What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-06 · 282 added, 121 removed, 495 unchanged (45% of the section changed)

FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF M ARCH 31, 2020 AND DECEMBER 31, 201 9

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 3 0 , 2020 AND DECEMBER 31, 201 9

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE AND SIX MONTHS ENDED JUNE 3 0 , 2020 AND 2019

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 3 0 , 2020 AND 2019

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 3 0 , 2020 AND 2019

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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These forward-looking statements include, but are not limited to, statements about:

• risks related to the direct or indirect impact of the COVID-19 global pandemic or a future pandemic, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response, material delays in diagnoses of rare diseases, initiation or continuation of treatment for diseases addressed by our products, or in patient enrollment in clinical trials, potential clinical trial, regulatory review or supply chain disruptions, and other potential impacts to our business, the effectiveness or timeliness of steps taken by us to mitigate the impact of the pandemic, and our ability to execute business continuity plans to address disruptions caused by the COVID-19 or a future pandemic;

• risks related to the direct or indirect impact of the COVID-19 global pandemic or any future pandemic, such as the scope and duration of the pandemic, government actions and restrictive measures implemented in response, material delays in diagnoses of rare diseases, initiation or continuation of treatment for diseases addressed by our products, or in patient enrollment in clinical trials, potential clinical trial, regulatory review and inspection or supply chain disruptions, and other potential impacts to our business, the effectiveness or timeliness of steps taken by us to mitigate the impact of the pandemic, and our ability to execute business continuity plans to address disruptions caused by the COVID-19 or any future pandemic;

• our views with respect to the potential for RNAi therapeutics, including ONPATTRO, GIVLAARI, lumasiran, patisiran, inclisiran, vutrisiran and fitusiran;

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• our ability or, with respect to inclisiran, our partner’s ability, to obtain and maintain regulatory approval, pricing and reimbursement for O NPATTRO, GIVLAARI or any future products, including lumasiran and inclisiran ;

• the status of our manufacturing operations and the construction of our manufacturing facility and any delays, interruptions or failures in the manufacture and supply of ONPATTRO, GIVLAARI or any of our product candidates by our contract manufacturers or by us;

• our progress continuing to build and leverage commercial and ex-United States, or U.S, infrastructure;

• the status of our manufacturing operations and the construction of our manufacturing facility and any delays, interruptions or failures in the manufacture and supply of ONPATTRO, GIVLAARI, lumasiran, inclisiran, or any of our other product candidates by our contract manufacturers or by us;

• our progress continuing to build and leverage global commercial infrastructure;

• successfully launching, marketing and selling our approved products globally;

• our ability to successfully expand the indication for ONPATTRO in the future;

• the possible impact of any competing products on the commercial success of ONPATTRO and GIVLAARI and our product candidates and our ability to compete against such products;

• the possible impact of any competing products on the commercial success of ONPATTRO and GIVLAARI and our product candidates, including lumasiran and inclisiran, and, with respect to inclisiran, our partner's ability to compete against such products;

• our ability to manage our growth and operating expenses;

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• our expectations regarding the length of time our current cash, cash equivalents and marketable debt and equity securities will support our operations based on our current operating plan;

• our belief that the funding provided by our strategic financing collaboration with Blackstone should enable us to achieve a self-sustainable profile without the need for future equity financing;

• our belief that the funding provided by our strategic financing collaboration with The Blackstone Group Inc.

and certain of its affiliates should enable us to achieve a self-sustainable profile without the need for future equity financing;

• our dependence on third parties for development, manufacture and distribution of products;

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• the risk of government investigations;

• regulatory developments in the U.S.

and foreign countries;

• regulatory developments in the United States, or U.S., and foreign countries;

• the impact of laws and regulations;

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Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

This Quarterly Report on Form 10-Q also may include data based on our own internal estimates and research, including estimates regarding the impact of the COVID-19 pandemic on our financial statements.

Our internal estimates have not been verified by any independent source and, while we believe any data obtained from industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

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(In thousands, except per share amounts)

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Current assets:

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Restricted investments 24,725 14,825

Receivable related to the sale of future royalties 500,000 —

Other assets 20,396 18,069

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Deferred revenue 107,587 77,821

Liability related to the sale of future royalties 5,957 —

Total current liabilities 384,302 352,594

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Deferred revenue, net of current portion 281,530 318,383

Liability related to the sale of future royalties, net of current portion 1,008,336 —

Other liabilities 18,855 9,330

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Stockholders’ equity:

Preferred stock, $ 0.01 par value per share, 5,000 shares authorized and no shares issued and outstanding as of March 31, 2020 and December 31, 2019

Preferred stock, $ 0.01 par value per share, 5,000 shares authorized and no shares issued and outstanding as of June 30, 2020 and December 31, 2019

Common stock, $ 0.01 par value per share, 250,000 shares authorized;

113,168 shares issued and outstanding as of March 31, 2020;

115,647 shares issued and outstanding as of June 30, 2020;

112,188 shares issued and outstanding as of December 31, 2019

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(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Statements of Operations

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Other income:

Interest expense ( 27,248 ) — ( 27,248 ) —

Interest income 3,165 8,781 8,645 16,306

Other income 23,032 43

Other income (expense) 45,039 ( 453 ) 68,071 ( 410 )

Change in fair value of liability obligation — 9,422 — 9,422

Total other income 20,956 17,750 49,468 25,318

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Net loss $ ( 179,229 ) $ ( 219,481 ) $ ( 361,450 ) $ ( 401,396 )

Other comprehensive income:

Unrealized gain on marketable debt securities 4,045 360

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable debt securities ( 1,796 ) 462 2,249 822

Foreign currency translation 571 842 911 842

Defined benefit pension plans, net of tax 72 ( 4,282 ) 146 ( 4,282 )

Total other comprehensive (loss) income ( 1,153 ) ( 2,978 ) 3,306 ( 2,618 )

Comprehensive loss $ ( 180,382 ) $ ( 222,459 ) $ ( 358,144 ) $ ( 404,014 )

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Balance as of March 31, 2020 113,168 1,131 5,289,966 ( 32,059 ) ( 3,909,309 ) 1,349,729

Exercise of common stock options, net of tax withholdings 1,233 12 91,861 — — 91,873

Issuance of common stock under equity plans 283 3 5,298 — — 5,301

Issuance of common stock to strategic partners, net of closing costs 963 10 99,488 — — 99,498

Stock-based compensation expense related to equity-classified awards — — 33,707 — — 33,707

Other comprehensive loss — — — ( 1,153 ) — ( 1,153 )

Net loss — — — — ( 179,229 ) ( 179,229 )

Balance as of June 30, 2020 115,647 $ 1,156 $ 5,520,320 $ ( 33,212 ) $ ( 4,088,538 ) $ 1,399,726

The accompanying notes are an integral part of these condensed consolidated financial statements.

