What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-06 · 107 added, 89 removed, 165 unchanged (54% of the section changed)

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Regulatory filings in other territories are pending and additional filings are planned for 2020.

In November 2019, we received regulatory approval for GIVLAARI from the FDA for the treatment of adults with acute hepatic porphyria, or AHP, and in March 2020, GIVLAARI was granted marketing authorisation by the European Commission, or EC, for the treatment of AHP in adults and adolescents aged 12 years and older.

We have also filed a marketing authorisation application, or MAA, for givosiran (the non-branded drug name for GIVLAARI) in Brazil and additional regulatory filings are planned for 2020 and beyond.

GIVLAARI is approved by the FDA for the treatment of adults with acute hepatic porphyria, or AHP, and in March 2020, GIVLAARI was granted marketing authorisation by the European Commission, or EC, for the treatment of AHP in adults and adolescents aged 12 years and older.

In July 2020, we received marketing authorisation approval for GIVLAARI in Brazil for the treatment of AHP in adults.

We have also filed a marketing authorisation application, or MAA, for givosiran (the non-branded drug name for GIVLAARI) in Switzerland and additional regulatory filings are planned for 2020 and beyond.

We have six late-stage investigational programs, advancing toward potential commercialization.

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Inclisiran for the treatment of hypercholesterolemia and atherosclerotic cardiovascular disease, or ASCVD, is being advanced by our partner, The Medicines Company (acquired by Novartis AG in January 2020), or MDCO, and fitusiran for the treatment of hemophilia is being advanced by our partner Sanofi Genzyme, the specialty care global business unit of Sanofi.

In December 2019, we reported positive topline results from our ILLUMINATE-A Phase 3 clinical trial for lumasiran, our investigational RNAi therapeutic targeting glycolate oxidase, for the treatment of PH1, and in April 2020, based on the positive ILLUMINATE-A data, we submitted a New Drug Application, or NDA, which was accepted by the FDA.

Additionally, in April 2020, we announced that we had submitted an MAA for lumasiran with the European Medicines Agency, or EMA.

The FDA has set an action date of December 3, 2020 under the Prescription Drug User Fee Act, and has indicated that they are not currently planning an advisory committee meeting as part of the NDA review.

Additionally, in March 2020, we submitted an MAA for lumasiran with the European Medicines Agency, or EMA, which has been validated by the EMA.

Lumasiran was previously granted an accelerated assessment by the EMA.

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In April 2020, we and Dicerna formed a development and commercialization collaboration on investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin deficiency-associated liver disease, or alpha-1 liver disease.

In addition, in

April 2020, we and Dicerna entered into a Patent Cross-License Agreement, pursuant to which each party agreed to cross-license its respective intellectual property related to our lumasiran and Dicerna’s nedosiran investigational programs for the treatment of primary hyperoxaluria.

In April 2020, we entered into a strategic financing collaboration with The Blackstone Group Inc., or Blackstone, to accelerate our advancement of RNAi therapeutics.

In connection with the collaboration, Blackstone and its affiliates will provide us up to $2.0 billion in financing, including $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, up to $750.0 million in a first lien senior secured term loan, up to $150.0 million towards the development of vutrisiran and ALN-AGT, subject to completion of a definitive agreement and a purchase of $100.0 million our common stock.

In addition, in April 2020, we and Dicerna entered into a Patent Cross-License Agreement, pursuant to which each party agreed to cross-license its respective intellectual property related to our lumasiran and Dicerna’s nedosiran investigational programs for the treatment of primary hyperoxaluria.

In April 2020, we entered into a strategic financing collaboration with certain affiliates of The Blackstone Group Inc., or Blackstone, to accelerate our advancement of RNAi therapeutics.

In connection with the collaboration, Blackstone will provide us up to $2.00 billion in financing, including $1.00 billion in committed payments to acquire 50% of royalties and 75% of commercial milestones payable to us in connection with sales of inclisiran, up to $750.0 million in a first lien senior secured term loan, and up to $150.0 million towards the development of vutrisiran and ALN-AGT, subject to completion of a definitive agreement.

