Alnylam Pharmaceuticals, Inc. (Nasdaq: ALNY), a leading RNAi therapeutics company, today reported its consolidated financial results for the fourth quarter and year ended December 31, 2009, and company highlights.

“We made great strides in 2009 as we continue to lead the industry’s efforts in the discovery and development of RNAi therapeutics. Notable in our year’s efforts was the significant progress we made in the advancement of our clinical pipeline and our major breakthroughs in delivery with a new second generation lipid nanoparticle platform. Overall, we believe we continue to lead the world in the translation of RNAi into clinical studies and that we will extend this leadership in the translation of these innovative medicines to the marketplace,” said John Maraganore, Ph.D., Chief Executive Officer of Alnylam. “As we start what we believe could be viewed as an ‘RNA Decade,’ we have positioned ourselves well to continue advancing RNAi therapeutics as a whole new class of medicines, and execute on our strategy of building a top-tier biopharmaceutical company founded on RNAi.”

“Important in 2009, and a key factor in future value creation, was the strength of our existing major partnerships,” said Barry Greene, President and Chief Operating Officer of Alnylam. “While we had aimed to form additional partnerships in 2009, we now expect to form new collaborations in 2010 across potential platform technology and product opportunities and/or our efforts in microRNA-based therapeutics with Regulus. Further, the successful launch of our Alnylam Biotherapeutics initiative forms the foundation of additional alliance opportunities across the entire biotech industry. Of course a critical element across all of these opportunities, in addition to our scientific leadership, is the dominance of our intellectual property position that we strengthened significantly in 2009 and expect to continue to strengthen in 2010.”

Cash, Cash Equivalents and Total Marketable Securities

At December 31, 2009, Alnylam had cash, cash equivalents and total marketable securities of $435.3 million, as compared to $512.7 million at December 31, 2008.

Net Loss

The net loss according to accounting principles generally accepted in the U.S. (GAAP) for the fourth quarter of 2009 was $7.8 million, or $0.19 per share on both a basic and diluted basis (including $3.9 million, or $0.09 per share of non-cash stock-based compensation expense), as compared to a net loss of $9.4 million, or $0.23 per share on both a basic and diluted basis (including $3.4 million, or $0.08 per share of non-cash stock-based compensation expense), for the same period in the previous year. For the year ended December 31, 2009, the net loss was $47.6 million, or $1.14 per share (including $19.7 million, or $0.47 per share of non-cash stock-based compensation expense), as compared to a net loss of $26.2 million, or $0.64 per share (including $16.4 million, or $0.40 per share of non-cash stock-based compensation expense), for the prior year.

Revenues

Revenues were $26.6 million for the fourth quarter of 2009, as compared to $24.4 million for the same period last year. Revenues for the fourth quarter of 2009 included $15.2 million of collaboration revenues related to the company’s alliance with Roche, $5.5 million of revenues from the company’s alliance with Takeda Pharmaceuticals Company Limited, which began in the second quarter of 2008, and $5.9 million of expense reimbursement and amortization revenues from Novartis, the National Institutes of Health (NIH), Cubist Pharmaceuticals, Inc., Biogen Idec Inc., InterfeRx™, research reagent and services licenses, and other sources. Revenues were $100.5 million for the year ended December 31, 2009, as compared to $96.2 million for the prior year. Revenues increased for the year ended December 31, 2009 as compared to the year ended December 31, 2008 primarily as a result of a full year of GAAP revenues earned from the company’s May 2008 alliance with Takeda. Revenues for the year ended December 31, 2009 included $56.9 million of collaboration revenues related to the company’s alliance with Roche, $21.7 million of revenues related to the company’s collaboration with Takeda, and $21.9 million of revenues related to the company’s collaborations with Novartis, the NIH, Cubist, Biogen Idec, InterfeRx, research reagent and services licenses, and other sources.

Research and Development Expenses

Research and development (R&D) expenses were $21.6 million in the fourth quarter of 2009, which included $2.0 million of non-cash stock-based compensation, as compared to $24.9 million in the fourth quarter of 2008, which included $1.5 million of non-cash stock-based compensation. The decrease in R&D expenses in the fourth quarter of 2009 as compared to the prior year period was due primarily to license fees incurred in the prior year period related to various intellectual property assets, partially offset by an increase in clinical trial and manufacturing expenses. R&D expenses were $108.7 million for the year ended December 31, 2009, which included $11.4 million of non-cash stock-based compensation, as compared to $96.9 million for the prior year, which included $9.6 million of non-cash stock-based compensation. R&D expenses for the year ended December 31, 2009 increased as compared to the year ended December 31, 2008 primarily as a result of increased clinical trial and manufacturing expenses. Also contributing to the increase in R&D expenses for the year ended December 31, 2009 was an increase in compensation and related expenses, non-cash stock-based compensation, and facilities-related expenses due primarily to additional R&D headcount to support the company’s alliances and expanding product pipeline.