ALNYLAM PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Common Stock Additional

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Issuance of common stock under benefit plans 12 — 784 — — 784

Issuance of common stock, net of offering costs 5,000 50 381,850 — — 381,900

Issuance of common stock, net of costs 5,000 50 381,850 — — 381,900

Stock-based compensation expense related to equity-classified awards — — 32,541 — — 32,541

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Balance as of March 31, 2019 106,400 1,064 4,601,662 ( 32,853 ) ( 3,022,887 ) 1,546,986

Exercise of common stock options, net of tax withholdings 203 2 6,180 — — 6,182

Issuance of common stock under equity plans 55 — 4,022 — — 4,022

Issuance of common stock under benefit plans 12 — 1,089 — — 1,089

Issuance of common stock to strategic partners, net of closing costs 4,444 44 390,533 — — 390,577

Stock-based compensation expense related to equity-classified awards — — 30,798 — — 30,798

Other comprehensive loss, net of tax — — — ( 2,978 ) — ( 2,978 )

Net loss — — — — ( 219,481 ) ( 219,481 )

Balance as of June 30, 2019 111,114 $ 1,110 $ 5,034,284 $ ( 35,831 ) $ ( 3,242,368 ) $ 1,757,195

The accompanying notes are an integral part of these condensed consolidated financial statements.

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(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net loss $ ( 361,450 ) $ ( 401,396 )

Non-cash adjustments to reconcile net loss to net cash used in operating activities:

Non-cash adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization 15,813 7,694

Amortization and interest accretion related to operating leases 18,971 18,584

Non-cash imputed interest expense on liability related to the sale of future royalties 27,248 —

Stock-based compensation 68,333 62,635

Unrealized gain on marketable equity securities ( 69,643 ) —

Change in fair value of liability obligation — ( 9,422 )

Other 4,372 ( 1,924 )

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Operating lease liability ( 18,235 ) ( 15,763 )

Net cash used in operating activities ( 246,161 ) ( 188,510 )

Net cash (used in) provided by operating activities ( 381,491 ) 100,185

Cash flows from investing activities:

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Purchases of restricted investments ( 9,900 ) —

Net cash provided by investing activities 113,688 102,652

Other investing activities ( 300 ) —

Net cash used in investing activities ( 327,542 ) ( 186,750 )

Cash flows from financing activities:

Proceeds from exercise of stock options and other types of equity, net 151,512 21,641

Offering proceeds, net of costs — 381,900

Proceeds from the sale of future royalties 500,000 —

Proceeds from issuance of common stock to strategic partners, net of closing costs 99,498 400,000

Proceeds from public offering, net of costs — 381,900

Payment of transaction costs related to sale of future royalties and term loan facility ( 8,128 ) —

Net cash provided by financing activities 742,882 803,541

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 196 ) ( 3 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 79,235 ) 305,073

Net increase in cash, cash equivalents and restricted cash 33,653 716,973

Cash, cash equivalents and restricted cash, beginning of period 549,628 422,631

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Lease liabilities arising from obtaining right-of-use assets $ 15,077 $ 1,728

Receivable and liability related to the sale of future royalties $ 500,000 $ —

The accompanying notes are an integral part of these condensed consolidated financial statements.

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In August 2018, we received approval for ONPATTRO from the United States Food and Drug Administration, or FDA, and began commercializing and generating product revenues in the U.S., and also received marketing authorization for ONPATTRO from the European Commission, or EC.

As of March 31, 2020, we have launched ONPATTRO in the U.S., Europe, Japan and in several additional countries.

As of June 30, 2020, we have launched ONPATTRO in the U.S., Europe, Japan and in several additional countries.

In November 2019, we received approval for GIVLAARI from the FDA and began commercializing and generating product revenues in the U.S.

in December 2019.

In March 2020, we received marketing authorization for GIVLAARI from the EC, and in April 2020, we launched GIVLAARI in Germany.

In March 2020, we received marketing authorization for GIVLAARI from the EC, and as of June 30, 2020, we have launched GIVLAARI in several countries in Europe.

Regulatory filings in additional markets are pending or planned for 2020 and beyond for both products.

In April 2020, we entered into a broad strategic financing collaboration with The Blackstone Group Inc.

and certain of its affiliates which includes a purchase and sale agreement, a credit agreement, a stock purchase agreement, and potential funding for certain research and development activities, subject to completion of a definitive agreement, under which The Blackstone Group Inc., and certain of its affiliates, will provide up to $ 2.00 billion to support our advancement of innovative RNAi therapeutics.

Each executed agreement is a separate unit of account and was recorded at fair value.

Please read Note 5, Note 9 and Note 10, respectively, for additional information regarding each executed agreement set forth above.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Updates to our significant accounting policies, including the liability related to the sale of future royalties accounting policy, resulting from the execution of a purchase and sale agreement with certain affiliates of The Blackstone Group Inc., are discussed below.

Reclassification

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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Actual results may differ from these estimates.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable debt and equity securities as of March 31, 2020, together with the cash we expect to generate from product sales and under our alliances and strategic

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

financing collaboration, will be sufficient to enable us to advance our long-term strategic goals for multiple years from the filing of this Quarterly Report on Form 10-Q.

will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Actual results may differ from these estimates.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable debt and equity securities as of June 30, 2020, together with the cash we expect to generate from product sales and under our alliances and strategic financing collaboration, will be sufficient to enable us to advance our long-term strategic goals for multiple years from the filing of this Quarterly Report on Form 10-Q.

Liability Related to the Sale of Future Royalties

We account for the liability related to the sale of future royalties as a debt financing, as we have significant continuing involvement in the generation of the cash flows.