As part of the strategic financing collaboration, Blackstone also purchased an aggregate of $100.0 million of our common stock.

We have incurred significant losses since we commenced operations in 2002 and expect such losses to continue for the foreseeable future.

As of March 31, 2020, we had an accumulated deficit of $3.91 billion.

As of June 30, 2020, we had an accumulated deficit of $4.09 billion.

Historically, we have generated losses principally from costs associated with the establishment of late-stage clinical and commercial capabilities, including global commercial operations, research and development activities, acquiring, filing and expanding intellectual property rights, and selling, general and administrative costs.

While we believe 2019 was our peak net loss year, and believe the funding provided by Blackstone should enable us to achieve a self-sustainable financial profile without the need for future equity financing, we expect to continue to incur annual net operating losses for the foreseeable future as we expand our efforts to discover, develop and commercialize RNAi therapeutics.

While we believe 2019 was our peak net loss year, and believe the funding provided by our strategic financing collaboration with Blackstone should enable us to achieve a self-sustainable financial profile without the need for future equity financing, we expect to continue to incur annual net operating losses for the foreseeable future as we expand our efforts to discover, develop and commercialize RNAi therapeutics.

We also anticipate that our operating results will fluctuate for the foreseeable future.

Therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.

We currently have programs focused on a number of therapeutic areas and as of March 31, 2020, we are generating net revenue from product sales for two marketed products, ONPATTRO and GIVLAARI.

We currently have programs focused on a number of therapeutic areas and as of June 30, 2020, we are generating net revenue from product sales for two marketed products, ONPATTRO and GIVLAARI.

However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products and/or successfully market and sell ONPATTRO, GIVLAARI or any other approved products in the future.

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and worldwide.

We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of COVID-19.

We are monitoring the global outbreak and spread of COVID-19 and have taken steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic.

The spread of COVID-19 has caused us to modify our business practices, including implementing a global work from home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the patients we serve and other business partners in light of COVID-19.

Given the fluidity of the COVID-19 pandemic however, we do not yet know the full extent of the potential impact of COVID-19 on our business operations.

We are continuing to monitor the global pandemic and spread of COVID-19 and plan to continue taking steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic.

The spread of COVID-19 has caused us to modify our business practices, including implementing a global work from home policy for all employees who are able to perform their duties remotely and restricting all nonessential business travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the patients we serve and other business partners in light of COVID-19.

At this time, we cannot predict when certain restrictions that are in place to protect our employees can be safely reduced or will no longer be needed.

Given the fluidity of the COVID-19 pandemic and the uncertainty on whether a second wave of the COVID-19 pandemic will occur later in calendar year 2020 or 2021, we do not yet know the full extent of the impact of COVID-19 on our business operations.

The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others.

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We will continue to work diligently with our partners and stakeholders to continue supporting patient access to our approved medicines, advancing our product candidates under regulatory review as well as in our clinical studies to the extent safe to do so for patients, caregivers and healthcare practitioners, and ensuring the continuity of our manufacturing and supply chain.

For additional information related to the potential impact of COVID-19 on our business, please read Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

For additional information related to the actual or potential impacts of COVID-19 on our business, please read Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

Research and Development

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Commercial Products and Late-Stage Clinical Development Pipeline

The chart below is a summary of our commercial products and late-stage development programs as of May 5, 2020.

The chart below is a summary of our commercial products and late-stage development programs as of August 5, 2020.

It identifies those programs for which we have received marketing approval, those programs for which we have received Breakthrough Therapy Designation from the FDA, the stage of these programs and our commercial rights to such programs:

Early-Stage Clinical Development Pipeline

The chart below is a summary of our early-stage development programs as of May 5, 2020.

The chart below is a summary of our early-stage development programs as of August 5, 2020.

