ALNYLAM PHARMACEUTICALS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a global commercial-stage biopharmaceutical company developing novel therapeutics based on ribonucleic acid interference, or RNAi. RNAi is a naturally occurring biological pathway within cells for sequence-specific silencing and regulation of gene expression. By harnessing the RNAi pathway, we have developed a new class of innovative medicines, known as RNAi therapeutics. RNAi therapeutics are comprised of small interfering RNA, or siRNA, and function upstream of conventional medicines by potently silencing messenger RNA, or mRNA, that encode for disease-causing proteins, thus preventing them from being made. We believe this is a revolutionary approach with the potential to transform the care of patients with genetic and other diseases. To date, our efforts to advance this revolutionary approach have yielded the approval of four first-in-class RNAi-based medicines, ONPATTRO ® (patisiran), GIVLAARI ® (givosiran), OXLUMO ® (lumasiran) and Leqvio ® (inclisiran). Our research and development strategy is to target genetically validated genes that have been implicated in the cause or pathway of human disease. We utilize a N-acetylgalactosamine (GalNAc) conjugate or lipid nanoparticle (LNP) approach to enable hepatic delivery of siRNAs. For delivery to the central nervous system, or CNS, and the eye (ocular delivery), we are utilizing alternative conjugate approaches. We are also advancing approaches for delivery of siRNAs to lung and other tissue types. Our focus is on clinical indications where there is a high unmet need, early biomarkers for the assessment of clinical activity in Phase 1 clinical studies, and a definable path for drug development, regulatory approval, patient access and commercialization. In early 2021, we launched our Alnylam P 5 x25 strategy, which focuses on our planned transition to a top five biotech company, as measured by market capitalization, by the end of 2025. 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. On October 28, 2021, we announced a leadership transition pursuant to which our current long-time Chief Executive Officer, John M. Maraganore, Ph.D., will depart on December 31, 2021, and Yvonne L. Greenstreet, MBChB, MBA, our current President and Chief Operating Officer, will transition to the role of Chief Executive Officer. We currently have four marketed products and 12 clinical programs, including six in late-stage development, across four Strategic Therapeutic Areas, or “STArs:” Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. Three of our marketed products are within the Genetic Medicines STAr, ONPATTRO, GIVLAARI and OXLUMO. ONPATTRO is approved in the United States, or U.S., by the United States Food and Drug Administration, or FDA, for the treatment of the polyneuropathy of hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, in adults and has also been approved in the European Union, or EU, for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy, in Japan for the treatment of transthyretin, or TTR, type familial amyloidosis with polyneuropathy, and in several additional countries, including Brazil. Regulatory filings in other territories are pending and additional filings are planned for 2022 and beyond. GIVLAARI is approved in the U.S. by the FDA for the treatment of adults with acute hepatic porphyria, or AHP, in the EU for the treatment of AHP in adults and adolescents aged 12 years and older, and in several additional countries, including Brazil, Canada and Japan. We have also filed for regulatory approval for givosiran (the non-branded drug name for GIVLAARI) in Switzerland and additional regulatory filings are pending or planned for 2021 and beyond. In November 2020, we received regulatory approval for OXLUMO in the U.S. and EU for the treatment of primary hyperoxaluria type 1, or PH1, in all age groups. In June 2021, we received marketing authorization approval for OXLUMO in Brazil for the treatment of PH1 in both children and adult patients. Regulatory filings in other territories are pending and additional filings are planned for 2021 and beyond. Our fourth product, Leqvio (inclisiran), is being developed and commercialized by our partner Novartis AG, or Novartis, and in December 2020 received marketing authorization from the European Commission, or EC, for the treatment of adults with hypercholesterolemia or mixed dyslipidemia and is in the Cardio-Metabolic Diseases STAr. With respect to regulatory review by the FDA of the New Drug Application, or NDA, filed with the FDA for inclisiran, the FDA issued a complete response letter in December 2020, due to unresolved facility inspection-related conditions at a third-party manufacturing facility in Europe. In July 2021, Novartis announced that the resubmission to the FDA for the