Interest on the liability related to the sale of future royalties will be recognized using the effective interest rate method over the life of the related royalty stream.

The liability related to the sale of future royalties and the related interest expense are based on our current estimates of future royalties and commercial milestones expected to be paid over the life of the arrangement.

We will periodically assess the expected payments and to the extent the amount or timing of our future estimated payments is materially different than our previous estimates, we will account for any such change by adjusting the liability related to the sale of future royalties and prospectively recognizing the related non-cash interest expense.

Recently Adopted Accounting Pronouncements

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The amendments did not have a significant impact on our condensed consolidated financial statements and related disclosures.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NET PRODUCT REVENUES

Net product revenues consist of the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2020 2019 2020 2019

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Total $ 77,533 $ 38,231 $ 149,471 $ 64,522

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2020 2019 2020 2019

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The following table presents the balance of our receivables related to our net product revenues:

(In thousands) As of March 31,

(In thousands) As of June 30,

2020 As of December 31,

Receivables included in “Accounts receivable, net” $ 59,250 $ 28,082

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NET REVENUES FROM COLLABORATIONS

Net revenues from collaborations consist of the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2020 2019 2020 2019

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The following table presents the balance of our receivables and contract liabilities related to our collaboration agreements:

(In thousands) As of March 31,

(In thousands) As of June 30,

2020 As of December 31,

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The following table presents revenue recognized as a result of changes in contract liability related to our collaboration agreements:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2020 2019 2020 2019

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In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance.

If additional consideration is received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new consideration for the period.

If additional

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

consideration is received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new consideration for the period.

The following table provides research and development expenses incurred by type, for which we recognize net revenue, that are directly attributable to our collaboration agreements, by collaboration partner:

Three Months Ended March 31,

Three Months Ended June 30,

(In thousands) Clinical Trial and Manufacturing External Services Other Clinical Trial and Manufacturing External Services Other

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Total $ 4,022 $ 193 $ 16,674 $ 3,773 $ 144 $ 680

Six Months Ended June 30,

(In thousands) Clinical Trial and Manufacturing External Services Other Clinical Trial and Manufacturing External Services Other

Regeneron $ 7,396 $ 24 $ 24,123 $ 515 $ 51 $ 425

Vir 1,378 209 5,292 542 248 340

MDCO 998 — 544 1,677 10 60

Sanofi 199 29 396 7,771 216 93

Total $ 9,971 $ 262 $ 30,355 $ 10,505 $ 525 $ 918

The research and development expenses incurred for each agreement listed in the table above consist of costs incurred for (i) clinical and manufacturing expenses, (ii) external services including consulting services and lab supplies and services, and (iii) other expenses, including professional services, facilities and overhead allocations, and a reasonable estimate of compensation and related costs as billed to our counterparties, for which we recognize net revenue from collaborations.

For the three months ended March 31, 2020 and 2019, we did not incur material selling, general and administrative expenses related to our collaboration agreements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2020 and 2019, we did not incur material selling, general and administrative expenses related to our collaboration agreements.

Product Alliances

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Pursuant to the Vir Agreement, Vir paid us an upfront fee of $ 10.0 million and issued to us 1,111,111 shares of its common stock.

Under the Vir Agreement, we may also receive milestone payments upon the achievement of certain development, regulatory and commercial milestones, as well as royalties on the net sales of licensed products ranging from high-single-digit to sub-teen double-digit percentages.

In March 2020, we achieved a development milestone relating to ALN-HBV02 and earned 1,111,111 shares of Vir's common stock and a $ 15.0 million cash payment.

Under the Vir Agreement, we may also receive milestone payments upon the achievement of certain development, regulatory and commercial milestones, as well as royalties on the net sales of licensed products, if any, ranging from high-single-digit to sub-teen double-digit percentages.

In March 2020, we achieved a development milestone relating to ALN-HBV02 and earned a $ 15.0 million cash milestone and 1,111,111 shares of Vir's common stock, which were received in the

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second quarter of 2020.

In June 2020, we achieved a $ 10.0 million milestone payment from Vir related to Vir's sublicensee option exercise on ALN-HBV02.

Due to the uncertainty of pharmaceutical development and the high historical failure rates generally associated with drug development, we may not receive any additional milestone payments or any royalty payments under the Vir Agreement.

In March 2020, we entered into an amendment to the Vir Agreement to expand our collaboration to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19.

In March and April 2020, we entered into amendments to the Vir Agreement to expand our collaboration to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19, along with three additional targets focused on human host factors for SARS-CoV-2, including angiotensin converting enzyme-2, or ACE2 and transmembrane protease, serine 2, or TMPRSS2, and potentially a third mutually selected host factor target.

Under the Vir amendments, we and Vir will each be responsible for pre-clinical development costs incurred by each such party in performing its allocated responsibilities under an agreed-upon initial pre-clinical development plan.

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We identified one performance obligation under the Vir Agreement, as amended, comprised of:

i) the exclusive license to develop, manufacture and commercialize RNAi therapeutics (including ALN-HBV02 and other infectious diseases), ii) the obligation to deliver four additional development candidates and supply product for each of the RNAi therapeutic programs for the treatment of infectious diseases, and iii) the obligation to deliver a development candidate and supply product for SARS-CoV-2.

i) the exclusive license to develop, manufacture and commercialize RNAi therapeutics (including ALN-HBV02 and other infectious diseases);

ii) the obligation to deliver four additional development candidates and supply product for each of the RNAi therapeutic programs for the treatment of infectious diseases;

and iii) the obligation to deliver up to four development candidates and supply product for RNAi therapeutic programs targeting SARS-CoV-2.

The license is not distinct from the services, including the obligation to deliver development candidates and supply product, as Vir cannot benefit on its own from the value of the license without receipt of such services and supply.

As of March 31, 2020, the total transaction price was determined to be $ 105.2 million, comprised of the upfront payment, fair value of non-cash equity consideration at contract inception, the development milestone and variable consideration related to development, manufacture and supply activities.

We measure proportional performance over time using an input method based on cost incurred relative to the total estimated costs for the identified performance obligation, on a quarterly basis, by determining the proportion of effort incurred as a percentage of total effort we expect to expend.

This ratio is applied to the total transaction price.

Management has applied significant judgment in the process of developing our estimates.

