What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-10 compared with 2021-02-11 · 282 added, 453 removed, 1005 unchanged (42% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets as of December 31, 2021 and 2020

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue from contracts with customers in 2018.

Basis for Opinions

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The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of critical audit matters does not alter in any way our opinion on the consolidated

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Liability Related to Sale of Future Royalties and Commercial Milestones

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Management periodically assesses the expected payments and to the extent the amount or timing of the future estimated payments is materially different than the previous estimates, management accounts for any such change by adjusting the liability related to the sale of future royalties and prospectively recognizing the related non-cash interest expense.

Management’s estimate of the amount of expected future payments to Blackstone over the life of the arrangement is based on the estimated global net sales of inclisiran .

Management’s estimate of the amount of expected future payments to Blackstone over the life of the arrangement is based on the estimated global net sales of Leqvio .

Th e Company recorded a liability related to the sale of future royalties of $1.19 billion as of December 31, 2021 and recognized interest expense on the liability related to the sale of future royalties of $116.9 million for the year ended December 31, 2021.

The principal considerations for our determination that performing procedures relating to the liability related to the sale of future royalties and commercial milestones is a critical audit matter are the significant judgment by management when developing the estimate of the timing and amount of future royalties and commercial milestones to be paid.

This in turn led to a high degree of auditor judgment and effort in performing procedures and in evaluating audit evidence relating to management’s estimate of the expected future royalties and commercial milestones to be paid and the selection of third party data used to estimate global net sales of inclisiran.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the liability for future royalties and commercial milestones, including controls over management’s process for developing the estimate of timing and amount of future royalties and commercial milestones to be paid .

These procedures also included, among others (i) testing management’s process for developing the estimate of timing and amount of future royalties and commercial milestones to be paid and (ii) evaluating the reasonableness of significant assumptions used by management when developing the estimate of expected future royalties and commercial milestones to be paid related to the selection of third party data used to estimate global net sales of inclisiran.

Evaluating management’s assumption related to the selection of third-party data used to estimate global net sales of inclisiran involved evaluating whether the assumptions used by management were reasonable considering consistency with industry data.

Evaluating management’s assumption related to the selection of third-party data used to estimate global net sales of Leqvio involved evaluating whether the assumptions used by management were reasonable considering consistency with industry data.

/s/ PricewaterhouseCoopers LLP

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Deferred revenue, net of current portion 152,360 225,094

Long-term debt 191,278 —

Long-term debt, net 675,697 191,278

Liability related to the sale of future royalties, net of current portion 1,151,024 1,058,225

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

Common stock, $ 0.01 par value per share, 250,000 and 250,000 shares authorized as of December 31, 2020 and December 31, 2019, respectively;

Common stock, $ 0.01 par value per share, 250,000 shares authorized as of December 31, 2021 and December 31, 2020, respectively;

120,182 shares issued and outstanding as of December 31, 2021;

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Net revenues from collaborations 180,953 131,333 53,213

Royalty revenue 1,196 — —

Total revenues 844,287 492,853 219,750

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Cost of goods sold 115,005 74,185 25,062

Cost of collaborations and royalties 25,139 3,867 —

Research and development 792,156 654,819 655,114

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Interest income 1,579 11,809 33,448

Other income, net 45,525 20,730 24,737

Total other (expense) income ( 27,162 ) 54,178 53,999

Other (expense) income, net ( 2,050 ) 45,525 20,730

Total other (expense) income, net ( 143,492 ) ( 27,162 ) 54,178

Loss before income taxes ( 852,144 ) ( 855,600 ) ( 885,253 )

Provision for income taxes ( 2,681 ) ( 863 ) ( 823 )

Benefit (provision) for income taxes ( 680 ) ( 2,681 ) ( 863 )

Net loss $ ( 852,824 ) $ ( 858,281 ) $ ( 886,116 )

Net loss per common share — basic and diluted $ ( 7.20 ) $ ( 7.46 ) $ ( 8.11 )

Weighted-average common shares used to compute basic and diluted net loss

per common share 114,986 109,264 100,590

Weighted-average common shares used to compute basic and diluted net loss per common share 118,451 114,986 109,264

Statements of Comprehensive Loss

Net loss $ ( 852,824 ) $ ( 858,281 ) $ ( 886,116 )

Other comprehensive (loss) income:

Unrealized gain on marketable securities 211 558 1,220

Foreign currency translation loss ( 7,081 ) ( 343 ) —

Other comprehensive income (loss):

Unrealized (loss) gain on marketable securities ( 1,978 ) 211 558

Foreign currency translation gain (loss) 11,398 ( 7,081 ) ( 343 )

Defined benefit pension plans, net of tax 943 ( 234 ) ( 3,520 )

Total other comprehensive income (loss) 10,363 ( 7,104 ) ( 3,305 )

Comprehensive loss $ ( 842,461 ) $ ( 865,385 ) $ ( 889,421 )

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Balance as of December 31, 2018 101,177 $ 1,011 $ 4,175,139 $ ( 33,213 ) $ ( 2,840,972 ) $ 1,301,965

Cumulative effect adjustment from the adoption of new revenue standard — — — — 68,210 68,210

Exercise of common stock options, net of tax withholdings

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Issuance of common stock under benefit plans 61 1 5,032 — — 5,033

Stock-based compensation expense related to equity-classified awards — — 158,642 — — 158,642

Other comprehensive gain, net of tax — — — 1,220 — 1,220

Issuance of common stock, net of offering costs 9,444 94 772,383 — — 772,477

Stock-based compensation expense — — 177,230 — — 177,230

Other comprehensive loss, net of tax — — — ( 3,305 ) — ( 3,305 )

Net loss — — — — ( 886,116 ) ( 886,116 )

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Issuance of common stock under equity plans 350 4 11,079 — — 11,083

Issuance of common stock under benefit plans 61 1 5,032 — — 5,033

Issuance of common stock, net of offering costs 9,444 94 772,383 — — 772,477

Stock-based compensation expense related to equity-classified awards — — 177,230 — — 177,230

Other comprehensive loss, net of tax — — — ( 3,305 ) — ( 3,305 )

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

Stock-based compensation expense — — 142,988 — — 142,988

Other comprehensive loss — — — ( 7,104 ) — ( 7,104 )

Net loss — — — — ( 858,281 ) ( 858,281 )

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Issuance of common stock under equity plans 777 8 13,623 — — 13,631

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

Stock-based compensation expense

— — 168,300 — — 168,300

Other comprehensive loss — — — ( 7,104 ) — ( 7,104 )

Other comprehensive gain — — — 10,363 — 10,363

Net loss — — — — ( 852,824 ) ( 852,824 )

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Realized and unrealized gain on marketable equity securities ( 55,695 ) ( 54,042 ) ( 11,288 )

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

Gain on litigation settlement — — ( 10,000 )

Other 57,676 11,259 ( 12,613 )

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Accounts receivable, net ( 101,799 ) ( 56,236 ) ( 24,238 )

Proceeds from landlord lease incentive for tenant improvements 5,550 30,170 25,350

Inventory ( 26,415 ) ( 35,426 ) ( 32,411 )

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Purchases of restricted investments ( 42,141 ) ( 25,900 ) —

Other ( 5,300 ) ( 7,000 ) —

Net cash (used in) provided by investing activities ( 435,518 ) ( 417,677 ) 272,945

Other investing activities ( 4,198 ) ( 5,300 ) ( 7,000 )

Net cash used in investing activities ( 273,300 ) ( 435,518 ) ( 417,677 )

Cash flows from financing activities:

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Offering proceeds, net of costs — — 381,900

Proceeds from issuance of term loan 200,000 — —

Repayment of term loan — ( 30,000 ) —

Proceeds from term loan facility 500,000 200,000 —

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

Payment of transaction costs related to sale of future royalties and term loan ( 13,403 ) — —

Other financing activities ( 18,750 ) ( 13,403 ) ( 30,000 )

Net cash provided by financing activities 1,247,118 994,979 823,184

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 9,018 ) 4,918 ( 83 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 50,582 ) 126,997 ( 224,201 )

Net increase (decrease) in cash, cash equivalents and restricted cash 323,107 ( 50,582 ) 126,997

Cash, cash equivalents and restricted cash, beginning of period 499,046 549,628 422,631

Cash, cash equivalents and restricted cash, end of period $ 822,153 $ 499,046 $ 549,628

Supplemental disclosure of cash flows:

Cash paid for interest $ 24,657 $ — $ 172

Supplemental disclosure of noncash investing and financing activities:

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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.

