Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a global commercial-stage biopharmaceutical company developing novel therapeutics based on ribonucleic acid interference, or RNAi. RNAi is a naturally occurring biological pathway within cells for sequence-specific silencing and regulation of gene expression. By harnessing the RNAi pathway, we have developed a new class of innovative medicines, known as RNAi therapeutics. RNAi therapeutics are comprised of small interfering RNA, or siRNA, that function upstream of conventional medicines by potently silencing messenger RNA, or mRNA, that encode for proteins implicated in the cause or pathway of disease, thus preventing them from being made. We believe this is a revolutionary approach with the potential to transform the care of patients with rare and prevalent diseases. To date, our efforts to advance this revolutionary approach have yielded the approval of five first-in-class RNAi-based medicines, AMVUTTRA ® (vutrisiran), ONPATTRO ® (patisiran), GIVLAARI ® (givosiran), OXLUMO ® (lumasiran) and Leqvio ® (inclisiran).
Our research and development strategy is to target genetically validated genes that have been implicated in the cause or pathway of human disease. We utilize a N-acetylgalactosamine (GalNAc) conjugate approach or lipid nanoparticle (LNP) to enable hepatic delivery of siRNAs. For delivery to the central nervous system, or CNS, and the eye (ocular delivery), we are utilizing an alternative conjugate approach based on a hexadecyl (C16) moiety as a lipophilic ligand. We are also advancing approaches for heart, skeletal muscle and adipose tissue delivery of siRNAs. Our focus is on clinical indications where there is a high unmet need, a genetically validated target, early biomarkers for the assessment of clinical activity in Phase 1 clinical trials, and a definable path for drug development, regulatory approval, patient access and commercialization.
In early 2021, we launched our Alnylam P 5 x25 strategy, which focuses on our planned transition to a top-tier biotech company by the end of 2025. With Alnylam P 5 x25 , we aim to deliver transformative rare, specialty and select prevalent disease medicines for patients around the world through sustainable innovation, while delivering exceptional financial performance.
We currently have five marketed products and more than ten clinical programs, including several in late-stage development, across rare, specialty and select prevalent indications.
AMVUTTRA is approved in the U.S. for the treatment of hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, with polyneuropathy in adults, in the European Union, or EU, and the United Kingdom, or UK, for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy, in Japan for the treatment of transthyretin, or TTR, type familial amyloidosis with polyneuropathy, and in multiple additional countries. Regulatory reviews continue in other territories. In June 2024, we reported positive topline results from the HELIOS-B trial of vutrisiran (the non-branded name of AMVUTTRA) in patients with ATTR amyloidosis with cardiomyopathy and announced that we plan to proceed with global regulatory filings later this year seeking approval of AMVUTTRA as a potential treatment for ATTR amyloidosis with cardiomyopathy, including filing a supplemental New Drug Application, or sNDA, with the United States Food and Drug Administration, or the FDA, using a Priority Review Voucher.
ONPATTRO is approved by the FDA for the treatment of the polyneuropathy of hATTR amyloidosis in adults and has also been approved in the EU for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy, in Japan for the treatment of TTR-type familial amyloidosis with polyneuropathy, and in multiple additional countries. Patisiran (the non-branded name of ONPATTRO) is under regulatory review with the Brazilian Health Regulatory Agency (ANVISA) for the treatment of ATTR amyloidosis with cardiomyopathy.
GIVLAARI is approved in the U.S. for the treatment of adults with acute hepatic porphyria, or AHP, in the EU for the treatment of AHP in adults and adolescents aged 12 years and older, and in several other countries. Regulatory filings for givosiran (the non-branded drug name for GIVLAARI) in additional territories are pending or planned during 2024 and beyond.
OXLUMO is approved in the U.S. for the treatment of primary hyperoxaluria type 1, or PH1, to lower urinary and plasma oxalate levels in pediatric and adult patients, and in the EU and the UK for the treatment of PH1 in all age groups. OXLUMO has also been approved in several other countries and regulatory filings in additional territories are pending or planned during 2024 and beyond.
Leqvio (inclisiran), our fifth product, is being developed and commercialized by our collaborator Novartis AG, or Novartis, and has received marketing authorization from the European Commission, or EC, for the treatment of adults with hypercholesterolemia or mixed dyslipidemia and from the FDA as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with heterozygous familial hypercholesterolemia, or HeFH, or clinical atherosclerotic cardiovascular disease, or ASCVD, who require additional lowering of low-density lipoprotein cholesterol, or LDL-C. In July 2023, the FDA approved an expanded indication for Leqvio to include treatment of adults with high LDL-C and who are at increased risk of
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heart disease. Leqvio has also been approved in China and Japan, and as of the end of June 2024, Leqvio had been approved in more than 90 countries.