Any changes to these estimates will be recognized in the period in which they change as a cumulative catch up.

We re-evaluate the transaction price as of the end of each reporting period and as of June 30, 2020, the total transaction price was determined to be $ 143.6 million, an increase of $ 38.4 million from the transaction price of $ 105.2 million as of March 31, 2020.

As of June 30, 2020, the transaction price is comprised of the upfront payment, fair value of non-cash equity consideration at contract inception, milestones achieved and variable consideration related to development, manufacture and supply activities.

The total transaction price is allocated entirely to the single performance obligation.

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We determined any variable consideration related to sales-based royalties and milestones related to the exclusive license to be constrained and therefore excluded such consideration from the transaction price.

As of March 31, 2020, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 71.8 million, which is expected to be recognized through the term of the Vir Agreement as the services are performed.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In April 2020, we further amended the Vir Agreement to include up to three additional targets focused on host factors for SARS-CoV-2, including angiotensin converting enzyme-2, or ACE2, and transmembrane protease, serine 2, or TMPRSS2, and potentially a third host target to emerge from Vir’s functional genomics work.

Regeneron Collaboration

As of June 30, 2020, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 103.7 million, which is expected to be recognized through the term of the Vir Agreement as the services are performed.

Regeneron Pharmaceuticals, Inc.

On April 8, 2019, we entered into a global, strategic collaboration with Regeneron Pharmaceuticals, Inc., or Regeneron, to discover, develop and commercialize RNAi therapeutics for a broad range of diseases by addressing therapeutic targets expressed in the eye and central nervous system, or CNS, 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 on May 21, 2019, or the Effective Date.

In connection with the Regeneron Master Agreement, we and Regeneron entered into (i) a binding co-co collaboration term sheet covering the continued development of cemdisiran, our C5 small interfering RNA, or siRNA, currently in Phase 2 development for C5 complement-mediated diseases, as a monotherapy and (ii) a binding license term sheet to evaluate anti-C5 antibody-siRNA combinations for C5 complement-mediated diseases including evaluating the combination of Regeneron’s pozelimab (REGN3918), currently in Phase 1 development, and cemdisiran.

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complement-mediated diseases, as a monotherapy and (ii) a binding license term sheet to evaluate anti-C5 antibody-siRNA combinations for C5 complement-mediated diseases including evaluating the combination of Regeneron’s pozelimab (REGN3918), currently in Phase 1 development, and cemdisiran.

The C5 co-co collaboration and license agreements were executed in August 2019.

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Unless earlier terminated pursuant to its terms, the Regeneron Master Agreement will remain in effect with respect to each program until (a) such program becomes a terminated program or (b) the parties enter into a license agreement or co-co collaboration agreement with respect to such program.

The Regeneron Master Agreement includes various

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

representations, warranties, covenants, dispute escalation and resolution mechanisms, indemnities and other provisions customary for transactions of this nature.

The Regeneron Master Agreement includes various representations, warranties, covenants, dispute escalation and resolution mechanisms, indemnities and other provisions customary for transactions of this nature.

For any license agreement subsequently entered into, the licensee will generally be responsible for its own costs and expenses incurred in connection with the development and commercialization of the collaboration products.

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For any co-co collaboration agreement subsequently entered into, we and Regeneron will share equally all costs of, and profits from, development and commercialization activities.

In the event that a party exercises its opt-out right, the lead party will be responsible for all costs and expenses incurred in connection with the development and commercialization of the collaboration products under the applicable co-co collaboration agreement, subject to continued sharing of costs through defined points.

In the event that a party exercises its opt-out right, the lead party will be responsible for all costs and expenses incurred in connection with the development and commercialization of the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

collaboration products under the applicable co-co collaboration agreement, subject to continued sharing of costs through defined points.

If a party exercises its opt-out right, following the first commercial sale of the applicable collaboration product under a co-co collaboration agreement, the lead party is required to make certain tiered royalty payments, ranging from low double-digits up to 20 %, to the other party based on the aggregate annual net sales of the collaboration product and the timing of the exercise of the opt-out right, subject to customary reductions and a reduction for opt-out transition costs.

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C5 Co-Co Obligation 364,600 246,000 ASC 808

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The transaction price was allocated to the obligations based on the relative estimated standalone selling prices of each obligation, over which management has applied significant judgment.

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We developed the estimated standalone selling price for the services and/or manufacturing and supply included in each of the obligations, as applicable, primarily based on the nature of the services to be performed and/or goods to be manufactured and estimates of the associated costs.

The estimated standalone selling price of the C5 Co-Co Obligation was developed by estimating the present value of expected future cash flows that Regeneron is entitled to receive.

The estimated standalone selling price of the C5 Co-Co Obligation was developed by estimating the present value of expected future cash flows that Regeneron is entitled to

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In developing such estimate, we applied judgment in determining the indications that will be pursued, the forecasted revenues for such indications, the probability of success and the discount rate.

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Any changes to these estimates will be recognized in the period in which they change as a cumulative catch up.

We re-evaluate the transaction price as of the end of each reporting period and during the quarter ended March 31, 2020, there was no change to the transaction price calculated at December 31, 2019.

We re-evaluate the transaction price as of the end of each reporting period and during the quarter ended June 30, 2020, there was no change to the transaction price calculated at December 31, 2019.

For the C5 Co-Co Obligation accounted for under ASC 808, the transaction price allocated to this obligation is recognized using a proportional performance method.

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Transaction Price Allocated Revenue Recognized During Deferred Revenue

Performance Obligations As of March 31,

2020 Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 As of March 31,

Performance Obligations As of June 30,

2020 Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 As of June 30,

2020 As of December 31,

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$ 555,100 $ 13,200 $ 29,700 $ 368,900 $ 393,600

As of March 31, 2020, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied is $ 296.8 million, which is expected to be recognized through the term of the Regeneron Collaboration as the services are performed.

As of June 30, 2020, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied is $ 265.5 million, which is expected to be recognized through the term of the Regeneron Collaboration as the services are performed.

This amount excludes the transaction price allocated to the C5 Co-Co Obligation accounted for under ASC 808.

Deferred revenue related to the Regeneron Collaboration is classified as either current or non-current in the condensed consolidated balance sheets based on the period the revenue is expected to be recognized.