Since inception, we have focused on discovering, developing and commercializing RNAi therapeutics by establishing and maintaining a strong intellectual property position in the RNAi field, establishing strategic alliances with leading pharmaceutical and life sciences companies, generating revenues through licensing agreements, and ultimately developing and commercializing RNAi therapeutics globally, either independently or with our strategic partners.

We have devoted substantially all of our efforts to business planning, research, development, manufacturing and commercial efforts, acquiring, filing and expanding intellectual property rights, recruiting management and technical staff, and raising capital.

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

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

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

In 2020, we obtained additional regulatory approval from the EC for GIVLAARI and expanded into European and other markets.

In the fourth quarter of 2020, we received regulatory approval from the FDA and EC for OXLUMO and began recording net product revenues subsequent to commercial launch.

Regulatory filings in additional markets are pending or planned for 2021 and beyond for each of our commercial products.

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

and certain of its affiliates which includes a purchase and sale agreement, a credit agreement, a funding agreement for the clinical development of vutrisiran and ALN-AGT and a stock purchase agreement, under which The Blackstone Group Inc.

and certain of its affiliates will provide up to $ 2.00 billion to support our advancement of innovative RNAi therapeutics.

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

Please read Note 5, Note 7, Note 8 and Note 13, respectively, for additional information regarding each executed agreement set forth above.

We have devoted substantially all of our efforts to business planning, research, development, manufacturing and early commercial efforts, acquiring, filing and expanding intellectual property rights, recruiting management and technical staff, and raising capital.

In early 2021, we launched our Alnylam P 5 x25 strategy, which focuses on our planned transition to a top five biotech company 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.

As of December 31, 2021, we have four products that have received marketing approval, including one partnered product, and five 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 United States, or U.S., Europe and Japan.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Actual results could differ from those estimates.

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

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

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

Actual results may differ from these estimates.

Reclassification

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period presentation.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of December 31, 2020, together with the cash we expect to generate from product sales and under our current alliances, including 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 annual report on Form 10-K.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of December 31, 2021, together with the cash we expect to generate from product sales and under our current alliances, including milestones and royalties on Leqvio sales, 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 Annual Report on Form 10-K.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities.

Financial instruments that potentially expose us to concentrations of credit risk primarily consist of cash, cash equivalents and marketable securities.

As of December 31, 2021 and 2020, substantially all of our cash, cash equivalents and marketable securities were invested in money market funds, certificates of deposit, commercial paper, corporate notes, U.S.

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treasury securities through highly rated financial institutions.

Corporate notes may also include foreign bonds denominated in U.S.

Corporate notes may also

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

include foreign bonds denominated in U.S.

Investments are restricted, in accordance with our investment policy, to a concentration limit per issuer.

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Regeneron Pharmaceuticals 11 % 12 % *

Sanofi Genzyme * * 58 %

Vir Biotechnology * * 16 %

__________________________________________

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As of December 31,

Distributor A 19 % 28 %

Novartis AG 20 % 16 %

Distributor B 14 % 10 %

Distributor A 14 % 19 %

Regeneron Pharmaceuticals 12 % 11 %

Sanofi Genzyme * 14 %

__________________________________________

* Represents less than 10%

Distributor B 10 % 14 %

Fair Value Measurements

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We report available-for-sale debt securities at fair value at each balance sheet date and include any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive (loss) income, a component of stockholders’ equity.

Realized gains and losses are determined using the specific

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

identification method and are included in other income (expense).

Realized gains and losses are determined using the specific identification method and are included in other income (expense).

If any adjustment to fair value reflects a decline in the value of the marketable debt securities, we consider all available evidence to evaluate if an impairment loss exists, and if so, mark the investment to market through a charge to our consolidated statements of operations and comprehensive loss.

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For our marketable debt securities, we perform our own review of prices received from the independent pricing services by comparing these prices to other sources and for our marketable equity securities, we confirm those securities are trading in active markets.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

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Depreciation expense is recorded on a straight-line basis over the estimated useful life of the asset.

Leasehold improvements are amortized over the shorter of the asset’s estimated useful life or the lease term.

Construction in progress reflects amounts incurred for construction or improvements of property, plant or equipment that have not been placed in service.

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During the years ended December 31, 2021, 2020 and 2019, we recorded $ 36.8 million, $ 30.2 million and $ 16.6 million, respectively, of depreciation expense related to our property, plant and equipment.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated useful lives of property, plant and equipment are as follows:

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Buildings 40 years

Effective January 1, 2019, we adopted Accounting Standards Update, or ASU, 2016-02, Leases Topic 842, or ASC 842, using a modified retrospective basis and utilizing the effective date as the date of initial application.

We determine if an arrangement is a lease at contract inception based on the facts and circumstances present in the arrangement.

All our leases are classified as operating leases under the new leasing standard.

All of our leases are classified as operating leases.

W e record operating lease assets and lease liabilities in our consolidated balance sheets.

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As most of our leases do not provide an implicit rate, in determining the operating lease liabilities, we use an estimate of our incremental borrowing rate based on the information available at commencement.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Lease expense for lease

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

payments is recognized on a straight-line basis over the lease term.

Short-term leases, or leases that have a lease term of 12 months or less at commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

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As of December 31, 2021 and 2020, we had no t capitalized any costs to obtain any of our contracts.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net Product Revenues

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We are also subject to potential rebates in connection with our value-based agreements with certain commercial payors.

We record reserves for rebates in the same period the related product revenue is recognized, resulting in a reduction of product revenues and a current liability that is included in accrued expenses on our consolidated balance sheet.

We record reserves for rebates in the same period the related product revenue is recognized, resulting in a

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reduction of product revenues and a current liability that is included in accrued expenses on our consolidated balance sheet.

Our estimate for rebates is based on statutory discount rates, expected utilization or an estimated number of patients on treatment, as applicable.

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Variable consideration such as performance-based milestones will be included in the total consideration if we expect to receive such consideration and if it is probable that the inclusion of the variable consideration will not result in a significant reversal in the cumulative amount of revenue recognized under the arrangement.

Our estimate of the total consideration we expect to receive under each collaboration arrangement is updated for each reporting period, and any

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

adjustments to revenue are recorded on a cumulative catch-up basis.

Our estimate of the total consideration we expect to receive under each collaboration arrangement is updated for each reporting period, and any adjustments to revenue are recorded on a cumulative catch-up basis.

We exclude sales-based royalty and milestone payments from the total consideration we expect to receive until the underlying sales occur because the license to our intellectual property is deemed to be the predominant item to which the royalties or milestones relate as it is the primary driver of value in our collaboration arrangements.

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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 during the respective period (including salary-related and stock-based compensation expenses for employees involved with production and distribution, freight and indirect overhead costs), third-party royalties payable on our net product revenues, amortization of intangible assets associated with the sale of our products and costs related to sales of product supply under our collaboration agreements.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cost of goods sold may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and overhead costs, and manufacturing variances.

Cost of Collaborations and Royalties

Cost of collaborations and royalties includes costs we incur in connection with providing commercial drug supplies, such as GalNAc material, to collaborators, in addition to royalties we owe to third parties on the net sales of licensed products by Novartis.

We account for income taxes under the asset and liability method.

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Stock-Based Compensation

We recognize stock-based compensation expense for grants under our stock incentive plans and employee stock purchase plan, as well as inducement stock grants outside of our stock incentive plans.

We account for all stock-based awards granted to employees at their fair value and generally recognize compensation expense over the vesting period of the award.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the amount of stock-based compensation to be recorded requires us to develop estimates of fair values of stock options as of the grant date.

We recognize stock-based compensation expense for grants under our stock incentive plans and employee stock purchase plan.

We account for all stock-based awards granted to employees at their fair value and recognize compensation expense over the vesting period of the award.

