goal
is to achieve, by the end of 2020, a company profile with three marketed products and ten RNAi therapeutic clinical programs, including four in late stages of development, across our three STArs.
Our most advanced investigational RNAi therapeutic in development, patisiran, targets the transthyretin, or TTR, gene for the treatment of patients with
polyneuropathy due to hereditary
TTR-mediated
amyloidosis, or hATTR amyloidosis. We expect to report
top-line
data from our ongoing APOLLO Phase 3 study of patisiran in
mid-2017.
Assuming that the APOLLO data are positive, we plan to submit our first new drug application, or NDA, and marketing authorization application, or MAA, for patisiran at the end of 2017. We expect to advance
additional investigational RNAi therapeutics into Phase 3 development during 2017, including fitusiran, for the treatment of hemophilia and rare bleeding disorders, and givosiran, for the treatment of acute hepatic porphyrias. Our partner, The
Medicines Company, or MDCO, has announced that it expects to initiate a Phase 3 program for inclisiran for the treatment of hypercholesterolemia in 2017. In addition, our manufacturing facility for patisiran formulated bulk drug product is now fully
operational and ready for the potential launch of patisiran and we
S-3
commenced construction of a manufacturing facility in Norton, Massachusetts for drug substance, including siRNAs and siRNA conjugates, for clinical and commercial use. We have also expanded our
global footprint with the establishment of our European headquarters in Zug, Switzerland, as well as the opening of a new development and commercial hub in Maidenhead, United Kingdom. Lastly, we continued to build our commercial and medical affairs
teams in preparation for the potential launch of patisiran in 2018, which we plan to market in the United States, Canada and Western Europe.
Finally, based on our expertise in RNAi therapeutics and broad intellectual property estate, we have formed alliances with leading pharmaceutical and
life sciences companies to support our development and commercialization efforts, including Sanofi Genzyme, the specialty care global business unit of Sanofi, and MDCO.
Commercial Operations
After years of work, successfully discovering a new product platform
technology, developing a potential new class of innovative medicines and retaining broad commercial rights, our next objective is to introduce our RNAi therapeutics to as many patients in need as possible. To meet that new challenge, we intend to
build a global commercial operation which will be fully integrated and ready to sequentially manage the potential of multiple product launches across multiple geographies. As a commercial-stage biopharmaceutical company, we intend to have the
ability to market and sell our products ourselves in many countries. The conduct of these commercial activities will be dependent upon if, and when, regulatory approval is obtained for our product candidates and on agreements that we have made or
may make in the future with strategic collaborators, currently as follows:
|
|
|
For patisiran, if our APOLLO Phase 3 trial is positive, we have rights to commercialize in the United States, Canada and Western Europe while Sanofi
Genzyme has rights to commercialize in the rest of the world;
|
|
|
|
For fitusiran, if our ATLAS Phase 3 trials are positive, we have rights to
co-commercialize
with Sanofi Genzyme
in the United States, Canada and Western Europe, and Sanofi Genzyme has rights to commercialize in the rest of the world;
|
|
|
|
For givosiran, we retain global rights to commercialize; and
|
|
|
|
For inclisiran, we have granted MDCO global rights to commercialize.
|
Throughout the development of our product candidates, we have remained focused on keeping patients at the center of everything we do. This patient focus will continue as we move towards commercialization.
Moreover, our late stage programs are focused on orphan diseases, and these patients and their families are often in need of more than just a product. It is our goal to identify information, education solutions and services that benefit these
patients and their families, and to have a rich patient services approach in these orphan diseases. In addition, we are focused early in the product development cycle on establishing evidence that we can bring to payors about the pharmacoeconomic
opportunities that our product candidates represent to ensure access for patients.
We are assembling the key components of a commercial
organization with a focus on preparation for the potential commercial launch of patisiran in 2018, if our APOLLO Phase 3 trial is positive and regulatory approval is obtained. We are beginning to assemble a focused commercial team with broad
experience in marketing, sales, patient access, distribution and product reimbursement, in particular for orphan diseases. As we continue to prepare for a potential patisiran commercial launch in the United States, Canada and Western Europe, we plan
to expand our commercial organization over the next twelve to eighteen months. This expansion will include incorporation of appropriate quality systems, compliance policies and procedures, implementation of internal systems and infrastructure in
order to support commercial sales, and establishment of patient-focused
S-4
programs. We have also begun to establish a presence in major European markets with the hiring of country general managers, market access professionals and medical experts. In each country where
our product candidates are approved by health authorities (if, when and where), we plan to build a full commercial team composed of marketing, field sales and patient services on time to execute successful launches. For some territories/countries,
we may also elect to utilize strategic partners, distributors or contract sales forces to assist in the commercialization of our products.
Company information
We are a Delaware
corporation. Our principal executive offices are located at 300 Third Street, Cambridge, Massachusetts 02142, and our telephone number at that address is
(617) 551-8200.
Our website address is
www.alnylam.com
. The information contained on our website is not incorporated by reference and should not be considered part of this prospectus supplement. We have included our website address in this prospectus supplement as an inactive
textual reference only.
S-5
The offering
Common stock offered
|
5,000,000 shares
|
Concurrent private placement
|
Sanofi Genzyme, one of our existing stockholders and collaboration partners, had the right to purchase directly from us, in a concurrent private placement, up to the number of shares needed to
maintain its current ownership percentage of our common stock of approximately 12 percent, at the public offering price. On May 24, 2017, Sanofi Genzyme exercised this right and indicated its intent to purchase 297,501 shares of common stock
directly from us. This sale of common stock to Sanofi Genzyme will not be registered as part of this offering, though it will be consummated simultaneously with and subject to the closing of the public offering. We refer to this transaction as the
concurrent private placement. Please read the section in this prospectus supplement entitled Underwriting for more information.
|
Common stock to be outstanding after this offering and the concurrent private placement
|
91,487,693 shares
|
Option to purchase additional shares offered to the underwriter
|
The underwriter has an option to purchase a maximum of an additional 750,000 shares of our common stock from us solely to cover over-allotments, if any. The underwriter can exercise this option
at any time within 30 days from the date of this prospectus supplement.
|
Use of proceeds
|
We intend to use the net proceeds from this offering for general corporate purposes, including clinical trial costs and other research and development expenses, continued growth of our
manufacturing, quality, commercial and medical affairs capabilities to support our transition toward a commercial-stage biopharmaceutical company, capital expenditures and general and administrative expenses. See Use of proceeds.
|
Risk factors
|
You should read the Risk factors section of this prospectus supplement beginning on page
S-8
for a discussion of factors to consider before
deciding to purchase shares of our common stock.
|
NASDAQ Global Select Market symbol
|
ALNY
|
The number of shares of our common stock to be outstanding after
this offering and the concurrent private placement is based on 86,190,192 shares outstanding as of April 28, 2017, and excludes:
|
|
|
12,012,670 shares of common stock issuable upon the exercise of outstanding stock options at a weighted-average exercise price of $57.61 per share as
of April 28, 2017;
|
|
|
|
160,472 shares of common stock reserved for issuance upon settlement of restricted stock units as of April 28, 2017; and
|
S-6
|
|
|
an aggregate of 693,099 additional shares of common stock reserved for future issuance under our 2009 stock incentive plan, our 2004 stock incentive
plan and our 2004 employee stock purchase plan as of April 28, 2017 (excluding an additional 3,780,000 shares and 500,000 shares of common stock available for future issuance under our 2009 stock incentive plan and our 2004 employee stock
purchase plan, respectively, approved by our stockholders at our 2017 Annual Meeting on May 2, 2017).
|
Except as
otherwise noted, we have presented the information in this prospectus supplement assuming:
|
|
|
no exercise by the underwriter of the option to purchase up to an additional 750,000 shares of our common stock in this offering;
|
|
|
|
no sale of additional shares of our common stock to Sanofi Genzyme as described in Underwriting based on the exercise by the underwriter of
the option described in the previous bullet; and
|
|
|
|
no exercise of outstanding stock options.
|
S-7
Risk factors
Investing in our common stock involves significant risks. In deciding whether to invest, you should carefully consider the following risk factors, as
well as the other information contained in this prospectus supplement, the accompanying prospectus and in our filings with the Securities and Exchange Commission, or the SEC, that we have incorporated by reference in this prospectus supplement and
the accompanying prospectus. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations and prospects and cause the value of our stock to decline, which could cause you to lose all or
part of your investment. The risks and uncertainties we have described are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business
operations.
Risks Related to Our Business
Risks Related to Being a Clinical Stage Company
Although we have product candidates
in late stage clinical development, there is limited information about our ability to successfully overcome many of the risks and uncertainties encountered by companies in the biopharmaceutical industry.
Although we have product candidates in late stage clinical development, we have limited experience and have not yet demonstrated an ability to
successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. For example, to execute our business plan, we will need to successfully:
|
|
|
execute product development activities using unproven technologies related to both RNAi and to the delivery of siRNAs to the relevant tissues and
cells;
|
|
|
|
build and maintain a strong intellectual property portfolio;
|
|
|
|
gain regulatory acceptance for the development and commercialization of our product candidates and market success for any products we commercialize;
|
|
|
|
develop and maintain successful strategic alliances; and
|
|
|
|
manage our spending as costs and expenses increase due to clinical trials, regulatory approvals and commercialization.
|
If we are unsuccessful in accomplishing these objectives, we may not be able to develop product candidates, commercialize products, raise capital, expand
our business or continue our operations.
The approach we are taking to discover and develop novel RNAi therapeutics is unproven and may
never lead to marketable products.
We have concentrated our efforts and therapeutic product research and development on RNAi
technology and our future success depends on the successful development of this technology and products based on it. Neither we nor any other company has received regulatory approval to market therapeutics utilizing siRNAs, the class of molecule we
are trying to develop into drugs. The scientific discoveries that form the basis for our efforts to discover and develop new drugs are relatively new. The scientific evidence to support the feasibility of developing drugs based on these discoveries
is both early stage and limited. Skepticism as to the feasibility of developing RNAi therapeutics has been expressed in scientific literature. For example, there are potential challenges to achieving safe RNAi therapeutics based on the
so-called
off-target
effects and activation of the interferon response. In addition, decisions by other companies with respect to their RNAi development efforts or their
adoption of different or related technologies may increase skepticism in the marketplace regarding the potential for RNAi therapeutics.
S-8
Relatively few product candidates based on these discoveries have ever been tested in humans. siRNAs may not
naturally possess the inherent properties typically required of drugs, such as the ability to be stable in the body, or the ability to enter cells within relevant tissues in order to exert their effects. We currently have limited data to suggest
that we can introduce these properties into siRNAs. We have spent and expect to continue to spend large amounts of money trying to develop siRNAs that possess the properties typically required of drugs, and we may never succeed in doing so. In
addition, these compounds may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory studies, and they may interact with human biological systems in unforeseen, ineffective or harmful ways. For
example, in October 2016, we discontinued development of revusiran, an investigational RNAi therapeutic that was in development for the treatment of patients with cardiomyopathy due to hATTR amyloidosis, due to safety concerns, and are conducting a
comprehensive evaluation of the revusiran data. We may never succeed in developing a marketable product, we may not become profitable and the value of our common stock will decline.
Further, our focus solely on RNAi technology for developing drugs, as opposed to multiple, more proven technologies for drug development, increases the risks associated with the ownership of our common
stock. If we are not successful in developing a product candidate using RNAi technology, we may be required to change the scope and direction of our product development activities. In that case, we may not be able to identify and implement
successfully an alternative product development strategy.
Risks Related to Our Financial Results and Need for Financing
We have a history of losses and may never become and remain consistently profitable.
We have experienced significant operating losses since our inception. At March 31, 2017, we had an accumulated deficit of $1.76 billion. To
date, we have not received regulatory approval to market or sell any products nor generated any revenues from the sale of products. Further, we do not expect to generate any product revenues until at the earliest 2018, assuming we receive marketing
approval for patisiran. We expect to continue to incur annual net operating losses over the next several years and will require substantial resources over the next several years as we expand our efforts to discover, develop and commercialize RNAi
therapeutics. We anticipate that the majority of any revenues we generate over the next several years will be from alliances with pharmaceutical and biotechnology companies, but cannot be certain that we will be able to maintain our existing
alliances or secure and maintain new alliances, or meet the obligations or achieve any milestones that we may be required to meet or achieve to receive payments. We anticipate that revenues derived from such sources will not be sufficient to make us
consistently profitable.