Sanofi Genzyme Collaboration

Collaboration Amendment

The Medicines Company

In February 2013, we and The Medicines Company, or MDCO, entered into a license and collaboration agreement pursuant to which we granted to MDCO an exclusive, worldwide license to develop, manufacture and commercialize RNAi therapeutics targeting proprotein convertase subtilisin/kexin type 9, or PCSK9, for the treatment of hypercholesterolemia and other human diseases, including inclisiran.

We refer to this agreement, as amended through the date hereof, as the MDCO License Agreement.

Under the MDCO License Agreement, MDCO paid us an upfront cash payment of $ 25.0 million.

As of June 30, 2020, we have earned $ 30.0 million of development milestones and upon achievement of certain events, we will be entitled to receive additional milestone payments, up to an aggregate of $ 150.0 million, $ 50.0 million in specified regulatory milestones and $ 100.0 million in specified commercialization milestones.

In addition, we will be entitled to royalties ranging from 10 % up to 20 % based on annual worldwide net sales, if any, of licensed products by MDCO, its affiliates and sublicensees, subject to reduction under specified circumstances.

The collaboration between us and MDCO is governed by a joint steering committee comprised of an equal number of representatives from each party.

In April 2016, we and MDCO entered into a supply and technical transfer agreement to provide for our supply of inclisiran to MDCO, in accordance with the terms of the MDCO agreement.

MDCO now has the sole right and responsibility to manufacture and supply inclisiran for development and commercialization under the MDCO development plan, subject to the terms of the MDCO agreement and the supply and technical transfer agreement.

Unless terminated earlier in accordance with the terms of the agreement, the MDCO License Agreement expires on a licensed product-by-licensed product and country-by-country basis upon expiration of the last royalty term for any licensed product in any country, where a royalty term is defined as the latest to occur of (1) the expiration of the last valid claim of patent rights covering a licensed product, (2) the expiration of the Regulatory Exclusivity, as defined in the MDCO License Agreement, and (3) the twelfth anniversary of the first commercial sale of the licensed product in such country.

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that our fundamental RNAi patents covering licensed products under the MDCO License Agreement will expire both in and outside of the U.S.

generally between 2016 and 2028.

We also estimate that our inclisiran product-specific patents covering licensed products under the MDCO License Agreement will expire in the U.S., Europe, China and Japan in 2036 and elsewhere at the end of 2033.

These patent rights are subject to potential patent term extensions and/or supplemental protection certificates extending such terms in countries where such extensions may become available due to regulatory delay.

In addition, more patent filings relating to the collaboration may be made in the future.

We evaluated the MDCO License Agreement and concluded that MDCO meets the definition of a customer and that the MDCO License Agreement is a contract.

We determined the transaction price, identified the performance obligations and allocated the transaction price to each performance obligation.

We also determined that substantially all of our performance obligations are within the scope of the revenue standard as they relate to the delivery of goods and services to a customer for that customer’s use in monetizing an asset.

Specifically, we concluded that MDCO meets the definition of a customer as we are delivering intellectual property and know-how rights as well as research and development activities.

In addition, we determined that the MDCO License Agreement met the requirements to be accounted for as a contract, including that it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services that will be delivered to MDCO.

We determined that, pursuant to the revenue standard, the performance obligations were not separately identifiable and were not distinct (and did not have standalone value) due to the specialized nature of the services to be provided by us and the dependent relationship between the performance obligations.

Given this fact pattern, we have concluded the MDCO License Agreement has a single identified or combined performance obligation.

None of the unearned milestones are included in the transaction price, as all unearned milestone amounts are not considered likely of achievement and therefore constrained.

We considered several factors, including that achievement of the milestones is outside our control and contingent upon success in clinical trials and regulatory decisions and the licensee’s efforts.

Any consideration related to sales-based royalties (including milestones) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to MDCO and as a result have also been excluded from the transaction price.

During 2018, we completed the performance obligations identified in the MDCO License Agreement, including the supply and technical transfer agreement, however, we continue to receive additional orders for supply.

We consider such orders as promised goods to be distinct from the other performance obligations since MDCO now has the ability to begin manufacturing on its own through its own vendors.

Such option orders will be treated as separate agreements and any associated revenue will be recognized upon transfer of control.

On January 6, 2020, Novartis AG completed its acquisition of MDCO.

Sanofi Genzyme

On April 8, 2019, we and Sanofi Genzyme entered into an amendment to our 2014 Sanofi Genzyme collaboration, which we refer to as the Collaboration Amendment.

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Following completion of such studies, we will transition, at our cost, such asset to Sanofi Genzyme.

Thereafter, Sanofi

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Genzyme will fund all potential future development and commercialization costs for such asset.

Thereafter, Sanofi Genzyme will fund all potential future development and commercialization costs for such asset.

If this asset is developed and approved, we will be eligible to receive tiered double-digit royalties on global net sales.

No changes were made to our Exclusive License Agreement with Sanofi Genzyme, referred to as the Exclusive TTR License, pursuant to which we have global rights for the development and commercialization of ONPATTRO, together with vutrisiran and all back-up products, which remains in full force and effect.

The components of inventory are summarized as follows:

(In thousands) As of March 31, 2020 As of December 31, 2019

Raw materials $ 30,662 $ 15,418

Work in progress 33,412 38,275

Finished goods 4,226 2,655

Total $ 68,300 $ 56,348

LIABILITY RELATED TO THE SALE OF FUTURE ROYALTIES

On April 10, 2020, we entered into a purchase and sale agreement, or Purchase Agreement, with BX Bodyguard Royalties L.P.

(an affiliate of The Blackstone Group Inc.), or Blackstone Royalties, under which Blackstone Royalties acquired 50 % of royalties payable, or Royalty Interest, with respect to net sales by MDCO, its affiliates or sublicensees of inclisiran and any other licensed products under the MDCO License Agreement, and 75 % of the commercial milestone payments payable under the MDCO License Agreement, together with the Royalty Interest, the Purchased Interest.

If Blackstone Royalties does not receive payments in respect of the Royalty Interest by December 31, 2029, equaling at least $ 1.00 billion, Blackstone Royalties

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will receive 55 % of the Royalty Interest beginning on January 1, 2030.