In addition to our marketed products, as part of our Alnylam P 5 x25 strategy, we have multiple drivers of future growth, including the development of transformative medicines to treat prevalent disease. In addition to Leqvio, we are advancing zilebesiran, an investigational, subcutaneously administered RNAi therapeutic targeting angiotensinogen, or AGT, in development for the treatment of hypertension. In 2023, we entered into a Collaboration and License Agreement, or the Roche Collaboration and License Agreement, with F. Hoffmann-La Roche Ltd. and Genentech, Inc. or, collectively, Roche, pursuant to which we established a worldwide, strategic collaboration for the joint development and commercialization of zilebesiran. In March 2024, we reported positive topline results from our KARDIA-2 clinical trial, which is designed to evaluate the safety and efficacy of zilebesiran administered biannually as a concomitant therapy in patients whose blood pressure is not adequately controlled by a standard of care antihypertensive medication. In April 2024, we dosed the first patient in our KARDIA-3 clinical trial, which is designed to evaluate the efficacy and safety of zilebesiran as an add-on therapy in adult patients with high cardiovascular risk and uncontrolled hypertension despite treatment with two to four standard of care antihypertensive medications.
We are also advancing mivelsiran (formerly ALN-APP), an investigational RNAi therapeutic targeting amyloid precursor protein in development for the treatment of Alzheimer’s disease and cerebral amyloid angiopathy, or CAA. In 2023, we reported positive interim results from the ongoing single ascending dose part of the Phase 1 clinical trial of mivelsiran in patients with early-onset Alzheimer’s disease. These results establish the first human translation of our proprietary C16-siRNA conjugate platform for CNS delivery and are the first clinical demonstration of gene silencing in the human brain using an RNAi therapeutic. In July 2024, we initiated dosing in the cAPPRicorn-1 Phase 2 clinical trial of mivelsiran in patients with CAA.
We have additional late-stage investigational programs advancing toward potential commercialization, including fitusiran for the treatment of hemophilia, which is being advanced by our collaborator Genzyme Corporation, a Sanofi Company, or Sanofi, and cemdisiran for the treatment of complement-mediated diseases, which our collaborator, Regeneron Pharmaceuticals, Inc., or Regeneron, is advancing in combination with pozelimab in Phase 3 clinical trials in myasthenia gravis and paroxysmal nocturnal hemoglobinuria.
In further support of our Alnylam P 5 x25 strategy and in view of our evolving risk profile, we remain focused on the continued evolution of our global infrastructure, including key objectives such as optimizing our global structure for execution in key markets, enhancing performance consistent with our values, and continuing to strengthen our culture. We continue to build our global compliance program to drive its evolution and enhancement. Building from our global Code of Business Conduct and Ethics, our compliance program is designed to empower our employees and those with whom we work to execute on our strategy consistent with our values and in compliance with applicable laws and regulations, and to mitigate risk. Comprised of components such as risk assessment and monitoring; policies, procedures, and guidance; training and communications; dedicated resources; and systems and processes supporting activities such as third party relationships and investigations and remediation; our program and related controls are built to enhance our business processes, structures, and controls across our global operations, and to empower ethical decision making.
Based on our expertise in RNAi therapeutics and broad intellectual property estate, we have formed collaborations with leading pharmaceutical and life sciences companies to support our development and commercialization efforts, including Roche, Regeneron, Sanofi, and Novartis (which acquired our collaborator The Medicines Company, or MDCO, in 2020).
We have incurred significant losses since we commenced operations in 2002 and as of June 30, 2024, we had an accumulated deficit of $7.09 billion. Historically, we have generated losses principally from costs associated with research and development activities, acquiring, filing and expanding intellectual property rights, and selling, general and administrative costs. As a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical and commercial capabilities, including global commercial operations, continued management and growth of our patent portfolio, collaborations and general corporate activities, we expect to incur additional operating losses. We may continue to incur annual operating losses, and will require substantial resources over the next several years as we expand our efforts to discover, develop and commercialize RNAi therapeutics, and aim to achieve financial self-sustainability by the end of 2025. We anticipate that our operating results will continue to fluctuate for the foreseeable future, therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.