inclisiran NDA to address the complete response letter was filed with an action date of January 1, 2022 under the Prescription Drug User Fee Act, or PDUFA. Novartis listed its own site in Schaftenau, Austria, as the manufacturing location for the final finished product within its NDA resubmission. Novartis reported that the transfer of the manufacturing location for the final finished product to its Schaftenau site was planned and initiated in 2020, prior to the receipt of the complete response letter. In addition to our marketed products, we have six late-stage investigational programs, advancing toward potential commercialization. These programs include our wholly owned programs: givosiran (the non-branded name for GIVLAARI) for the treatment of adolescent patients with AHP; lumasiran for the treatment of PH1 and recurrent renal stones; patisiran (the non-branded drug name for ONPATTRO) for the treatment of transthyretin amyloidosis, or ATTR amyloidosis, with cardiomyopathy; and vutrisiran for the treatment of ATTR amyloidosis. In addition, inclisiran (the non-branded name for Leqvio) for the treatment of hypercholesterolemia and atherosclerotic cardiovascular disease, or ASCVD, is being advanced by 28 Table of Contents our partner Novartis, and fitusiran for the treatment of hemophilia, is being advanced by our partner Sanofi Genzyme, the specialty care global business unit of Sanofi. In January 2021, we reported positive topline results from our HELIOS-A Phase 3 study of vutrisiran in patients with hATTR amyloidosis with polyneuropathy, and in April 2021, based on the positive HELIOS-A data, we submitted an NDA for vutrisiran, which was accepted by the FDA. The FDA has set an action date of April 14, 2022 under the PDUFA, and indicated that they were not currently planning an advisory committee meeting as part of the NDA review. In September 2021, we presented additional 9-month data from the HELIOS-A Phase 3 study of vutrisiran, and submitted a marketing authorisation application, or MAA, in the EU with the European Medicines Agency, or EMA. In October 2021, we reported positive topline results for 18-month endpoints and safety from the HELIOS-A Phase 3 study of vutrisiran. Based on our expertise in RNAi therapeutics and broad intellectual property estate, we have formed alliances with leading pharmaceutical and life sciences companies to support our development and commercialization efforts, including Regeneron Pharmaceuticals, Inc., or Regeneron, Novartis (which acquired our partner The Medicines Company, or MDCO, in 2020), Sanofi Genzyme, Vir Biotechnology, Inc., or Vir, and Dicerna Pharmaceuticals, Inc., or Dicerna. We have incurred significant losses since we commenced operations in 2002 and expect such losses to continue for the foreseeable future. As of September 30, 2021, we had an accumulated deficit of $5.18 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 our strategic financing collaboration with The Blackstone Group Inc., or 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 September 30, 2021, we are generating net revenue from product sales for three marketed products, ONPATTRO, GIVLAARI and OXLUMO. 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, OXLUMO or any other approved products in the future. A substantial portion of our total revenues in recent years has been derived from collaboration revenues from strategic alliances with Regeneron, Novartis and Vir. In addition to revenues from the commercial sales of ONPATTRO, GIVLAARI, OXLUMO and potentially from sales of future products, including vutrisiran, we expect our sources of potential funding for the next several years to continue to be derived in part from existing and new strategic alliances, which may include license and other fees, funded research and development, milestone payments and royalties on product sales by our licensees, as well as funding due or available to us under our strategic financing collaboration with Blackstone. The COVID-19 Pandemic In March 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic, which continues to spread throughout the U.S. and worldwide. More recently, other, potentially more infectious, variants of COVID-19 have been identified. 