We believe that to become and remain consistently profitable, we must succeed in discovering, developing and
commercializing novel drugs with significant market potential. This will require us to be successful in a range of challenging activities, including
pre-clinical
testing and clinical trial stages of
development, obtaining regulatory approval and reimbursement for these novel drugs and manufacturing, marketing and selling them. We may never succeed in these activities, and may never generate revenues that are significant enough to achieve
profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we cannot become and remain consistently profitable, the market price of our common stock could decline.
In addition, we may be unable to raise capital, expand our business, develop additional product candidates or continue our operations.
We will require substantial additional funds to complete our research and development activities and if additional funds are not available, we may
need to critically limit, significantly scale back or cease our operations.
We have used substantial funds to develop our RNAi
technologies and will require substantial funds to conduct further research and development, including
pre-clinical
testing and clinical trials of our product candidates, and to manufacture, market and sell
any products that are approved for commercial sale. Because we cannot be certain of the length of time or activities associated with successful development of our product candidates, we are unable to estimate the actual funds we will require to
develop and commercialize them.
S-9
Our future capital requirements and the period for which we expect our existing resources to support our
operations may vary from what we expect. We have based our expectations on a number of factors, many of which are difficult to predict or are outside of our control, including:
|
|
|
our progress in demonstrating that siRNAs can be active as drugs and achieve desired clinical effects;
|
|
|
|
progress in our research and development programs, as well as what may be required by regulatory bodies to advance these programs;
|
|
|
|
the timing, receipt and amount of milestone and other payments, if any, from present and future collaborators, if any;
|
|
|
|
our ability to maintain and establish additional collaborative arrangements and/or new business initiatives;
|
|
|
|
the resources, time and costs required to initiate and complete our
pre-clinical
and clinical studies, obtain
regulatory approvals, prepare for the commercialization of our product candidates, and obtain and maintain licenses to third-party intellectual property;
|
|
|
|
our ability to establish, maintain and operate our own manufacturing facilities in a timely and cost effective manner;
|
|
|
|
our ability to manufacture, or contract with third parties for the manufacture of, our product candidates for clinical testing and commercial sale;
|
|
|
|
the resources, time and cost required for the preparation, filing, prosecution, maintenance and enforcement of patent claims;
|
|
|
|
the costs associated with legal activities, including litigation, arising in the course of our business activities and our ability to prevail in any
such legal disputes; and
|
|
|
|
the timing, receipt and amount of sales and royalties, if any, from our potential products.
|
If our estimates and predictions relating to these factors are incorrect, we may need to modify our operating plan.
Even if our estimates are correct, we will be required to seek additional funding in the future and intend to do so through either collaborative
arrangements, public or private equity offerings or debt financings, or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. For example, our decision in October 2016 to
discontinue development of revusiran and the subsequent decline in our stock price may make it more difficult for us to obtain additional funding on acceptable terms.
In April 2016, our subsidiary, Alnylam U.S., Inc., entered into an aggregate of $150.0 million in term loan agreements with Bank of America N.A., or BOA, and Wells Fargo National Association, or
Wells, for which we are the guarantor, related to the build out of our new drug substance manufacturing facility, that mature in April 2021. Interest on the borrowings is calculated based on LIBOR plus 0.45 percent. During an event of default
under either agreement, the obligations under such agreement will bear interest at a rate per annum equal to the interest rate then in effect plus two percent. The obligations under the term loan agreements are secured by cash collateral in an
amount equal to, at any given time, at least 100 percent of the principal amount of all term loans outstanding under the credit agreements at such time. The agreements include restrictive covenants that could limit our flexibility in conducting
future business activities and further limit our ability to change the nature of our business and, in the event of insolvency, the lenders would be paid before holders of equity securities received any distribution of corporate assets. If an event
of default occurs, the interest rate would increase and the lenders would be entitled to take various actions, including the acceleration of amounts due under the loan. Our ability to satisfy our obligations under these agreements and meet our debt
service obligations will depend upon our future performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control.
S-10
In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders.
For example, if we raise additional funds by issuing equity securities, further dilution to our existing stockholders will result. In addition, as a condition to providing additional funding to us, future investors may demand, and may be granted,
rights superior to those of existing stockholders. Moreover, our investor agreement with Sanofi Genzyme provides Sanofi Genzyme with the right, subject to certain exceptions, generally to maintain its ownership position in us until Sanofi Genzyme
owns less than 7.5 percent of our outstanding common stock, subject to certain additional limited rights of Sanofi Genzyme to maintain its ownership percentage. In accordance with the investor agreement, as a result of our issuance of shares in
connection with our acquisition of Sirna in March 2014, Sanofi Genzyme exercised its right to purchase an additional 344,448 shares of our common stock. In January 2015, Sanofi Genzyme also exercised its right to purchase 196,251 shares based on its
2014 compensation-related right and its right to purchase 744,566 shares in connection with our public offering. In February 2016, Sanofi Genzyme purchased an additional 205,030 shares based on its 2015 compensation-related right. These purchases
allowed Sanofi Genzyme to maintain its ownership level of approximately 12 percent of our outstanding common stock. While the exercise of these rights by Sanofi Genzyme has provided us with an additional $126.3 million in cash to date, and
while any exercise of these rights by Sanofi Genzyme in the future will provide us with further additional cash, these exercises have caused, and any future exercise of these rights by Sanofi Genzyme will also cause further, dilution to our
stockholders. In January 2017, Sanofi Genzyme elected not to exercise its compensation-related right for 2016. In November 2016, Sanofi Genzyme elected to expand its regional rights for fitusiran and
opt-in
to
co-develop
and
co-commercialize
fitusiran in the United States, Canada and Western Europe, in addition to developing and commercializing the product in the Sanofi
Genzyme Territory. In connection with the exercise of this right, Sanofi Genzyme paid us in January 2017 for its incremental share of
co-development
costs incurred from January 2016 to September 2016, in
accordance with the 2014 Sanofi Genzyme collaboration. Going forward, Sanofi Genzyme will share in 50 percent of certain development and sales and marketing costs for fitusiran, which will result in increased expense reimbursement to us.
If we are unable to obtain funding on a timely basis, we may be required to significantly delay or curtail one or more of our research or
development programs or undergo future reductions in our workforce or other corporate restructuring activities, and our ability to achieve our strategy for 2020 may be delayed or diminished. We also could be required to seek funds through
arrangements with collaborators or others that may require us to relinquish rights to some of our technologies, product candidates or products that we would otherwise pursue on our own.
If the estimates we make, or the assumptions on which we rely, in preparing our condensed consolidated financial statements prove inaccurate, our actual results may vary from those reflected in our
projections and accruals.
Our condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses,
the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot
assure you, however, that our estimates, or the assumptions underlying them, will be correct.
The investment of our cash, cash
equivalents and fixed income marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.
At March 31, 2017, we had $812.2 million in cash, cash equivalents and fixed income marketable securities, excluding our investment in equity securities of Regulus and the $150.0 million of
restricted investments related to the term loan agreements with BOA and Wells. We historically have invested these amounts in high-grade corporate notes, commercial paper, securities issued or sponsored by the U.S. government, certificates of
deposit
S-11
and money market funds meeting the criteria of our investment policy, which is focused on the preservation of our capital. Corporate notes may also include foreign bonds denominated in U.S.
dollars. These investments are subject to general credit, liquidity, market and interest rate risks. We may realize losses in the fair value of these investments or a complete loss of these investments, which would have a negative effect on our
condensed consolidated financial statements. In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associated with our investment portfolio may have an
adverse effect on our results of operations, liquidity and financial condition.
Risks Related to Our Dependence on Third Parties
We may not be able to execute our business strategy if we are unable to enter into alliances with other companies that can provide
business and scientific capabilities and funds for the development and commercialization of our product candidates. If we are unsuccessful in forming or maintaining these alliances on terms favorable to us, our business may not succeed.
We do not currently have any capability for sales or distribution and have early capability for marketing and market access, as well
as limited capacity for drug development due to our growing pipeline of RNAi therapeutic opportunities. Accordingly, we have entered into alliances with other companies and collaborators that we believe can provide such capabilities in certain
territories, and we intend to enter into additional such alliances in the future. Our collaboration strategy is to form alliances that create significant value for us and our collaborators in the advancement of RNAi therapeutics as a new class of
innovative medicines. Specifically, with respect to our Genetic Medicine pipeline, we formed a broad strategic alliance with Sanofi Genzyme in 2014 pursuant to which we retain development and commercial rights for our current and future Genetic
Medicine products in the United States, Canada and Western Europe, and Sanofi Genzyme has the right to develop and commercialize our current and future Genetic Medicine products principally in the rest of the world, subject to certain broader
rights. With respect to our Cardio-Metabolic and Hepatic Infectious Disease pipelines, we intend to seek future strategic alliances for these programs, while retaining significant product development and commercialization rights. We currently have a
global alliance with MDCO to advance inclisiran.
In such alliances, we expect our current, and may expect our future, collaborators to
provide substantial capabilities in clinical development, regulatory affairs, and/or marketing, sales and distribution. Under certain of our alliances, we also may expect our collaborators to develop, market and/or sell certain of our product
candidates. We may have limited or no control over the development, sales, marketing and distribution activities of these third parties. Our future revenues may depend heavily on the success of the efforts of these third parties. For example, we
will rely entirely on (i) Sanofi Genzyme for the development and commercialization of patisiran, fitusiran and potentially other of our Genetic Medicine programs in territories outside of the United States, Canada and Western Europe, and
(ii) MDCO for all future development and commercialization of inclisiran worldwide. If Sanofi Genzyme and/or MDCO are not successful in their commercialization efforts, our future revenues from RNAi therapeutics for these indications may be
adversely affected. In addition, Sanofi Genzyme may elect not to opt into one or more of our Genetic Medicine programs. For example, during 2016, Sanofi Genzyme elected not to take a regional license for our givosiran and
ALN-CC5
programs. While we intend to advance these programs independently, retaining global development and commercial rights, our ability to advance these programs and successfully develop and commercialize these
product candidates may be adversely affected as a result of Sanofi Genzymes decision.
We may not be successful in entering into future
alliances on terms favorable to us due to various factors, including our ability to successfully demonstrate proof of concept for our technology in humans, our ability to demonstrate the safety and efficacy of our specific drug candidates, our
ability to manufacture or have third parties manufacture RNAi therapeutics, the strength of our intellectual property and/or concerns around challenges to our intellectual property. For example, our decision in October 2016 to discontinue
development of revusiran could make it more difficult for us to attract collaborators due to concerns around the safety and/or efficacy of our technology platform or product candidates. Even if we do succeed in securing any such alliances,
S-12
we may not be able to maintain them if, for example, development or approval of a product candidate is delayed, challenges are raised as to the validity or scope of our intellectual property, we
are unable to secure adequate reimbursement from payors or sales of an approved drug are lower than we expected.
Furthermore, any delay in
entering into collaboration agreements would likely either delay the development and commercialization of certain of our product candidates and reduce their competitiveness even if they reach the market, or prevent the development of certain product
candidates. Any such delay related to our collaborations could adversely affect our business.
For certain product candidates that we may
develop, we have formed collaborations to fund all or part of the costs of drug development and commercialization, such as our collaborations with Sanofi Genzyme and MDCO. We may not, however, be able to enter into additional collaborations for
certain other programs, and the terms of any collaboration agreement we do secure may not be favorable to us. If we are not successful in our efforts to enter into future collaboration arrangements with respect to one or more of our product
candidates, we may not have sufficient funds to develop that or other product candidates internally, or to bring our product candidates to market. If we do not have sufficient funds to develop and bring our product candidates to market, we will not
be able to generate revenues from these product candidates, and this will substantially harm our business.
If any collaborator
terminates or fails to perform its obligations under agreements with us, the development and commercialization of our product candidates could be delayed or terminated.
Our dependence on collaborators for capabilities and funding means that our business could be adversely affected if any collaborator terminates its collaboration agreement with us or fails to perform its
obligations under that agreement. Our current or future collaborations, if any, may not be scientifically or commercially successful. Disputes may arise in the future with respect to the ownership of rights to technology or products developed with
collaborators, which could have an adverse effect on our ability to develop and commercialize any affected product candidate.