We currently have programs focused on a number of therapeutic areas and, as of June 30, 2024, we generate worldwide product revenues from four commercialized products, ONPATTRO, AMVUTTRA, GIVLAARI and OXLUMO, primarily in the U.S. and Europe. However, our ongoing development and regulatory efforts may not be successful and we may not be able to commence sales of any other products and/or successfully expand the label of or market and sell our existing commercialized products or any other approved products in the future. A meaningful portion of our total revenues in recent years has been derived from collaboration revenues from collaborations with Roche, Regeneron and Novartis. In addition to revenues from the commercial sales of our approved products and potentially from sales of future products, we expect our sources of potential
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funding for the next several years to continue to be derived in part from existing and new strategic collaborations. Such collaborations include, or may include in the future, license and other fees, funded research and development, milestone payments and royalties on product sales by our licensors, including royalties on sales of Leqvio made by our collaborator Novartis, as well as proceeds from the sale of equity or debt.
Research and Development
Since our inception, we have focused primarily on drug discovery and development programs. Research and development expenses represent a substantial percentage of our total operating expenses, as reflected by our broad pipeline of clinical development programs, which includes multiple programs in late-stage development.
Our Product Pipeline
Our broad pipeline, including five approved products and multiple late and early-stage investigational RNAi therapeutics, addresses unmet needs in several disease areas, and spans indications in rare, specialty and select prevalent diseases. We describe our commercial and clinical-stage pipeline in more detail below. The investigational therapeutics described below are in various stages of clinical development and the scientific information included about these therapeutics is preliminary and investigative. None of these investigational therapeutics have been approved by the FDA, European Medicines Agency, or EMA, or any other health authority and no conclusions can or should be drawn regarding the safety or efficacy of these investigational therapeutics.
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The table below represents our commercial products and late- and early-stage development programs as of August 1, 2024.
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During the second quarter of 2024 and recent period, we reported the following updates from our commercially approved products and our late-stage clinical programs:
Commercial
Total TTR: ONPATTRO & AMVUTTRA
• We achieved global net product revenues for ONPATTRO and AMVUTTRA for the second quarter of 2024 of $77.2 million and $230.1 million, respectively.
Total Rare: GIVLAARI & OXLUMO
• We achieved global net product revenues for GIVLAARI and OXLUMO for the second quarter of 2024 of $62.1 million and $40.6 million, respectively.
Late-Stage Clinical Development
• We reported positive topline results from the HELIOS-B Phase 3 study of vutrisiran in patients with ATTR amyloidosis with cardiomyopathy.
• We reported positive results from the KARDIA-2 Phase 2 study of investigational zilebesiran added to standard-of-care antihypertensives in patients with inadequately controlled hypertension.
• Our collaboration partner, Sanofi, submitted regulatory filings for the investigational agent for hemophilia, fitusiran, in China, Brazil, and the U.S., with an FDA target action date of March 28, 2025.
There is a risk that any drug discovery or development program may not produce revenue for a variety of reasons, including the possibility that we will not be able to adequately demonstrate the safety and effectiveness of the product candidate or obtain approval or the desired labeling for the product candidate from regulatory authorities. Moreover, there are uncertainties specific to any new field of drug discovery, including RNAi. The success of ONPATTRO, AMVUTTRA, GIVLAARI, OXLUMO or any other product candidate we develop is highly uncertain. Due to the numerous risks associated with developing drugs, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of any potential product candidate or indication, or the period, if any, in which material net cash inflows will commence from any approved product or indication. Any failure to complete any stage of the development of any potential products or any approved product for an expanded indication in a timely manner or successfully launch, market and sell any of our commercially approved products, could have a material adverse effect on our operations, financial position and liquidity. A discussion of some of the risks and uncertainties associated with completing our research and development programs within the planned timeline, or at all, and the potential consequences of failing to do so, are set forth in Part II, Item 1A below under the heading “Risk Factors.”
Strategic Collaborations
Our business strategy is to develop and commercialize a broad pipeline of RNAi therapeutic products directed towards transformative rare, specialty and select prevalent diseases. As part of this strategy, we have entered into, and may in the future enter into additional, collaboration and licensing agreements as a means of obtaining resources, capabilities and funding to advance our investigational RNAi therapeutic programs.
Below is a brief description of certain of our key collaborations.