Determining the amount of stock-based compensation to be recorded requires us to develop estimates of fair values of stock options as of the grant date.

We calculate the grant date fair values of stock options using the Black-Scholes valuation model, which requires the input of subjective assumptions, including but not limited to expected stock price volatility over the term of the awards and the expected term of stock options.

The fair value of restricted stock awards granted to employees is based upon the quoted closing market price per share on the date of grant.

We have performance conditions included in certain of our stock option and restricted stock awards that are based upon the achievement of pre-specified clinical development, regulatory and/or commercial events.

As the outcome of each event has inherent risk and uncertainties, and a positive outcome may not be known until the event is achieved, we begin to recognize the value of the performance-based stock option and restricted stock awards when we determine the achievement of each performance condition is deemed probable, a determination which requires significant judgment by management.

We have performance conditions included in certain of our restricted stock awards that are based upon the achievement of pre-specified clinical development, regulatory, commercial and/or financial performance events.

As the outcome of each event has inherent risk and uncertainties, and a positive outcome may not be known until the event is achieved, we begin to recognize the value of the performance-based restricted stock awards when we determine the achievement of each performance condition is deemed probable, a determination which requires significant judgment by management.

At the probable date, we record a cumulative expense catch-up, with remaining expense amortized over the remaining service period.

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

The liability related to the sale of future royalties and the related interest expense are based on our current estimates of future royalties and commercial milestones expected to be paid over the life of the arrangement, which we determine by using third-party forecasts of inclisiran’s global net revenue.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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Please read Note 3 for information regarding our net product sales by geography.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-13 which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred.

For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment.

The new standard became effective for us on January 1, 2020 and did not have a significant impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13 amending accounting guidance that eliminate, add and modify certain disclosure requirements on fair value measurements.

The new standard became effective for us on January 1, 2020 and did not have a significant impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15 to clarify the accounting for implementation costs in cloud computing arrangements (hosting arrangements).

The new standard requires a customer in a cloud computing arrangement to determine which implementation costs to capitalize as assets or expense as incurred.

Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use.

The new standard became effective for us on January 1, 2020 and did not have a significant impact on our consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18 to clarify the interaction between the accounting guidance for collaborative arrangements and revenue from contracts with customers.

The new standard became effective for us on January 1, 2020 using a retrospective transition method.

This standard did not have a significant impact on our consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12 amending accounting guidance that simplify the accounting for income taxes, as part of its initiative to reduce complexity in the accounting standards.

In December 2019, the Financial Accounting Standards Board, or FASB, issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Taxes, amending accounting guidance that simplify the accounting for income taxes, as part of its initiative to reduce complexity in the accounting standards.

The amendments eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

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

In May 2014, the FASB issued new accounting guidance related to revenue recognition (ASC 606), which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition accounting guidance and requires increased disclosures.

We adopted ASC 606 in the first quarter of 2018 and recognized the cumulative effect of initially applying ASC 606 as an adjustment to opening retained earnings for the year ended December 31, 2018.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NET PRODUCT REVENUES

Net product revenues by geography consist of the following:

Net product revenues consist of the following:

Year Ended December 31,

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Total $ 127,815 $ 55,106 $ 150

United States $ 18,876 $ — $ —

Europe 38,949 333 —

Rest of World 1,761 — —

Total $ 59,586 $ 333 $ —

Total net product revenues $ 662,138 $ 361,520 $ 166,537

As of December 31, 2021 and 2020, net product revenue-related receivables of $ 124.9 million and $ 68.9 million , respectively, were included in “Accounts receivable, net.”

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020 and 2019, net product revenue-related receivables of $ 68.9 million and $ 28.1 million , respectively, were included in “Accounts receivable, net.”

The following table summarizes balances and activity in each product revenue allowance and reserve category:

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Total $ 90,705 $ 639 $ 3,763 $ 95,107

During the year ended December 31, 2021 , we paid $ 56.4 million attributed to the finalization of pricing and reimbursement for the sale of ONPATTRO in France.

NET REVENUES FROM COLLABORATIONS

The following table summarizes our total consolidated net revenues from collaborations:

Net revenues from collaborations consist of the following:

Year Ended December 31,

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Regeneron Pharmaceuticals $ 113,226 $ 74,072 $ 26,075

Vir Biotechnology 31,396 12,809 12,778

49,120 22,208 2,315

Sanofi Genzyme 995 10,976 46,000

Vir Biotechnology 16,897 31,396 12,809

Other 1,710 3,657 12,014

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

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

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:

Year Ended December 31,

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Regeneron $ 24,989 $ 840 $ 47,582 $ 13,302 $ 171 $ 44,360 $ 2,793 $ 344 $ 21,779

Sanofi Genzyme 644 181 2,132 11,505 334 2,017 36,600 5,340 1,279

Vir 9,546 723 3,080 18,470 584 11,590 10,353 381 4,745

Novartis 999 — 700 2,025 — 696 1,664 2 203

Other 765 52 1,409 1,643 181 2,832 13,530 334 2,713

Total $ 35,300 $ 1,615 $ 52,071 $ 33,415 $ 936 $ 58,782 $ 26,676 $ 1,059 $ 29,237

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

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 revenues from collaborations.

For the years ended December 31, 2021, 2020 and 2019, 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 $ 17.1 million, $ 11.1 million, and $ 1.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, from cost reimbursement due under certain of our collaboration agreements accounted for under ASC 808.

Product Alliances

Regeneron Pharmaceuticals, Inc.

On April 8, 2019, we entered into a global, strategic collaboration with Regeneron Pharmaceuticals, Inc., or Regeneron, to discover, develop and commercialize RNAi therapeutics for a broad range of diseases by addressing therapeutic targets expressed in the eye and central nervous system, or CNS, in addition to a select number of targets expressed in the liver, which we refer to as the Regeneron Collaboration.

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

In 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.

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 3 development, and cemdisiran.

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Under the terms of the Regeneron Collaboration, we are working exclusively with Regeneron to discover RNAi therapeutics for eye and CNS diseases for an initial five-year research period, which we refer to as the Initial Research Term.

Regeneron has an option to extend the Initial Research Term (referred to as the Research Term Extension Period, and together with the Initial Research Term, the Research Term) for up to an additional two years , for a research term extension fee of up to $ 400.0 million.

Regeneron has an option to extend the Initial Research Term (referred to as the Research Term Extension Period, and together with the Initial Research Term, the Research Term) for up to an additional five years , for a research term extension fee of up to $ 400.0 million.

The Regeneron Collaboration also covers a select number of RNAi therapeutic programs designed to target genes expressed in the liver, including our previously announced collaboration with Regeneron to identify RNAi therapeutics for the chronic liver disease nonalcoholic steatohepatitis.

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Regeneron will lead development and commercialization for all programs targeting eye diseases (subject to limited exceptions), entitling us to certain potential milestone and royalty payments pursuant to the terms of a license agreement, the form of which has been agreed upon by the parties.

We and Regeneron will alternate leadership on CNS and liver programs, with the lead party retaining global development and commercial responsibility.

For CNS and liver programs, both we and Regeneron will have the option at lead candidate selection to enter into a co-co collaboration agreement, the form of which has been agreed upon by the parties, whereby both companies will share equally all costs of, and profits from, all development and commercialization activities under the program.

We and Regeneron will alternate leadership on CNS and liver programs covered by the Regeneron Collaboration, with the lead party retaining global development and commercial responsibility.

For such CNS and liver programs, both we and Regeneron will have the option at lead candidate selection to enter into a co-co collaboration agreement, the form of which has been agreed upon by the parties, whereby both companies will share equally all costs of, and profits from, all development and commercialization activities under the program.

If the non-lead party elects to not enter into a co-co collaboration agreement with respect to a given CNS or liver program, we and Regeneron will enter into a license agreement with respect to such program and the lead party will be the “Licensee” for the purposes of the license agreement.

If the lead party for a CNS or liver program elects to not enter into the co-co collaboration agreement, then we and Regeneron will enter into a license agreement

If the lead party for a CNS or liver program elects to not enter into the co-co collaboration agreement, then we and

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with respect to such program and leadership of the program will transfer to the other party and the former non-lead party will be the “Licensee” for the purposes of the license agreement.