It identifies those programs in which we have achieved human proof-of-concept, or POC, by demonstrating target gene knockdown and/or additional evidence of activity in clinical studies, the stage of these programs, and our commercial rights to such programs, as well as programs which we believe could result in an IND or CTA filing in 2020:

During the first quarter of 2020 and recent period, we reported the following updates from ONPATTRO and GIVLAARI commercialization and our late-stage clinical programs:

• We achieved ONPATTRO net product revenues for the first quarter of 2020 of $66.7 million, and received marketing authorization approval for ONPATTRO in Brazil, and continued progress with market access efforts with recent launches in Italy, Sweden, Israel, Turkey, and Spain.

• We achieved GIVLAARI net product revenues for the first quarter of 2020 of $5.3 million, and received marketing authorization approval for GIVLAARI in the EU, and continued progress with market access efforts with initial launch underway.

During the second quarter of 2020 and recent period, we reported the following updates from ONPATTRO and GIVLAARI commercialization and our late-stage clinical programs:

• We achieved ONPATTRO global net product revenues for the second quarter of 2020 of $66.5 million, and continued progress with market access efforts with recent launches in Spain and Italy.

• We achieved GIVLAARI global net product revenues for the second quarter of 2020 of $11.0 million, received marketing authorization approval for GIVLAARI in Brazil, and continued progress with market access efforts with a launch in Germany.

Late-Stage Clinical Development

• We continued to advance the development of patisiran (the non-proprietary name for ONPATTRO) for the potential treatment of the cardiomyopathy of both hereditary and wild-type ATTR amyloidosis:

◦ Continued enrollment in the APOLLO-B Phase 3 study in ATTR amyloidosis patients with cardiomyopathy;

◦ Announced that due to the impact of the COVID-19 pandemic, enrollment delays in APOLLO-B will result in a shift in the enrollment completion date from late 2020 into 2021.

• We continued to advance lumasiran, an investigational RNAi therapeutic in development for the treatment of PH1:

◦ Initiated and completed the rolling submission of an NDA to the FDA and submitted an MAA to the EMA;

◦ Completed enrollment in the ILLUMINATE-B Phase 3 study in PH1 patients less than six years of age with preserved renal function, and remain on track to report topline results in mid-2020;

• We continued to advance the development of patisiran for the potential treatment of the cardiomyopathy of both hereditary and wild-type ATTR amyloidosis, and continued enrollment in the APOLLO-B Phase 3 study in ATTR amyloidosis patients with cardiomyopathy.

• We submitted an MAA for givosiran in Switzerland and Israel.

• We continued to advance lumasiran for the treatment of PH1:

◦ Completed the rolling submission of an NDA to the FDA and submitted an MAA to the EMA, with both applications now accepted;

◦ Presented complete results from the ILLUMINATE-A Phase 3 study;

◦ Continued treating patients in ILLUMINATE-B, a global Phase 3 pediatric study of lumasiran in PH1 patients less than six years of age with preserved renal function, and remain on track to report topline results in mid-2020;

◦ Continued enrollment in the ILLUMINATE-C Phase 3 study of lumasiran for the treatment of advanced PH1 in patients of all ages.

• We continued to advance vutrisiran, a subcutaneously administered investigational RNAi therapeutic in development for the treatment of ATTR amyloidosis:

◦ Completed enrollment in the HELIOS-A Phase 3 study in patients with hereditary ATTR amyloidosis with polyneuropathy, and remain on track to report topline results in early 2021;

◦ Continued treating patients in the fully enrolled HELIOS-A Phase 3 study of vutrisiran in hATTR amyloidosis patients with polyneuropathy, and remain on track to report topline results in early 2021;

◦ Received Fast Track Designation from the FDA for the treatment of the polyneuropathy of hATTR amyloidosis;

◦ Continued enrollment in the HELIOS-B Phase 3 study in patients with hereditary and wild-type ATTR amyloidosis with cardiomyopathy.