In consideration for the sale of the Purchased Interest, Blackstone Royalties paid us $ 500.0 million in April 2020 and has an unconditional obligation to pay us an additional $ 500.0 million on September 30, 2021, which was recorded as a receivable upon execution of the Purchase Agreement.

We continue to own or control all inclisiran intellectual property rights and are responsible for certain ongoing manufacturing and supply obligations related to the generation of the Purchased Interest.

Due to our continuing involvement, we will continue to account for any royalties and commercial milestones due to us under the MDCO License Agreement as revenue in our condensed consolidated statement of operations and comprehensive loss and recorded the proceeds from this transaction as a liability, net of closing costs, on our condensed consolidated balance sheet.

In order to determine the amortization of the liability related to the sale of future royalties, we are required to estimate the total amount of future payments to Blackstone Royalties over the life of the Purchase Agreement.

The $ 1.00 billion liability, recorded at execution of the agreement, will be accreted to the total of these royalty and commercial milestone payments as interest expense over the life of the Purchase Agreement.

At execution, our estimate of this total interest expense resulted in an effective annual interest rate of 11 %.

This estimate contains assumptions that impact both the amount recorded at execution and the interest expense that will be recognized in future periods.

As payments are made to Blackstone Royalties, the balance of the liability will be effectively repaid over the life of the Purchase Agreement.

As inclisiran is not yet approved for sale, the exact timing and amount of repayment is likely to change each reporting period.

A significant increase or decrease in net sales of inclisiran will materially impact the liability related to the sale of future royalties, interest expense and the time period for repayment.

We will periodically assess the expected payments to Blackstone Royalties and to the extent the amount or timing of such payments is materially different than our initial estimates, we will prospectively adjust the amortization of the liability related to the sale of future royalties and the related interest expense.

As of June 30, 2020, the carrying value of the liability related to the sale of future royalties was $ 1.01 billion, net of closing costs of $ 13.0 million.

The carrying value of the liability related to the sale of future royalties approximates fair value as of June 30, 2020 and is based on our current estimates of future royalties and commercial milestones expected to be paid to Blackstone Royalties over the life of the arrangement, which are considered Level 3 inputs.

For the three and six months ended June 30, 2020, we recognized interest expense of $ 27.2 million.

The following table shows the activity with respect to the liability related to the sale of future royalties during the three months ended June 30, 2020, in thousands:

Liability related to the sale of future royalties as of April 10, 2020 $ 1,000,000

Capitalized closing costs ( 12,955 )

Interest expense recognized 27,248

Carrying value of liability related to sale of future royalties as of June 30, 2020

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FAIR VALUE MEASUREMENTS

The following tables present information about our assets that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques we utilized to determine such fair value:

(In thousands) As of March 31, 2020 Quoted

(In thousands) As of June 30, 2020 Quoted

(Level 1) Significant

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Marketable debt securities:

Certificates of deposit 5,134 — 5,134 —

Commercial paper 11,613 — 11,613 —

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Total $ 1,781,986 $ 472,774 $ 1,309,212 $ —

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(In thousands) As of December 31, 2019 Quoted

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Total $ 1,450,480 $ 135,331 $ 1,315,149 $ —

During the three months ended March 31, 2020 and 2019, there were no transfers between Level 1 and Level 2 financial assets.

During the six months ended June 30, 2020 and 2019, there were no transfers between Level 1 and Level 2 financial assets.

The carrying amounts reflected in our condensed consolidated balance sheets for cash, accounts receivable, net, other current assets, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

In March 2020, pursuant to the Vir Agreement, we achieved a development milestone relating to ALN-HBV02 and earned a $ 15.0 million cash milestone and 1,111,111 shares of Vir's common stock, which were received in the second quarter of 2020.

As a result of certain securities law restrictions, our Vir common stock is subject to a 180 -day holding period.

As such, we have recorded the investment at fair value, with the effect of the holding period restriction estimated using an option pricing valuation model, which is considered a Level 2 input.

During the second quarter of 2020, we recognized an unrealized loss of $ 4.7 million to adjust our investment in Vir common stock to fair value as of June 30, 2020.

MARKETABLE DEBT SECURITIES

We invest our excess cash balances in marketable debt securities and at each balance sheet date presented, we classify all of our investments in debt securities as available-for-sale and as current assets as they represent the investment of funds available for current operations.

We did not record any impairment charges related to our marketable debt securities during the three months ended March 31, 2020 or 2019.

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available for current operations.

We did no t record any impairment charges related to our marketable debt securities during the three and six months ended June 30, 2020 or 2019.

The following tables summarize our marketable debt securities:

As of March 31, 2020

As of June 30, 2020

(In thousands) Amortized

Losses Fair Value

Certificates of deposit $ 5,141 $ — $ ( 7 ) $ 5,134

Commercial paper $ 11,613 $ — $ — $ 11,613

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Total $ 1,315,012 $ 246 $ ( 109 ) $ 1,315,149

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The fair values of our marketable debt securities by classification in the condensed consolidated balance sheets were as follows:

(In thousands) As of March 31, 2020 As of December 31, 2019

(In thousands) As of June 30, 2020 As of December 31, 2019

Cash and cash equivalents $ 9,999 $ 340,132

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Total $ 1,268,424 $ 1,315,149

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

OTHER BALANCE SHEET DETAILS

The components of inventory are summarized as follows:

(In thousands) As of June 30, 2020 As of December 31, 2019

Raw materials $ 43,515 $ 15,418

Work in progress 20,686 38,275

Finished goods 13,217 2,655

Total $ 77,418 $ 56,348

As of June 30, 2020, we capitalized $ 11.5 million of inventory produced for commercial sale for products awaiting regulatory approval.