Our current
collaborations allow, and we expect that any future collaborations will allow, either party to terminate the collaboration for a material breach by the other party. In addition, our collaborators may have additional termination rights for
convenience with respect to the collaboration or a particular program under the collaboration, under certain circumstances. Moreover, our agreement with MDCO relating to the development and commercialization of inclisiran worldwide may be terminated
by MDCO at any time upon four months prior written notice. If we were to lose a commercialization collaborator, we would have to attract a new collaborator or develop expanded sales, distribution and marketing capabilities internally, which
would require us to invest significant amounts of financial and management resources.
In addition, if we have a dispute with a collaborator
over the ownership of technology or other matters, or if a collaborator terminates its collaboration with us, for breach or otherwise, or determines not to pursue the research, development and/or commercialization of RNAi therapeutics, it could
delay our development of product candidates, result in the need for additional company resources to develop product candidates, require us to expend time and resources to develop expanded sales and marketing capabilities outside of the United States
and EU on a more expedited timeline, make it more difficult for us to attract new collaborators and could adversely affect how we are perceived in the business and financial communities. For example, in March 2011, Arbutus Biopharma Corporation, or
ABC (formerly Tekmira Pharmaceuticals Corporation) and Protiva Biotherapeutics, Inc., a wholly owned subsidiary of ABC, and together with ABC, referred to as Arbutus, filed a civil complaint against us claiming, among other things, misappropriation
of its confidential and proprietary information and trade secrets. As a result of the litigation, which was settled in November 2012, we were required to expend resources and management attention that would otherwise have been engaged in other
activities. In addition, in August 2013, we initiated binding arbitration proceedings to resolve a disagreement with Arbutus regarding the achievement by Arbutus of a $5.0 million milestone payment under our cross-license agreement relating to
the manufacture of
ALN-VSP
clinical trial material for use in China. The Arbutus
S-13
arbitration hearing was held in May 2015. In March 2016, the arbitration panel ruled in our favor and as a result, no milestone payment is due to Arbutus at this time. The grounds on which
Arbutus could appeal this ruling were limited and Arbutus did not appeal by the deadline.
Moreover, a collaborator, or in the event of a
change in control of a collaborator or the assignment of a collaboration agreement to a third party, the successor entity or assignee, could determine that it is in its interests to:
|
|
|
pursue alternative technologies or develop alternative products, either on its own or jointly with others, that may be competitive with the products on
which it is collaborating with us or which could affect its commitment to the collaboration with us;
|
|
|
|
pursue higher-priority programs or change the focus of its development programs, which could affect the collaborators commitment to us; or
|
|
|
|
if it has marketing rights, choose to devote fewer resources to the marketing of our product candidates, if any are approved for marketing, than it
does for product candidates developed without us.
|
If any of these occur, the development and commercialization of one or
more product candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue such development and commercialization on our own
We rely on third parties to conduct our clinical trials, and if they fail to fulfill their obligations, our development plans may be adversely
affected.
We rely on independent clinical investigators, contract research organizations and other third-party service providers to
assist us in managing, monitoring and otherwise carrying out our clinical trials. We have contracted, and we plan to continue to contract with, certain third parties to provide certain services, including site selection, enrollment, monitoring and
data management services. Although we depend heavily on these parties, we control only certain aspects of their activity and therefore, we cannot be assured that these third parties will adequately perform all of their contractual obligations to us.
Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory
responsibilities. We and our contract research organizations are required to comply with good clinical practice, or GCP, requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of
our product candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our contract research organizations fail
to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before
approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations.
If our third-party service providers cannot adequately and timely fulfill their obligations to us, or if the quality and accuracy of our clinical trial
data is compromised due to failure by such third party to adhere to our protocols or regulatory requirements or if such third parties otherwise fail to meet deadlines, our development plans and/or regulatory reviews for marketing approvals may be
delayed or terminated. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.
We have limited manufacturing experience and resources and we must incur significant costs to develop this expertise and/or rely on third parties
to manufacture our products.
We have limited manufacturing experience. In order to develop our product candidates, apply for
regulatory approvals and commercialize our products, if approved, we will need to develop, contract for, or otherwise
S-14
arrange for the necessary manufacturing capabilities. Historically, our internal manufacturing capabilities were limited to small-scale production of material for use in in vitro and in vivo
experiments that is not required to be produced under current good manufacturing practices, or cGMP, standards. During 2012, we developed cGMP capabilities and processes for the manufacture of patisiran formulated bulk drug product for late stage
clinical trial use and commercial supply. In addition, in April 2016, we completed our purchase of a parcel of land in Norton, Massachusetts, where we have commenced construction of a cGMP manufacturing facility for drug substance, including siRNAs
and siRNA conjugates, for clinical and commercial use.
We may manufacture limited quantities of clinical trial materials ourselves, but
otherwise we currently rely on third parties to manufacture the drug substance and, with the exception of patisiran, the finished product we will require for any clinical trials that we initiate and to support the commercial launch of our first
several products. There are a limited number of manufacturers that supply synthetic siRNAs. We currently rely on a limited number of contract manufacturing organizations, or CMOs, for our supply of synthetic siRNAs. For example, in July 2015, we
amended our manufacturing agreement with Agilent, to provide for Agilent to supply, subject to any conflicting obligations under our third-party agreements, a specified percentage of the active pharmaceutical ingredients required for certain of our
products in clinical development, as well as other products the parties may agree upon in the future. There are risks inherent in pharmaceutical manufacturing that could affect the ability of our CMOs, including Agilent, to meet our delivery time
requirements or provide adequate amounts of material to meet our needs. Included in these risks are potential synthesis and purification failures and/or contamination during the manufacturing process, as well as other issues with the CMOs
facility and ability to comply with the applicable manufacturing requirements, which could result in unusable product and cause delays in our manufacturing timelines and ultimately delay our clinical trials, as well as result in additional expense
to us. To fulfill our siRNA requirements, we will likely need to secure alternative suppliers of synthetic siRNAs and such alternative suppliers are limited and may not be readily available, or we may be unable to enter into agreements with them on
reasonable terms and in a timely manner. As noted above, in order to ensure long-term supply capabilities for our RNAi therapeutics, we are developing our own capabilities to manufacture drug substance, including siRNAs and siRNA conjugates, for
clinical and commercial use.
In addition to the manufacture of the synthetic siRNAs, we may have additional manufacturing requirements
related to the technology required to deliver the siRNA to the relevant cell or tissue type, such as LNPs or conjugates. In some cases, the delivery technology we utilize is highly specialized or proprietary, and for technical and/or legal reasons,
we may have access to only one or a limited number of potential manufacturers for such delivery technology. In addition, the
scale-up
of our delivery technologies could be very difficult and/or take
significant time. We also have very limited experience in such
scale-up
and manufacturing, requiring us to depend on a limited number of third parties, who might not be able to deliver in a timely manner, or
at all. Failure by manufacturers to properly manufacture our delivery technology and/or formulate our siRNAs for delivery could result in unusable product. Furthermore, competition for supply from our manufacturers from other companies, a breach by
such manufacturers of their contractual obligations or a dispute with such manufacturers would cause delays in our discovery and development efforts, as well as additional expense to us.
Given the limited number of suppliers for our delivery technology and drug substance, we have developed cGMP capabilities and processes for the manufacture of patisiran formulated bulk drug product for
late stage clinical use and commercial supply. During 2015, we scaled our cGMP manufacturing capacity for patisiran and believe we should have adequate resources to supply our commercial needs. In addition, as noted above, we are developing our own
capabilities to manufacture drug substance, including siRNAs and siRNA conjugates, for clinical and commercial use. In developing these manufacturing capabilities by building our own manufacturing facilities, we have incurred substantial
expenditures, and expect to incur significant additional expenditures in the future. In addition, the construction and qualification of our drug substance facility is expected to take several years to complete and there are many risks inherent in
the construction of a new facility that could result in delays and additional costs, including the need to obtain access to necessary equipment and third-party technology, if any. Also, we have had to, and will likely need to continue to, hire and
train qualified employees to staff our facilities. We do not currently have a second source of supply for patisiran formulated bulk drug product. If we are unable
S-15
to manufacture sufficient quantities of material or if we encounter problems with our facilities in the future, we may also need to secure alternative suppliers of patisiran formulated bulk drug
product and drug substance, and such alternative suppliers may not be available, or we may be unable to enter into agreements with them on reasonable terms and in a timely manner.
The manufacturing process for any products that we may develop is subject to the FDA and foreign regulatory authority approval process and we will need to meet, and will need to contract with CMOs who can
meet, all applicable FDA and foreign regulatory authority requirements on an ongoing basis. In addition, if we receive the necessary regulatory approval for any product candidate, we also expect to rely on third parties, including potentially our
commercial collaborators, to produce materials required for commercial supply. We may experience difficulty in obtaining adequate manufacturing capacity for our needs and the needs of our collaborators, who we have, in some instances, the obligation
to supply. If we are unable to obtain or maintain CMOs for these product candidates, or to do so on commercially reasonable terms, we may not be able to successfully develop and commercialize our products.
To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we depend, and will depend in the future, on
these third parties, including Agilent, to perform their obligations in a timely manner and consistent with contractual and regulatory requirements, including those related to quality control and quality assurance. The failure of Agilent or any
other CMO to perform its obligations as expected, or, to the extent we manufacture all or a portion of our product candidates ourselves, our failure to execute on our manufacturing requirements, could adversely affect our business in a number of
ways, including:
|
|
|
we or our current or future collaborators may not be able to initiate or continue clinical trials of product candidates that are under development;
|
|
|
|
we or our current or future collaborators may be delayed in submitting regulatory applications, or receiving regulatory approvals, for our product
candidates;
|
|
|
|
we may lose the cooperation of our collaborators;
|
|
|
|
our facilities and those of our CMOs, and our products could be the subject of inspections by regulatory authorities that could have a negative outcome
and result in delays in supply;
|
|
|
|
we may be required to cease distribution or recall some or all batches of our products or take action to recover clinical trial material from clinical
trial sites; and
|
|
|
|
ultimately, we may not be able to meet commercial demands for our products.
|
If any CMO with whom we contract, including Agilent, fails to perform its obligations, we may be forced to manufacture the materials ourselves, for which we may not have the capabilities or resources, or
enter into an agreement with a different CMO, which we may not be able to do on reasonable terms, if at all. In either scenario, our clinical trials or commercial distribution could be delayed significantly as we establish alternative supply
sources. In some cases, the technical skills required to manufacture our products or product candidates may be unique or proprietary to the original CMO and we may have difficulty, or there may be contractual restrictions prohibiting us from,
transferring such skills to a
back-up
or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change CMOs for any reason, we will be required to verify
that the new CMO maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing
process will produce our product according to the specifications previously submitted to or approved by the FDA or another regulatory authority. The delays associated with the verification of a new CMO could negatively affect our ability to develop
product candidates in a timely manner or within budget. Furthermore, a CMO may possess technology related to the manufacture of our product candidate that such CMO owns independently. This would increase our reliance on such CMO or require us to
obtain a license from such CMO in order to have another CMO manufacture our products or product candidates.
S-16
We have no sales or distribution experience and only early capabilities for marketing, sales and
market access, and expect to invest significant financial and management resources to establish these capabilities and to establish infrastructure in the EU.
We have no sales or distribution experience and only early capabilities for marketing, sales and market access. We currently expect to rely heavily on third parties to launch and market certain of our
product candidates in certain geographies, if approved. However, we intend to commercialize the majority of our products on our own in the United States, Canada and the EU, as well as globally in the case of givosiran. Accordingly, we will need to
develop internal sales, distribution and marketing capabilities as part of our core product strategy initially in the United States, Canada and the EU, and longer-term on a global basis, which will require significant financial and management
resources. For the majority of our Genetic Medicine programs where we will perform sales, marketing and distribution functions ourselves in the United States, Canada and Western Europe, and for future Cardio-Metabolic and Hepatic Infectious Disease
products we successfully develop where we intend to retain significant product development and commercialization rights, we could face a number of additional risks, including:
|
|
|
we may not be able to attract and build a significant marketing or sales force;
|
|
|
|
we may not be able to establish our capabilities and infrastructure in the EU or in other territories in a timely manner;
|
|
|
|
the cost of establishing a marketing or sales force may not be justifiable in light of the revenues generated by any particular product; and
|
|
|
|
our direct sales and marketing efforts may not be successful.
|
If we are unable to develop our own sales, marketing and distribution capabilities in the United States, Canada and the EU, as well as globally for certain products, we will not be able to successfully
commercialize our products in our sales territories without reliance on third parties.