Roche . In July 2023, we entered into the Roche Collaboration and License Agreement, pursuant to which we and Roche established a worldwide, strategic collaboration for the joint development of pharmaceutical products containing zilebesiran. Under the Roche Collaboration and License Agreement, we granted to Roche (i) co-exclusive rights to develop zilebesiran worldwide and commercialize zilebesiran in the U.S., (ii) exclusive rights to commercialize zilebesiran outside of the U.S., and (iii) non-exclusive rights to manufacture zilebesiran for the development and commercialization of zilebesiran outside of the U.S. Roche made an upfront payment of $310.0 million. In April 2024, we achieved the development milestone associated with the dosing of the first patient in the KARDIA-3 Phase 2 clinical trial, entitling us to receive a $65.0 million development milestone payment from Roche. In addition, we will be eligible to receive up to an additional $2.45 billion in contingent payments based on the achievement of specified development, regulatory and sales-based milestones. We are responsible for forty percent (40%) and Roche is responsible for the remaining sixty percent (60%) of development costs incurred in the conduct of development activities that support regulatory approval of zilebesiran globally. We and Roche share equally (50/50) all costs incurred in connection with development activities that are conducted to support regulatory approval of zilebesiran in the U.S. Upon regulatory approval, Roche will be solely responsible for costs incurred in connection with commercialization of zilebesiran outside of the U.S. and will pay us tiered, low double digit royalties based on net sales of zilebesiran on a country-by-country basis outside of the U.S. during the royalty term. We and Roche will share equally (50/50) profits and losses (including commercialization costs) of zilebesiran in the U.S.
Regeneron. In April 2019, we entered into a global, strategic collaboration with Regeneron to discover, develop and commercialize RNAi therapeutics for a broad range of diseases by addressing therapeutic targets expressed in the eye and CNS,
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in addition to a select number of targets expressed in the liver, which we refer to as the Regeneron Collaboration. The Regeneron Collaboration is governed by a Master Agreement, referred to as the Regeneron Master Agreement, which became effective in May 2019.
Under the terms of the Regeneron Collaboration, we are working exclusively with Regeneron to discover RNAi therapeutics for eye and CNS diseases for an initial research period of up to seven years, which we refer to as the Initial Research Term. Regeneron has an option to extend the Initial Research Term for up to an additional five years by paying a research term extension fee of $300.0 million. The Regeneron Collaboration also covers a select number of RNAi therapeutic programs designed to target genes expressed in the liver. We retain broad global rights to all of our liver-directed clinical and pre-clinical pipeline programs that have not been collaborated.
Regeneron leads development and commercialization for all programs targeting eye diseases (subject to limited exceptions), entitling us to certain potential milestone and royalty payments pursuant to the terms of a license agreement, the form of which has been agreed upon by the parties. We and Regeneron are alternating leadership on CNS and liver programs, with the lead party retaining global development and commercial responsibility.
In August 2019, in connection with the Regeneron Master Agreement, we and Regeneron entered into (i) a co-co collaboration agreement covering the continued development of cemdisiran, our C5 siRNA, currently in development for C5 complement-mediated diseases, as a monotherapy, or the C5 Co-Co Collaboration Agreement, and (ii) a license agreement to evaluate anti-C5 antibody-siRNA combinations for C5 complement-mediated diseases including evaluating the combination of Regeneron’s pozelimab and cemdisiran, or the C5 License Agreement. In November 2022, Regeneron exercised its right under the C5 Co-Co Collaboration Agreement to opt-out of the further development and commercialization of cemdisiran as a monotherapy, at which time we became solely responsible for development and commercialization of cemdisiran as a monotherapy, and Regeneron no longer shared in the costs on any monotherapy program. Regeneron remained eligible to receive tiered, double-digit royalties on net sales of cemdisiran as a monotherapy.
In June 2024, we entered into an amended and restated C5 License Agreement, or the Amended C5 License Agreement, which terminated the C5 Co-Co Collaboration Agreement and granted Regeneron a worldwide license to cemdisiran as a monotherapy in addition to the license to cemdisiran in combination with anti-C5 antibodies. Through the Amended C5 License Agreement, Regeneron is now solely responsible for development, manufacturing, and commercialization of cemdisiran as a monotherapy and in combination with anti-C5 antibodies. Regeneron provided us with an upfront payment of $10.0 million and we will receive certain milestone payments upon receipt of regulatory approval for cemdisiran as a monotherapy, and tiered, double-digit royalties on net sales. The Amended C5 License Agreement did not change our rights to receive low double-digit royalties and commercial milestones of up to $325.0 million on any potential product sales if cemdisiran is used as part of a combination product.