General and Administrative Expenses

General and administrative (G&A) expenses were $13.1 million in the fourth quarter of 2009, which included $1.9 million of non-cash stock-based compensation, as compared to $7.3 million for the same period in 2008, which included $1.9 million of non-cash stock-based compensation. The increase in G&A expenses for the fourth quarter of 2009 was due primarily to higher professional service fees in association with business activities, primarily legal activities. G&A expenses were $39.9 million for the year ended December 31, 2009, which included $8.3 million of non-cash stock-based compensation, as compared to $27.1 million for the prior year, which included $6.8 million of non-cash stock-based compensation. The increase in G&A expenses during the year ended December 31, 2009 as compared to the prior year was due primarily to higher professional service fees in association with business activities, primarily legal activities, as well as higher non-cash stock-based compensation.

Regulus Therapeutics

Alnylam incurred $1.5 million and $3.9 million equity in loss of joint venture related to the company’s share of the net losses incurred by Regulus Therapeutics Inc. for the fourth quarter of 2009 and 2008, respectively. The company incurred $4.9 million and $9.3 million equity in loss of joint venture in the years ended December 31, 2009 and 2008, respectively. These amounts were related to the company’s share of the net losses incurred by Regulus, which was formed in September 2007 and is focused on the discovery, development, and commercialization of microRNA-based therapeutics. Through December 31, 2008, the company was recognizing the first $10.0 million of losses of Regulus as equity in loss of joint venture in its consolidated statements of operations because the company was responsible for funding those losses through its initial $10.0 million cash contributions. Beginning in January 2009, in connection with the conversion of Regulus to a C corporation, the company is recognizing approximately 49% of the income and losses of Regulus.

Interest Income

Interest income was $0.8 million for the fourth quarter of 2009, as compared to $2.7 million for the fourth quarter of 2008. Interest income was $5.4 million for the year ended December 31, 2009, as compared to $14.4 million in 2008. The decrease in interest income was due primarily to significantly lower average interest rates as compared to the prior year.

Income Taxes

Income tax benefit, primarily the result of a $0.3 million tax credit awarded by the Massachusetts Life Sciences Center, was $0.4 million for the fourth quarter of 2009, as compared to income tax expenses of $0.1 million for the fourth quarter of 2008. The company recorded income tax expenses, primarily as a result of its alliances with Roche and Takeda, of $0.6 million and $0.7 million for the years ended December 31, 2009 and 2008, respectively.

2010 Financial Guidance

Alnylam expects that its cash, cash equivalents and total marketable securities balance will be greater than $325 million at December 31, 2010, which excludes the potential payment from Novartis should they decide to execute their adoption license later this year.

“In 2009, we achieved our highest quarterly and annual revenues to date due primarily to a strong and steady stream of recurring revenues resulting from our existing alliances, including our recent milestone with Roche,” said Patricia Allen, Vice President, Finance and Treasurer of Alnylam. “This allows us to continue to invest prudently in our RNAi therapeutics programs and scientific platform. We expect to finish 2010 with greater than $325 million in cash, which excludes the potential adoption license payment from Novartis.”