Credit and financial market conditions may
exacerbate certain risks affecting our business from time to time.
Due to tightening of global credit, there may be a disruption or
delay in the performance of our third-party contractors, suppliers or collaborators. We rely on third parties for several important aspects of our business, including significant portions of our manufacturing needs, development of product candidates
and conduct of clinical trials. If such third parties are unable to satisfy their commitments to us, our business could be adversely affected.
Our ability to secure additional financing in addition to the term loan agreements with BOA and Wells and to satisfy our financial obligations under
indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally,
and financial, business and other factors, many of which are beyond our control. In light of periodic uncertainty in the capital and credit markets, there can be no assurance that sufficient financing will be available on desirable or even any terms
to fund investments, acquisitions, stock repurchases, dividends, debt refinancing or extraordinary actions.
Risks Related to Managing Our
Operations
If we are unable to attract and retain qualified key management and scientists, development and commercial staff,
consultants and advisors, our ability to implement our business plan may be adversely affected.
We are highly dependent upon our
senior management and our scientific, clinical and medical staff. The loss of the service of any of the members of our senior management, including Dr. John Maraganore, our Chief Executive Officer, may significantly delay or prevent the
achievement of product development and other business objectives. Our employment arrangements with our key personnel are terminable without notice. We do not carry key person life insurance on any of our employees.
S-17
We have grown our workforce significantly over the past year and anticipate continuing to add a significant
number of additional employees as we focus on achieving our
Alnylam 2020
strategy. We face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, universities, governmental entities and other
research institutions, many of which have substantially greater resources with which to reward qualified individuals than we do. In addition, due to the risks associated with a new class of medicine, we may experience disappointing results in a
clinical program and our stock price may decline as a result, as was the case following our decision in October 2016 to discontinue our revusiran program. As a result, we may face additional challenges in attracting and retaining employees.
Accordingly, we may be unable to attract and retain suitably qualified individuals in order to support our growing research, development and commercialization efforts and initiatives, and our failure to do so could have an adverse effect on our
ability to implement our future business plan.
We may have difficulty expanding our operations successfully as we evolve from a
U.S.-based company primarily involved in discovery,
pre-clinical
testing and clinical development into a global company that develops and commercializes multiple drugs.
We expect that as we increase the number of product candidates we are developing we will also need to expand our operations in the United States and
continue to build operations in the EU and eventually other geographies. As noted above, we grew our workforce significantly during 2016 and anticipate continuing to hire additional employees, including employees in the EU, as we focus on achieving
our
Alnylam 2020
strategy. This expected growth is placing a strain on our administrative and operational infrastructure, and we will need to develop additional and/or new infrastructure and capabilities to support our growth and obtain
additional space to conduct our operations in the United States, the EU and other geographies. If we are unable to develop such additional infrastructure or obtain sufficient space to accommodate our growth in a timely manner and on commercially
reasonable terms, our business could be negatively impacted. As product candidates we develop enter and advance through clinical trials, we will need to expand our development, regulatory, manufacturing, quality, compliance, and marketing and sales
capabilities in the United States and the EU, as well as other geographies or contract with other organizations to provide these capabilities for us. In addition, as our operations expand due to our development progress, we expect that we will need
to manage additional relationships with various collaborators, suppliers and other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management controls and
systems, reporting systems and infrastructure, and policies and procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing
systems and controls.
Our business and operations could suffer in the event of system failures.
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from
computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. Such events could cause interruption of our operations. For example, the loss of
pre-clinical
trial data or data from completed or ongoing clinical trials for our product candidates could result in delays in our regulatory filings and development efforts, as well as delays in the
commercialization of our products, and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information,
we could incur liability and the development and potential commercialization of our product candidates could be delayed.
The results of
the United Kingdoms referendum on withdrawal from the EU may have a negative effect on global economic conditions, financial markets and our business.
In June 2016, the United Kingdom, or UK, held a referendum in which voters approved an exit from the EU, commonly referred to as Brexit. This referendum has created political and economic
uncertainty, particularly
S-18
in the UK and the EU, and this uncertainty may persist for years. A withdrawal could, among other outcomes, disrupt the free movement of goods, services and people between the UK and the EU, and
result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe. The UKs vote to exit the EU could also result in similar referendums or votes in other European countries in which we do
business. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the withdrawal of the UK from the EU would have and how such withdrawal would affect us.
For example, Brexit could result in the UK or the EU significantly altering its regulations affecting the clearance or approval of our product candidates
that are developed in the UK. Any new regulations could add time and expense to the conduct of our business, as well as the process by which our products receive regulatory approval in the UK, the EU and elsewhere. In addition, the announcement of
Brexit and the withdrawal of the UK from the EU have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and
restrict the ability of key market participants to operate in certain financial markets. Any of these effects of Brexit, among others, could adversely affect our business, our results of operations, liquidity and financial condition.
Risks Related to Our Industry
Risks Related to Development, Clinical Testing and Regulatory Approval of Our Product Candidates
Any product candidates we develop may fail in development or be delayed to a point where they do not become commercially viable.
Before obtaining regulatory approval for the commercial distribution of our product candidates, we must conduct, at our own expense, extensive nonclinical tests and clinical trials to demonstrate the
safety and efficacy in humans of our product candidates. Nonclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome, and the historical failure rate for product
candidates is high. In October 2016, we discontinued development of one of our product candidates, which included a Phase 3 clinical trial. We currently have multiple other programs in clinical development, including one program in a Phase 3
clinical trial, as well as several earlier stage clinical programs. However, we may not be able to further advance these or any other product candidate through clinical trials and regulatory approval.
If we enter into clinical trials, the results from nonclinical testing or early clinical trials of a product candidate may not predict the results that
will be obtained in subsequent subjects or in subsequent human clinical trials of that product candidate or any other product candidate. For example, we have announced results from our Phase 1 clinical trial of fitusiran, including clinical data on
a small number of people with hemophilia with inhibitors. Although the clinical data from this trial are encouraging, these data, or other positive data, may not continue for these people with hemophilia or occur for any future patients in this
study, and may not be repeated or observed in any future studies. There can be no assurance that our studies of fitusiran will ultimately be successful or support further clinical advancement or regulatory approval of this product candidate. In
addition, in June 2016, we reported initial data from PNH patients in our
ALN-CC5
Phase 1/2 clinical trial, and we reiterated that we now plan to pursue a more focused development path in PNH where
ALN-CC5
would be evaluated in eculizumab poor responders and for eculizumab sparing, as well as potentially in other indications. There is a high failure rate for drugs proceeding through clinical studies. A number
of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies, and any such setbacks in our clinical development could have a
material adverse effect on our business and operating results. Moreover, patisiran, fitusiran and our other product candidates each employ novel delivery technologies that have yet to be extensively evaluated in human clinical trials and proven safe
and effective.
In addition, we, the FDA or other applicable regulatory authorities, or an institutional review board, or IRB, or similar
foreign review board or committee, may delay initiation of or suspend clinical trials of a product
S-19
candidate at any time for various reasons, including if we or they believe the healthy volunteer subjects or patients participating in such trials are being exposed to unacceptable health risks.
Among other reasons, adverse side effects of a product candidate or related product on healthy volunteer subjects or patients in a clinical trial could result in our decision, or a decision by the FDA or foreign regulatory authorities, to suspend or
terminate the trial, or, in the case of regulatory agencies, a refusal to approve a particular product candidate for any or all indications of use. For example, in October 2016, we announced our decision to discontinue development of revusiran, an
investigational RNAi therapeutic that was being developed for the treatment of patients with cardiomyopathy due to hATTR amyloidosis. Our decision followed the recommendation of the revusiran ENDEAVOUR Phase 3 study DMC to suspend dosing and the
observation of an imbalance in mortality in revusiran-treated patients as compared to those on placebo. Separately, the patisiran APOLLO DMC met at our request following our decision to discontinue development of revusiran, and recommended
continuation of the APOLLO Phase 3 trial of patisiran, without modification. We are conducting a comprehensive evaluation of the revusiran data. While we believe that the decision to discontinue development of revusiran does not affect patisiran,
which is in development for the treatment of hATTR amyloidosis, or any of our other investigational RNAi therapeutic programs in development, our comprehensive evaluation of the revusiran data is preliminary and ongoing. We expect this evaluation
will take some time to complete and there remains uncertainty regarding the cause of the findings that led to the discontinuation of the revusiran program.
Clinical trials of a new product candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease the product candidate is intended to treat and
who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, including the size of the patient population, the age and condition of the patients, the stage and severity of disease, the availability of clinical
trials for other investigational drugs for the same disease or condition, the nature of the protocol, the proximity of patients to clinical sites, the availability of effective treatments for the relevant disease, and the eligibility criteria for
the clinical trial. For example, we may experience difficulty enrolling our clinical trials, including, but not limited to, our clinical trials for fitusiran, due to the availability of existing approved treatments, as well as other investigational
treatments in development. Delays or difficulties in patient enrollment or difficulties retaining trial participants, including as a result of the availability of existing or other investigational treatments, can result in increased costs, longer
development times or termination of a clinical trial.
Although our investigational RNAi therapeutics have been generally well tolerated in
our clinical trials to date, new safety findings may emerge. For example, as noted above, in October 2016, we made the decision to discontinue our revusiran program. Following reports in the revusiran Phase 2 OLE study of new onset or worsening
peripheral neuropathy, the revusiran ENDEAVOUR Phase 3 study DMC assembled in early October 2016 at our request to review these reports and ENDEAVOUR safety data on an unblinded basis. The DMC did not find conclusive evidence for a drug-related
neuropathy signal in the ENDEAVOUR trial, but informed us that the benefit-risk profile for revusiran no longer supported continued dosing. We subsequently reviewed unblinded ENDEAVOUR data which revealed an imbalance of mortality in the revusiran
arm as compared to placebo. We had previously reported, in July 2016, preliminary data from our revusiran Phase 2 OLE study for 12 patients who had reached the
12-month
endpoint as of the data transfer date of
May 26, 2016. Serious adverse events, or SAEs, were observed in 14 patients, one of which, a case of lactic acidosis, was deemed possibly related to the study drug and the patient discontinued treatment. There were a total of seven deaths
reported at that time in the revusiran OLE study, all of which were unrelated to study drug. The majority of the adverse events, or AEs, were mild or moderate in severity; injection site reactions, or ISRs, were reported in 12 patients. In August
2015, we reported that three patients had discontinued from the revusiran Phase 2 OLE study due to recurrent localized reactions at the injection site or a diffuse rash; no further discontinuations due to ISRs had occurred as of May 26, 2016.
In our patisiran Phase 2 OLE study in patients with polyneuropathy due to hATTR amyloidosis, based on preliminary
24-month
data reported from 27 patients as of the data cutoff on May 12, 2016, the most
common drug-related or possibly drug-related AEs were flushing and infusion-related reactions, all of which were all mild in severity and did not result in any discontinuations. There were nine reports of SAEs in six patients, all of which were
unrelated to study drug, including one discontinuation for gastroesophageal cancer at approximately 20 months in a patient who subsequently died and one death due to myocardial infarction in a
S-20
79 year-old
patient who died after having completed the full 24 months of treatment. As noted above, the patisiran APOLLO Phase 3 study DMC met at our
request following our decision to discontinue development of revusiran, and recommended continuation of the APOLLO Phase 3 trial without modification. In addition, in our
ALN-VSP
clinical trial, one patient
with advanced pancreatic neuroendocrine cancer with extensive involvement of the liver developed hepatic failure five days following the second dose of
ALN-VSP
and subsequently died; this was deemed possibly
related to the study drug. As demonstrated by the recent discontinuation of our revusiran program, the occurrence of AEs can result in the suspension or termination of clinical trials of a product candidate by us or the FDA or a foreign regulatory
authority, or refusal to approve a particular product candidate for any or all indications of use.
Clinical trials also require the review,
oversight and approval of IRBs or, outside of the United States, an independent ethics committee, which continually review clinical investigations and protect the rights and welfare of human subjects. Inability to obtain or delay in obtaining IRB or
ethics committee approval can prevent or delay the initiation and completion of clinical trials, and the FDA or foreign regulatory authorities may decide not to consider any data or information derived from a clinical investigation not subject to
initial and continuing IRB or ethics committee review and approval, as the case may be, in support of a marketing application.