In May 2024, Regeneron notified us of its decision to opt-out of the further co-development of mivelsiran, an investigational RNAi therapeutic in development for the treatment of hereditary CAA and autosomal dominant Alzheimer’s Disease under our co-co collaboration agreement with respect to mivelsiran. As a result of Regeneron’s opt-out, we now have full global development and commercialization rights to mivelsiran in all indications, and we are responsible for development and commercialization costs of mivelsiran beyond our ongoing Phase 1 program. Regeneron will no longer share potential future profits from sales of mivelsiran with us, although we remain subject to certain financial obligations to Regeneron under the mivelsiran co-co collaboration agreement. We continue to advance multiple other programs with Regeneron.
Sanofi. We formed a broad strategic alliance with Sanofi in 2014. In January 2018, we and Sanofi amended our 2014 collaboration and entered into the Exclusive License Agreement, referred to as the Exclusive TTR License, under which we have the exclusive right to pursue the further global development and commercialization of all TTR products, including ONPATTRO, AMVUTTRA and any back-up products, and the ALN-AT3 Global License Terms, referred to as the AT3 License Terms, under which Sanofi has the exclusive right to pursue the further global development and commercialization of fitusiran and any back-up products. Under the Exclusive TTR License, Sanofi is eligible to receive (i) royalties up to 25% increasing over time, based on annual net sales of ONPATTRO in territories excluding the U.S., Canada and Western Europe, provided royalties on annual net sales of ONPATTRO in Japan were set at 25% beginning at the effective date of the Exclusive TTR License and (ii) tiered royalties of 15% to 30% based on global annual net sales of AMVUTTRA. In April 2019, we and Sanofi agreed to further amend the 2014 Sanofi collaboration to conclude the research and option phase and to amend and restate the AT3 License Terms to modify certain of the business terms. The material collaboration terms for fitusiran were unchanged. Under the amended and restated AT3 License Terms, we are eligible to receive tiered royalties of 15% to 30% based on global annual net sales of fitusiran by Sanofi, its affiliates and its sublicensees.
Novartis. In February 2013, we entered into an exclusive, worldwide license with MDCO (acquired by Novartis AG in January 2020) pursuant to which MDCO was granted the right to develop, manufacture and commercialize RNAi therapeutics targeting proprotein convertase subtilisin/kexin type 9 for the treatment of hypercholesterolemia and other human diseases, including Leqvio.
We also have entered into license agreements to obtain rights to intellectual property in the field of RNAi. In addition, because delivery of RNAi therapeutics has historically been an important objective of our research activities, we have entered
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into various collaboration and licensing arrangements with other companies and academic institutions to gain access to delivery technologies, including various LNP delivery technologies, and we may enter into such agreements in the future to gain access to products or technologies.
Critical Accounting Policies and Estimates
Our critical accounting policies are described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2023, which we filed with the SEC on February 15, 2024. There have been no significant changes to our critical accounting policies since the beginning of this fiscal year.
Results of Operations
The following data summarizes the results of our operations:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
Total revenues $ 659,825 $ 318,754 $ 341,071 107 % $ 1,154,158 $ 638,044 $ 516,114 81 %
Operating costs and expenses
$ 611,211 $ 548,585 $ 62,626 11 % $ 1,148,979 $ 1,017,682 $ 131,297 13 %
Income (loss) from operations $ 48,614 $ (229,831) $ 278,445 (121) % $ 5,179 $ (379,638) $ 384,817 (101) %
Net loss $ (16,889) $ (276,024) $ 259,135 (94) % $ (82,824) $ (450,125) $ 367,301 (82) %
Discussion of Results of Operations
Revenues
Total revenues consist of the following:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
Net product revenues $ 410,088 $ 305,705 $ 104,383 34 % $ 775,251 $ 582,033 $ 193,218 33 %
Net revenues from collaborations
227,338 5,844 221,494 * 345,886 42,306 303,580 *
Royalty revenue 22,399 7,205 15,194 211 % 33,021 13,705 19,316 141 %
Total $ 659,825 $ 318,754 $ 341,071 107 % $ 1,154,158 $ 638,044 $ 516,114 81 %
* Indicates the percentage change period over period is greater than 500%.