2009 and Recent Significant Corporate Highlights

Product Pipeline and Scientific Leadership Highlights

• Expanded Development of ALN-RSV for Treatment of Respiratory Syncytial Virus (RSV) Infection. Alnylam and Cubist presented complete data from a Phase IIa randomized, double-blind study of inhaled ALN-RSV01 or placebo in RSV-infected lung transplant patients. This study achieved its primary objective of demonstrating safety and tolerability for ALN-RSV01. Based on the results of this study, Alnylam has recently initiated a double-blind, placebo-controlled, randomized Phase IIb study of ALN-RSV01 in RSV-infected adult lung transplant patients. The study will be performed in over 30 sites worldwide and aims to enroll up to 76 patients. The primary study endpoint is the incidence of new or progressive bronchiolitis obliterans syndrome (BOS), a life threatening complication of RSV infection and an irreversible disease of the transplanted lung, resulting in approximately 50% mortality within three to five years of onset.
• Continued Clinical Development of ALN-VSP for Treatment of Liver Cancers. Alnylam initiated a Phase I multi-center, open label, dose escalation trial to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of ALN-VSP in patients with advanced solid tumors with liver involvement, including hepatocellular carcinoma (HCC). ALN-VSP is the company’s first systemic RNAi program and represents Alnylam’s first clinical program in oncology. A significant number of patients have been enrolled across multiple dose cohorts, and Alnylam expects to present preliminary data from the initial dose cohorts of the Phase I trial in mid-2010.
• Advanced ALN-TTR Program for Transthyretin-Mediated Amyloidosis (ATTR) Toward the Clinic. Alnylam is on track to initiate a Phase I trial in ATTR patients in the first half of 2010. ALN-TTR01 is a systemically delivered RNAi therapeutic that employs first generation lipid nanoparticles (LNPs). Pre-clinical studies have demonstrated potent and durable silencing of both the normal and mutated transthyretin (TTR) gene in rodents and non-human primates. Further, administration of the RNAi therapeutic has been shown to reduce the pathogenic accumulation of mutant TTR in peripheral tissues in studies performed in a transgenic mouse model of ATTR. In parallel, Alnylam is also advancing ALN-TTR02 utilizing second generation LNPs.
• Continued to Advance Additional Development and Pre-Clinical Programs. Alnylam continued to advance its additional development programs including ALN-PCS, an RNAi therapeutic targeting proprotein convertase subtilisin/kexin type 9 (PCSK9) for the treatment of hypercholesterolemia, and, in collaboration with Medtronic, Inc., ALN-HTT, an RNAi therapeutic targeting the huntingtin gene for the treatment of Huntington’s disease. Alnylam expects to advance its ALN-PCS program toward the clinic with a goal of initiating a Phase I clinical trial in 2011. Further, Alnylam is advancing a number of additional pre-clinical RNAi therapeutic programs. In addition, Alnylam is advancing its microRNA-based therapeutic programs through its co-ownership of Regulus. Regulus’ lead program, which was recently partnered with GlaxoSmithKline (GSK), is an anti-miR targeting miR-122 for the treatment of hepatitis C virus (HCV) infection. Regulus plans to advance this program toward the clinic in 2011.
• Achieved Major Advances in Delivery of RNAi Therapeutics. In collaboration with scientists at the Massachusetts Institute of Technology (MIT) and, separately, in collaboration with scientists at AlCana Technologies, Inc., Tekmira Pharmaceuticals Corporation, and The University of British Columbia (UBC), Alnylam published on the discovery of novel lipids that enable formulation of second generation LNPs with markedly enhanced gene silencing potency, with in vivo effects achieved at doses as low as 0.01 mg/kg in rodents and non-human primates (Love et al., Proc. Natl Acad. Sci. USA, 107(5):1864-9, 2010 and Semple et al., Nature Biotechnology, 28: 172-178, 2010). Further, Alnylam presented new pre-clinical data at the “Advances in Biopharmaceuticals” Keystone Symposium showing:
  
  

  -- the in vivo mechanism for systemic delivery of LNP-encapsulated siRNAs, demonstrating that endogenous apolipoprotein E (ApoE) mediates hepatocyte delivery of LNPs via ApoE receptors such as the LDL receptor;

  -- the ability to achieve targeted delivery of engineered LNPs via the asialoglycoprotein receptor (ASGR); and,

  -- delivery of RNAi therapeutics with novel LNPs to immune cells, including macrophages and dendritic cells.

• Formed New Collaborations Focused on Delivery of RNAi Therapeutics. Alnylam formed a new research collaboration with scientists at UBC and AlCana, in addition to Tekmira, focused on the discovery of novel cationic lipids for use in LNPs for the systemic delivery of RNAi therapeutics. Alnylam also formed a new collaboration with Isis focused on the development of single-stranded RNAi (ssRNAi) technology.
• Launched Alnylam Biotherapeutics. Alnylam presented data at the company’s 2009 R&D Day regarding the application of RNAi technology to improve the manufacturing processes for biologics, an approach the company is advancing in an internal effort called “Alnylam Biotherapeutics.” In particular, Alnylam Biotherapeutics is advancing RNAi technologies to improve the quantity and quality of biologics manufacturing processes using mammalian cell culture, such as Chinese hamster ovary (CHO) cells. RNAi technology can be applied to the improvement of manufacturing processes for existing marketed drugs, new drugs in development, and for the emerging biosimilars market.
• Continued Scientific Leadership. During 2009, scientists from Alnylam and Regulus demonstrated continued scientific leadership with the publication of 25 peer-reviewed scientific papers in some of the world’s top journals. A list and description of Alnylam’s and Regulus’ peer-reviewed publications in the fourth quarter of 2009 and to date in 2010 is provided at the end of this press release.