• Inclisiran, potentially the first and only siRNA cholesterol-lowering treatment, continued to advance under our partner, MDCO (which was acquired by Novartis AG in January 2020), with acceptance of the NDA and MAA for inclisiran by the FDA and EMA, respectively.

◦ Continued enrollment in the HELIOS-B Phase 3 study in ATTR amyloidosis patients with cardiomyopathy.

• Inclisiran continued to advance under our partner, MDCO (which was acquired by Novartis AG in January 2020), and is undergoing review for approval in the U.S.

• Our partner, Sanofi Genzyme, continued enrollment in the ATLAS Phase 3 program for fitusiran in patients with hemophilia A or B with and without inhibitors, with topline results expected in the first half of 2021.

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Any failure to complete any stage of the development of any potential products or any approved product for an expanded indication in a timely manner or successfully launch, market and sell any approved product, including ONPATTRO and GIVLAARI, could have a material adverse effect on our operations, financial position and liquidity.

A discussion of some of

the risks and uncertainties associated with completing our projects on schedule, or at all, and the potential consequences of failing to do so, are set forth in Part II, Item 1A below under the heading “Risk Factors.”

A discussion of some of the risks and uncertainties associated with completing our research and development programs within the planned timeline, or at all, and the potential consequences of failing to do so, are set forth in Part II, Item 1A below under the heading “Risk Factors.”

Strategic Alliances

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Specifically, with respect to our CNS/Ocular Disease pipeline, in April 2019, we entered into a global, strategic collaboration with Regeneron to discover, develop and commercialize RNAi therapeutics for a broad range of diseases by addressing disease targets expressed in the eye and CNS, in addition to a select number of targets expressed in the liver.

In July 2020, Regeneron exercised its co-development/co-commercialization option on our first CNS-targeted development candidate, ALN-APP, an investigational RNAi therapeutic in development for the treatment of hereditary cerebral amyloid angiopathy and autosomal dominant Alzheimer’s Disease, which we will lead.

With respect to our Cardio-Metabolic pipeline, in March 2013, we entered into an exclusive, worldwide license with MDCO (acquired by Novartis AG in January 2020) pursuant to which MDCO was granted the right to develop, manufacture and commercialize RNAi therapeutics targeting PCSK9 for the treatment of hypercholesterolemia and other human diseases, including inclisiran.

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Critical Accounting Policies and Estimates

Liability Related to the Sale of Future Royalties

In April 2020, we entered into a purchase and sale agreement with Blackstone, prompting our adoption of a new accounting policy associated with the liability related to the sale of future royalties.

Please read Note 1 and Note 5 to our condensed consolidated financial statements included in Part I, Item 1, “Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q for a discussion of the policy and the accounting implications of this agreement, respectively.

Our critical accounting policies are described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2019, which we filed with the SEC on February 13, 2020.

There have been no significant changes to our critical accounting policies since the beginning of this fiscal year.

There have been no significant changes to our critical accounting policies since the beginning of this fiscal year other than with respect to the liability related to the sale of future royalties described above.

Results of Operations

The following data summarizes the results of our operations:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

Total revenues $ 103,962 $ 44,714 $ 59,248 133 % $ 203,438 $ 78,008 $ 125,430 161 %

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Total revenues consist of the following:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

Net product revenues $ 77,533 $ 38,231 $ 39,302 103 % $ 149,471 $ 64,522 $ 84,949 132 %

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Net product revenues consist of the following, by region:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

United States $ 40,929 $ 28,192 $ 12,737 45 % $ 83,399 $ 46,952 $ 36,447 78 %

Europe 25,357 10,039 15,318 153 % 46,523 17,570 28,953 165 %

Rest of World (primarily Japan) 8,302 — 8,302 N/A

Rest of World (primarily Japan) 11,247 — 11,247 N/A 19,549 — 19,549 N/A

$ 77,533 $ 38,231 $ 39,302 103 % $ 149,471 $ 64,522 $ 84,949 132 %

Net product revenues consist of the following, by product:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