Regeneron will enter into a license agreement with respect to such program and leadership of the program will transfer to the other party and the former non-lead party will be the “Licensee” for the purposes of the license agreement.

With respect to the programs directed to C5 complement-mediated diseases, we retain control of cemdisiran monotherapy development, and Regeneron is leading combination product development.

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Reimbursement of our share of costs will be recognized as a reduction to research and development expense in the consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2020 and 2019, we recognized $ 5.4 million and $ 0.0 million, respectively, as a reduction to research and development expense.

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

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Similarly, the worldwide license to cemdisiran for combination therapies is not distinct from the manufacturing and supply and development service obligations, as Regeneron cannot benefit on its own from the value of the license without receipt of supply.

Separately, the cemdisiran monotherapy co-co collaboration agreement is under the scope of ASC 808 as we and Regeneron are both active participants in the development and manufacturing activities and are exposed to significant risks and

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rewards that are dependent on commercial success of the activities of the arrangement.

The development and manufacturing activities are a combined unit of account under the scope of ASC 808 and are not deliverables under ASC 606.

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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 December 31, 2020, the total transaction price was determined to be $ 531.8 million, a decrease of $ 23.3 million from December 31, 2019.

We re-evaluate the transaction price as of the end of each reporting period and as of December 31, 2021, the total transaction price was determined to be $ 538.4 million, an increase of $ 6.6 million from December 31, 2020.

As of December 31, 2021, the transaction price is comprised of the upfront payment and variable consideration related to development, manufacture and supply activities.

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Revenue Recognized During

Performance Obligations Year Ended December 31, 2020 Year Ended December 31, 2019 Accounting Guidance

Performance Obligations Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 Accounting Guidance

Research Services Obligation $ 37,600 $ 44,800 $ 21,000 ASC 606

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

Sanofi Genzyme

2014 Sanofi Genzyme Collaboration, as amended in January 2018 and further amended in April 2019

In January 2014, we entered into the 2014 Sanofi Genzyme collaboration.

The 2014 Sanofi Genzyme collaboration superseded and replaced the 2012 Sanofi Genzyme agreement and was amended in January 2018, at which time we also entered into an Exclusive License Agreement, referred to as the Exclusive TTR License, as well as the ALN-AT3 Global License Terms, referred to as the AT3 License Terms, as described below.

The 2014 Sanofi Genzyme collaboration and the AT3 License Terms were further amended in April 2019.

Under the 2014 Sanofi Genzyme collaboration, certain of Sanofi Genzyme’s specific license rights and the programs which Sanofi Genzyme opted into prior to the 2018 amendment included the following:

• Upon the effective date of the 2014 Sanofi Genzyme collaboration, Sanofi Genzyme opted into a broader regional license and collaboration for patisiran, which was originally established under the 2012 Sanofi Genzyme agreement, and a co-development/co-commercialization license for revusiran.

As part of our TTR program, we are also developing vutrisiran.

Sanofi Genzyme had a right to elect a co-development/co-commercialization license for vutrisiran.

• In September 2015, Sanofi Genzyme elected to opt into our fitusiran clinical development program for the treatment of hemophilia under the regional license terms.

Cost-sharing for the fitusiran program began in January 2016 under the regional license terms.

Sanofi Genzyme also had the right to elect to co-develop and co-commercialize fitusiran in the U.S., Canada and Western Europe, referred to as the Alnylam Territory, pursuant to the co-development/co-commercialization license terms.

Upon opt-in, we retained product rights in the Alnylam Territory, while Sanofi Genzyme obtained exclusive rights to develop and commercialize fitusiran in the rest of the world, referred to as the Sanofi Genzyme Territory, and to co-commercialize the product in the Alnylam Territory.

In November 2016, Sanofi Genzyme exercised that right and elected to co-develop and co-commercialize fitusiran in the Alnylam Territory.

Development costs for co-development/co-commercialization products, once Sanofi Genzyme exercised an option, were shared between Sanofi Genzyme and us, with Sanofi Genzyme responsible for 50 % of the global development costs.

In connection with the exercise of its co-development/co-commercialization rights for fitusiran, Sanofi Genzyme paid us approximately $ 6.0 million in January 2017 for its incremental share of co-development costs incurred from January 2016 through September 2016.

Sanofi Genzyme was required to make certain milestone payments for fitusiran, and in December 2014, we earned a development milestone payment of $ 25.0 million based upon the initiation of the first global Phase 3 clinical trial for revusiran.

Sanofi Genzyme was also obligated to pay us a milestone of $ 25.0 million upon the dosing of the first patient in our ATLAS Phase 3 program for fitusiran.

In addition, Sanofi Genzyme was required to pay tiered double-digit royalties up to 20 % for each co-development/co-

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commercialization product based on annual net sales, if any, in the Sanofi Genzyme Territory for such product by Sanofi Genzyme, its affiliates and sublicensees.

The parties were to share profits equally and we expected to book product sales in the Alnylam Territory.

• During 2016, Sanofi Genzyme elected not to opt into the development and commercialization of givosiran or cemdisiran in the Sanofi Genzyme Territory.

Sanofi Genzyme’s rights with respect to patisiran and fitusiran were modified in connection with the 2018 amendment, the Exclusive TTR License and the AT3 License Terms, as described below.

At such time, Sanofi Genzyme had the right to opt into our future rare genetic disease programs for development and commercialization in the Sanofi Genzyme Territory under the regional license terms.

In connection with the 2018 amendment, the Exclusive TTR License and the AT3 License Terms, we and Sanofi Genzyme agreed to terminate the co-development and co-commercialization rights related to revusiran, vutrisiran and fitusiran under the 2014 Sanofi Genzyme collaboration, and further agreed that no future rights would be granted to Sanofi Genzyme for co-development and co-commercialization under the 2014 Sanofi Genzyme collaboration, as amended by the 2018 amendment.

During the first quarter of 2018, Sanofi Genzyme elected not to exercise its global option for our lumasiran program.

In April 2019, we and Sanofi Genzyme further amended the 2014 Sanofi Genzyme collaboration, which we refer to as the Collaboration Amendment.

Under the Collaboration Amendment, we and Sanofi Genzyme agreed to conclude the research and option phase under our collaboration agreement.

In connection and simultaneously with entering into the Collaboration Amendment, we and Sanofi Genzyme also entered into the Amended and Restated ALN-AT3 Global License Terms, with respect to ALN-AT3 (fitusiran) and certain back-up products, which we refer to as the A&R AT3 License Terms.

The A&R AT3 License Terms amend and restate the original AT3 License Terms to modify certain of the business terms.

The material collaboration terms for fitusiran continued unchanged.

Such terms are described below.

Exclusive TTR License and A&R AT3 License Terms

As noted above, the 2018 amendment, together with the Exclusive TTR License and the original AT3 License Terms, revised the terms and conditions of the 2014 Sanofi Genzyme collaboration to (i) provide us the exclusive right to pursue the further global development and commercialization of all TTR products, including ONPATTRO, vutrisiran and any back-up products, (ii) provide Sanofi Genzyme the exclusive right to pursue the further global development and commercialization of fitusiran and any back-up products and (iii) terminate the previous co-development and co-commercialization rights related to revusiran, vutrisiran and fitusiran under the 2014 Sanofi Genzyme collaboration.

As a result, we are funding all development and commercialization costs for ONPATTRO and vutrisiran.

We also funded development and commercialization costs for fitusiran through the transition period, up to a cap of $ 50.0 million, after which Sanofi Genzyme became responsible for funding all development and commercialization costs for fitusiran.

We completed the transition period relating to the transition of the fitusiran program to Sanofi Genzyme in 2018.

Each party was responsible for its costs associated with the transfer of the respective program to the other party.

Under the 2018 amendment and the Exclusive TTR License, Sanofi Genzyme is eligible to receive (i) royalties up to 25 %, increasing over time, based on annual net sales of ONPATTRO in territories excluding the U.S., Canada and Western Europe, provided royalties on annual net sales of ONPATTRO in Japan were set at 25 % beginning as of the effective date of the Exclusive TTR License, (ii) tiered royalties of 15 % to 30 % based on global annual net sales of vutrisiran (consistent with the royalties due to us from Sanofi Genzyme on fitusiran), and (iii) tiered royalties of up to 15 % based on global annual net sales of any back-up products, in each case by us, our affiliates and our sublicensees.