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 current COVID-19 pandemic. Since the onset of the global pandemic in 2020 and throughout 2021, we have been closely monitoring the spread of COVID-19 and its variants, 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 caused us to modify our business practices, including implementing a temporary global work from home policy in March 2020 for all employees who were able to perform their duties remotely and temporarily 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 and variants thereof. Where and to the extent permitted to be open under local regulations, our office sites are operational with appropriate safety precautions based on COVID-19 infection rates, vaccination rates and local guidance, and in October 2021, we formally re-opened our offices in the U.S., following openings in other territories, to those employees who have been fully vaccinated. The effects of the COVID-19 pandemic continue to evolve and, at this time, we cannot predict when certain restrictions that remain in place to protect our employees, customers and patients will no longer be needed. Recognizing that local conditions vary for our offices around the world and that the trajectory of the virus continues to be uncertain, we may adjust our plans for employees returning to our offices as deemed necessary. Since early 2021, global vaccination efforts have been underway to control the pandemic. However, due to the speed and fluidity with which the COVID-19 pandemic continues to evolve, and the emergence of highly contagious variants, 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, including the effectiveness of vaccination 29 Table of Contents campaigns, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19 and variants thereof. We will continue to work diligently with our partners and stakeholders to support patient access to our approved medicines, advance 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 ensure the continuity of our manufacturing and supply chain. 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 Since our inception, we have focused on drug discovery and development programs. Research and development expenses represent a substantial percentage of our total operating expenses, as reflected by our broad pipeline of clinical development programs, which includes multiple programs in late-stage development. Our Product Pipeline Our broad pipeline, including four approved products and multiple late and early-stage investigational RNAi therapeutics, is focused in four STArs: Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. The chart below is a summary of our commercial products and late- and early-stage development programs as of October 2021. It identifies those programs for which we have received marketing approval, the stage of our programs and our commercial rights to such programs: During the third quarter of 2021 and recent period, we reported the following updates from our commercially approved products and our late-stage clinical programs: Commercial ONPATTRO • We achieved ONPATTRO global net product revenues for the third quarter of 2021 of $120.3 million. GIVLAARI • We achieved GIVLAARI global net product revenues for the third quarter of 2021 of $31.8 million, and continued geographic expansion for GIVLAARI with pricing and reimbursement approvals in Spain, the United Kingdom, France and Japan. 30 Table of Contents OXLUMO • We achieved OXLUMO global net product revenues for the third quarter of 2021 of $14.9 million, and continued planned geographic expansion for OXLUMO with ongoing pricing and reimbursement discussions in many European countries. Leqvio • We earned royalty revenues of $0.5 million from our partner, Novartis, based on Leqvio global net product revenues in the third quarter of 2021. • Novartis announced a commercial agreement with the NHS in England as part of a collaboration to pioneer a first-of-its-kind population health management approach to address elevated LDL-C in eligible patients with ASCVD across England. Late-Stage Clinical Development • We continued to advance vutrisiran, a subcutaneously administered investigational RNAi therapeutic in development for the treatment of ATTR amyloidosis: ◦ Reported positive topline results for 18-month endpoints and safety from the HELIOS-A Phase 3 study in hATTR amyloidosis patients with polyneuropathy; ◦ Completed enrollment in the HELIOS-B Phase 3 study in ATTR amyloidosis patients with cardiomyopathy, ahead of schedule; and ◦ Submitted an MAA to the EMA, ahead of schedule, and an NDA to ANVISA in Brazil for the treatment of hATTR amyloidosis in adult patients with polyneuropathy. • We continued to advance lumasiran for the treatment of PH1: ◦ Reported positive topline results from the ILLUMINATE-C Phase 3 study in patients with advanced PH1. • Our partner, Sanofi Genzyme, continued advancement of the ATLAS Phase 3 program for fitusiran in patients with hemophilia A or B with and without inhibitors: ◦ Announced that a potential filing date for fitusiran has been moved to 2024 due to the introduction of a lower dose cohort in the ongoing phase 3 studies. There is a risk that any drug discovery or development program may not produce revenue for a variety of reasons, including the possibility that we will not be able to adequately demonstrate the safety and effectiveness of the product candidate. Moreover, there are uncertainties specific to any new field of drug discovery, including RNAi. The success of ONPATTRO, GIVLAARI, OXLUMO or any other product candidate we develop, including vutrisiran, is highly uncertain. Due to the numerous risks associated with developing drugs, including those risks associated with the COVID-19 pandemic, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of any potential product candidate or indication, or the period, if any, in which material net cash inflows will commence from any approved product or indication. 