ONPATTRO $ 66,535 $ 38,231 $ 28,304 74 % $ 133,199 $ 64,522 $ 68,677 106 %

GIVLAARI 5,274 — 5,274 N/A

GIVLAARI 10,998 — 10,998 N/A 16,272 — 16,272 N/A

$ 77,533 $ 38,231 $ 39,302 103 % $ 149,471 $ 64,522 $ 84,949 132 %

Net product sales increased during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, as a result of the continued, global expansion of ONPATTRO, in addition to sales generated from our second marketed product, GIVLAARI, subsequent to FDA approval and commercial launch in November and December 2019, respectively.

We anticipate net product revenues to decrease during the three months ended June 30, 2020 in comparison to the three months ended March 31, 2020 due to the impact from the COVID-19 pandemic, however, we expect net product revenues to increase for the twelve-month period ending December 31, 2020, as compared to the same twelve-month period in 2019, as we continue to add new patients onto ONPATTRO and GIVLAARI therapy, as well as launch our approved products into additional markets, assuming regulatory approvals.

Net product sales increased during the three and six months ended June 30, 2020, as compared to the same periods in the prior year, as a result of the continued, global expansion of ONPATTRO, in addition to sales generated from our second marketed product, GIVLAARI, following commercial launch in the U.S.

in November and December 2019, respectively, and initial European launch of GIVLAARI in the second quarter of 2020.

We expect net product revenues to increase for the twelve-month period ending December 31, 2020, as compared to the same period in 2019, as we continue to add new patients onto ONPATTRO and GIVLAARI therapy, as well as launch our approved products into additional markets, assuming regulatory approvals.

Net revenues from collaborations

Net revenues from collaborations consist of the following:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

Regeneron $ 19,503 $ — $ 19,503 N/A

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

Regeneron $ 15,413 $ 700 $ 14,713 2,102 % $ 34,916 $ 700 $ 34,216 4,888 %

Vir 6,448 1,091 5,357 491 % 12,964 2,019 10,945 542 %

MDCO 1,060 1,745 (685) (39) %

Sanofi Genzyme — 4,117 (4,117) (100) %

MDCO 3,878 — 3,878 N/A 4,938 1,745 3,193 183 %

Sanofi 373 4,383 (4,010) (91) % 373 8,500 (8,127) (96) %

Other 317 309 8 3 % 776 522 254 49 %

Total $ 26,429 $ 6,483 $ 19,946 308 % $ 53,967 $ 13,486 $ 40,481 300 %

Net revenues from collaborations increased during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 primarily due to an increase in revenues recognized in connection with our collaboration agreement with Regeneron.

We expect net revenues from collaborations to increase for the twelve-month period ending December 31, 2020, as compared to the same twelve-month period in 2019, primarily due to increased reimbursable activities and milestones under our

existing collaborations, as well as an increase in revenues to be recognized in connection with our collaborations with Regeneron and Vir.

Net revenues from collaborations increased during the three and six months ended June 30, 2020, as compared to the same periods in the prior year, primarily due to an increase in revenues recognized in connection with our collaboration agreement with Regeneron.

We expect net revenues from collaborations to increase for the twelve-month period ending December 31, 2020, as compared to the same period in 2019, primarily due to increased reimbursable activities and milestones under our collaborations with Regeneron and Vir.

Operating Costs and Expenses

Operating costs and expenses consist of the following:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

Cost of goods sold $ 19,929 $ 4,326 $ 15,603 361 % $ 33,231 $ 7,673 $ 25,558 333 %

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Cost of goods sold.

Cost of goods sold includes the cost of producing and distributing inventories that are related to product revenues, third-party royalties, and amortization of licensing rights.

Cost of goods sold increased during the three months ended March 31, 2020, as compared to the same period in the prior year, due to the increase in net product revenues and an increase in sales of capitalized inventory.