The Collaboration Amendment entered into in April 2019 made no changes to the terms described in clauses (i)-(iii) above, which remain in full force and effect.

Except as described below, there are no additional milestones due to either party with respect to ONPATTRO, vutrisiran or fitusiran.

In consideration for the rights granted to Sanofi Genzyme under the 2018 amendment and the original AT3 License Terms, Sanofi Genzyme was required to make one milestone payment of $ 50.0 million following the dosing of the first patient in the ATLAS Phase 3 program for fitusiran.

This milestone was achieved in the first quarter of 2018.

In addition, under the A&R AT3 License Terms, we are eligible to receive tiered royalties of 15 % to 30 % based on global annual net sales of fitusiran and up to 15 % based on global annual net sales of any back-up products controlled by Sanofi Genzyme, in each case by Sanofi Genzyme, its affiliates and its sublicensees.

We intend to continue to work with Sanofi Genzyme to ensure continuity for the supply of fitusiran for ongoing clinical studies, and, at Sanofi Genzyme’s request, commercial sales.

Sanofi Genzyme also has the right to manufacture fitusiran.

Under the A&R AT3 License Terms, we agreed to advance, at our cost, a selected investigational asset in an undisclosed rare genetic disease through the end of investigational new drug-enabling studies.

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

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

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

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Due to the uncertainty of pharmaceutical development and the high historical failure rates generally associated with drug development, we may not receive any royalty payments under the A&R AT3 License Terms.

The 2014 Sanofi Genzyme collaboration, as amended, will continue to be governed by an alliance joint steering committee that is comprised of an equal number of representatives from each party.

Additional committees oversee certain matters that may arise under the Exclusive TTR License and the A&R AT3 License Terms.

The original master agreement (including the license terms appended thereto), as well as the Exclusive TTR License and the A&R AT3 License Terms, contain certain termination provisions, including for material breach by the other party.

In addition, we have the right to terminate the Exclusive TTR License without cause with respect to any or all licensed products at any time upon six months’ prior written notice and Sanofi Genzyme has the right to terminate the A&R AT3 License Terms without cause with respect to any particular licensed product at any time upon six months’ prior written notice.

The term of the Exclusive TTR License expires on a licensed product-by-licensed product and country-by-country basis upon expiration of the last royalty term to expire under the agreement, where a royalty term is defined as the latest to occur of (a) expiration of the last valid claim of patent rights covering a licensed product;

(b) the expiration of Regulatory Exclusivity for a licensed product, as defined in the Exclusive TTR License;

or (c) the twelfth anniversary of the first commercial sale of the licensed product in such country.

The term of the A&R AT3 License Terms expires on a licensed product-by-licensed product and country-by-country basis upon expiration of the last royalty term to expire under the agreement, where a royalty term is defined as the latest to occur of (x) the expiration of the last valid claim of patent rights covering a licensed product;

(y) the expiration of Regulatory Exclusivity for a licensed product, as defined in the A&R AT3 License Terms;

or (z) the twelfth anniversary of the first commercial sale of the licensed product in such country.

As noted above, the Sanofi Genzyme collaboration originally entered into in 2012 was materially modified during its term when the agreement was amended in 2014, prior to our adoption of ASC 606 on January 1, 2018.

In accordance with the new revenue standard, we evaluated the Sanofi Genzyme collaboration with the aggregate effect of all modifications when identifying performance obligations, determining the transaction price and allocating the transaction price.

We determined that certain promises included in these agreements are within the scope of ASC 606 since Sanofi Genzyme is a customer with respect to the license of the rights to its territories.

We also determined, however, that certain aspects of these agreements are within the scope of the collaboration accounting guidance with respect to co-commercialization activities as these activities are joint risk-sharing and are not reflective of a vendor-customer relationship.

We apply ASC 606 to all promises associated with the transfer of goods and services to a customer.

We concluded that Sanofi Genzyme meets the definition of a customer as we were delivering intellectual property and know-how rights as well as research and development activities for the TTR programs and fitusiran programs in support of territories in which we are not jointly sharing the risks and rewards.

We concluded that the accounting for the original 2014 Sanofi Genzyme collaboration, and the collaboration, as amended in 2018, should be assessed as separate contracts for (i) the patisiran and revusiran (TTR) programs, upon the initiation of the 2014 Sanofi Genzyme collaboration, and (ii) the subsequent opt-in by Sanofi Genzyme for the fitusiran program.

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

We identified contract promises or deliverables for licenses to our intellectual property and know-how rights, associated development activities, joint steering committee participation and information exchange.

We determined that, pursuant to ASC 606 (and consistent with our accounting prior to the adoption of the new revenue standard), the performance obligations were not separately identifiable and were not distinct (and did not have standalone value) due to the specialized nature of the services to be provided by us and the dependent relationship between the performance obligations.

Given this fact pattern, we concluded each of the TTR and fitusiran contracts have a single identified or combined performance obligation.

When applying the previous revenue standard, we determined that the co-commercialization activities prior to the 2018 amendment were within the scope of the collaboration accounting standard since both parties would actively participate in the co-commercialization and be subject to significant risks and rewards.

As a result of this determination, we recorded any payments or cash receipts for these joint risk-sharing activities as an adjustment to the related operations expense captions.

The amounts recorded as a reduction of our selling, general and administrative activities were not material.

The transaction price as of January 1, 2018 of $ 127.6 million for the 2014 Sanofi Genzyme collaboration related to the license to the TTR programs included the $ 22.5 million upfront payment and $ 11.0 million of development milestone payments earned under the now superseded 2012 Sanofi Genzyme agreement, a $ 25.0 million development milestone payment for revusiran achieved in 2014, the estimated patisiran and revusiran cost-share reimbursements, net of payments to Sanofi Genzyme, of $ 63.6 million and $ 57.0 million, respectively, and a $ 51.5 million equity discount related to the stock purchase agreement pursuant to which Sanofi Genzyme purchased 8,766,338 shares of our common stock and paid $ 700 million in aggregate cash consideration to us.

Since the fair value of the stock at the time of closing was more than the consideration received by us by $ 51.5 million, we reduced the transaction price of the license and collaboration contract, treating the equity discount in a manner consistent with a payment to the customer.

The transaction price related to our license to the fitusiran

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program as of January 1, 2018, accounted for as a separate agreement, included estimated fitusiran development cost-share reimbursements of $ 147.3 million, net of payments to Sanofi Genzyme.

There are no refund provisions in the agreement and, therefore, none of the consideration received to date has been excluded from the transaction price calculation.

None of the unearned milestones as of January 1, 2018 were included in the transaction price, as all unearned milestone amounts were not considered likely of achievement.

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

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

We allocated the transaction price to the combined performance obligation.

We have determined that this combined performance obligation was satisfied over time based on our performance that is creating or enhancing an asset that Sanofi Genzyme controls.

In this instance, Sanofi Genzyme received control over the asset, or the licensed intellectual property, and know-how, at the time the contract was executed since the licensed intellectual property and know-how meet the definition of functional intellectual property per the new revenue standard, which defines functional intellectual property as intellectual property that derives a substantial portion of its utility from its standalone functionality rather than the entity’s ongoing activities (thus, once the asset is fully developed, our ongoing involvement is not required for the licensee to derive value).

The other promises included in the performance obligation, however, are enhancing the controlled asset, and thus the combined performance obligation is being satisfied over time.

ASC 606 requires a single method of measuring performance for each performance obligation satisfied over time.

Since we do not have a reliable method of estimating progress based upon its outputs, it was determined that the most reliable method of estimating progress would be using a cost-to-cost input method.

We have determined that our completion of certain clinical and regulatory development tasks is relevant and directly related to our progress in completing the combined performance obligation.

As such, we measured our progress upon adoption and will continue to measure our progress during each reporting period based upon the amount of development costs incurred divided by the total amount of development costs expected to be incurred over the course of the agreement.

We exclude costs that are not related to our completion of this performance obligation, such as the completion of tasks (and incurring of costs) associated with the marketing and commercialization of the drug.

We estimated our internal costs during the last three years, excluding non-reimbursable costs that were not deemed to directly relate to the delivery of the development services to Sanofi Genzyme.

Historically, we have been unable to reliably measure our performance based upon our lack of historical experience in completing the development of a drug candidate and have, as a result, defaulted to straight-line attribution for many of our licensing agreements.

At the time of adoption of ASC 606, however, we had completed a substantial portion of our development obligations and determined we had sufficient information to estimate the remaining development costs for the fitusiran program and sufficient experience to reasonably estimate our development costs, the effect of which comprises the majority of the adjustment to retained earnings as a result of initially applying the new revenue accounting guidance.

We determined that the 2018 amendment, together with the Exclusive TTR License and the original AT3 License Terms, referred to as the 2018 restructured agreement, were included in the scope of the modification provisions of ASC 606.

We had identified that the agreement for the TTR programs under the 2014 Sanofi Genzyme collaboration should be accounted for separately from any subsequent option exercises, including with respect to fitusiran.

Therefore, we concluded it was appropriate to account for the 2018 restructured agreement as two separate modifications to the 2014 Sanofi Genzyme collaboration:

one related to the TTR programs and one related to the fitusiran program.

Our conclusions related to scoping under the prior revenue standard were consistent with ASC 606.

As noted above, the 2018 amendment, together with the Exclusive TTR License, provided us with the exclusive right to pursue the further global development and commercialization of all TTR products, including ONPATTRO.

We are responsible for all development and commercialization costs for ONPATTRO and vutrisiran.

As of the 2018 restructured agreement, we are no longer required to complete the delivery of any of the performance obligations under the agreement related to the TTR programs.

As a result, the transaction price prior to the 2018 amendment has been reduced as we are no longer entitled to cost-share reimbursements or any of the previously constrained consideration, such as milestones and royalties.

Since the 2018 amendment affected the transaction price but did not add any incremental and distinct performance obligations, we concluded this amendment should be accounted for as a change to the existing agreement and recorded the revenue on a cumulative catch-up basis.

At the time of the 2018 amendment, we had $ 2.9 million in revenue deferred as a contract liability on our consolidated balance sheet related to this contract for TTR programs, all of which we recognized in the first quarter of 2018 under a cost-to-cost input model as we no longer expected to incur costs associated with the delivery of goods or services.

We record royalties payable to Sanofi Genzyme with respect to sales of ONPATTRO within cost of goods sold on our consolidated statements of operations and comprehensive loss as Sanofi Genzyme is no longer considered our customer after the 2018 restructured agreement for sales of all TTR products, including ONPATTRO, and as such, these royalty payments are outside of the scope of ASC 606, including with respect to principal versus agent guidance.

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The 2018 amendment, together with the original AT3 License Terms, as noted above, provided Sanofi Genzyme the exclusive right to pursue the further global development and commercialization of fitusiran and any back-up products and terminated the previous co-development and co-commercialization rights related to fitusiran under the 2014 Sanofi Genzyme collaboration.

The 2018 restructured agreement provided a broader license that permits global development, manufacturing and commercialization, and we were required to facilitate the transfer of all ongoing activities, contracts, intellectual property, know-how and other materials and information related to fitusiran to Sanofi Genzyme.

In connection with the 2018 restructured agreement for fitusiran, we funded development and commercialization costs for fitusiran through the transition period, which was completed in 2018, up to a limit of $ 50.0 million.

The only milestone under the 2018 restructured agreement, which was achieved in the first quarter of 2018, was considered variable consideration for the license and transition services related to the fitusiran program.

We agreed to reimburse Sanofi Genzyme for certain transition activities that are reflected as a reduction in the transaction price.

As a result, the transaction price was reduced as we are no longer entitled to cost-share reimbursements or any of the previously constrained consideration, such as milestones and royalties.

We concluded that the modification that resulted from the 2018 restructured agreement related to fitusiran would be treated as a termination and replacement of the 2014 Sanofi Genzyme collaboration and accounted for prospectively as the remaining license and transition services are considered distinct from that under the agreement prior to this modification.

However, the incremental consideration under the 2018 restructured agreement does not directly reflect the standalone selling price of the incremental performance obligation.

Therefore, we concluded the 2018 restructured agreement for fitusiran should be accounted for on a prospective basis.

At the time of the 2018 amendment, we had $ 0.6 million in revenue deferred as a contract liability on our consolidated balance sheet related to the 2014 Sanofi Genzyme collaboration for the fitusiran program.

The transaction price of the 2018 restructured agreement for fitusiran was $ 37.6 million, primarily related to the $ 50.0 million milestone that was achieved in the first quarter of 2018, offset by consideration paid to Sanofi Genzyme for its transition activities that were accounted for as a reduction of the transaction price.

Consistent with our accounting prior to this 2018 modification, we applied the sales-based royalty under the new revenue standard to exclude from the transaction price the royalties earned on Sanofi Genzyme’s sales of fitusiran as determined in the context of all the performance obligations, including those delivered prior to the 2018 modification, that the value of the broader license will continue to represent a substantial portion of the value provided to Sanofi Genzyme;

and therefore the license to the intellectual property is the predominant item to which the royalty relates.

We recognized the transaction price of the 2018 restructured agreement related to fitusiran under a separate cost-to-cost input model as we performed transition services over the transition period, which was completed in 2018.

We measured our performance based on a percentage of our costs expected to be incurred in connection with the transition.

During the transition, we incurred a total cost of $ 38.0 million.

During the year ended December 31, 2018, under a cost-to-cost input model, we recognized revenues of $ 37.6 million related to the 2018 restructured agreement for fitusiran.

We have determined that Sanofi Genzyme’s right to purchase additional clinical and commercial material from us reflects optional purchases that are distinct from other performance obligations.

Revenues associated with these purchases will be recognized in accordance with the right to invoice practical expedient and as Sanofi Genzyme obtains control of any purchased material.

2013 Collaboration with The Medicines Company

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

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

As of December 31, 2020, 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.

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

As of December 31, 2021, we have earned $ 70.0 million of milestones and upon achievement of certain events, we will be entitled to receive additional milestones, up to an aggregate of $ 110.0 million, including $ 100.0 million in specified commercialization milestones and $ 10.0 million in other specified regulatory milestones.

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

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

Under the MDCO License Agreement, we had responsibility for the development of inclisiran until Phase 1 Completion, as defined in the MDCO License Agreement, at our cost, up to an agreed upon initial development cost cap.

In late 2015, MDCO assumed responsibility for all development and commercialization of inclisiran, at its sole cost.

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

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We were solely responsible for obtaining supply of finished product reasonably required for the conduct of our obligations under the initial development plan through Phase 1 Completion, and for supplying finished product reasonably required for the first Phase 2 clinical trial of inclisiran conducted by MDCO, at our expense, subject to certain caps.

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

Novartis has the sole right and responsibility to manufacture and supply inclisiran for development and commercialization, subject to the terms of the MDCO License Agreement and the supply and technical transfer agreement.

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

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

generally between 2016 and 2028.

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

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

We estimate that our core technology patents covering licensed products under the MDCO License Agreement will expire in most countries by 2029.

We also estimate that our inclisiran product-specific patents covering licensed products under the MDCO License Agreement will expire in the U.S., Europe, China, Japan and elsewhere between 2027 and 2036.

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

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

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In addition, Novartis has the right to terminate the agreement without cause at any time upon four months’ prior written notice.

During the term of the MDCO License Agreement, neither party will, alone or with an affiliate or third party, research, develop or commercialize, or grant a license to any third party to research, develop or commercialize, in any country, any product directed to the PCSK9 gene, other than a licensed product, without the prior written agreement of the other party, subject to the terms of the MDCO License Agreement.

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product (for Alnylam) and any siRNA product (for Novartis) directed to the PCSK9 gene, other than a licensed product, without the prior written agreement of the other party, subject to the terms of the MDCO License Agreement.

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

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

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

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

Novartis License Agreement

In December 2021, we and Novartis entered into a collaboration and license agreement, or the Novartis License Agreement, pursuant to which we granted to Novartis an exclusive, worldwide license to develop, manufacture and commercialize siRNAs targeting end-stage liver disease, or ESLD, potentially leading to the development of a treatment designed to promote the regrowth of functional liver cells and to provide an alternative to transplantation for patients with liver failure.

Pursuant to the Novartis License Agreement, we will receive an upfront fee of $ 12.5 million.

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

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

Under the Novartis License Agreement, we will develop and test potential siRNAs using target-specific assays developed by Novartis pursuant to an agreed upon research plan for a specified period referred to as the Collaboration Term.

Novartis will reimburse us for the cost of our activities under the research plan, referred to as the DC Workplan, subject to an agreed upon cap.

Once a lead candidate is identified, further development and clinical research will be conducted by Novartis.

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

Unless terminated earlier in accordance with the terms of the Novartis License Agreement, the Collaboration Term expires at the earlier of (1) 180 days after completion of the development activities assigned to us as agreed upon between the parties, or (2) December 17, 2024.

Either party may terminate the Novartis License Agreement in the event the other party fails to cure a material breach or upon patent-related challenges by the other party.

In addition, Novartis has the right to terminate the agreement without cause at any time upon three months ’ prior written notice.

During the term of the Novartis License Agreement, neither party will, alone or with an affiliate or third party, research, develop or commercialize, or grant a license to any third party to research, develop or commercialize, in any country, any product directed to a liver target identified by Novartis, other than a licensed product, without the prior written agreement of the other party, subject to the terms of the Novartis License Agreement.

We identified one performance obligation under the Novartis License Agreement comprised of:

i) the exclusive license to develop, manufacture and commercialize siRNAs targeting ESLD;

and ii) the obligation to perform work under the DC Workplan.

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

We measure proportional performance over time using an input method based on cost incurred relative to the total estimated costs for the identified performance

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obligation, on a quarterly basis, by determining the proportion of effort incurred as a percentage of total effort we expect to expend.

This ratio is applied to the total transaction price.

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

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

As of December 31, 2021, the total transaction price was determined to be approximately $ 17.0 million, comprised of the $ 12.5 million upfront payment and estimated variable consideration attributed to work to be performed under the DC Workplan.

We utilized the expected value method to determine the amount of reimbursement for these activities.

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

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 December 31, 2021, no revenue was recognized under the Novartis License Agreement and the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 17.0 million, which is expected to be recognized through the term of the DC Workplan as the services are performed.

Vir Biotechnology, Inc.

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Pursuant to the Vir Agreement, we granted to Vir an exclusive license to develop, manufacture and commercialize ALN-HBV02 (VIR-2218), for all uses and purposes other than certain excluded fields, as set forth in the Vir Agreement.

In addition, we granted Vir an exclusive option for up to four additional RNAi therapeutic programs for the treatment of infectious diseases.

In addition, we granted Vir an exclusive option for up to 4 additional RNAi therapeutic programs for the treatment of infectious diseases.

Under the terms of the Vir Agreement, for each product arising from the HBV program, including ALN-HBV02, we retained the right to opt into a profit-sharing arrangement prior to the start of a Phase 3 clinical trial.

In addition, we have the right on a

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product-by-product basis with respect to each additional infectious disease program that Vir elects to pursue, to opt into a profit-sharing arrangement for each such product at any time during a specified period prior to the initiation of a Phase 3 clinical trial for each such product.

In addition, we have the right on a product-by-product basis with respect to each additional infectious disease program that Vir elects to pursue, to opt into a profit-sharing arrangement for each such product at any time during a specified period prior to the initiation of a Phase 3 clinical trial for each such product.

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

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We also agreed that Vir would lead all development and commercialization of any selected development candidates.

In December 2020, we signed a letter agreement to amend the Vir Agreement such that we are 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 are responsible for all pre-clinical development costs incurred under such plan for such COVID-19 related activities.

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, 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 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.

Unless terminated earlier in accordance with the terms of the agreement, the Vir Agreement expires on a licensed product-by-product and country-by-country basis upon expiration of all royalty payment obligations under the agreement.

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However, if we exercise our profit-sharing option for any product, the term of the agreement will continue until the expiration of the profit-sharing arrangement for such product.

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Either party may terminate the agreement in the event the other party fails to cure a material breach, or upon patent-related challenges by the other party.

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ii) the obligation to deliver four additional development candidates and supply product for each such RNAi therapeutic program;

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

and iii) the obligation to deliver up to four development candidates and supply product for RNAi therapeutic programs targeting SARS-CoV-2 (through July 2021).

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

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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 December 31, 2020, the total transaction price was determined to be $ 110.1 million, an increase of $ 72.4 million from December 31, 2019 as a result of additional cash and shares received from Vir in 2020, as well as an increase in our estimated variable consideration.

As of December 31, 2020, the transaction price is comprised of the upfront payment, fair value of non-cash equity consideration at contract inception, milestones achieved, and variable consideration related to development, manufacture and supply activities.

As of December 31, 2021, the total transaction price was determined to be $ 111.0 million, 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 expected value method to determine the amount of reimbursement for these activities.

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As of December 31, 2021, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 36.5 million, which is expected to be recognized through the term of the Vir Agreement as the services are performed.

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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

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

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

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

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

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

The exact timing and amount of repayment is likely to change each reporting period.

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

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

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

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The carrying value of the liability related to the sale of future royalties approximates fair value as of December 31, 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.

For the year ended December 31, 2020, we recognized interest expense of $ 84.5 million.

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

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

Carrying value as of January 1, 2020 $ —

Sale of future royalties 1,000,000

Interest expense recognized 84,496

Capitalized closing costs ( 12,955 )

Carrying value as of December 31, 2020

Interest expense recognized 116,940

Carrying value of liability related to sale of future royalties as of December 31, 2020

Payments ( 378 )

Carrying value as of December 31, 2021

OTHER BALANCE SHEET DETAILS

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Total inventory $ 122,701 $ 92,302

As of December 31, 2021 and 2020, we had $ 36.3 million and $ 17.1 million of long-term inventory, respectively, included within other assets in our consolidated balance sheet as we anticipate it being consumed beyond our normal operating cycle.

As of December 31, 2021, we had $ 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.

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As of December 31, 2020, we had long-term inventory of $ 17.1 million in other assets in our consolidated balance sheet as we anticipate such inventory being consumed beyond our normal operating cycle.

As of December 31, 2019, we had no long-term inventory.

As of December 31, 2020 and 2019, there was no capitalized inventory for products awaiting regulatory approval.

Property, Plant and Equipment, Net

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Leasehold improvements 152,045 149,505

Construction in progress 80,753 28,005

Laboratory equipment 61,351 48,930

Manufacturing equipment 43,739 41,089

Construction in progress 28,005 54,195

Computer equipment and software 21,885 19,064

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(In thousands) 2021 2020

Compensation and related $ 97,433 $ 68,304

Product rebates and discounts $ 131,279 $ 94,242

Compensation and related 93,583 97,433

Pre-clinical, clinical trial and manufacturing 83,534 46,506

Contingent liabilities 41,216 —

Licensing and collaboration agreements 22,843 15,424

Consulting and professional services 17,784 11,501

Contingent liabilities — 41,216

Other 46,151 49,587

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Cash and cash equivalents $ 819,975 $ 496,580 $ 547,178

Total restricted cash included in prepaid expenses, other current assets and long-term other assets 2,466 2,450 2,485

Total cash, cash equivalents, and restricted cash shown in the consolidated

statements of cash flows $ 499,046 $ 549,628 $ 422,631

Total restricted cash included in other assets 2,178 2,466 2,450

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 822,153 $ 499,046 $ 549,628

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

Plans, Net of Tax Unrealized (Losses) Gains from Debt

Plans, Net of Tax Unrealized Gains (Losses) from Debt

Foreign Currency Translation

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$ ( 32,792 ) $ ( 3,520 ) $ 137 $ ( 343 ) $ ( 36,518 )

Other comprehensive (loss) income before reclassifications — ( 3,661 ) 22 ( 343 ) ( 3,982 )

Other comprehensive loss before reclassifications — ( 531 ) ( 14 ) ( 7,081 ) ( 7,626 )

Amounts reclassified from other comprehensive income — 297 225 — 522

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( 32,792 ) ( 3,754 ) 348 ( 7,424 ) ( 43,622 )

Other comprehensive (loss) income before reclassifications — ( 531 ) ( 14 ) ( 7,081 ) ( 7,626 )

Other comprehensive income before reclassifications — 899 — 11,398 12,297

Amounts reclassified from other comprehensive income — 44 ( 1,978 ) — ( 1,934 )

Net other comprehensive (loss) income — ( 234 ) 211 ( 7,081 ) ( 7,104 )

Net other comprehensive income (loss) — 943 ( 1,978 ) 11,398 10,363

Balance as of December 31, 2021

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CREDIT AGREEMENT

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

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

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

The Credit Agreement provides for a senior secured delayed 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 was drawn as of December 31, 2020 and is included in long-term debt in the consolidated balance sheets.

