Ep1: John Maraganore

Yeah, it's a — it's — that's what it takes. This is all — this is a long-haul business. It's a marathon, no doubt.

Well, I mean, look, Alnylam got started around a big, bold vision of taking the Nobel Prize-winning discovery of RNA interference and harnessing that natural biological mechanism to create a whole new category of drugs by essentially silencing disease-causing genes — more specifically, by targeting the messenger RNA that encodes the disease-causing proteins that exist in virtually all maladies. And so that big, bold vision back in 2002 — you know, venture-backed company, we had intellectual property that we brought in from academic institutions, sort of classic biotech story, if you will — venture money, the IP consolidation, and then off we went to sort of figure out how to take the science and actually make something good out of it at the end of the day.

And it was raw science. I mean, this was — we're talking about Nature papers and stuff done in cell culture and in C. elegans, and you know, hardly — no, zero in vivo data at the time when we got started with this approach. And we then had to figure out painstakingly how to conquer the technical hurdles that existed with RNAi, the big one being delivery of these molecules to ultimately make them viable as clinical medicines and clinical studies and ultimately for the market. And so we're now in the late stages of our clinical journey with our most advanced program just about to report phase 3 data literally in the next, you know, six to eight weeks. So pretty exciting time for the company. Lots of people knocking wood and crossing fingers and stuff like that, but we are really coming to this part of our journey where, if all goes well, we should be a commercial-stage company in 2018.

But you know, we always knew from the beginning that it would take time to figure out how to make these into drugs, and it did. It did. And it took a lot of money as well. You know, we've invested $2.1 billion since inception behind this overall quest, and we've raised $3.3 billion to date since inception from, you know, the equity markets, venture, from partners, and R&D funding from even government sources. And so it is a remarkable story, but it is exactly what we expected to have happen. You know, I remember talking to our board at the very beginning and saying, 'Look, you know, this is going to be a ten-year journey at least. It's going to take billions of dollars to make this happen.' And here we are, you know, billions of dollars later, you know, fifteen years later. It's exactly what it takes.

Yeah, that's for sure. That's for sure. And you know, a lot of people on the investment community side, for example, say, 'God, it's taken so long, what's happened?' And this is why, you know, you have these classic curves of new technologies where there's a period of time — and we lived it too — of massive despair and consternation and belief that it will never get there. And you know, I mean, Andy Pollack is one of my favorite reporters, now retired, as you know, Luke, and he wrote an article in 2010 around, you know, the excitement around RNAi has fizzled. And I actually keep that article in front of my desk so I can constantly be reminded that what you do today is what you do today. But people ultimately, you know, don't have a lot of patience around what we do. But the reality is it takes a lot of time to do it well.

Right. At the same time, we're still very much in the throes of a global financial crisis or just coming out of it. It was during that very dark period, as we all remember, that I mean, I think everybody felt, boy, maybe biotech will never be successful as a whole class. I mean, how will we raise money in the future? So it was a dark period. You know, fortunately, we were, I think, mostly lucky — maybe a little bit of smart, but mostly lucky — in raising capital, you know, robustly in that period of exuberance and effectively bringing in a lot of money. So, you know, even in the darkest days around the Lehman Brothers collapse and, you know, pharma exiting the RNAi field, we had hundreds of millions of dollars of capital on our balance sheet, and that really was fortunate.

Yeah, we had the cash to weather the storm, and as a board, you know, we never lost conviction. You know, it's really interesting. I mean, during those dark times, I got to tell you, Luke, we had data in house that made us incredibly encouraged and willing to persevere the storm. You know, our board — there was never an occasion as a board where we said, 'Hey, you know, maybe we ought to start going to plan B instead of plan A here and look at some different technology or look at some different opportunity to build a company.' We never wavered on this overall quest, in part because the science that we were seeing was very encouraging and very promising. But it wasn't until late 2011 that we were able to convince the outside world that we could actually do this. And I'll never forget the first patient that we saw in one of our clinical studies where there was a clear RNAi effect in that patient — patient 503 from one of our TTR phase one studies. And that response was unequivocal. It was clearly an RNAi response. It was black and white. And that was the beginning of the outside world saying, 'Oh my gosh, I think these guys might actually be able to do it.' And that was just an awesome period for the company.