Our product
candidates that we develop may encounter problems during clinical trials that will cause us, an IRB, ethics committee or regulatory authorities to delay, suspend or terminate these trials, or that will delay or confound the analysis of data from
these trials. If we experience any such problems, we may not have the financial resources to continue development of the product candidate that is affected, or development of any of our other product candidates. We may also lose, or be unable to
enter into, collaborative arrangements for the affected product candidate and for other product candidates we are developing.
A failure of
one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, nonclinical testing and the clinical trial process that could delay or prevent regulatory approval or our
ability to commercialize our product candidates, including:
|
|
|
our nonclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct
additional nonclinical testing or clinical trials, or we may abandon projects that we expect to be promising;
|
|
|
|
delays in filing investigational new drug, or IND, applications or comparable foreign applications or delays or failure in obtaining the necessary
approvals from regulators or IRBs/ethics committees in order to commence a clinical trial at a prospective trial site, or their suspension or termination of a clinical trial once commenced;
|
|
|
|
conditions imposed on us by an IRB or ethics committee, or the FDA or comparable foreign authorities regarding the scope or design of our clinical
trials;
|
|
|
|
problems in engaging IRBs or ethics committees to oversee clinical trials or problems in obtaining or maintaining IRB or ethics committee approval of
trials;
|
|
|
|
delays in enrolling patients and volunteers into clinical trials, and variability in the number and types of patients and volunteers available for
clinical trials;
|
|
|
|
high
drop-out
rates for patients and volunteers in clinical trials;
|
|
|
|
negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours;
|
|
|
|
inadequate supply or quality of product candidate materials or other materials necessary for the conduct of our clinical trials;
|
|
|
|
greater than anticipated clinical trial costs;
|
|
|
|
serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our
product candidates;
|
S-21
|
|
|
poor or disappointing effectiveness of our product candidates during clinical trials;
|
|
|
|
unfavorable FDA or other regulatory agency inspection and review of a clinical trial site or records of any clinical or nonclinical investigation;
|
|
|
|
failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a
timely manner, or at all;
|
|
|
|
governmental or regulatory delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory
oversight around clinical testing generally or with respect to our technology in particular; or
|
|
|
|
varying interpretations of data by the FDA and similar foreign regulatory agencies.
|
Even if we successfully complete clinical trials of our product candidates, any given product candidate may not prove to be a safe and effective
treatment for the disease for which it was being tested.
We may be unable to obtain United States or foreign regulatory approval and,
as a result, unable to commercialize our product candidates.
Our product candidates are subject to extensive governmental regulations
relating to, among other things, research, testing, development, manufacturing, safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing and distribution of drugs. Rigorous
nonclinical testing and clinical trials and an extensive regulatory approval process are required to be successfully completed in the United States and in many foreign jurisdictions before a new drug can be marketed. Satisfaction of these and other
regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that none of the product candidates we may develop will obtain the regulatory approvals necessary for us or our collaborators to begin
selling them.
We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including
approval by the FDA. The time required to obtain FDA and other regulatory approvals is unpredictable but typically takes many years following the commencement of clinical trials, depending upon the type, complexity and novelty of the product
candidate. The standards that the FDA and its foreign counterparts use when regulating us are not always applied predictably or uniformly and can change. Any analysis we perform of data from nonclinical and clinical activities is subject to
confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, for example, from future legislation or
administrative action, or from changes in FDA policy during the period of product development, clinical trials and FDA regulatory review. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign regulations,
guidance or interpretations will be changed, or what the impact of such changes, if any, may be.
Because the drugs we are developing may
represent a new class of drug, the FDA and its foreign counterparts have not yet established any definitive policies, practices or guidelines in relation to these drugs. The lack of policies, practices or guidelines may hinder or slow review by the
FDA of any regulatory filings that we may submit. Moreover, the FDA may respond to these submissions by defining requirements we may not have anticipated. Such responses could lead to significant delays in the clinical development of our product
candidates. In addition, because there may be approved treatments for some of the diseases for which we may seek approval, in order to receive regulatory approval, we may need to demonstrate through clinical trials that the product candidates we
develop to treat these diseases, if any, are not only safe and effective, but safer or more effective than existing products. Furthermore, in recent years, there has been increased public and political pressure on the FDA with respect to the
approval process for new drugs, and the FDAs standards, especially regarding drug safety, appear to have become more stringent.
Assuming the data from our APOLLO Phase 3 clinical trial is positive, we expect to file our first NDA and MAA for patisiran at the end of 2017. Any delay
or failure in obtaining required approvals could have a material
S-22
adverse effect on our ability to generate revenues from patisiran or any product candidate for which we may seek approval in the future. Furthermore, any regulatory approval to market patisiran
or any other product may be subject to limitations on the approved uses for which we may market the product or the labeling or other restrictions. In addition, the FDA has the authority to require a Risk Evaluation and Mitigation Strategy, or REMS,
plan as part of an NDA, or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug, such as limiting prescribing to certain physicians or medical centers that have undergone specialized
training, limiting treatment to patients who meet certain
safe-use
criteria and requiring treated patients to enroll in a registry. In the EU, we could be required to adopt a similar plan, known as a risk
management plan, and our products could be subject to specific risk minimization measures, such as restrictions on prescription and supply, the conduct of post-marketing safety or efficacy studies, or the distribution of patient and/or prescriber
educational materials. In either instance, these limitations and restrictions may limit the size of the market for the product and affect reimbursement by third-party payors.
We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party
reimbursement. The foreign regulatory approval process varies among countries and includes all of the risks associated with FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions.
Approval by the FDA does not ensure approval by regulatory authorities outside the United States and vice versa.
Even if we obtain
regulatory approvals, our marketed drugs will be subject to ongoing regulatory oversight. If we fail to comply with continuing U.S. and foreign requirements, our approvals could be limited or withdrawn, we could be subject to other penalties, and
our business would be seriously harmed.
Following any initial regulatory approval of any drugs we may develop, we will also be subject
to continuing regulatory oversight, including the review of adverse drug experiences and clinical results that are reported after our drug products are made commercially available. This would include results from any post-marketing tests or
surveillance to monitor the safety and efficacy of the drug product required as a condition of approval or agreed to by us. Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved uses
for which the product may be marketed. Other ongoing regulatory requirements include, among other things, submissions of safety and other post-marketing information and reports, registration and listing, as well as continued compliance with cGMP
requirements and GCP requirements for any clinical trials that we conduct post-approval. In addition, we are conducting, and intend to continue to conduct, clinical trials for our product candidates, and we intend to seek approval to market our
product candidates, in jurisdictions outside of the United States, and therefore will be subject to, and must comply with, regulatory requirements in those jurisdictions.
The FDA has significant post-market authority, including, for example, the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials to
evaluate serious safety risks related to the use of a drug and to require withdrawal of the product from the market. The FDA also has the authority to require a REMS plan after approval, which may impose further requirements or restrictions on the
distribution or use of an approved drug.
The CMO and manufacturing facilities we use to make our product candidates, including our Cambridge
facility, our future Norton facility, and Agilent and other CMOs, will also be subject to periodic review and inspection by the FDA and other regulatory agencies. To date, our Cambridge manufacturing facility has not been subject to an inspection by
any regulatory authority. The discovery of any new or previously unknown problems with us or our CMOs, or our or their manufacturing processes or facilities, may result in restrictions on the drug or CMO or facility, including withdrawal of the drug
from the market. We have developed cGMP capabilities and processes for the manufacture of patisiran formulated bulk drug product for Phase 3 clinical and commercial use. In addition, in April 2016, we completed our purchase of a parcel of land in
Norton, Massachusetts, where we have commenced construction of a cGMP manufacturing facility for drug substance, including siRNAs and siRNA conjugates, for clinical and commercial use. We may not have the ability or capacity to manufacture material
at a
S-23
broader commercial scale in the future. We may manufacture clinical trial materials or we may contract a third party to manufacture these materials for us. Reliance on CMOs entails risks to which
we would not be subject if we manufactured products ourselves, including reliance on the CMO for regulatory compliance. Our product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review.
If we or our collaborators, CMOs or service providers fail to comply with applicable continuing regulatory requirements in the United States
or foreign jurisdictions in which we may seek to market our products, we or they may be subject to, among other things, fines, warning letters, holds on clinical trials, refusal by the FDA or foreign regulatory authorities to approve pending
applications or supplements to approved applications, suspension or withdrawal of regulatory approval, product recalls and seizures, refusal to permit the import or export of products, operating restrictions, injunction, civil penalties and criminal
prosecution.
Even if we receive regulatory approval to market our product candidates, the market may not be receptive to our product
candidates upon their commercial introduction, which will prevent us from becoming profitable.
The product candidates that we are
developing are based upon new technologies or therapeutic approaches. Key participants in pharmaceutical marketplaces, such as physicians, third-party payors and consumers, may not accept a product intended to improve therapeutic results based on
RNAi technology. As a result, it may be more difficult for us to convince the medical community and third-party payors to accept and use our product, or to provide favorable reimbursement.
Other factors that we believe will materially affect market acceptance of our product candidates include:
|
|
|
the timing of our receipt of any marketing approvals, the terms of any approvals and the countries in which approvals are obtained;
|
|
|
|
the safety and efficacy of our product candidates, as demonstrated in clinical trials and as compared with alternative treatments, if any;
|
|
|
|
relative convenience and ease of administration of our product candidates;
|
|
|
|
the willingness of patients to accept potentially new routes of administration or new or different therapeutic approaches and mechanisms of action;
|
|
|
|
the success of our physician education programs;
|
|
|
|
the availability of adequate government and third-party payor reimbursement;
|
|
|
|
the pricing of our products, particularly as compared to alternative treatments; and
|
availability of alternative effective treatments for the diseases that product candidates we develop are intended to treat and the relative risks,
benefits and costs of those treatments.
For example, patisiran utilizes an intravenous mode of administration that physicians and/or patients
may not readily adopt or which may not compete with other potentially available options. In addition, fitusiran represents a new approach to treating hemophilia which may not be readily accepted by patients and their caregivers.
In addition, our estimates regarding the potential market size may be materially different from what we currently expect at the time we commence
commercialization, which could result in significant changes in our business plan and may have a material adverse effect on our results of operations and financial condition.
S-24
If we or our collaborators, CMOs or service providers fail to comply with healthcare laws and
regulations, we or they could be subject to enforcement actions, which could affect our ability to develop, market and sell our products and may harm our reputation.
As a manufacturer of pharmaceuticals, we are subject to federal, state, and comparable foreign healthcare laws and regulations pertaining to fraud and abuse and patients rights. These laws and
regulations include:
|
|
|
the U.S. federal Anti-Kickback statute, which prohibits, among other things, persons from soliciting, receiving, offering or paying remuneration,
directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made under a federal healthcare program such as Medicare or
Medicaid;
|
|
|
|
the U.S. federal false claims laws, which prohibit, among other things, individuals or entities from knowingly presenting or causing to be presented,
claims for payment by government-funded programs such as Medicare or Medicaid that are false or fraudulent, and which may apply to us by virtue of statements and representations made to customers or third parties;
|
|
|
|
the U.S. federal Health Insurance Portability and Accountability Act and Health Information Technology for Economic and Clinical Health Act, which
impose requirements relating to the privacy, security, and transmission of individually identifiable health information; and require notification to affected individuals and regulatory authorities of certain breaches of security of individually
identifiable health information;
|
|
|
|
the U.S. federal Open Payments requirements were implemented by The Centers for Medicare and Medicaid Services, or CMS, pursuant to the Patient
Protection and Affordable Care Act, also referred to as the Affordable Care Act or PPACA. Under the Open Payments Program, manufacturers of medical devices, medical supplies, biological products and drugs covered by Medicare, Medicaid and the
Childrens Health Insurance Programs report all transfers of value, including consulting fees, travel reimbursements, research grants, and other payments or gifts with values over $10 made to physicians and teaching hospitals; and
|
|
|
|
state and foreign laws comparable to each of the above federal laws, including in the EU laws prohibiting giving healthcare professionals any gift or
benefit in kind as an inducement to prescribe our products, national transparency laws requiring the public disclosure of payments made to healthcare professionals and institutions, and data privacy laws, in addition to anti-kickback and false
claims laws applicable to commercial insurers and other
non-federal
payors, requirements for mandatory corporate regulatory compliance programs, and laws relating to government reimbursement programs, patient
data privacy and security.
|
If our operations are found to be in violation of any such requirements, we may be subject to
penalties, including civil or criminal penalties, criminal prosecution, monetary damages, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, or exclusion from participation in government
contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, or the imposition of a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services, any of
which could adversely affect our financial results. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an
alleged or suspected violation could cause us to incur significant legal expenses and could divert our managements attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining
compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.