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 of our commercially approved products, 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 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 Our business strategy is to develop and commercialize a broad pipeline of RNAi therapeutic products directed towards our four STArs. As part of this strategy, we have entered into, and expect to enter into additional, collaboration and licensing agreements as a means of obtaining resources, capabilities and funding to advance our investigational RNAi therapeutic programs. Our collaboration strategy is to form alliances that create significant value for ourselves and our collaborators in the advancement of RNAi therapeutics as a new class of innovative medicines. 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. 31 Table of Contents 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 proprotein convertase subtilisin/kexin type 9, or PCSK9, for the treatment of hypercholesterolemia and other human diseases, including inclisiran. In March 2018, we entered into a discovery collaboration with Regeneron to identify RNAi therapeutics for nonalcoholic steatohepatitis, or NASH, and potentially other related diseases, and in November 2018, we and Regeneron entered into a separate, fifty-fifty collaboration to further research, co-develop and commercialize any therapeutic product candidates that emerge from these discovery efforts. In April 2020, we entered into a development and commercialization collaboration with Dicerna to advance investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin deficiency-associated liver disease, or alpha-1 liver disease. With respect to our Hepatic Infectious Disease pipeline, in October 2017, we announced an exclusive licensing agreement with Vir for the development and commercialization of RNAi therapeutics for infectious diseases, including chronic hepatitis B virus, or HBV, infection. In March 2020, we announced an expansion of our exclusive licensing agreement with Vir to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19. In April 2020, we further expanded our broad multi-target existing collaboration for the development and commercialization of RNAi therapeutics for infectious diseases to include up to three additional targets focused on host factors for SARS-CoV-2, including angiotensin converting enzyme-2, and transmembrane protease, serine 2, and potentially a third mutually selected host factor target. In July 2021, we notified Vir that we 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. 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 our exclusive licensing agreement. With respect to our Genetic Medicine pipeline, we formed a broad strategic alliance with Sanofi Genzyme in 2014. In January 2018, we and Sanofi Genzyme amended our 2014 collaboration and entered into the Exclusive License Agreement, referred to as the Exclusive TTR License, under which we have the exclusive right to pursue the further global development and commercialization of all TTR products, including ONPATTRO, vutrisiran and any back-up products, and the ALN-AT3 Global License Terms, referred to as the AT3 License Terms, under which Sanofi Genzyme has the exclusive right to pursue the further global development and commercialization of fitusiran and any back-up products. In April 2019, we and Sanofi Genzyme agreed to further amend the 2014 Sanofi Genzyme collaboration to conclude the research and option phase and to amend and restate the AT3 License Terms to modify certain of the business terms. We also have entered into license agreements to obtain rights to intellectual property in the field of RNAi. In addition, because delivery of RNAi therapeutics has historically been an important objective of our research activities, we have entered into various collaboration and licensing arrangements with other companies and academic institutions to gain access to delivery technologies, including various LNP delivery technologies, and we may enter into such agreements in the future to gain access to products or technologies. Critical Accounting Policies and Estimates 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, 2020, which we filed with the SEC on February 11, 2021. There have been no significant changes to our critical