As of December 31, 2019, there was no capitalized inventory for products awaiting regulatory approval.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our condensed consolidated balance sheets that sum to the total of these amounts shown in the condensed consolidated statements of cash flows:

As of March 31,

As of June 30,

(In thousands) 2020 2019

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$ 583,281 $ 1,139,604

OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables summarize the changes in accumulated other comprehensive (loss) income, by component, for the three months ended March 31, 2020 and 2019:

The following tables summarize the changes in accumulated other comprehensive (loss) income, by component:

(In thousands) Loss on Investment in Joint Venture Defined Benefit Pension

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Net other comprehensive income — 146 2,249 911 3,306

Balance as of March 31, 2020 $ ( 32,792 ) $ ( 3,446 ) $ 4,182 $ ( 3 ) $ ( 32,059 )

Balance as of June 30, 2020 $ ( 32,792 ) $ ( 3,374 ) $ 2,386 $ 568 $ ( 33,212 )

(In thousands) Loss on Investment in Joint Venture Defined Benefit Pension

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Amounts reclassified from other comprehensive income — — 344 — 344

Net other comprehensive income — — 360 — 360

Balance as of March 31, 2019 $ ( 32,792 ) $ — $ ( 61 ) $ — $ ( 32,853 )

Net other comprehensive income (loss) — ( 4,282 ) 822 842 ( 2,618 )

Balance as of June 30, 2019 $ ( 32,792 ) $ ( 4,282 ) $ 401 $ 842 $ ( 35,831 )

Amounts reclassified out of accumulated other comprehensive loss relate to settlements of marketable debt securities and amortization of our pension obligation which are recorded as interest income and other income, respectively, in the condensed consolidated statements of operations and comprehensive loss.

CREDIT AGREEMENT

On April 10, 2020, we entered into the Credit Agreement among us, certain of our subsidiaries (such subsidiaries, together with us, the Loan Parties), funds or accounts managed or advised by GSO Capital Partners LP and certain other affiliates of T he Blackstone Group Inc.

, and the other lenders from time to time parties thereto, collectively, the Lenders, and Wilmington Trust, National Association, as the administrative agent for the Lenders.

The Credit Agreement provides for a senior secured delayed

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draw term loan facility of up to $ 700.0 million to be funded in three tranches, collectively referred to as the Term Loans, as follows:

Tranche Requested No Later Than Aggregate Principal Amount, up to (in thousands)

Tranche 1 Loan December 31, 2020 $ 200,000

Tranche 2 Loan June 30, 2021 250,000

Tranche 3 Loan December 31, 2021 250,000

Total $ 700,000

In addition, we may (a) at any time following April 10, 2021, request an increase in respect of the unfunded commitments in an amount not to exceed $ 50.0 million on terms to be agreed and subject to the consent of the Lenders providing such increase and/or (b) at any time prior to April 10, 2021, cancel the unfunded commitments or reallocate the unfunded commitments in respect of the Tranche 2 Loan or Tranche 3 Loan to the Tranche 1 Loan and/or the Tranche 2 Loan in an amount not to exceed $ 100.0 million in the aggregate for all such cancellations or reallocations.

The Tranche 1 Loan will be requested no later than December 31, 2020, the Tranche 2 Loan will be requested no later than June 30, 2021 and the Tranche 3 Loan will be requested no later than December 31, 2021, in each case, subject to customary terms and conditions, including, in the case of the Tranche 2 Loan and Tranche 3 Loan, either (a) the first sale of inclisiran in the U.S.

for end use or consumption after FDA regulatory approval thereof or (b) revenue attributable to ONPATTRO and GIVLAARI equal to or greater than $ 300.0 million as of the last day of the most recently ended twelve month period, referred to as the Subsequent Borrowing Conditions.

In the event the Subsequent Borrowing Conditions are not satisfied as of the dates set forth in the table above, the Tranche 2 Loan and Tranche 3 Loan will be funded if such Subsequent Borrowing Conditions are satisfied on or prior to December 31, 2022.

The Term Loans mature seven years from the date the Tranche 1 Loan is funded, referred to as the Tranche 1 Funding Date.

We can elect an interest rate of either LIBOR plus 7 %, subject to a floor of 1 %, or a base rate plus 6 %, subject to a floor of 2 %.

We may, at our option, pay interest in kind on interest due within a three -year period beginning on the Tranche 1 Funding Date at a rate that is 1 % higher than the interest rate otherwise applicable to such Term Loan .

On the date any Tranche 1 Loan, Tranche 2 Loan or Tranche 3 Loan is funded, we will pay a funding fee equal to 2.5 % of the principal amount of the Term Loans funded on such date.

In addition, we will pay an exit fee equal to 1 % of the commitments in respect of the Term Loans, payable upon any repayment of the Term Loans or termination of the unfunded Term Loan commitments.

We are obligated to pay interest due on the Term Loans for a two -year period beginning on the Tranche 1 Funding Date which will be calculated without regard to the Term Loans being prepaid or an unfunded tranche being terminated during this period (in whole or in part).

Any prepayments of Term Loans or terminations of unfunded tranches that occur between 2 to 5 years from the Tranche 1 Funding Date are subject to a fee of up to 5 % of the loan principal that is prepaid or the amount of the unfunded tranche that is terminated.

All obligations under the Credit Agreement are secured, subject to certain exceptions, by security interests in the following assets:

(1) intellectual property owned by us relating to ONPATTRO, GIVLAARI and vutrisiran, (2) the equity interests held by the Loan Parties in their subsidiaries, (3) all of our ownership of the inclisiran royalty remaining after the royalty purchase under the Purchase Agreement, and (4) material real property, and certain personal property, including, without limitation, cash held in certain deposit accounts of the Loan Parties and equipment.

The Credit Agreement contains negative covenants that, among other things and subject to certain exceptions, could restrict our ability to, incur additional liens, incur additional indebtedness, make investments, including acquisitions, engage in fundamental changes, sell or dispose of assets that constitute collateral, including certain intellectual property, pay dividends or make any distribution or payment on or redeem, retire or purchase any equity interests, amend, modify or waive certain material agreements or organizational documents and make payments of certain subordinated indebtedness.

Additionally, the Credit Agreement contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default, including nonpayment of principal, interest and other amounts;

failure to comply with covenants;

the rendering of judgments or orders or default by us in respect of other material indebtedness;

and certain insolvency and ERISA events.

The Credit Agreement also requires us to have consolidated liquidity of at least $ 100.0 million as of the last day of each fiscal quarter.

As of June 30, 2020, we were in compliance with the applicable terms and conditions of the covenants under the Credit Agreement.

No later than December 31, 2020, we will draw the Tranche 1 Loan based on the terms of the Credit Agreement.

As of June 30, 2020, we had not yet drawn down on the Term Loans.