Based on our policy, we record costs associated with the manufacturing of our products as research and development expense prior to FDA approval or until we expect that these costs will be recoverable through commercialization of our products (zero-cost inventory).

Certain units of product sold and recognized as revenue during the three months ended March 31, 2020 and 2019 were zero-cost inventory and therefore the cost of goods sold for the three months ended March 31, 2020 and 2019 reflects only a portion of the manufacturing cost of our commercial products.

Cost of goods sold includes the cost of producing and distributing inventories that are related to product revenues, costs related to sales of product supply under our collaboration agreements, third-party royalties and amortization of licensing rights.

Based on our inventory policy, we record costs associated with the manufacturing of our products as research and development expense until we determine it is probable that these costs will be recovered through commercial sale (zero-cost inventory).

Cost of goods sold increased during the three and six months ended June 30, 2020, as compared to the same periods in the prior year, due to the increase in third-party royalties and sales of capitalized inventory.

During the three and six months ended June 30, 2020, product sold and recognized as revenue was substantially from capitalized inventory, whereas during the three and six months ended June 30, 2019, all units of product sold and recognized as revenue were zero-cost inventory.

We will continue to sell our zero-cost inventory of GIVLAARI throughout 2020.

We anticipate variability in our cost of goods sold as a percentage of net product revenues due to the timing of manufacturing runs and utilization and the depletion of zero-cost inventories, as well as future product launches.

We expect that cost of goods sold will increase for the twelve-month period ending December 31, 2020, as compared to the same twelve-month period in 2019, primarily as a result of an expected increase in net product sales as well as the sale of capitalized inventory.

We expect that cost of goods sold will increase for the twelve-month period ending December 31, 2020, as compared to the same period in 2019, primarily as a result of an expected increase in net product sales as well as the sale of capitalized inventory.

Research and development .

Research and development expenses consist on the following:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

Clinical trial and manufacturing $ 56,525 $ 34,601 $ 21,924 63 %

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

Compensation and related $ 49,314 $ 35,310 $ 14,004 40 % $ 97,477 $ 71,687 $ 25,790 36 %

Clinical trial and manufacturing 44,527 52,046 (7,519) (14) % 101,052 86,647 14,405 17 %

External services 18,277 17,078 1,199 7 % 35,938 30,608 5,330 17 %

Stock-based compensation 16,049 16,125 (76) (0) %

Facilities-related 17,701 13,178 4,523 34 % 33,402 25,405 7,997 31 %

Stock-based compensation 15,790 15,282 508 3 % 31,839 31,407 432 1 %

Lab supplies, materials, and other 9,387 10,765 (1,378) (13) % 22,446 19,432 3,014 16 %

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Total $ 154,996 $ 163,890 $ (8,894) (5) % $ 324,567 $ 293,017 $ 31,550 11 %

For the three months ended March 31, 2020, the increase in research and development expenses, as compared to the same period in the prior year, was primarily related to the following:

For the three months ended June 30, 2020, the decrease in research and development expenses, as compared to the same period in the prior year, was primarily related to the following:

• Decreased license fees due to the execution of our collaboration agreement with Regeneron in April 2019;

• Decreased clinical trial and manufacturing expenses associated with material manufactured for clinical trials.

Partially offset by:

• Increased compensation and related expenses as a result of increased headcount to support long-term strategic growth.

For the six months ended June 30, 2020, the increase in research and development expenses, as compared to the same period in the prior year, was primarily related to the following:

• Increased compensation and related expenses as a result of increased headcount to support long-term strategic growth;

• Increased clinical trials and manufacturing and lab supplies, materials and other expenses as a result of increased preclinical and clinical services related to the advancement of our early- and late-stage programs to support our long-term strategic goals;

• Increased compensation and related expenses as a result of growth in headcount to support our goals for 2020.