accounting policies since the beginning of this fiscal year. 32 Table of Contents Results of Operations The following data summarizes the results of our operations: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change Total revenues $ 187,633 $ 125,853 $ 61,780 49 % $ 585,752 $ 329,291 $ 256,461 78 % Operating costs and expenses $ 369,310 $ 351,052 $ 18,258 5 % $ 1,099,843 $ 963,507 $ 136,336 14 % Loss from operations $ (181,677) $ (225,199) $ 43,522 (19) % $ (514,091) $ (634,216) $ 120,125 (19) % Total other (expense) income, net $ (22,559) $ (27,253) $ 4,694 (17) % $ (77,751) $ 22,215 $ (99,966) (450) % Net loss $ (204,514) $ (253,291) $ 48,777 (19) % $ (594,364) $ (614,741) $ 20,377 (3) % Discussion of Results of Operations Revenues Total revenues consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change Net product revenues $ 167,044 $ 99,206 $ 67,838 68 % $ 463,624 $ 248,677 $ 214,947 86 % Net revenues from collaborations 20,136 26,647 (6,511) (24) % 121,328 80,614 40,714 51 % Royalty revenue 453 — 453 N/A 800 — 800 N/A Total $ 187,633 $ 125,853 $ 61,780 49 % $ 585,752 $ 329,291 $ 256,461 78 % 33 Table of Contents Net product revenues Net product revenues consist of the following, by product and region: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change ONPATTRO United States $ 51,247 $ 39,027 $ 12,220 31 % $ 153,109 $ 108,491 $ 44,618 41 % Europe 51,019 30,478 20,541 67 % 136,576 74,664 61,912 83 % Rest of World (primarily Japan) 18,051 13,011 5,040 39 % 46,422 32,560 13,862 43 % Total $ 120,317 $ 82,516 $ 37,801 46 % $ 336,107 $ 215,715 $ 120,392 56 % GIVLAARI United States $ 22,372 $ 12,108 $ 10,264 85 % $ 62,502 $ 26,043 $ 36,459 140 % Europe 7,568 4,582 2,986 65 % 22,461 6,919 15,542 225 % Rest of World (primarily Japan) 1,893 — 1,893 N/A 2,173 — 2,173 N/A Total $ 31,833 $ 16,690 $ 15,143 91 % $ 87,136 $ 32,962 $ 54,174 164 % OXLUMO United States $ 5,236 $ — $ 5,236 N/A $ 13,156 $ — $ 13,156 N/A Europe 9,658 — 9,658 N/A 27,225 — 27,225 N/A Total $ 14,894 $ — $ 14,894 N/A $ 40,381 $ — $ 40,381 N/A Total net product revenues $ 167,044 $ 99,206 $ 67,838 68 % $ 463,624 $ 248,677 $ 214,947 86 % Net product revenues increased during the three and nine months ended September 30, 2021, as compared to the same periods in the prior year, as a result of the continued, global expansion of ONPATTRO and GIVLAARI into additional major markets and increased patients on therapy, in addition to sales generated from our third commercial product, OXLUMO, following regulatory approvals in the fourth quarter of 2020. We expect net product revenues to increase for the twelve-month period ending December 31, 2021, as compared to the same period in 2020, as we continue to add new patients onto our approved, commercial products, 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 September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change Regeneron Pharmaceuticals $ 14,161 $ 14,874 $ (713) (5) % $ 90,908 $ 49,790 $ 41,118 83 % Novartis AG 4,160 1,091 3,069 281 % 21,179 6,029 15,150 251 % Vir Biotechnology 1,233 8,512 (7,279) (86) % 8,033 21,476 (13,443) (63) % Other 582 2,170 (1,588) (73) % 1,208 3,319 (2,111) (64) % Total $ 20,136 $ 26,647 $ (6,511) (24) % $ 121,328 $ 80,614 $ 40,714 51 % Net revenues from collaborations decreased during the three months ended September 30, 2021, as compared to the same period in the prior year, primarily due to a decrease in revenue recognized in connection with our collaboration agreement with Vir. Net revenues from collaborations increased during the nine months ended September 30, 2021, as compared to the same period in the prior year, primarily due to an increase in revenue recognized in connection with our collaboration agreements with Regeneron as a result of increased activities under the C5 collaboration. We expect net revenues from collaborations to increase for the twelve-month period ending December 31, 2021, as compared to the same period in 2020, primarily due to increased activities under our collaborations with Regeneron and Novartis. 34 Table of Contents Royalty revenue We earn royalty revenue from global net sales of Leqvio by our collaborator, Novartis. We expect royalty revenue to increase for the remainder of 2021 as Novartis continues to execute on its launch of Leqvio in Europe and potentially other geographies, assuming regulatory approvals. Operating Costs and Expenses Operating costs and expenses consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change Cost of goods sold $ 28,091 $ 20,826 $ 7,265 35 % $ 81,370 $ 52,393 $ 28,977 55 % Cost of collaborations and royalties 4,572 971 3,601 N/A 21,110 2,635 18,475 N/A Research and development 194,572 161,783 32,789 20 % 563,106 486,350 76,756 16 % Selling, general and administrative 142,075 167,472 (25,397) (15) % 434,257 422,129 12,128 3 % Total $ 369,310 $ 351,052 $ 18,258 5 % $ 1,099,843 $ 963,507 $ 136,336 14 % Cost of goods sold . Cost of goods sold increased during the three and nine months ended September 30, 2021, as compared to the same periods in the prior year, due to the increase in third-party royalties and sales of capitalized inventory. 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 cost of goods sold will increase for the twelve-month period ending December 31, 2021, as compared to the same period in 2020, primarily as a result of an expected increase in net product sales as well as the sale of capitalized inventory. Cost of collaborations and royalties . Cost of collaborations and royalties includes costs we incur in connection with providing commercial drug supplies, such as GalNAc, for collaborators, in addition to royalties we owe to third parties on the net sales of licensed products by Novartis. We expect cost of collaborations and royalties will increase for the twelve-month period ending December 31, 2021, as compared to the same period in 2020, as we continue to supply material to Novartis to support the manufacturing of Leqvio as Novartis executes on the product launch in Europe and prepares for other potential market approvals. Research and development . Research and development expenses consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change Clinical trial and manufacturing $ 75,639 $ 54,705 $ 20,934 38 % $ 217,683 $ 155,757 $ 61,926 40 % Compensation and related 47,168 47,982 (814) (2) % 142,547 145,459 (2,912) (2) % External services 27,982 17,512 10,470 60 % 58,734 53,450 5,284 10 % Facilities-related 19,928 18,256 1,672 9 % 59,932 51,658 8,274 16 % Stock-based compensation 12,417 13,703 (1,286) (9) % 49,878 45,542 4,336 10 % Lab supplies, materials and other 11,275 9,625 1,650 17 % 32,952 32,071 881 3 % License Fees 163 — 163 N/A 1,380 2,413 (1,033) (43) % Total $ 194,572 $ 161,783 $ 32,789 20 % $ 563,106 $ 486,350 $ 76,756 16 % For the three and nine months ended September 30, 2021, the increase in research and development expenses, as compared to the same period in the prior year, was primarily related to increased expenses associated with activities related to the advancement of our early- and late-stage programs. During the three and nine months ended September 30, 2021 and 2020, in connection with advancing activities under our collaboration agreements, we incurred research and development expenses, primarily related to external development and clinical expenses, including manufacturing of clinical product. 35 Table of Contents 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 September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Regeneron Pharmaceuticals $ 14,401 $ 12,565 $ 51,972 $ 44,108 Vir Biotechnology 1,102 4,903 5,526 11,782 Other 235 1,076 2,039 3,242 Total $ 15,738 $ 18,544 $ 59,537 $ 59,132 Selling, general and administrative . Selling, general and administrative expenses consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change Compensation and related $ 52,075 $ 53,532 $ (1,457) (3) % $ 162,516 $ 148,502 $ 14,014 9 % Consulting and professional services 45,622 40,008 5,614 14 % 129,887 120,318 9,569 8 % Stock-based compensation 20,950 23,561 (2,611) (11) % 71,257 60,055 11,202 19 % Facilities-related 10,343 11,299 (956) (8) % 33,944 32,695 1,249 4 % Other 13,085 39,072 (25,987) (67) % 36,653 60,559 (23,906) (39) % Total $ 142,075 $ 167,472 $ (25,397) (15) % $ 434,257 $ 422,129 $ 12,128 3 % For the three months ended September 30, 2021, the decrease in selling, general and administrative expenses, as compared to the same periods in the prior year, was primarily due to a change in an estimate of contingent liabilities related to our arbitration with Ionis Pharmaceuticals, Inc. in 2020. For the nine months ended September 30, 2021, the increase in selling, general and administrative expenses, as compared to the same periods in the prior year, was primarily related to increases in compensation and related expenses and stock-based compensation expense as a result of increased headcount to support our Alnylam P 5 x25 strategy, offset by a change in an estimate of contingent liabilities related to our arbitration with Ionis Pharmaceuticals, Inc. in 2020. We expect that research and development expenses combined with selling, general and administrative expenses will increase for the twelve-month period ending December 31, 2021, as compared to the same period in 2020, 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, OXLUMO and potentially additional product launches, including vutrisiran. 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. 