Yes. And you know, we managed to do that, right? So in that period between 2011 and 2015, for the most part — although I probably most acutely between 2011 and 2014 — it was really all around getting human efficacy data and safety data to convince the outside world and pharma partners that we could actually do this, we can actually make it happen. And that sort of peaked in the beginning of 2014 with the large deal that we did with Sanofi Genzyme around our rare disease pipeline, which really was, you know, that was our J.P. Morgan meeting where we announced those data. We also acquired Sirna from Merck, which was, you know, back in 2002–2003 it was our competitor. Merck bought them in 2005 for $1.1 billion, and we bought it from Merck for $175 million in the beginning of 2014. And so we consolidated that part of the story too. But that was really sort of the peak period where we had definitively convinced the outside world, you know, our investors, the clinicians and so forth that we can do it. And then what happened and what's happened is that people are now waiting for phase 3 data. It's not enough anymore to knock down a disease gene in a human. I mean, that's great, but they don't care so much about that. What they care about is what's your phase 3 data going to look like. So we're in a different period, if you will, now from where we were in 2014, where it was really around early clinical data. Now it's really late-stage clinical data, and then soon enough it'll be revenues, right? It'll be what is our revenue ramp in 2018, '19, '20 that's going to convince people that these can be commercial successes.

Oh, you bet. You bet.

Well, I think part of it — and so we're living this exactly to your point as we speak, right? And so part of this is that we have maintained and will maintain scientific excellence in our RNA as a company, right? We're an RNA company, so we have to put it all in our RNA, not our DNA. And so, you know, that has to be preserved, and that very much has been preserved as we've been making this transition now over the last 12, 18 months with, you know, new people from the commercial side coming into the company. They get that. They've bought into that as a fundamental tenet. The other part of this, which of course, you know, being a company focused in the rare diseases is critical, is that the patient is front and center of everything we do. And so, you know, we cared as much about patients in the early days at Alnylam, where we can imagine our therapies making a difference in their lives. Now we're closer to the patient than ever before. And the people that we brought in on the commercial side are focused on really what's the impact we can make in the patient's life. And that has been a critical element. But there are, you know, as we grow and scale, there are processes that have to be put in place. There are — you know, we're doing GMP manufacturing, we're doing obviously as we think about our sales organization, we have to think about compliance and training and education. So these are all elements that have to be integrated within the company and are being integrated within the company that are different. And, you know, the book around what got you here won't get you going forward. You know, that's very true, and part of that is to bring in the right people to help you do it.

Yeah. Well, let's get to that in just a second. But let me build on an earlier point that you raised, which is — I mean, what's exciting about Alnylam right now is that, you know, and if all goes well — and I'm sure there will be ups and downs, right, because there's no such thing as a straight line — but we really are positioned with patisiran to launch our first product in 2018, and then with givosiran, which is our drug in porphyria, and fitusiran, which is our drug in hemophilia, we're positioned to have additional commercial product launches in 2019 and 2020 with those two products. And then Medicines Company is developing inclisiran, which is that PCSK9 product, and that is likely to be a product where they're guiding for the readout to happen in 2019 and be able to be commercial in 2020. And so, you know, it's rare in biotech to have a company like Alnylam where we're going to have not just one product get into the market but potentially many over a relatively short period of time. And so that creates a profile which is very, very important.

Now on the pricing side, and your point about pricing — this is front and center, you know, of my mind, you know, almost every day of the week. It is obviously front and center of the whole industry. But as we think about our orphan medicines in our pipeline, we obviously have to reflect on these medicines providing significant value for patients, and the pricing for these medicines is going to be consistent with the value delivered. You know, we're building value dossiers for all of these medicines to understand the real economic value that they can generate to society and to overall healthcare costs. And that has to be very robust. It has to be very well put together. We're meeting with payers on these programs to basically understand how they think about a product like the ones that we're developing and how they think about reimbursement for those type of products. And so we're doing a lot on the pricing side to really understand that landscape very specifically for our products. Now, these are orphan drugs and they're going to be priced likely with six digits, which is very much consistent with orphan drug development and pricing. But it has to be supported by the real economic value that they deliver. Even if it's an orphan drug, if it's just making people feel a little bit better every day and not having a big impact, you're not going to be able to get significant premium pricing on a product like that. But long and short of it is, we're spending a lot of time on the issue.

Luke, you take a person with a rare disease who has no options and basically give them their life back and enable them to go back to work and be a productive citizen, productive worker. That's worth a lot. I think most people would agree that that is huge. I mean, you know, I'll give you a good example. We have a patient in our hemophilia program that has hemophilia B with inhibitors, which is really probably at the pinnacle of the unmet need in the hemophilia space. These patients have no prophylaxis. They have enormous burden. This patient was self-administering NovoSeven, which is recombinant factor VIIa, to basically control his bleeding two to three times a day. NovoSeven has notoriously a very short half-life, and he had to give two to three IV infusions every day to basically just be able to not die. And he's been in the fitusiran study getting a once-monthly subq injection. His life has transformed. He doesn't use NovoSeven anymore. His bleeding is well under control, and he felt good enough to get engaged. So it's one of these wonderful things that we get to see in the rare disease space where these medicines can be truly transformative for patients. And we've seen the same type of results in our patisiran phase 2 open-label study and in our givosiran study in porphyria. We've seen amazing results, and so this transformation is something which can really be realized with these type of medicines.