During the three months ended March 31, 2020 and 2019, in connection with advancing activities under our collaboration agreements, we incurred research and development expenses, primarily related to external development and manufacturing services.

• Increased facilities-related expenses as a result of costs recognized in connection with placing portions of our cGMP manufacturing facility into service.

Partially offset by:

• Decreased license fees related to the execution of our collaboration agreement with Regeneron in April 2019 and regulatory milestones deemed probable in 2019.

During the three and six months ended June 30, 2020 and 2019, in connection with advancing activities under our collaboration agreements, we incurred research and development expenses, primarily related to external development and manufacturing services.

The following table summarizes research and development expenses incurred, 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, Six Months Ended June 30,

(In thousands) 2020 2019 2020 2019

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MDCO 278 75 1,542 1,747

Sanofi Genzyme 248 5,020

Sanofi 376 3,060 624 8,080

Total $ 20,889 $ 4,597 $ 40,588 $ 11,948

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Selling, general and administrative expenses consist of the following:

Three Months Ended March 31,

(In thousands, except percentages) 2020 2019 Dollar Change % of Change

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

(In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change

Compensation and related $ 48,141 $ 40,592 $ 7,549 19 % $ 94,970 $ 70,715 $ 24,255 34 %

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Total $ 127,896 $ 112,769 $ 15,127 13 % $ 254,657 $ 202,377 $ 52,280 26 %

For the three months ended March 31, 2020, the increase in selling, general and administrative expenses, as compared to the same period in the prior year, was primarily related to the following:

• Increased compensation and related and consulting and professional services expenses as a result of increased overall corporate headcount to support long-term strategic growth, and the continued commercialization of ONPATTRO and GIVLAARI.

We expect that research and development expenses combined with selling, general and administrative expenses will increase for the twelve-month period ending December 31, 2020, as compared to the same twelve-month period in 2019, as we continue to develop our pipeline, advance our product candidates, including partnered programs, into later-stage development, prepare regulatory submissions and build-out of our global commercial infrastructure and field team to support ONPATTRO, GIVLAARI and potentially additional product launches, However, we expect that certain expenses will be variable depending on the timing of manufacturing batches, clinical trial enrollment and results, regulatory review of our product candidates and programs, and stock-based compensation expenses due to our determination regarding the probability of vesting for performance-based awards.

For the three and six months ended June 30, 2020, the increase in selling, general and administrative expenses, as compared to the same periods in the prior year, was primarily related to the following:

• Increased compensation and related and consulting and professional services expenses as a result of increased headcount to support long-term strategic growth and potential additional product launches in 2020 and thereafter, as well as the continued commercialization of ONPATTRO and GIVLAARI.

However, we expect that certain expenses will be variable depending on the timing of manufacturing batches, clinical trial enrollment and results, regulatory review of our product candidates and programs, and stock-based compensation expenses due to our determination regarding the probability of vesting for performance-based awards.

Total Other Income .

For the three months ended March 31, 2020, total other income increased, as compared to the same period in the prior year, primarily due to unrealized gains in marketable equity securities of $24.1 million.

For the three and six months ended June 30, 2020, total other income increased, as compared to the same periods in the prior year, primarily due to unrealized gains in marketable equity securities of $45.5 million and $69.6 million, respectively, offset by $27.2 million of interest expense due to the sale of future royalties.

Liquidity and Capital Resources

The following table summarizes our cash flow activities:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2020 2019

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

Adjustments to reconcile net loss to net cash used in operating activities 28,133 45,050

Non-cash adjustments to reconcile net loss to net cash (used in) provided by operating activities 65,094 77,567

Changes in operating assets and liabilities (85,135) 424,014

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

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

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

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

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

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Since we commenced operations in 2002, we have generated significant losses.

As of March 31, 2020, we had an accumulated deficit of $3.91 billion.

As of March 31, 2020, we had cash, cash equivalents and marketable debt and equity securities of $1.34 billion, compared to $1.54 billion as of December 31, 2019.