36 Table of Contents Other (Expense) Income. Other (expense) income consists of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2021 2020 $ Change % Change 2021 2020 $ Change % Change Interest expense $ (40,274) $ (28,731) $ (11,543) 40 % $ (106,205) $ (55,979) $ (50,226) 90 % Interest income 225 2,072 (1,847) (89) % 1,084 10,717 (9,633) (90) % Other (expense) income, net Realized and unrealized gains (losses) on marketable equity securities 18,691 (3,017) 21,708 (720) % 61,273 66,626 (5,353) (8) % Change in fair value of development derivative liability 3,188 (1,229) 4,417 N/A (19,655) (1,229) (18,426) N/A Other (4,389) 3,652 (8,041) (220) % (14,248) 2,080 (16,328) (785) % Total $ (22,559) $ (27,253) $ 4,694 (17) % $ (77,751) $ 22,215 $ (99,966) (450) % For the three months ended September 30, 2021, total other expense, net, decreased, as compared to the same period in the prior year, primarily due to realized and unrealized gains on marketable equity securities offset by increases in interest expense associated with the sale of future royalties and the drawdown of our credit facility beginning in December 2020. For the nine months ended September 30, 2021, total other expense, net, increased, as compared to total other income, net, in the same period in the prior year, primarily due to increases in interest expense associated with the sale of future royalties and the drawdown of our credit facility beginning in December 2020. We expect total other expense, net, will increase for the twelve-month period ending December 31, 2021, as compared to the same period in 2020, as we continue to incur interest expense on our long-term debt and sale of future royalties. Liquidity and Capital Resources The following table summarizes our cash flow activities: Nine Months Ended September 30, (In thousands) 2021 2020 Net loss $ (594,364) $ (614,741) Non-cash adjustments to reconcile net loss to net cash used in operating activities: 250,524 150,133 Changes in operating assets and liabilities (147,712) (27,209) Net cash used in operating activities (491,552) (491,817) Net cash provided by (used in) investing activities 140,105 (337,630) Net cash provided by financing activities 954,827 777,029 Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,968) 1,946 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 Cash, cash equivalents and restricted cash, end of period $ 1,096,458 $ 499,156 Since we commenced operations in 2002, we have generated significant losses. As of September 30, 2021, we had an accumulated deficit of $5.18 billion. As of September 30, 2021, we had cash, cash equivalents and marketable securities of $2.33 billion, compared to $1.87 billion as of December 31, 2020. Operating activities Net cash used in operating activities was relatively consistent during the nine months ended September 30, 2021, compared to the same period in 2020, as stronger cash receipts from increased product sales were largely offset by cash disbursements related to working capital receipts and payments. 37 Table of Contents Investing activities Net cash provided by investing activities increased during the nine months ended September 30, 2021, compared to the same period in the prior year, reflecting timing differences related to purchases, sales, and maturities of debt securities and changes in our portfolio-mix. Financing activities Net cash provided by financing activities increased during the nine months ended September 30, 2021, compared to the same period in the prior year, primarily due to proceeds of $250.0 million in connection with the second drawdown on our credit agreement, received in June 2021. Operating Capital Requirements We currently have programs focused on a number of therapeutic areas and, as of September 30, 2021, have received regulatory approval and commercially launched three products: ONPATTRO, GIVLAARI and OXLUMO. In early 2021, we announced our Alnylam P 5 x25 strategy, which is aimed at our planned transition to a top 5 biotech in market capitalization. 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. 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 losses 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, manufacturing 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 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 long-term strategic goals for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q. However, due to numerous factors described in more detail under the caption Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q, we may require significant additional funds earlier than we currently expect in order to continue to commercialize ONPATTRO, GIVLAARI and OXLUMO, and to develop, conduct clinical trials for, manufacture and, if approved, commercialize additional product candidates, including vutrisiran. Contractual Obligations and Commitments 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, 2020. There have been no material changes in our contractual obligations and commitments since December 31, 2020.