Business Execution Highlights

• Formed Partnership with Cubist for Advancement of ALN-RSV Program. Alnylam formed a strategic collaboration with Cubist for the development and commercialization of the company’s ALN-RSV program. Alnylam’s partnership with Cubist is a 50-50 co-development and profit share arrangement in North America, and a milestone- and royalty-bearing license arrangement in the rest of the world outside of Asia, where ALN-RSV is partnered with Kyowa Hakko Kirin Co., Ltd. In November 2009, Alnylam and Cubist agreed that Alnylam would move forward with the development of ALN-RSV01 in adult transplant patient populations, and the two companies would focus the collaboration and joint development efforts on ALN-RSV02 in pediatric patients. Cubist retains a right to opt-in to the ALN-RSV01 program.
• Extended Novartis Collaboration for Fifth and Final Planned Year. Novartis elected to extend the company’s RNAi therapeutics collaboration for a fifth and final planned year, through October 2010, resulting in continued R&D funding to Alnylam.
• Advanced 2007 Alliance with Roche. Roche and Alnylam announced the initiation of the drug discovery phase of their 2007 alliance. In addition, Alnylam received a milestone payment from Roche related to the initiation of pre-IND studies for an RNAi therapeutic product candidate.
• Regulus Formed New Collaboration with GSK. Regulus formed a new collaboration with GSK to develop and commercialize microRNA-based therapeutics targeting miR-122 in all fields with HCV infection as the lead indication. The new HCV collaboration includes the potential for more than $150 million in upfront and milestone payments, in addition to royalties to Regulus. Regulus and GSK aim to advance anti-miR-122 toward the clinic in 2011.
• Regulus Raised $20 Million in Series A Financing. Alnylam and Isis continued their investment in Regulus with a $20 million Series A preferred equity financing.
• Continue to Form New Partnerships in 2010. In 2010, and in addition to the recently announced HCV collaboration between Regulus and GSK, Alnylam expects to form additional new alliances, which could include: platform alliances, such as the company’s partnerships with Takeda and Roche; product alliances, such as those the company has formed with Medtronic, Kyowa Hakko Kirin, and Cubist; alliances with Regulus, such as that formed with GSK; alliances with the Alnylam Biotherapeutics initiative; as well as the formation of new business ventures.

Intellectual Property (IP) Highlights

• Advanced Alnylam’s IP Estate with Continued Dominant Position. During 2009, Alnylam received over 40 new patents worldwide. In 2009 and in 2010 to date, some notable achievements include:
  
  

  -- allowance by the United States Patent and Trademark Office (USPTO) of a new patent in the Crooke patent family (Application No. 10/078,949) covering methods of using chemically modified double-stranded RNA-containing compounds, such as siRNAs, to activate an RNA nuclease (RNase);

  -- notification from the European Patent Office (EPO) of a patent grant (EP1309726) in the Tuschl I patent series;

  -- an intent to grant in China for a patent in the Tuschl II patent series (ZL01820900.9);

  -- successful outcomes in European opposition proceedings for the Kreutzer-Limmer I ’235 (DE 10066235) and Kreutzer-Limmer II ’061 (EP1352061) patents, in addition to a notification from the EPO of a patent grant in the Kreutzer-Limmer III (EP1349927) patent series; and,

  -- allowance by the USPTO of a patent in the “Soutschek and Manoharan” patent family (Application No. 10/916,185) that covers chemically modified siRNAs with “drug-like” properties for in vivo delivery.

In addition, significant progress was made in the Regulus IP estate related to microRNA-based therapeutics, including:

-- allowance from the USPTO of a new patent (Application No. 11/747,409) and a grant from the Japanese Patent Office (JPO) for a patent (JP 4371812), both from the Tuschl III patent series, which pertains to the discovery of mammalian microRNAs;

-- grant from the USPTO of the Manoharan patent (US 7,582,744), which covers antagomirs; and,

-- allowance by the USPTO of a patent application within the Esau patent family (Application No. 10/909,125), which includes claims covering methods of inhibiting miR-122.