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Net Product Revenues
Net product revenues consist of the following, by product and region:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
ONPATTRO
United States $ 22,112 $ 25,560 $ (3,448) (13) % $ 38,651 $ 55,377 $ (16,726) (30) %
Europe 37,074 56,393 (19,319) (34) % 81,764 116,071 (34,307) (30) %
Rest of World 18,058 9,505 8,553 90 % 26,046 22,503 3,543 16 %
Total 77,244 91,458 (14,214) (16) % 146,461 193,951 (47,490) (24) %
AMVUTTRA
United States 148,463 96,469 51,994 54 % 278,701 175,482 103,219 59 %
Europe 56,760 14,405 42,355 294 % 100,493 21,173 79,320 375 %
Rest of World 24,886 21,262 3,624 17 % 46,156 37,249 8,907 24 %
Total 230,109 132,136 97,973 74 % 425,350 233,904 191,446 82 %
GIVLAARI
United States 41,225 35,196 6,029 17 % 79,956 65,487 14,469 22 %
Europe 16,314 14,051 2,263 16 % 31,629 28,522 3,107 11 %
Rest of World 4,588 8,652 (4,064) (47) % 8,598 11,796 (3,198) (27) %
Total 62,127 57,899 4,228 7 % 120,183 105,805 14,378 14 %
OXLUMO
United States 15,744 8,794 6,950 79 % 29,076 17,851 11,225 63 %
Europe 20,503 12,216 8,287 68 % 41,930 25,525 16,405 64 %
Rest of World 4,361 3,202 1,159 36 % 12,251 4,997 7,254 145 %
Total 40,608 24,212 16,396 68 % 83,257 48,373 34,884 72 %
Total net product revenues $ 410,088 $ 305,705 $ 104,383 34 % $ 775,251 $ 582,033 $ 193,218 33 %
Net product revenues increased during the three and six months ended June 30, 2024, as compared to the same periods in 2023, due to strong growth from AMVUTTRA driven by increased patient demand, as well as increased patients on GIVLAARI and OXLUMO therapies.
Net Revenues from Collaborations and Royalty Revenue
Net revenues from collaborations and royalty revenue consist of the following:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
Roche
$ 16,506 $ — $ 16,506 N/A $ 91,186 $ — $ 91,186 N/A
Regeneron Pharmaceuticals 207,429 (2,837) 210,266 * 234,193 17,153 217,040 *
Novartis AG 2,304 8,627 (6,323) (73) % 16,820 23,560 (6,740) (29) %
Other 1,099 54 1,045 * 3,687 1,593 2,094 131 %
Total net revenues from collaborations
$ 227,338 $ 5,844 $ 221,494 * $ 345,886 $ 42,306 $ 303,580 *
Royalty revenue
$ 22,399 $ 7,205 $ 15,194 211 % $ 33,021 $ 13,705 $ 19,316 141 %
* Indicates the percentage change period over period is greater than 500%.
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Net revenues from collaborations increased during the three and six months ended June 30, 2024, as compared to the same period in 2023, primarily driven by revenue recognized under our Regeneron Collaboration. We modified our collaboration with Regeneron in June 2024 and provided Regeneron with an exclusive license to develop, manufacture and commercialize cemdisiran as a monotherapy. The transaction price of $191.5 million allocated to this license was recognized immediately as this obligation was satisfied at a point in time upon transfer of the license to Regeneron. Control of the license was transferred in June 2024 and Regeneron could begin to use and benefit from the license.
Royalty revenue increased during the three and six months ended June 30, 2024, as compared to the same period in 2023, due to increased royalties earned from global net sales of Leqvio by our collaborator, Novartis, primarily attributed to their ongoing launch efforts.
Recognition of our combined net revenues from collaborations and royalty revenue is dependent on a variety of factors including the level of work reimbursed by collaborators, achievement of milestones under our collaboration agreements, and royalties associated with sales of Leqvio. As a result, there may be variability in the net revenues recognized from collaborations and royalty revenue in 2024, as compared with 2023.