Well, I mean, let's take patisiran and talk about that drug. This is a drug for a disease, hereditary ATTR amyloidosis, which is a progressive disease. It's uniformly debilitating. Basically, patients over time, you know, lose their ability to walk. They lose their ability to put their shirt on, to hold their fork, you know, because they have a peripheral neuropathy that makes them unable to do that. They ultimately require a cane, then they require a wheelchair, and then they ultimately waste away. They have an autonomic neuropathy as well, and so they can't digest food. They have trouble innervating, you know, parts of their body that are needed. They can die from infection within typically a decade. So this is — and the only thing, sadly, the only thing about these patients that doesn't go bad is their mind. So they get to — they have the horrible experience of actually seeing their body decay in front of their very eyes, not unlike ALS in many ways. So what's the value of having a drug that stops the disease progression? What's the value of having a drug that in some cases might even reverse the underlying disease? You know, you can calculate that value. You can calculate, you know, the cost to the healthcare system for dealing with the burden of that patient when they get to later stages of their disease, and how do you economically avert that cost with a new medicine? Right? So there is a very sound way to quantify the value of a medicine like that in a way that then has to be looked at by payers, and they have to say, wow, the value of the drug, the price of the drug that we have to pay for annually is worth it given the cost savings that can be generated in the system. Not even to speak of the benefit to the patient beyond just the cost. And that type of value is measurable.

Well, it is part of the fundamental rub, and there's really no ways around that. You know, we have to, as a society, we have to say, do we just want to let people die and die a miserable death? I think our society would say, no, we don't. We can't let that happen. So how do we think about the value that's being delivered with the new medicine in relationship to the overall costs that are being averted? And how do we think about that at a population level? Because obviously, you know, you have a given payer that has a given patient in their system, has to sort of look at the entirety of the data to understand the economic value. They can't just do it at the individual level. Now, having said that, you know, we are believers and will be proactive about this, that having risk-sharing agreements is a good thing to do. And so we've constructed many different ways in which our drugs would be offered and available to payers under a risk-sharing agreement where the drug is being reimbursed provided it provides benefit to the patients, and we have to define with payers what that benefit is or what the surrogate for that benefit would be. But we can do it, and I think that type of an approach, which is being used elsewhere as well in the industry, is a prudent approach for pricing medicines, especially medicines that are expensive.

Well, that sort of money-back approach is more complicated, right? There's a lot of accounting challenges with that. That would make our lives and many people's lives very difficult. But there are ways of coming up with constructs, and I think the industry is being very creative about this with payers where you reach an agreement. You can form it in a contract in many ways around what is going to be measured at what time point to indicate that the drug is acting effectively. And, you know, at least in the schemes that we've come up with, it may be that the drug is offered for free until there's proof that the drug is working, after which time the drug would be reimbursed.

And so there are schemes, many different schemes that one can imagine. Obviously, if the patient is no longer feeling better from the drug individually and is no longer progressing in their disease, they're going to come off the drug anyway, right? The physicians and the patient will decide, hey, I'm not benefiting from this, and they will naturally come off. But you want to create a better framework for reimbursement that could be more objective and more driven based on population data as opposed to individual data, which is always very complicated. So these are approaches, Luke, that we're very actively discussing both internally and with payers, and believe that this is a type of approach that would be important for the medicines that we want to create.

I'll say one thing too, which is, you know, we have a wonderful opportunity at Alnylam because we are just now becoming a commercial-stage company, and so we can be the type of commercial-stage company we want to be, as opposed to having to deal with legacy burdens and past history and stuff like that. And our goal and our vision is to be as creative as a commercial-stage company as we've been as an R&D company. We want to be viewed by our market and by payers and physicians and others to be a partner and a solution-oriented business, just as we've been a partner to patients and scientists as an R&D company. And that's a real opportunity for Alnylam that I'm personally very passionate about. And you know, you'll hear a lot more about that going forward from our company.

Yeah. Well, we haven't gotten to that yet, and it's a very important question and one that I think makes a lot of sense. We have talked a lot about what do we want to do from an external disclosure perspective when we talk about our products, our product launches commercially. And do we want to focus on revenues and earnings, or do we want to focus on patient numbers and patient impact? Is there a way to create a sort of a triple P&L that has, if you will, earnings but also patient numbers and some measure of patient impact as well, and you basically create a different way to look at your performance as a company than just the numbers. And so we've talked a lot about that, but the specifics around a compensation program for our ultimate sales force, our account managers, is a detail that we haven't gotten to yet, but I think it's one that will have to marry up with a more progressive way to think about commercializing medicines. And it's something that we're quite interested in. So, but we haven't gotten to solutions there yet.