If we or our collaborators, CMOs
or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions, which could affect our ability to develop, market and sell our products successfully and could harm our
reputation and lead to reduced acceptance of our products by the market. These enforcement actions include, among others:
|
|
|
adverse regulatory inspection findings;
|
S-25
|
|
|
voluntary or mandatory product recalls or public notification or medical product safety alerts to healthcare professionals;
|
|
|
|
restrictions on, or prohibitions against, marketing our products;
|
|
|
|
restrictions on, or prohibitions against, importation or exportation of our products;
|
|
|
|
suspension of review or refusal to approve pending applications or supplements to approved applications;
|
|
|
|
exclusion from participation in government-funded healthcare programs;
|
|
|
|
exclusion from eligibility for the award of government contracts for our products;
|
|
|
|
suspension or withdrawal of product approvals;
|
|
|
|
civil and criminal penalties, up to and including criminal prosecution resulting in fines, exclusion from healthcare reimbursement programs and
imprisonment.
|
Moreover, federal, state or foreign laws or regulations are subject to change, and while we, our
collaborators, CMOs and/or service providers currently may be compliant, that could change due to changes in interpretation, prevailing industry standards or the legal structure.
Any drugs we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, thereby harming our business.
The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries require
approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains
subject to continuing governmental control even after initial approval is granted. We are actively monitoring these regulations as several of our programs move into late stages of development, however, a number of our programs are currently in the
earlier stages of development and we will not be able to assess the impact of price regulations for a number of years. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations
that delay our commercial launch of the product and negatively impact the revenues we are able to generate from the sale of the product in that country and potentially in other countries due to reference pricing.
Our ability to commercialize any products successfully also will depend in part on the extent to which reimbursement for these products and related
treatments will be available from government health administration authorities, private health insurers and other organizations. Even if we succeed in bringing one or more products to the market, these products may not be considered cost-effective,
and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. Increasingly, the third-party payors who reimburse patients or healthcare providers, such as government and private insurance
plans, are requiring that drug companies provide them with predetermined discounts from list prices, and are seeking to reduce the prices charged or the amounts reimbursed for drug products. If the price we are able to charge for any products we
develop, or the reimbursement provided for such products, is inadequate in light of our development and other costs, or if reimbursement is denied, our return on investment could be adversely affected.
We currently expect that some of the drugs we develop may need to be administered under the supervision of a physician or other healthcare professional
on an outpatient basis. Under currently applicable U.S. law, certain drugs that are not usually self-administered (including injectable drugs) may be eligible for coverage under the Medicare Part B program if:
|
|
|
they are incident to a physicians services;
|
S-26
|
|
|
they are reasonable and necessary for the diagnosis or treatment of the illness or injury for which they are administered according to accepted
standards of medical practice; and
|
|
|
|
they have been approved by the FDA and meet other requirements of the statute.
|
There may be significant delays in obtaining coverage for newly-approved drugs, and coverage may be more limited than the purposes for which the drug is
approved by the FDA or foreign regulatory authorities. Moreover, eligibility for coverage does not imply that any drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale and
distribution or that covers a particular providers cost of acquiring the drug. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement may be based on payments
allowed for lower-cost drugs that are already reimbursed, may be incorporated into existing payments for other services and may reflect budgetary constraints or imperfections in Medicare data. Net prices for drugs may be reduced by mandatory
discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors
for new drugs that we develop and for which we obtain regulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our overall financial condition.
We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare and legislative and regulatory proposals to
broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number of legislative and regulatory changes in the healthcare system in the United States and
other major healthcare markets have been proposed in recent years, and such efforts have expanded substantially in recent years. These developments have included prescription drug benefit legislation that was enacted in 2003 and took effect in
January 2006, healthcare reform legislation enacted by certain states, and major healthcare reform legislation that was passed by Congress and enacted into law in the United States in 2010. These developments could, directly or indirectly, affect
our ability to sell our products, if approved, at a favorable price.
In particular, in March 2010, the PPACA was signed into law. This
legislation changed the system of healthcare insurance and benefits intended to broaden coverage and control costs. The law also contains provisions that affect companies in the pharmaceutical industry and other healthcare related industries by
imposing additional costs and changes to business practices. Provisions affecting pharmaceutical companies include the following:
|
|
|
Mandatory rebates for drugs sold into the Medicaid program were increased, and the rebate requirement was extended to drugs used in risk-based Medicaid
managed care plans.
|
|
|
|
The 340B Drug Pricing Program under the Public Health Service Act was extended to require mandatory discounts for drug products sold to certain
critical access hospitals, cancer hospitals and other covered entities.
|
|
|
|
Pharmaceutical companies are required to offer discounts on brand-name drugs to patients who fall within the Medicare Part D coverage gap, commonly
referred to as the donut hole.
|
|
|
|
Pharmaceutical companies are required to pay an annual
non-tax
deductible fee to the federal government based
on each companys market share of prior year total sales of branded products to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs and Department of Defense. Since we expect our branded
pharmaceutical sales to constitute a small portion of the total federal healthcare program pharmaceutical market, we do not expect this annual assessment to have a material impact on our financial condition.
|
|
|
|
The law provides that approval of an application for a
follow-on
biologic product may not become effective
until 12 years after the date on which the reference innovator biologic product was first
|
S-27
|
licensed by the FDA, with a possible
six-month
extension for pediatric products. After this exclusivity ends, it will be easier for generic manufacturers
to enter the market, which is likely to reduce the pricing for such products and could affect our profitability.
|
The full
effects of the U.S. healthcare reform legislation cannot be known until the law is fully implemented through regulations or guidance issued by the CMS and other federal and state healthcare agencies. The financial impact of the U.S. healthcare
reform legislation over the next few years will depend on a number of factors, including, but not limited, to the policies reflected in implementing regulations and guidance, and changes in sales volumes for products affected by the new system of
rebates, discounts and fees. This legislation may also have a positive impact on our future net sales, if any, by increasing the aggregate number of persons with healthcare coverage in the United States.
As a result of the 2016 election in the United States, there is great political uncertainty concerning the fate of the PPACA and other healthcare laws.
In May 2017, the United States House of Representatives passed legislation known as the American Health Care Act to repeal parts of the PPACA, but it is uncertain whether such legislation will be passed by the United States Senate, and with what
amendments (if any). The scope of this replacement healthcare law remains uncertain.
We cannot predict what healthcare reform initiatives may
be adopted in the future. Further federal and state legislative and regulatory developments are likely, and we expect ongoing initiatives in the United States to increase pressure on drug pricing. Such reforms could have an adverse effect on
anticipated revenues from product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop drug candidates.
Our ability to obtain services, reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.
Under the Budget Control Act of 2011, the failure of Congress to enact deficit reduction measures of at least $1.2 trillion for the
years 2013 through 2021 triggered automatic cuts to most federal programs. These cuts included aggregate reductions to Medicare payments to providers of up to 2 percent per fiscal year, starting in 2013. Certain of these automatic cuts have
been implemented resulting in reductions in Medicare payments to physicians, hospitals, and other healthcare providers, among other things. The full impact on our business of these automatic cuts is uncertain.
If other federal spending is reduced, any budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or National Institutes
of Health to continue to function. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve drug research and development,
manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.
There is
a substantial risk of product liability claims in our business. If we are unable to obtain sufficient insurance, a product liability claim against us could adversely affect our business.
Our business exposes us to significant potential product liability risks that are inherent in the development, testing, manufacturing and marketing of
human therapeutic products. Product liability claims could delay or prevent completion of our clinical development programs. Following the decision to discontinue clinical development of revusiran, we have undertaken a comprehensive evaluation of
available revusiran data, which is ongoing. Notwithstanding the risks undertaken by all persons who participate in clinical trials, and the information on risks provided to study investigators and patients participating in revusiran studies, it is
possible that product liability claims will be asserted against us relating to the worsening of a patients condition alleged to have been caused by revusiran. Such claims might not be fully covered by product liability insurance. If we succeed
in marketing products, product liability claims could result in an FDA investigation of the safety and
S-28
effectiveness of our products, our manufacturing processes and facilities or our marketing programs, and potentially a recall of our products or more serious enforcement action, limitations on
the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to
defend the related litigation, a diversion of managements time and our resources, substantial monetary awards to trial participants or patients and a decline in our stock price. We currently have product liability insurance that we believe is
appropriate for our stage of development and may need to obtain higher levels prior to marketing any of our product candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore,
clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have a
material adverse effect on our business.
If we do not comply with laws regulating the protection of the environment and health and
human safety, our business could be adversely affected.
Our research, development and manufacturing involve the use of hazardous
materials, chemicals and various radioactive compounds. We maintain quantities of various flammable and toxic chemicals in our facilities in Cambridge that are required for our research, development and manufacturing activities. We are subject to
federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We believe our procedures for storing, handling and disposing these materials in our Cambridge facilities
comply with the relevant guidelines of the City of Cambridge, the Commonwealth of Massachusetts and the Occupational Safety and Health Administration of the U.S. Department of Labor. Although we believe that our safety procedures for handling and
disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting
damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous
materials.
Although we maintain workers compensation insurance to cover us for costs and expenses we may incur due to injuries to our
employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in
connection with our storage or disposal of biological, hazardous or radioactive materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with,
and substantial fines or penalties if we violate, any of these laws or regulations.
Risks Related to Patents, Licenses and Trade Secrets
If we are not able to obtain and enforce patent protection for our discoveries, our ability to develop and commercialize our product
candidates will be harmed.
Our success depends, in part, on our ability to protect proprietary methods and technologies that we
develop under the patent and other intellectual property laws of the United States and other countries, so that we can prevent others from unlawfully using our inventions and proprietary information. However, we may not hold proprietary rights to
some patents required for us to manufacture and commercialize our proposed products. Because certain U.S. patent applications are confidential until the patents issue, such as applications filed prior to November 29, 2000, or applications filed
after such date which will not be filed in foreign countries, third parties may have filed patent applications for technology covered by our pending patent applications without our being aware of those applications, and our patent applications may
not have priority over those applications. For this and other reasons, we may be unable to secure desired patent rights, thereby losing desired exclusivity. Further, we may be required to obtain licenses under third-party patents to market our
proposed products or conduct our research and development or other activities. If licenses are not available to us on acceptable terms, we may not be able to market the affected products or conduct the desired activities.
S-29
Our strategy depends on our ability to rapidly identify and seek patent protection for our discoveries. In
addition, we may rely on third-party collaborators to file patent applications relating to proprietary technology that we develop jointly during certain collaborations. The process of obtaining patent protection is expensive and time-consuming. If
our present or future collaborators fail to file and prosecute all necessary and desirable patent applications at a reasonable cost and in a timely manner, our business may be adversely affected. Despite our efforts and the efforts of our
collaborators to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. While issued patents are presumed valid, this does not guarantee that the patent will survive a validity
challenge or be held enforceable. Any patents we have obtained, or obtain in the future, may be challenged, invalidated, adjudged unenforceable or circumvented by parties attempting to design around our intellectual property. Moreover, third parties
or the United States Patent and Trademark Office, or USPTO, may commence interference proceedings involving our patents or patent applications. Any challenge to, finding of unenforceability or invalidation or circumvention of, our patents or patent
applications, would be costly, would require significant time and attention of our management and could have a material adverse effect on our business.
Our pending patent applications may not result in issued patents. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and
factual considerations. The standards that the USPTO and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change. Similarly, the ultimate degree of protection that will be afforded to
biotechnology inventions, including ours, in the United States and foreign countries, remains uncertain and is dependent upon the scope of the protection decided upon by patent offices, courts and lawmakers. Moreover, there are periodic discussions
in the Congress of the United States and in international jurisdictions about modifying various aspects of patent law. For example, the America Invents Act included a number of changes to the patent laws of the United States. If any of the enacted
changes do not provide adequate protection for discoveries, including our ability to pursue infringers of our patents for substantial damages, our business could be adversely affected. One major provision of the America Invents Act, which took
effect in March 2013, changed United States patent practice from a
first-to-invent
to a
first-to-file
system. If we fail to file an invention before a competitor files on the same invention, we no longer have the ability to provide proof that we were in
possession of the invention prior to the competitors filing date, and thus would not be able to obtain patent protection for our invention. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or
allowable in pharmaceutical or biotechnology patents.