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Blackstone Equity Placement

On April 10, 2020, we entered into a stock purchase agreement, or Investors SPA, with certain affiliates of The Blackstone Group Inc., or Investors, pursuant to which we sold 963,486 shares of our common stock to the Investors for aggregate cash consideration of $ 100.0 million, or $ 103.79 per share, as part of the broad strategic financing collaboration with The Blackstone Group Inc.

The Investors SPA contains customary representations, warranties, and covenants of each of the parties thereto.

Regeneron Equity Placement

On April 8, 2019, we executed a stock purchase agreement with Regeneron, or the Regeneron SPA, to sell 4,444,445 shares of our common stock for aggregate cash consideration of $ 400.0 million, or $ 90.00 per share, which we refer to as the Equity Transaction.

Under the terms of the Regeneron SPA, if at the time of closing of the Equity Transaction, a sufficient number of authorized shares of common stock under our Restated Certificate of Incorporation was not available, the $ 400.0 million of equity under the Regeneron SPA would instead have been issued in the form of 1,481,482 shares of our Series A redeemable convertible preferred stock, par value $ 0.01 per share, at a purchase price of $ 270.00 per share, that would have converted automatically into common stock on a 1-for- 3 basis upon stockholder approval of additional authorized shares of common stock.

The Regeneron SPA contains customary representations, warranties and covenants of each of the parties thereto.

On April 25, 2019, following the receipt of stockholder approval at our 2019 annual meeting, a Certificate of Amendment was filed to our Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 125,000,000 to 250,000,000 shares, providing for a sufficient number of authorized shares of common stock available to be issued to Regeneron pursuant to the Equity Transaction.

On May 21, 2019, subsequent to the expiration of the applicable pre-merger waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, Regeneron purchased 4,444,445 shares of our common stock for aggregate cash consideration of $ 400.0 million.

Because we had an obligation to Regeneron as of April 8, 2019 that may have resulted in the issuance of redeemable convertible preferred stock, we were required to follow the guidance in ASC 480 and mark-to-market the obligation to potentially issue this redeemable security until April 25, 2019, when it became known that the obligation would be fulfilled in common stock.

The final mark-to-market adjustment of this obligation under ASC 480 resulted in us recording a gain of $ 9.4 million included in other income in the consolidated statements of comprehensive loss during the three and six months ended June 30, 2019, with the offsetting adjustment to equity netting against the $ 400.0 million proceeds that were received upon closing.

Public Offering

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The following table summarizes stock-based compensation expenses included in operating costs and expenses:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2020 2019 2020 2019

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Because the inclusion of potential common shares would be anti-dilutive for all periods presented, diluted net loss per common share is the same as basic net loss per common share.

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The following common share equivalents were excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive:

As of March 31,

As of June 30,

(In thousands) 2020 2019

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COMMITMENTS AND CONTINGENCIES

From time to time, we are a party to legal proceedings in the course of our business, including the matters described below.

From time to time, we may be a party to litigation, arbitration or other legal proceedings in the course of our business, including the matters described below.

The claims and legal proceedings in which we could be involved include challenges to the scope, validity or enforceability of patents relating to our products or product candidates, and challenges by us to the scope, validity or enforceability of the patents held by others.

These include claims by third parties that we infringe their patents.

These include claims by third parties that we infringe their patents or breach our license or other agreements with such third parties.

The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain.

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Securities Litigation

On September 26, 2018, Caryl Hull Leavitt, individually and on behalf of all others similarly situated, filed a class action complaint for violation of federal securities laws against us, our Chief Executive Officer and our former Chief Financial Officer

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in the United States District Court for the Southern District of New York.

By stipulation of the parties and Order of the Court dated November 20, 2018, the action was transferred to the United States District Court for the District of Massachusetts.

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On March 23, 2020, the Court allowed our motion and dismissed the Complaint without prejudice.

On April 13, 2020, the plaintiff filed a motion seeking to amend the judgment to permit the plaintiff to file a further amended complaint.

Defendants filed an opposition to that motion on April 17, 2020.

Pursuant to a prior Order of the Court, on June 1, 2020, plaintiff filed a motion seeking leave to file a further amended complaint.

That motion was fully briefed on June 22, 2020, and remains pending with the Court.

On September 12, 2019, the Chester County Employees Retirement Fund, individually and on behalf of all others similarly situated, filed a purported securities class action complaint for violation of federal securities laws against us, certain of our current and former directors and officers, and the underwriters of our November 14, 2017 public stock offering, in the Supreme Court of the State of New York, New York County.

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Plaintiff’s response to that motion was filed on February 3, 2020, and defendants filed a joint reply on March 4, 2020.

Defendants' motion remains pending.

On June 2, 2020, the Court heard oral argument on defendants' motion, at which time it took the motion under advisement.

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We believe that the allegations contained in the complaints are without merit and intend to defend the cases vigorously.

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The unfunded benefit obligation corresponds to the projected benefit obligations of which the discounted net present value is calculated based on years of employment, expected salary increases and pension adjustments, offset by the fair value of the assets held by plan.

The unfunded benefit obligation was approximately $ 4.3 million as of March 31, 2020 and December 31, 2019, and is recorded in other liabilities on the condensed consolidated balance sheet.

The total net periodic benefit cost for the three months ended March 31, 2020 and 2019 was not material.

SUBSEQUENT EVENTS

On April 10, 2020, we entered into a broad strategic financing collaboration with the Blackstone Group Inc., or Blackstone, under which Blackstone will provide up to $ 2.0 billion to support our advancement of innovative RNAi medicines that have the potential to transform the lives of patients suffering from a range of debilitating diseases.

The strategic financing collaboration includes:

(1) $ 1.0 billion in committed payments to acquire 50 % of royalties and 75 % of commercial milestones payable to us in connection with sales of inclisiran;

(2) up to $ 750.0 million in a first lien senior secured term loan;

(3) up to $ 150.0 million for development of vutrisiran and ALN-AGT, subject to completion of a definitive agreement;

and (4) the purchase of $ 100.0 million of our common stock.

The unfunded benefit obligation was approximately $ 4.3 million as of June 30, 2020 and December 31, 2019, and is recorded in other liabilities on the condensed consolidated balance sheet.

The total net periodic benefit cost for the three and six months ended June 30, 2020 and 2019 was not material.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements