What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-08-03 · 131 added, 123 removed, 569 unchanged (31% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current assets:

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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 June 30, 2021 and December 31, 2020

Preferred stock, $ 0.01 par value per share, 5,000 shares authorized and no shares issued and outstanding as of September 30, 2021 and December 31, 2020

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

118,596 shares issued and outstanding as of June 30, 2021;

119,480 shares issued and outstanding as of September 30, 2021;

116,427 shares issued and outstanding as of December 31, 2020

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Net loss $ ( 204,514 ) $ ( 253,291 ) $ ( 594,364 ) $ ( 614,741 )

Other comprehensive (loss) income:

Other comprehensive income (loss):

Unrealized (loss) gain on marketable securities ( 64 ) ( 1,481 ) ( 312 ) 768

Foreign currency translation gains 825 571 7,673 911

Foreign currency translation gain (loss) 1,857 ( 2,576 ) 9,530 ( 1,665 )

Defined benefit pension plans, net of tax 58 76 174 222

Total other comprehensive income 636 ( 1,153 ) 7,541 3,306

Total other comprehensive income (loss) 1,851 ( 3,981 ) 9,392 ( 675 )

Comprehensive loss $ ( 202,663 ) $ ( 257,272 ) $ ( 584,972 ) $ ( 615,416 )

13 unchanged sentences

Issuance of common stock under equity plans 280 3 ( 3 ) — — —

Stock-based compensation expense related to equity-classified awards — — 56,295 — — 56,295

Stock-based compensation expense — — 56,295 — — 56,295

Other comprehensive income — — — 6,905 — 6,905

3 unchanged sentences

Issuance of common stock under equity plans 282 3 7,715 — — 7,718

Stock-based compensation expense related to equity-classified awards — — 32,928 — — 32,928

Stock-based compensation expense — — 32,928 — — 32,928

Other comprehensive income — — — 636 — 636

1 unchanged sentence

Balance as of June 30, 2021 118,596 1,186 5,863,476 ( 36,081 ) ( 4,975,219 ) 853,362

Exercise of common stock options, net of tax withholdings 883 9 71,490 — — 71,499

Issuance of common stock under equity plans 1 — — — — —

Stock-based compensation expense — — 33,695 — — 33,695

Other comprehensive income — — — 1,851 — 1,851

Net loss — — — — ( 204,514 ) ( 204,514 )

Balance as of September 30, 2021 119,480 $ 1,195 $ 5,968,661 $ ( 34,230 ) $ ( 5,179,733 ) $ 755,893

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

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Issuance of common stock under equity plans 4 — — — — —

Stock-based compensation expense related to equity-classified awards — — 34,578 — — 34,578

Stock-based compensation expense — — 34,578 — — 34,578

Other comprehensive income — — — 4,459 — 4,459

4 unchanged sentences

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

Stock-based compensation expense — — 33,707 — — 33,707

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

1 unchanged sentence

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

Exercise of common stock options, net of tax withholdings 494 5 32,207 — — 32,212

Issuance of common stock under equity plans 2 — 129 — — 129

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

Stock-based compensation expense — — 40,228 — — 40,228

Other comprehensive loss — — — ( 3,981 ) — ( 3,981 )

Net loss — — — — ( 253,291 ) ( 253,291 )

Balance as of September 30, 2020 116,143 $ 1,161 $ 5,592,884 $ ( 37,193 ) $ ( 4,341,829 ) $ 1,215,023

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

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

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Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 5,968 ) 1,946

Net increase in cash, cash equivalents and restricted cash 249,019 33,653

Net increase (decrease) in cash, cash equivalents and restricted cash 597,412 ( 50,472 )

Cash, cash equivalents and restricted cash, beginning of period 499,046 549,628

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Alnylam Pharmaceuticals, Inc.

(also referred to as Alnylam, we, our or us) commenced operations on June 14, 2002 as a biopharmaceutical company seeking to develop and commercialize novel therapeutics based on RNA interference, or RNAi.

We are committed to the advancement of our company strategy of building a multi-product, global, commercial biopharmaceutical company with a deep and sustainable clinical pipeline of RNAi therapeutics for future growth and a robust, organic research engine for sustainable innovation and great potential for patient impact.

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With Alnylam P 5 x25 , we aim to deliver transformative rare and prevalent disease medicines for patients around the world through sustainable innovation, delivering exceptional financial performance and driving profitability.

As of June 30, 2021, we have four products that have received marketing approval, including one partnered product, and six late-stage investigational programs advancing towards potential commercialization.

We currently generate product revenues from ONPATTRO in the U.S., Europe, Japan and in several additional countries as well as from GIVLAARI and OXLUMO in the U.S.

and several countries in Europe.

As of September 30, 2021, we have four products that have received marketing approval, including one partnered product, and six late-stage investigational programs advancing towards potential commercialization.

We currently generate worldwide product revenues from three commercialized products, ONPATTRO, GIVLAARI and OXLUMO, primarily in the U.S., Europe and Japan.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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Actual results may differ from these estimates.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of June 30, 2021, together with the cash we expect to generate from product sales and under our current alliances, in addition to our strategic financing collaboration with The Blackstone Group Inc.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of September 30, 2021, together with the cash we expect to generate from product sales and under our current alliances, in addition to our strategic financing collaboration with The Blackstone Group Inc.

and certain of its affiliates, will be sufficient to enable us to advance our Alnylam P 5 x25 strategy for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2021 2020 2021 2020

5 unchanged sentences

Europe 7,568 4,582 22,461 6,919

Rest of World 242 — 280 —

Rest of World (primarily Japan) 1,893 — 2,173 —

Total $ 31,833 $ 16,690 $ 87,136 $ 32,962

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

(In thousands) As of June 30,

(In thousands) As of September 30,

2021 As of December 31,

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Net revenues from collaborations consist of the following:

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

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

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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 June 30, 2021 As of December 31, 2020

(In thousands) As of September 30, 2021 As of December 31, 2020

Receivables included in “Accounts receivable, net” $ 23,584 $ 33,542

Contract liabilities included in “Deferred revenue” $ 76,452 $ 120,021

We recognized revenue of $ 29.2 million and $ 54.5 million in the three and six months ended June 30, 2021, respectively, and revenue of $ 16.8 million and $ 31.5 million in the three and six months ended June 30, 2020, respectively, that in each case was included in the contract liability balance at the beginning of the respective period.

We recognized revenue of $ 12.7 million and $ 65.2 million in the three and nine months ended September 30, 2021, respectively, and revenue of $ 19.2 million and $ 50.7 million in the three and nine months ended September 30, 2020, respectively, that in each case was included in the contract liability balance at the beginning of the respective period.

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.

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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 June 30,

Three Months Ended September 30,

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

Regeneron Pharmaceuticals $ 3,152 $ 285 $ 10,964 $ 3,355 $ 43 $ 9,167

Novartis AG 678 — 52 — — 278

Vir Biotechnology 519 37 546 1,379 277 3,247

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Total $ 3,724 $ 322 $ 11,692 $ 5,247 $ 337 $ 12,960

Six Months Ended June 30,

Nine Months Ended September 30,

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

Regeneron Pharmaceuticals $ 17,343 $ 547 $ 34,082 $ 10,751 $ 67 $ 33,290

Novartis AG 678 — 55 998 — 544

Vir Biotechnology 2,234 693 2,599 2,757 486 8,539

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The research and development expenses incurred for each agreement listed in the table above consist of costs incurred for (i) clinical expenses, including manufacturing of clinical product, (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 and six months ended June 30, 2021 and 2020, we did not incur material selling, general and administrative expenses related to our collaboration agreements.

In addition, we recognized a reduction to our research and development expenses of $ 4.0 million and $ 9.4 million for the three and six months ended June 30, 2021, respectively, and of $ 0.7 million and $ 5.2 million for the three and six months ended June 30, 2020, respectively, from cost reimbursement due under certain of our collaboration agreements accounted for under ASC 808.

For the three and nine months ended September 30, 2021 and 2020, we did not incur material selling, general and administrative expenses related to our collaboration agreements.

In addition, we recognized a reduction to our research and development expenses of $ 3.3 million and $ 12.7 million for the three and nine months ended September 30, 2021, respectively, and of $ 3.2 million and $ 8.4 million for the three and nine months ended September 30, 2020, respectively, from cost reimbursement due under certain of our collaboration agreements accounted for under ASC 808.

Product Alliances

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In April 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.

The Regeneron Collaboration is governed by a Master Agreement, referred to as the Regeneron Master Agreement, which became effective on May 21, 2019.

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 2 development, and cemdisiran.

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We are also eligible to receive up to an additional $ 200.0 million in milestone payments upon achievement of certain criteria during early clinical development for eye and CNS programs.

We and Regeneron plan to advance programs directed to up to 30 targets

We and Regeneron plan to advance programs directed to up to 30 targets under the Regeneron Collaboration during the Initial Research Term.

For each program, Regeneron will provide us with $ 2.5

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

under the Regeneron Collaboration during the Initial Research Term.

For each program, Regeneron will provide us with $ 2.5 million in funding at program initiation and an additional $ 2.5 million at lead candidate identification, with the potential for approximately $ 30.0 million in annual discovery funding to us as the Regeneron Collaboration reaches steady state.

million in funding at program initiation and an additional $ 2.5 million at lead candidate identification, with the potential for approximately $ 30.0 million in annual discovery funding to us as the Regeneron Collaboration reaches steady state.

Regeneron has the right to terminate the Regeneron Master Agreement for convenience upon ninety days ’ notice.

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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 as of June 30, 2021, the total transaction price was $ 539.7 million, an increase of $ 7.9 million from December 31, 2020.

As of June 30, 2021, the transaction price is comprised of the upfront payment and variable consideration related to development, manufacture and supply activities.

We re-evaluate the transaction price as of the end of each reporting period and as of September 30, 2021, the total transaction price was $ 539.7 million, an increase of $ 7.9 million from December 31, 2020.

As of September 30, 2021, the transaction price is comprised of the upfront payment and variable consideration related to development, manufacture and supply activities.

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 Deferred Revenue

Performance Obligations As of June 30,

2021 As of June 30,

Performance Obligations As of September 30,

2021 As of September 30,

2021 As of December 31,

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Performance Obligations Three Months Ended

June 30, 2021 Three Months Ended

June 30, 2020 Six Months Ended

June 30, 2021 Six Months Ended

June 30, 2020 Accounting Guidance

September 30, 2021 Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2021 Nine Months Ended

September 30, 2020 Accounting Guidance

Research Services Obligation $ 8,900 $ 10,700 $ 28,900 $ 33,300 ASC 606

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$ 12,600 $ 13,100 $ 75,700 $ 42,800

As of June 30, 2021, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied was $ 171.6 million, which is expected to be recognized through the term of the Regeneron Collaboration as the services are performed.

As of September 30, 2021, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied was $ 161.5 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.

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On January 6, 2020, Novartis completed its acquisition of MDCO, and assumed all rights and obligations under the MDCO License Agreement.

As of June 30, 2021, we have earned $ 45.0 million of milestones and upon achievement of certain events, we will be entitled to receive additional milestones, up to an aggregate of $ 135.0 million, including $ 25.0 million associated with the U.S.

As of September 30, 2021, we have earned $ 45.0 million of milestones and upon achievement of certain events, we will be entitled to receive additional milestones, up to an aggregate of $ 135.0 million, including $ 25.0 million associated with the U.S.

regulatory approval milestone, $ 10.0 million in other specified regulatory milestones and $ 100.0 million in specified commercialization milestones.

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In December 2020, we signed a letter agreement to amend the Vir Agreement such that we would be solely responsible for conducting pre-clinical research activities under the pre-clinical development plan related to the COVID-19 activities in the March and April 2020 amendments, at our discretion and sole expense, and effective as of July 1, 2020, we were responsible for all pre-clinical development costs incurred under such plan for such COVID-19 related activities.

In July 2021, we notified Vir that we have elected to discontinue ALN-COV, in development for the treatment of COVID-19, and all other COVID-19 research and development activities, based on a portfolio prioritization in view of the availability of highly effective vaccines and alternative treatment options, in accordance with our rights under the letter agreement with Vir.

In July 2021, we notified Vir that we have elected to discontinue ALN-COV, in development for the treatment of COVID-19, and all other COVID-19 research and development activities, based on a portfolio prioritization decision in view of the availability of highly effective vaccines and alternative treatment options, in accordance with our rights under the letter agreement with Vir.

Following such discontinuation of COVID-19 related activities, we have no further obligations to work on the COVID-related targets and Vir will have no further rights to such targets under the Vir Agreement.

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

As of June 30, 2021, the total transaction price was determined to be $ 110.8 million, and 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.

As of September 30, 2021, the total transaction price was determined to be $ 110.8 million, and 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.

We utilized the

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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 June 30, 2021, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 45.6 million, which is expected to be recognized through the term of the Vir Agreement as the services are performed.

As of September 30, 2021, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 44.4 million, which is expected to be recognized through the term of the Vir Agreement as the services are performed.

Other Strategic License Agreements

PeptiDream, Inc.

In July 2021, we entered into a license and collaboration agreement with PeptiDream, Inc., or PeptiDream, to discover and develop peptide-siRNA conjugates to create multiple opportunities to deliver RNAi therapeutics to tissues outside the liver.

Through this collaboration, the companies will collaborate to select and optimize peptides for targeted delivery of small siRNA molecules to a wide range of cell types and tissues via specific interactions with receptors expressed on the target cells.

Under the terms of the agreement, PeptiDream received an upfront payment from us of $ 10.0 million and we will provide research and development funding over the term of the research collaboration, according to the terms of the PeptiDream agreement.

Due to the early stage of these assets, we recorded research and development expense for the upfront payment of $ 10.0 million during the third quarter of 2021.

PeptiDream may also receive payments based on the achievement of specified development, regulatory, and commercial milestones potentially totaling up to $ 247.0 million for each product developed by us that utilizes PeptiDream’s technology, as well as low-to-mid single digit royalties on sales, if any, of any such products.

LIABILITY RELATED TO THE SALE OF FUTURE ROYALTIES

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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 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.

In consideration for the sale of the Purchased Interest, Blackstone Royalties paid us $ 500.0 million in April 2020 and $ 500.0 million in September 2021.

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.

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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, 2021, the carrying value of the liability related to the sale of future royalties was $ 1.13 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, 2021 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.

As of September 30, 2021, the carrying value of the liability related to the sale of future royalties was $ 1.16 billion, net of closing costs of $ 12.0 million.

The carrying value of the liability related to the sale of future royalties approximates fair value as of September 30, 2021 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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table shows the activity with respect to the liability related to the sale of future royalties, in thousands:

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Payments ( 152 )

Carrying value of liability related to sale of future royalties as of June 30, 2021

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Carrying value of liability related to sale of future royalties as of September 30, 2021

FAIR VALUE MEASUREMENTS

The following tables present information about our financial assets and liabilities 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 June 30, 2021 Quoted

(In thousands) As of September 30, 2021 Quoted

(Level 1) Significant

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Money market funds $ 341,315 $ 341,315 $ — $ —

treasury securities 10,000 — 10,000 —

Marketable debt securities:

treasury securities 769,224 — 769,224 —

government-sponsored enterprise securities 144,630 — 144,630 —

Corporate notes 167,888 — 167,888 —

government-sponsored enterprise securities 128,161 — 128,161 —

Commercial paper 87,523 — 87,523 —

Certificates of deposit 7,502 — 7,502 —

Municipal securities 1,026 — 1,026 —

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Cash equivalents:

treasury securities $ 20,000 $ — $ 20,000 $ —

Money market funds $ 75,726 $ 75,726 $ — $ —

treasury securities 20,000 — 20,000 —

Marketable debt securities:

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Development derivative liability $ 25,585 $ — $ — $ 25,585

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The carrying amounts reflected on 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.

The carrying amount of our debt as of June 30, 2021 approximates fair value.

The carrying amount of our debt as of September 30, 2021 approximates fair value.

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 no t record any impairment charges related to our marketable debt securities during the three and six months ended June 30, 2021 or 2020.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We did no t record any impairment charges related to our marketable debt securities during the three and nine months ended September 30, 2021 or 2020.

The following tables summarize our marketable debt securities:

As of June 30, 2021

As of September 30, 2021

(In thousands) Amortized

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treasury securities $ 779,163 $ 96 $ ( 35 ) $ 779,224

government-sponsored enterprise securities 144,612 47 ( 29 ) 144,630

Corporate notes 167,938 20 ( 70 ) 167,888

government-sponsored enterprise securities 128,136 30 ( 5 ) 128,161

Commercial paper 87,523 — — 87,523

Certificates of deposit 7,502 — — 7,502

Municipal securities 1,026 — — 1,026

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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 June 30, 2021 As of December 31, 2020

(In thousands) As of September 30, 2021 As of December 31, 2020

Marketable debt securities $ 1,161,324 $ 1,333,182

1 unchanged sentence

Total $ 1,171,324 $ 1,353,182

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OTHER BALANCE SHEET DETAILS

The components of inventory are summarized as follows:

(In thousands) As of June 30, 2021 As of December 31, 2020

(In thousands) As of September 30, 2021 As of December 31, 2020

Raw materials $ 65,158 $ 63,460

2 unchanged sentences

Total $ 110,949 $ 92,302

As of June 30, 2021 and December 31, 2020, we held $ 11.8 million and $ 17.1 million of long- term inventory, respectively, included within other assets in our condensed consolidated balance sheet as we anticipate it being consumed beyond our normal operating cycle.

As of June 30, 2021, we capitalized $ 7.1 million of inventory produced for commercial sale for products awaiting regulatory approval.

As of September 30, 2021 and December 31, 2020, we held $ 13.1 million and $ 17.1 million of long-term inventory, respectively, included within other assets in our condensed consolidated balance sheet as we anticipate it being consumed beyond our normal operating cycle.

As of September 30, 2021, we hold $ 7.1 million of capitalized inventory produced for commercial sale for products awaiting regulatory approval.

As of December 31, 2020, there was no capitalized inventory for products awaiting regulatory approval.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents and Restricted Cash

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 June 30,

As of September 30,

(In thousands) 2021 2020

Cash and cash equivalents $ 1,093,991 $ 496,704

Total restricted cash included in prepaid expenses, other current assets and long-term other assets 2,298 2,452

Total restricted cash included in other assets 2,467 2,452

Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows

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Net other comprehensive income (loss) — 174 ( 312 ) 9,530 9,392

Balance as of June 30, 2021 $ ( 32,792 ) $ ( 3,638 ) $ 100 $ 249 $ ( 36,081 )

Balance as of September 30, 2021 $ ( 32,792 ) $ ( 3,580 ) $ 36 $ 2,106 $ ( 34,230 )

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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Net other comprehensive income — 222 768 ( 1,665 ) ( 675 )

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

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.

Balance as of September 30, 2020 $ ( 32,792 ) $ ( 3,298 ) $ 905 $ ( 2,008 ) $ ( 37,193 )

Amounts reclassified out of accumulated other comprehensive loss relate to settlements of marketable equity 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

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The Credit Agreement provides for a senior secured delayed draw term loan facility, referred to as the Term Loans, which consists of three tranches providing funding up to $ 700.0 million .

The Tranche 1 Loan of $ 200.0 million and the Tranche 2 Loan of $ 250.0 million were drawn as of December 31, 2020 and June 30, 2021, respectively, and are included in long-term debt in the condensed consolidated balance sheets.

The remaining tranche, the Tranche 3 Loan of

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

$ 250.0 million, will be requested no later than December 31, 2021.

The remaining tranche, the Tranche 3 Loan of $ 250.0 million, will be requested no later than December 31, 2021.

In addition, we may 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.

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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.

The Subsequent Borrowing Conditions were satisfied as of June 30, 2021 .

The Subsequent Borrowing Conditions were satisfied as of September 30, 2021 .

The Term Loans mature in December 2027.

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We may, at our option, pay interest in kind on interest due through 2023 at a rate that is 1 % higher than the interest rate otherwise applicable to such Term Loan .

As of June 30, 2021, we drew the Tranche 1 Loan and the Tranche 2 Loan, elected a LIBOR Rate plus 7 %, and paid a $ 5.0 million and $ 6.3 million funding fee, respectively, in connection with such Term Loans.

As of September 30, 2021, we drew the Tranche 1 Loan and the Tranche 2 Loan, elected a LIBOR Rate plus 7 %, and paid a $ 5.0 million and $ 6.3 million funding fee, respectively, in connection with such Term Loans.

On the date the 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.

Our interest rate was 8 % as of June 30, 2021 and December 31, 2020.

Our interest rate was 8 % as of September 30, 2021 and December 31, 2020.

We are obligated to pay interest due on the Term Loans from 2021 through 2022 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).

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(i) intellectual property owned by us relating to ONPATTRO, GIVLAARI, and vutrisiran, (ii) the equity interests held by the Loan Parties in their subsidiaries, (iii) all of our ownership of the inclisiran royalty remaining after the royalty purchase under the Purchase Agreement, and (iv) 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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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;

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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, 2021, we were in compliance with the applicable terms and conditions of the covenants under the Credit Agreement.

As of September 30, 2021, we were in compliance with the applicable terms and conditions of the covenants under the Credit Agreement.

DEVELOPMENT DERIVATIVE LIABILITY

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As consideration for Blackstone Life Sciences’ funding for Phase 2 clinical development costs of zilebesiran, we have agreed to pay Blackstone Life Sciences fixed payments of up to 3.25 times their Phase 2 investment over a four-year period upon the successful completion of the zilebesiran Phase 2 clinical trial, unless certain regulatory events affecting the continued development of zilebesiran occur.

As consideration for

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Blackstone Life Sciences’ funding for Phase 3 clinical development costs of zilebesiran, we have agreed to pay Blackstone Life Sciences fixed payments of up to 4.5 times their Phase 3 investment over a four-year period upon regulatory approval of zilebesiran in specified countries, unless it is later withdrawn from the market following a mandatory recall.

As consideration for Blackstone Life Sciences’ funding for Phase 3 clinical development costs of zilebesiran, we have agreed to pay Blackstone Life Sciences fixed payments of up to 4.5 times their Phase 3 investment over a four-year period upon regulatory approval of zilebesiran in specified countries, unless it is later withdrawn from the market following a mandatory recall.

Our payment obligations under the Funding Agreement will be secured, subject to certain exceptions, by security interests in intellectual property owned by us relating to vutrisiran and zilebesiran, as well as in our bank account in which the funding deposits will be made.

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The change in fair value due to the remeasurement of the development derivative liability is recorded as other expense on our condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2021, the derivative liability is classified as a Level 3 financial liability in the fair value hierarchy.

The valuation method incorporates certain unobservable Level 3 key inputs including (i) the probability and timing of achieving stated development milestones to receive payments from Blackstone Life Sciences, (ii) the probability and timing of achieving regulatory approval and payments to Blackstone Life Sciences, (iii) an estimate of the amount and timing of the royalty payable on net sales of vutrisiran, assuming regulatory approval, (iv) our cost of borrowing ( 15 %), and (v) Blackstone Life Sciences' cost of borrowing ( 4 %).

As of September 30, 2021, the derivative liability is classified as a Level 3 financial liability in the fair value hierarchy.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

regulatory approval and payments to Blackstone Life Sciences, (iii) an estimate of the amount and timing of the royalty payable on net sales of vutrisiran, assuming regulatory approval, (iv) our cost of borrowing ( 15 %), and (v) Blackstone Life Sciences' cost of borrowing ( 4 %).

The following table presents the activity with respect to the development derivative liability, in thousands:

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Loss recorded from remeasurement of development derivative liability 19,655

Development derivative liability as of June 30, 2021

Development derivative liability as of September 30, 2021

Blackstone Equity Placement

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION

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

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

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

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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 June 30,

As of September 30,

(In thousands) 2021 2020

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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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

validity or enforceability of the patents held by others.

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

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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 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.

On May 8, 2019, the Court entered an order appointing a lead plaintiff, and on July 3, 2019, lead plaintiff filed a consolidated class action complaint, or the Complaint.

In addition to the originally named defendants, the Complaint also named as defendants certain of our other executive officers, and purported to be brought on behalf of a class of persons who acquired our securities between September 20, 2017 and September 12, 2018 and sought to recover damages caused by defendants’ alleged violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder.

The Complaint alleged, among other things, that the defendants made materially false and misleading statements related to the efficacy and safety of our product, ONPATTRO.

The plaintiff sought, among other things, the designation of this action as a class action, an award of unspecified compensatory damages, interest, costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate.

All defendants filed

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

a motion to dismiss the Complaint in its entirety on July 31, 2019.

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

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.

By Memorandum & Order dated March 12, 2021, the Court denied plaintiffs’ motion.

Plaintiffs did not appeal the Court's decision.

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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In June 2021, defendants filed a motion in the First Department seeking reargument or, in the alternative, for leave to appeal to the New York Court of Appeals.

We believe that the allegations contained in the New York Complaint are without merit and intend to defend the case vigorously.

We cannot predict at this point the length of time that this action will be ongoing or the liabilities, if any, which may arise therefrom.

In August 2021, the parties reached an agreement in principle to resolve the matter.

Proceedings in the First Department are adjourned until February 2022 pending final approval of any settlement.

Government Investigation

On or about April 9, 2021, we received a subpoena from the U.S.

We have previously disclosed that, on or about April 9, 2021, we received a subpoena from the U.S.

Department of Justice, U.S.

Attorney’s Office for the District of Massachusetts, requiring production of documents pertaining to our marketing and promotion of ONPATTRO (patisiran) in the United States.

We are preparing a response to the subpoena and cooperating with the government.

Experienced outside legal counsel has been retained to assist with this matter.

Since learning of this federal government investigation, and consistent with its charter, our nominating and corporate governance committee is directing our review of and response to the matter.

Given the early stage and ongoing nature of the investigation, no determination has been made that a loss, if any, arising from this matter is probable or that the amount of any such loss, or range of loss, is reasonably estimable.

SUBSEQUENT EVENT

Through this collaboration, the companies will collaborate to select and optimize peptides for targeted delivery of small interfering RNA (siRNA) molecules to a wide range of cell types and tissues via specific interactions with receptors expressed on the target cells.

Under the terms of the agreement, PeptiDream will receive an upfront payment from us of $ 10.0 million as well as R&D funding over the term of the research collaboration, as provided in the agreement.

PeptiDream may also receive payments based on the achievement of specified development, regulatory, and commercial milestones potentially totaling up to $ 247.0 million for each Alnylam product that utilizes PeptiDream’s technology, as well as low-to-mid single digit royalties on sales, if any, of any such Alnylam products that utilize PeptiDream’s technology.

Attorney’s Office for the District of Massachusetts, requiring production of documents pertaining to our marketing and promotion of ONPATTRO (patisiran) in the U.S.

We are cooperating with the U.S.

Attorney’s Office and producing documents in response to the subpoena.

Current and former officers and employees also have received subpoenas in connection with the preservation and production of related materials.

Given the ongoing nature of the investigation, it is possible that the U.S.

Attorney’s Office for the District of Massachusetts or other government entities may request other information from, or issue other subpoenas, findings or similar documents to, us, our related entities and their respective directors, officers and employees.

In light of the relatively early stage and ongoing nature of the investigation, no determination has been made that a loss, if any, arising from this matter is probable or that the amount of any such loss, or range of loss, is reasonably estimable.

We also previously disclosed that since learning of this federal government investigation, our nominating and corporate governance committee is directing our review of and response to the matter.

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