Accordingly, we do not know the degree of future protection for our proprietary rights
or the breadth of claims that will be allowed in any patents issued to us or to others. We also rely to a certain extent on trade secrets,
know-how
and technology, which are not protected by patents, to
maintain our competitive position. If any trade secret,
know-how
or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial
condition could be materially adversely affected.
We license patent rights from third-party owners. If such owners do not properly or
successfully obtain, maintain or enforce the patents underlying such licenses, our competitive position and business prospects may be harmed.
We are a party to a number of licenses that give us rights to third-party intellectual property that is necessary or useful for our business. In particular, we have obtained licenses from, among others,
Cancer Research Technology Limited, Ionis Pharmaceuticals, Inc., or Ionis (formerly Isis Pharmaceuticals, Inc.), the Massachusetts Institute of Technology, or MIT, the Whitehead Institute for Biomedical Research, or Whitehead, Max Planck Innovation
and Arbutus. We also intend to enter into additional licenses to third-party intellectual property in the future.
Our success will depend in
part on the ability of our licensors to obtain, maintain and enforce patent protection for our licensed intellectual property, in particular, those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the
patent applications to which we are licensed. Even if patents issue in
S-30
respect of these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may
pursue such litigation less aggressively than we would. Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive
business position and harm our business prospects. In addition, we sublicense our rights under various third-party licenses to our collaborators. Any impairment of these sublicensed rights could result in reduced revenues under our collaboration
agreements or result in termination of an agreement by one or more of our collaborators.
Other companies or organizations may challenge
our patent rights or may assert patent rights that prevent us from developing and commercializing our products.
RNAi is a relatively
new scientific field, the commercial exploitation of which has resulted in many different patents and patent applications from organizations and individuals seeking to obtain patent protection in the field. We have obtained grants and issuances of
RNAi patents and have licensed many of these patents from third parties on an exclusive basis. The issued patents and pending patent applications in the United States and in key markets around the world that we own or license claim many different
methods, compositions and processes relating to the discovery, development, manufacture and commercialization of RNAi therapeutics.
Specifically, we have a portfolio of patents, patent applications and other intellectual property covering: fundamental aspects of the structure and uses
of siRNAs, including their use as therapeutics, and RNAi-related mechanisms; chemical modifications to siRNAs that improve their suitability for therapeutic and other uses; siRNAs directed to specific targets as treatments for particular diseases;
delivery technologies, such as in the fields of carbohydrate conjugates and cationic liposomes; and all aspects of our specific development candidates.
As the field of RNAi therapeutics is maturing, patent applications are being fully processed by national patent offices around the world. There is uncertainty about which patents will issue, and, if they
do, as to when, to whom, and with what claims. It is likely that there will be significant litigation and other proceedings, such as interference, reexamination and opposition proceedings, as well as inter partes and post-grant review proceedings
introduced by provisions of the America Invents Act, which became available to third party challengers on September 16, 2012, in various patent offices relating to patent rights in the RNAi field. For example, various third parties have
initiated oppositions to patents in our McSwiggen,
Kreutzer-Limmer
and Tuschl II series in the EPO and in other jurisdictions. We expect that additional oppositions will be filed in the EPO and elsewhere, and
other challenges will be raised relating to other patents and patent applications in our portfolio. In many cases, the possibility of appeal exists for either us or our opponents, and it may be years before final, unappealable rulings are made with
respect to these patents in certain jurisdictions. The timing and outcome of these and other proceedings is uncertain and may adversely affect our business if we are not successful in defending the patentability and scope of our pending and issued
patent claims. In addition, third parties may attempt to invalidate our intellectual property rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our intellectual property rights. Our defense against any
attempt by third parties to circumvent or invalidate our intellectual property rights could be costly to us, could require significant time and attention of our management and could have a material adverse effect on our business and our ability to
successfully compete in the field of RNAi.
There are many issued and pending patents that claim aspects of oligonucleotide chemistry and
modifications that we may need to apply to our siRNA therapeutic candidates. There are also many issued patents that claim targeting genes or portions of genes that may be relevant for siRNA drugs we wish to develop. Thus, it is possible that one or
more organizations will hold patent rights to which we will need a license. If those organizations refuse to grant us a license to such patent rights on reasonable terms, we may not be able to market products or perform research and development or
other activities covered by these patents.
S-31
If we become involved in patent litigation or other proceedings related to a determination of rights,
we could incur substantial costs and expenses, substantial liability for damages or be required to stop our product development and commercialization efforts.
Third parties may sue us for infringing their patent rights. Likewise, we may need to resort to litigation to enforce a patent issued or licensed to us or to determine the scope and validity of
proprietary rights of others or protect our proprietary information and trade secrets. For example, during the second quarter of 2015, we filed a trade secret misappropriation lawsuit against Dicerna Pharmaceuticals, Inc., or Dicerna, to protect our
rights in the RNAi assets we purchased from Merck. A third party may also claim that we have improperly obtained or used its confidential or proprietary information. For example, in March 2011, Arbutus (formerly Tekmira) filed a civil complaint
against us alleging, among other things, misappropriation of its confidential and proprietary information and trade secrets. In November 2012, we settled this litigation and restructured our contractual relationship with Arbutus. In connection with
this restructuring, we incurred a $65.0 million charge to operating expenses during the quarter ended December 31, 2012. In addition, during the pendency of the litigation, we incurred significant costs, and the defense of this litigation
diverted the attention of our management and other resources that would otherwise have been engaged in other activities.
Furthermore, third
parties may challenge the inventorship of our patents or licensed patents. For example, in March 2011, The University of Utah, or Utah, filed a complaint in the United States District Court for the District of Massachusetts, or the MA District
Court, against us, Max Planck Gesellschaft Zur Foerderung Der Wissenschaften e.V. and Max Planck Innovation, together, Max Planck, Whitehead, MIT and UMass, claiming that a professor of Utah is the sole inventor, or in the alternative, a joint
inventor of certain of our
in-licensed
patents. Utah was seeking correction of inventorship of the Tuschl patents, unspecified damages and other relief. After several years of court proceedings and discovery,
in September 2015, the MA District Court granted our motions for summary judgment, finding that there was no collaboration between Dr. Bass and Dr. Tuschl, which is a
pre-requisite
for
co-inventorship,
and dismissing Utahs state law damages claims as well. On October 28, 2015, Utah filed a notice of appeal from this ruling to the United States Court of Appeals for the Federal Circuit,
or CAFC. On December 18, 2015, the CAFC entered an order dismissing Utahs appeal following a joint motion filed by us and Utah seeking dismissal of the appeal with prejudice. This disposed of Utahs inventorship claims and its state
law claims for damages. On October 14, 2015, we filed a motion with the MA District Court seeking reimbursement of costs and fees associated with defending this action in the amount of approximately $8.0 million. On November 30, 2015,
the MA District Court denied our motion and on December 15, 2015 we filed a notice of appeal of this ruling with the CAFC. Oral arguments were heard on January 12, 2017. On March 23, 2017, the CAFC denied our appeal and we have
decided not to appeal this ruling any further.
In addition, in connection with certain license and collaboration agreements, we have agreed
to indemnify certain third parties for certain costs incurred in connection with litigation relating to intellectual property rights or the subject matter of the agreements. The cost to us of any litigation or other proceeding relating to
intellectual property rights, even if resolved in our favor, could be substantial, and litigation would divert our managements efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than
we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of any litigation could delay our research and development efforts and limit our ability to continue our operations.
If any parties successfully claim that our creation or use of proprietary technologies infringes upon or otherwise violates their intellectual property
rights, we might be forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties patent rights. In addition to any damages we might have to pay, a court could require us to stop the
infringing activity or obtain a license. Any license required under any patent may not be made available on commercially acceptable terms, if at all. In addition, such licenses are likely to be
non-exclusive
and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license and are unable to design around a patent, we may be unable to effectively market some of our technology and products,
which could limit our ability to generate revenues or
S-32
achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. Moreover, we expect that a number of our collaborations will provide that royalties
payable to us for licenses to our intellectual property may be offset by amounts paid by our collaborators to third parties who have competing or superior intellectual property positions in the relevant fields, which could result in significant
reductions in our revenues from products developed through collaborations.
If we fail to comply with our obligations under any licenses
or related agreements, we may be required to pay damages and could lose license or other rights that are necessary for developing and protecting our RNAi technology and any related product candidates that we develop, or we could lose certain rights
to grant sublicenses.
Our current licenses impose, and any future licenses we enter into are likely to impose, various development,
commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach any of these obligations, or use the intellectual property licensed to us in an
unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license or render the license
non-exclusive,
which could result in us being unable to develop,
manufacture, market and sell products that are covered by the licensed technology or enable a competitor to gain access to the licensed technology. For example, in 2013, Arbutus (formerly Tekmira) notified us that it believed it had achieved a
$5.0 million milestone payment under our cross-license agreement relating to the manufacture of
ALN-VSP
clinical trial material for use in China. We notified Arbutus that we did not believe that the
milestone has been achieved under the terms of the cross-license agreement. In August 2013, we initiated binding arbitration proceedings seeking a declaratory judgment that Arbutus had not yet met the conditions of the milestone and was not entitled
to payment at the time. The Arbutus arbitration hearing was held in May 2015. On March 9, 2016, the arbitration panel ruled in our favor and as a result, no milestone payment is due to Arbutus at this time. The grounds on which Arbutus could
appeal this ruling were limited and Arbutus did not appeal by the deadline.
Moreover, our licensors may own or control intellectual property
that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensors rights. In addition, while we cannot currently determine the amount of the
royalty obligations we will be required to pay on sales of future products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in products that we
successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize products, we may be unable to achieve or maintain profitability.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our collaborators, employees,
consultants, outside scientific collaborators and sponsored researchers, and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation
could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
S-33
Risks Related to Competition
The pharmaceutical market is intensely competitive. If we are unable to compete effectively with existing drugs, new treatment methods and new technologies, we may be unable to commercialize
successfully any drugs that we develop.
The pharmaceutical market is intensely competitive and rapidly changing. Many large
pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private research organizations are pursuing the development of novel drugs for the same diseases that we are targeting or expect to target.
Many of our competitors have:
|
|
|
much greater financial, technical and human resources than we have at every stage of the discovery, development, manufacture and commercialization of
products;
|
|
|
|
more extensive experience in
pre-clinical
testing, conducting clinical trials, obtaining regulatory approvals,
and in manufacturing, marketing and selling drug products;
|
|
|
|
product candidates that are based on previously tested or accepted technologies;
|
|
|
|
products that have been approved or are in late stages of development; and
|
|
|
|
collaborative arrangements in our target markets with leading companies and research institutions.
|
We will face intense competition from drugs that have already been approved and accepted by the medical community for the treatment of the conditions for
which we may develop drugs. We also expect to face competition from new drugs that enter the market. We believe a number of drugs are currently under development, and may become commercially available in the future, for the treatment of conditions
for which we may try to develop drugs. These drugs may be more effective, safer, less expensive, or marketed and sold more effectively, than any products we develop. For example, we are developing patisiran for the treatment of hATTR amyloidosis. We
have completed enrollment in our ongoing APOLLO Phase 3 clinical trial and expect to report
top-line
data from our Phase 3 clinical trial in
mid-2017.
We are aware of
other approved products used to treat this disease, including tafamidis, marketed by Pfizer, as well as product candidates in various stages of clinical development, including an investigational drug being developed by Ionis. Ionis has
completed enrollment in its ongoing Phase 3 clinical trial in hATTR amyloidosis and in May 2017 reported positive top-line efficacy data and limited safety data, including thrombocytopenia and renal insufficiency serious adverse events. Patisiran
may not compete favorably with these products and product candidates, and even if approved, it may not achieve commercial success.