As of June 30, 2020, we had an accumulated deficit of $4.09 billion.

As of June 30, 2020, we had cash, cash equivalents and marketable debt and equity securities of $1.93 billion, compared to $1.54 billion as of December 31, 2019.

Operating activities

Net cash used in operating activities increased during the three months ended March 31, 2020, compared to the same period in 2019, primarily due to the increase in our operating expenses to support overall growth offset by certain non-cash adjustments, including the unrealized gain from our marketable equity securities, as well as changes in certain operating assets and liabilities due to the timing of receipts on accounts receivable, buildup of inventory or payments of prepaid expenses and other assets.

Net cash used in operating activities increased during the six months ended June 30, 2020, compared to the same period in 2019, primarily due to the receipt of $400 million in May 2019 for the upfront payment associated with our strategic collaboration with Regeneron.

In addition, cash used in operating activities during the six months ended June 30, 2020 increased as a result of changes in working capital to support corporate growth.

Investing activities

Net cash provided by investing activities increased during the three months ended March 31, 2020, compared to the same period in the prior year, primarily due to a decrease in purchases of property, plant and equipment partially offset by an increase of restricted cash collateral to support letters of credit.

Net cash used in investing activities increased during the six months ended June 30, 2020, compared to the same period in the prior year, primarily due to the purchase of marketable debt securities.

Financing activities

Net cash provided by financing activities decreased during the three months ended March 31, 2020, compared to the same period in 2019, primarily due to net proceeds of $381.9 million received from our January 2019 underwritten public offering, for which similar financing did not occur in 2020, offset by an increase in cash received from the exercise of employee stock options.

Net cash provided by financing activities decreased during the six months ended June 30, 2020, compared to the same period in the prior year, primarily due to proceeds of $400.0 million from our issuance of common stock to Regeneron in April 2019 and $381.9 million received from our January 2019 underwritten public offering, offset by $500.0 million received from our sale of the MDCO royalty interest in April 2020 and net proceeds of $151.5 million from the issuance of common stock in connection with stock option exercises and other types of equity during the six months ended June 30, 2020.

Operating Capital Requirements

We currently have programs focused on a number of therapeutic areas and, as of March 31, 2020, have two globally marketed products, ONPATTRO and GIVLAARI.

We currently have programs focused on a number of therapeutic areas and, as of June 30, 2020, have two globally marketed products, ONPATTRO and GIVLAARI.

However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products in the future.

In addition, we anticipate that we will continue to generate significant losses for the foreseeable future as a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical and commercial capabilities, including global operations, continued management and growth of our intellectual property including our patent portfolio, collaborations and general corporate activities.

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 current alliances, as well as the funds due or available to us a result of the strategic financing collaboration with Blackstone, 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.

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 current alliances, as well as the funds due or available to us as a result of the strategic financing collaboration with Blackstone, 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.

Although we believe the strategic financing collaboration with Blackstone will enable us to achieve a self-sustainable financial profile without the need for further equity financing, in the future, we may seek additional funding through new collaborative arrangements, public or private debt financings, royalty or other monetization transactions or a combination of one or more of these funding sources.

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The disclosure of our contractual obligations and commitments is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2019.

There have been no material changes in our contractual obligations and commitments since December 31, 2019.

In April 2020, we entered into a purchase and sale agreement with Blackstone, resulting in an initial recognition of $1.00 billion liability related to the sale of future royalties.

Please read Note 5 to our condensed consolidated financial statements included in Part I, Item 1, “Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q for a description of this agreement.

As a result, we expect our contractual obligations through 2036 will increase from the amounts previously disclosed in our 2019 Annual Report on Form 10-K due to payments under this agreement.

Recent Accounting Pronouncements

Please read Note 2 to our condensed consolidated financial statements included in Item 1, “Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.

Please read Note 2 to our condensed consolidated financial statements included in Part I, Item 1, “Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.

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 2. Management’s Discussion and Analysis