Operating Costs and Expenses
Operating costs and expenses consist of the following:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
Cost of goods sold $ 67,271 $ 75,336 $ (8,065) (11) % $ 121,884 $ 116,768 $ 5,116 4 %
Cost of goods sold as a percentage of net product revenues 16.4 % 24.6 % 15.7 % 20.1 %
Cost of collaborations and royalties 1,401 10,034 (8,633) (86) % 12,764 23,471 (10,707) (46) %
Research and development 294,142 248,526 45,616 18 % 555,137 479,095 76,042 16 %
Selling, general and administrative
248,397 214,689 33,708 16 % 459,194 398,348 60,846 15 %
Total $ 611,211 $ 548,585 $ 62,626 11 % $ 1,148,979 $ 1,017,682 $ 131,297 13 %
Cost of goods sold
Cost of goods sold as a percentage of net product revenues decreased during the three and six months ended June 30, 2024, as compared to the same period in 2023, primarily due to higher costs in 2023 associated with cancelled manufacturing commitments for ONPATTRO and other adjustments to inventory, for which similar expenses did not occur in 2024.
We expect our cost of goods sold will increase during 2024, as compared to 2023, primarily as a result of an expected increase in net product sales as well as increased royalties, predominately driven by an increase in volume and rate of royalties payable on net sales of AMVUTTRA.
Cost of collaborations and royalties
Cost of collaborations and royalties decreased during the three and six months ended June 30, 2024, as compared to the same period in 2023, primarily due to decreased demand for GalNAc material supplied to our collaborators in support of certain product manufacturing as our collaborators transition to producing the material independently.
We expect cost of collaborations and royalties will continue to decrease during 2024, as compared to 2023, as a result of our collaborators transitioning to produce GalNAc independently and reduced royalties payable from the expiration of licenses of third-party intellectual property.
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Research and development
Research and development expenses consist of the following:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
Clinical research and outside services $ 119,496 $ 109,698 $ 9,798 9 % $ 245,006 $ 221,295 $ 23,711 11 %
Compensation and related 86,762 64,707 22,055 34 % 163,971 129,427 34,544 27 %
Occupancy and all other costs 39,769 41,320 (1,551) (4) % 78,830 79,340 (510) (1) %
Stock-based compensation 48,115 32,801 15,314 47 % 67,330 49,033 18,297 37 %
Total $ 294,142 $ 248,526 $ 45,616 18 % $ 555,137 $ 479,095 $ 76,042 16 %
For the three and six months ended June 30, 2024, the increase in research and development expenses, as compared to the same period in 2023, was primarily due to the following:
• increased costs associated with our preclinical activities as we continue to expand our R&D pipeline;
• increased clinical research expenses primarily associated with zilebesiran in the KARDIA-3 clinical trial and mivelsiran in the cAPPRicorn-1 Phase 2 clinical trial due to increased startup activities, respectively;
• increased expenses associated with our HELIOS-B clinical trial primarily driven by increased costs and fees leading up to the topline data readout in June 2024;
• increased employee compensation and related expenses to support our R&D pipeline and development expenses; and
• increased stock-based compensation expense primarily due to the accounting for certain performance-based awards.
Offset by:
• decreased expenses within other clinical programs, specifically APOLLO-B Phase 3 clinical trial of patisiran due to the wind down of clinical activities during the open label extension period; and
• decreased expenses associated with the timing of manufacturing activities to support pre-clinical and clinical programs.
During the three and six months ended June 30, 2024 and 2023, in connection with advancing activities under our collaboration agreements, we incurred research and development expenses, primarily related to external development and clinical services, including the manufacture of clinical product.
The following table summarizes research and development expenses incurred, for which we recognize net revenue, that are directly attributable to our collaboration agreements, by collaborator:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2024 2023 2024 2023
Roche
$ 26,236 $ — $ 44,317 $ —
Regeneron Pharmaceuticals 14,284 20,196 32,987 39,315
Other 1,816 548 4,629 1,346
Total $ 42,336 $ 20,744 $ 81,933 $ 40,661
Selling, general and administrative
Selling, general and administrative expenses consist of the following:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
Compensation and related $ 96,538 $ 75,507 $ 21,031 28 % $ 187,747 $ 149,833 $ 37,914 25 %
Consulting and professional services 66,731 57,848 8,883 15 % 123,490 108,536 14,954 14 %
Occupancy and all other costs 43,955 38,333 5,622 15 % 80,652 73,263 7,389 10 %
Stock-based compensation 41,173 43,001 (1,828) (4) % 67,305 66,716 589 1 %
Total $ 248,397 $ 214,689 $ 33,708 16 % $ 459,194 $ 398,348 $ 60,846 15 %
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For the three months ended June 30, 2024, the increase in selling, general and administrative expenses, as compared to the same period in 2023, was primarily due to increased marketing investment associated with promotion of our TTR therapies and increased employee compensation expenses.
We expect that research and development expenses combined with selling, general and administrative expenses will continue to increase during 2024, as compared to 2023, as we continue to build out our global commercial and compliance infrastructure as well as launch our commercial products into new markets, assuming regulatory approvals, advance our product candidates, including collaboration programs, into later-stage development, advance and develop our platform and pre-clinical pipeline, and prepare regulatory submissions. However, we expect that certain expenses will be variable depending on the timing of manufacturing batches, clinical trial enrollment and results, regulatory review of our product candidates and programs, and stock-based compensation expenses due to our determination regarding the probability of vesting for performance-based awards.
Other (Expense) Income
Other (expense) income consists of the following:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except percentages) 2024 2023 $ Change % Change 2024 2023 $ Change % Change
Interest expense $ (33,258) $ (30,035) $ (3,223) 11 % $ (68,511) $ (58,990) $ (9,521) 16 %
Interest income 29,182 21,075 8,107 38 % 58,827 39,730 19,097 48 %
Other expense, net
Realized and unrealized loss on marketable equity securities (1,367) 1,400 (2,767) (198) % (1,289) (867) (422) 49 %
Change in fair value of development derivative liability (55,642) (30,215) (25,427) 84 % (64,228) (36,686) (27,542) 75 %
Other 1,304 (6,603) 7,907 (120) % (4,732) (10,120) 5,388 (53) %
Total $ (59,781) $ (44,378) $ (15,403) 35 % $ (79,933) $ (66,933) $ (13,000) 19 %
Total other expense increased during the three and six months ended June 30, 2024, as compared to the same period in 2023, primarily due to increased expense associated with the change in fair value of the development derivative liability triggered by positive topline results for the HELIOS-B clinical trial announced in June 2024, partially offset by an increase in interest income driven by higher market interest rates on our marketable debt securities.
Provision for Income Taxes
For the three and six months ended June 30, 2024, we recorded a provision for income taxes of $5.7 million and $8.1 million, respectively, which primarily represents tax expense for foreign subsidiaries that are profitable and state taxes.
We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets. As of June 30, 2024, we continue to maintain a full valuation allowance against our U.S., Bermuda and Switzerland deferred tax assets. We will release the valuation allowance when there is sufficient positive evidence to support a conclusion that it is more likely than not the deferred tax assets will be realized. It is possible that within the next 12 months sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance attributable to Switzerland will no longer be needed. Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and may result in a material decrease to income tax expense for the period the release is recorded.
Liquidity and Capital Resources
The following table summarizes our cash flow activities:
Six Months Ended June 30,
(In thousands) 2024 2023
Net cash provided by (used in):
Operating activities $ 42,643 $ (225,461)
Investing activities $ (33,680) $ (84,930)
Financing activities $ 160,407 $ 99,765
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Operating activities
Net cash provided by operating activities increased during the six months ended June 30, 2024, compared to the same period in 2023, primarily due to stronger cash receipts from increased product sales in addition to decreased cash disbursements related to working capital payments.
Investing activities
Net cash used in investing activities decreased during the six months ended June 30, 2024, compared to the same period in 2023, primarily due to the timing of net investments of cash into our marketable debt securities.
Financing activities
Net cash provided by financing activities increased during the six months ended June 30, 2024, compared to the same period in 2023, primarily due to increased net proceeds from the issuance of common stock in connection with stock option exercises.
Additional Capital Requirements
We currently have programs focused in many therapeutic areas and, as of June 30, 2024, have received regulatory approval and commercially launched four products. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products or successfully expand the indications for our approved products, including AMVUTTRA, in the future. In addition, we anticipate that we will continue to generate losses as a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical, manufacturing, commercial and compliance capabilities, including global operations, continued management and growth of our intellectual property including our patent portfolio, collaborations and general corporate activities.
Our expected working and other capital requirements are described in our 2023 Annual Report on Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of June 30, 2024, other than the changes disclosed in the “Notes to Condensed Consolidated Financial Statements” and “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q, there have been no other material changes to our expected working and other capital requirements as described in our 2023 Annual Report on Form 10-K.
Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of June 30, 2024, together with the cash we expect to generate from product sales and under our current alliances, will be sufficient to satisfy our near-term capital and operating needs for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q. However, due to numerous factors described in more detail under the caption Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q, we may require significant additional funds earlier than we currently expect in order to continue to commercialize our approved products, and to develop, conduct clinical trials for, manufacture and, if approved, commercialize additional product candidates.