If we
successfully develop product candidates, and obtain approval for them, we will face competition based on many different factors, including:
|
|
|
the safety and effectiveness of our products relative to alternative therapies, if any;
|
|
|
|
the ease with which our products can be administered and the extent to which patients accept relatively new routes of administration;
|
|
|
|
the timing and scope of regulatory approvals for these products;
|
|
|
|
the availability and cost of manufacturing, marketing and sales capabilities;
|
|
|
|
reimbursement coverage; and
|
Our
competitors may develop or commercialize products with significant advantages over any products we develop based on any of the factors listed above or on other factors. Our competitors may therefore be more successful in commercializing their
products than we are, which could adversely affect our competitive position
S-34
and business. Competitive products may make any products we develop obsolete or noncompetitive before we can recover the expenses of developing and commercializing our product candidates. Such
competitors could also recruit our employees, which could negatively impact our level of expertise and the ability to execute on our business plan. Furthermore, we also face competition from existing and new treatment methods that reduce or
eliminate the need for drugs, such as the use of advanced medical devices. The development of new medical devices or other treatment methods for the diseases we are targeting could make our product candidates noncompetitive, obsolete or
uneconomical.
We face competition from other companies that are working to develop novel drugs and technology platforms using
technology similar to ours. If these companies develop drugs more rapidly than we do or their technologies, including delivery technologies, are more effective, our ability to successfully commercialize drugs may be adversely affected.
In addition to the competition we face from competing drugs in general, we also face competition from other companies working to
develop novel drugs using technology that competes more directly with our own. We are aware of several other companies that are working to develop RNAi therapeutic products. Some of these companies are seeking, as we are, to develop chemically
synthesized siRNAs as drugs. Others are following a gene therapy approach, with the goal of treating patients not with synthetic siRNAs but with synthetic, exogenously-introduced genes designed to produce siRNA-like molecules within cells. Companies
working on chemically synthesized siRNAs include Takeda, Marina Biotech, Inc., Arrowhead Research Corporation, or Arrowhead, and its subsidiary, Calando Pharmaceuticals, Inc., or Calando, Quark Pharmaceuticals, Inc., or Quark, Silence Therapeutics
plc, Arbutus, Sylentis S.A.U., or Sylentis, Dicerna, WAVE Life Sciences Ltd. and Arcturus Therapeutics, Inc. In addition, we granted licenses or options for licenses to Ionis (formerly Isis), Benitec Ltd., Arrowhead and its subsidiary, Calando,
Arbutus, Quark, Sylentis and others under which these companies may independently develop RNAi therapeutics against a limited number of targets. Any one of these companies may develop its RNAi technology more rapidly and more effectively than us.
In addition, as a result of agreements that we have entered into, Arrowhead, as the assignee of F.
Hoffmann-La
Roche Ltd, and Takeda Pharmaceutical Company Limited have obtained
non-exclusive
licenses, and Arrowhead, as the assignee of Novartis Pharma AG, has obtained
specific exclusive licenses for 30 gene targets, to certain aspects of our technology that give them the right to compete with us in certain circumstances. We also compete with companies working to develop antisense-based drugs. Like RNAi
therapeutics, antisense drugs target messenger RNAs, or mRNAs, in order to suppress the activity of specific genes. Ionis (formerly Isis) is currently marketing an antisense drug and has several antisense product candidates in clinical trials,
including one for the treatment of hATTR amyloidosis. Ionis is also developing antisense drugs using ligand-conjugated GalNAc technology licensed from us, and these drugs have been shown to have increased potency at lower doses in clinical and
pre-clinical
studies, compared with antisense drugs that do not use such licensed GalNAc technology. The development of antisense drugs is more advanced than that of RNAi therapeutics, and antisense technology may
become the preferred technology for drugs that target mRNAs to silence specific genes.
In addition to competition with respect to RNAi and
with respect to specific products, we face substantial competition to discover and develop safe and effective means to deliver siRNAs to the relevant cell and tissue types. Safe and effective means to deliver siRNAs to the relevant cell and tissue
types may be developed by our competitors, and our ability to successfully commercialize a competitive product would be adversely affected. In addition, substantial resources are being expended by third parties in the effort to discover and develop
a safe and effective means of delivering siRNAs into the relevant cell and tissue types, both in academic laboratories and in the corporate sector. Some of our competitors have substantially greater resources than we do, and if our competitors are
able to negotiate exclusive access to those delivery solutions developed by third parties, we may be unable to successfully commercialize our product candidates.
S-35
Risks Related to this Offering and Our Common Stock
Investors in this offering will pay a much higher price than the book value of our common stock.
If you purchase common stock in this offering, you will incur an immediate and substantial dilution in net tangible book value of $58.65 per share after
giving effect to the sale by us of 5,000,000 shares of common stock offered in this offering and the concurrent private placement of 297,501 shares of common stock at the public offering price of $71.87 per share, and after deducting underwriting
discounts and commissions for shares sold in the public offering and estimated offering expenses payable by us. See Dilution. In the past, we have issued options to acquire common stock at prices significantly below this offering price.
To the extent these outstanding options are ultimately exercised, you will incur additional dilution. Furthermore, if the underwriter exercises its option to purchase additional shares, you will also incur additional dilution.
Our management will have broad discretion over the use of the net proceeds from this offering and the concurrent private placement, you may not
agree with how we use the proceeds and the proceeds may not be invested successfully.
Our management will have broad discretion as to
the use of the net proceeds from any offering by us and could use them for purposes other than those contemplated at the time of this offering. Accordingly, you may be relying on the judgment of our management with regard to the use of these net
proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable, or any,
return for Alnylam.
If our stock price fluctuates, purchasers of our common stock could incur substantial losses.
The market price of our common stock has fluctuated significantly and may continue to fluctuate significantly in response to factors that are beyond our
control. The stock market in general has from time to time experienced extreme price and volume fluctuations, and the biotechnology in particular has very recently experienced extreme price and volume fluctuations. The market prices of securities of
pharmaceutical and biotechnology companies have been extremely volatile, and have experienced fluctuations that often have been unrelated or disproportionate to the clinical development progress or operating performance of these companies, including
as a result of adverse development events. These broad market and sector fluctuations have resulted and could in the future result in extreme fluctuations in the price of our common stock, which could cause purchasers of our common stock to incur
substantial losses.
We may incur significant costs from class action litigation due to stock volatility.
Our stock price may fluctuate for many reasons, including as a result of public announcements regarding the progress of our development efforts or the
development efforts of our collaborators and/or competitors, the addition or departure of our key personnel, variations in our quarterly operating results and changes in market valuations of pharmaceutical and biotechnology companies. For example,
in October 2016, we announced that we were discontinuing the development of revusiran and our stock price declined significantly as a result. When the market price of a stock has been volatile as our stock price has been, holders of that stock have
occasionally brought securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, we could incur substantial costs
defending the lawsuit. The lawsuit could also divert the time and attention of our management.
Sales of additional shares of our common
stock, including by us or our directors and officers following expiration or early release of the
60-day
lock-up,
could cause the price of our common stock to decline.
Sales of substantial amounts of our common stock in the public market, or the availability of such shares for sale, by us or others,
including the issuance of common stock upon exercise of outstanding options, could adversely
S-36
affect the price of our common stock. In connection with this offering, we, our directors and officers and Sanofi Genzyme have entered into
lock-up
agreements for a period of 60 days following this offering (which period may be extended under certain circumstances). We, our directors, officers or Sanofi Genzyme may be released from
lock-up
prior to the
expiration of the
lock-up
period at the sole discretion of Barclays Capital Inc. See Underwriting. Upon expiration or earlier release of the
lock-up,
we, our
directors, officers or Sanofi Genzyme may sell shares into the market, which could adversely affect the market price of shares of our common stock. In addition, during the
lock-up
period and thereafter, sales
of shares held by our directors and officers are permitted under trading plans, as in effect as of the date of the applicable
lock-up
agreement, established pursuant to Rule
10b5-1
of the Exchange Act.
Sanofi Genzymes ownership of our common stock could delay or
prevent a change in corporate control.
Sanofi Genzyme currently holds approximately 12 percent of our outstanding common stock
and has the right to increase its ownership up to 30 percent, as well as the right to maintain its ownership percentage through the term of our collaboration, subject to certain limitations. This concentration of ownership may harm the market
price of our common stock by:
|
|
|
delaying, deferring or preventing a change in control of our company;
|
|
|
|
impeding a merger, consolidation, takeover or other business combination involving our company; or
|
|
|
|
discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.
|
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our
stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in
our certificate of incorporation and our bylaws may delay or prevent an acquisition of us or a change in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current
management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt
by our stockholders to replace current members of our management team. These provisions include:
|
|
|
a classified board of directors;
|
|
|
|
a prohibition on actions by our stockholders by written consent;
|
|
|
|
limitations on the removal of directors; and
|
|
|
|
advance notice requirements for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings.
|
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware
General Corporation Law, which prohibits a person who owns in excess of 15 percent of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in
excess of 15 percent of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions would apply even if the proposed merger or acquisition could be considered beneficial by some
stockholders.
S-37
Use of proceeds
We estimate that the net proceeds from the sale of 5,000,000 shares of our common stock in this offering will be approximately $355.2 million, after
deducting underwriting discounts and commissions and estimated offering expenses payable by us and assuming the underwriter does not exercise its option to purchase additional shares of common stock. If the underwriter exercises its over-allotment
option in full, we estimate that the aggregate net proceeds to us from the public offering will be approximately $408.5 million. We also expect to receive approximately $21.4 million from the sale by us of 297,501 shares of our common stock in the
concurrent private placement to Sanofi Genzyme at a price per share equal to the public offering price. Sanofi Genzyme has also exercised its right to purchase additional shares directly from us in connection with any exercise by the underwriter of
its over-allotment option. If the underwriter exercises its option to purchase additional shares in full, we estimate that the aggregate net proceeds to us from the concurrent private placement to Sanofi Genzyme will be approximately $28.4 million.
We intend to use the net proceeds of this offering and the concurrent private placement for general corporate purposes, ultimately focused on
advancing and potentially accelerating our clinical pipeline and continuing to build capabilities and expand geographically, as required for commercialization of RNAi therapeutics in our pipeline that may obtain regulatory approval. Programs that
may be accelerated include ALN-TTRsc02. Although we have not yet identified specific uses for these proceeds, we currently anticipate using the proceeds for some or all of the following purposes:
|
|
|
research and development expenses, including for the advancement of our
Alnylam 2020
strategy for the development and commercialization of RNAi
therapeutics as a potential new class of innovative medicines, with the goal of achieving, by the end of 2020, a company profile with three marketed products and ten RNAI therapeutic clinical programs, including four in late stages of development,
across our three STArs;
|
|
|
|
continued growth of our manufacturing, quality, commercial and medical affairs capabilities to support our transition from a development-stage company
toward a multi-product, commercial-stage biopharmaceutical company;
|
|
|
|
capital expenditures; and
|
|
|
|
general and administrative expenses.
|
We have not determined the amounts we plan to spend on any of the areas identified above or the timing of these expenditures. As a result, our management will have broad discretion to allocate the net
proceeds from this offering and the concurrent private placement. We may temporarily invest the net proceeds in investment-grade, interest-bearing securities until they are used for their stated purpose.
S-38
Price range of common stock
Our common stock is listed on The NASDAQ Global Select Market and trades under the symbol ALNY. The following table sets forth, for the
quarterly periods indicated, the high and low sale price per share of our common stock as reported on The NASDAQ Global Select Market:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
2015
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
121.93
|
|
|
$
|
82.06
|
|
Second Quarter
|
|
|
140.00
|
|
|
|
98.63
|
|
Third Quarter
|
|
|
137.89
|
|
|
|
76.46
|
|
Fourth Quarter
|
|
|
110.75
|
|
|
|
71.14
|
|
2016
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
98.00
|
|
|
$
|
51.51
|
|
Second Quarter
|
|
|
75.08
|
|
|
|
49.96
|
|
Third Quarter
|
|
|
80.11
|
|
|
|
53.56
|
|
Fourth Quarter
|
|
|
71.67
|
|
|
|
31.38
|
|
2017
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
60.41
|
|
|
$
|
35.98
|
|
Second Quarter (through May 23, 2017)
|
|
|
75.83
|
|
|
|
46.90
|
|
On May 23, 2017, the last reported sale price of our common stock was $74.87 per share.
Dividend policy
We have never declared or paid any cash dividends on our common stock. We anticipate that, in the foreseeable future, we will continue to retain any earnings for use in the operation of our business and
will not pay any cash dividends.
S-39