The remaining two tranches will provide funds as follows:

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

Tranche 2 Loan June 30, 2021 $ 250,000

Tranche 3 Loan December 31, 2021 $ 250,000

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

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

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

As of December 31, 2020, the Subsequent Borrowing Conditions have been satisfied.

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 of $ 700.0 million.

The Tranche 1 Loan of $ 200.0 million, the Tranche 2 loan of $ 250.0 million and the Tranche 3 Loan of $ 250.0 million were drawn as of December 31, 2020, June 30, 2021, and December 31, 2021 respectively, and are included in long-term debt in the consolidated balance sheets.

In addition to the $ 700.0 million previously drawn under the Credit Agreement, we may also request an increase 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.

The Term Loans mature in December 2027.

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

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 .

We drew the Tranche 1 Loan in December 2020, elected a LIBOR Rate plus 7 %, and paid a $ 5.0 million funding fee.

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

In addition, we will pay an exit fee equal to 1 % of the

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commitments in respect of the Term Loans, payable upon any repayment of the Term Loans or termination of the unfunded Term Loan commitments.

As of December 31, 2020, our interest rate was 8 %.

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

Any prepayments of Term Loans or terminations of unfunded tranches that occur between 2023 and 2025 are subject to a fee of up to 5 % of the loan principal that is prepaid or the amount of the unfunded tranche that is terminated.

As of December 31, 2021, we had elected a LIBOR Rate plus 7 %, and paid $ 17.5 million in total funding fees in connection with such Term Loans.

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

Any prepayments of Term Loans that occur between 2023 and 2025 are subject to a fee of up to 5 % of the loan principal that is prepaid.

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

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

(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.

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and certain insolvency and ERISA events.

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

As of December 31, 2020, we were in compliance with the applicable terms and conditions of the covenants under the Credit Agreement.

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

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As of December 31, 2021 and 2020, we were in compliance with the applicable terms and conditions of the covenants under the Credit Agreement.

DEVELOPMENT DERIVATIVE LIABILITY

On August 15, 2020, we entered into a co-development agreement, referred to as the Funding Agreement, with BXLS V Bodyguard – PCP L.P.

and BXLS Family Investment Partnership V – ESC L.P., collectively referred to as Blackstone Life Sciences, pursuant to which Blackstone Life Sciences will provide up to $ 150.0 million in funding for the clinical development of vutrisiran and ALN-AGT, two of our cardiometabolic programs.

In August 2020, we entered into a co-development agreement, referred to as the Funding Agreement, with BXLS V Bodyguard – PCP L.P.

With respect to vutrisiran, Blackstone Life Sciences has committed to provide up to $ 70.0 million to fund development costs related to the HELIOS-B Phase 3 clinical trial.

In addition, Blackstone Life Sciences has the right, but is not obligated, to fund up to $ 26.0 million for development costs related to a Phase 2 clinical trial of ALN-AGT and up to $ 54.0 million for development costs related to a Phase 3 clinical trial of ALN-AGT.

In November 2021, Blackstone Life Sciences opted in to Phase 2 clinical trial funding of zilebesiran, committing to fund, upon meeting certain patient enrollment thresholds, up to $ 26.0 million.

Furthermore, Blackstone Life Sciences has the right, but is not obligated, to fund up to $ 54.0 million for development costs related to a Phase 3 clinical trial of zilebesiran.

The amount of funding ultimately provided by Blackstone Life Sciences is dependent on us achieving specified development milestones with respect to each clinical trial.

We retain sole responsibility for the development and commercialization of both vutrisiran and ALN-AGT.

We retain sole responsibility for the development and commercialization of both vutrisiran and zilebesiran.

As consideration for Blackstone Life Sciences’ funding for vutrisiran clinical development costs, we have agreed to pay Blackstone Life Sciences a 1 % royalty on net sales of vutrisiran for a 10 -year term beginning upon the first commercial sale following regulatory approval of vutrisiran for ATTR-cardiomyopathy, as well as fixed payments of up to 2.5 times their investment over a two-year period upon regulatory approval of vutrisiran for ATTR-cardiomyopathy in specified countries, unless it is later withdrawn from the market following a mandatory recall.

As consideration for Blackstone Life Sciences’ funding for Phase 2 clinical development costs of ALN-AGT, 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 ALN-AGT Phase 2 clinical trial, unless certain regulatory events affecting the continued development of ALN-AGT occur.

As consideration for Blackstone Life Sciences’ funding for Phase 3 clinical development costs of ALN-AGT, 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 ALN-AGT 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 ALN-AGT, as well as in our bank account in which the funding deposits will be made.

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 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.

We and Blackstone Life Sciences each have the right to terminate the Funding Agreement in its entirety in the event of the other party’s bankruptcy or similar proceedings.

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In addition, Blackstone Life Sciences has the right to terminate the Funding Agreement in its entirety upon the occurrence of certain events affecting our ability to make payments under the agreement or to develop or commercialize the products, or upon a change of control of us.

Blackstone Life Sciences may also terminate the Funding Agreement with respect to a product if the joint steering committee elects to terminate

Blackstone Life Sciences may also terminate the Funding Agreement with respect to a product if the joint steering committee elects to terminate the development program for that product in its entirety, if certain clinical endpoints are not achieved for that product or, with respect to vutrisiran only, if our right to develop or commercialize vutrisiran is enjoined in a specified major market as a result of an alleged patent infringement.

In certain termination circumstances, we will be obligated to pay Blackstone Life Sciences an amount that is equal to, or a multiplier of, the development funding received from Blackstone Life Sciences, and we may remain obligated under certain circumstances to make the payments to Blackstone Life Sciences described above, or the royalty described above in the case of vutrisiran, should we obtain regulatory approval for vutrisiran or zilebesiran following termination.

We account for the Funding Agreement under ASC 815 as a derivative liability, measured at fair value, within other liabilities on our consolidated balance sheets.

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

As of December 31, 2021 and 2020, the derivative liability is classified as a Level 3 financial liability in the fair value hierarchy.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the development program for that product in its entirety, if certain clinical endpoints are not achieved for that product or, with respect to vutrisiran only, if our right to develop or commercialize vutrisiran is enjoined in a specified major market as a result of an alleged patent infringement.

We account for the Funding Agreement under ASC 815 as a derivative liability, measured at fair value, within other liabilities on our consolidated balance sheets.

The liability was initially recorded at $ 4.2 million upon receipt of funding in the third quarter of 2020, pursuant to the contractual terms, and then subsequently increased in the fourth quarter of 2020 upon receipt of additional funding.

The change in fair value due to the remeasurement of the development derivative liability resulted in a $ 17.2 million loss for the year ended December 31, 2020, recorded within other income, net on our consolidated statements of operations and comprehensive loss.

As of December 31, 2020, 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 %).

royalty payable on net sales of vutrisiran, assuming regulatory approval, (iv) our cost of borrowing ( 14 %), and (v) Blackstone Life Sciences' cost of borrowing ( 4 %).

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

Development derivative liability as of August 15, 2020 $ —

Carrying value as of January 1, 2020 $ —

Amount received under the Funding Agreement 8,400

Loss recorded from remeasurement of development derivative liability 17,185

Development derivative liability as of December 31, 2020

Loss recorded from remeasurement 17,185

Carrying value as of December 31, 2020

Amount received under the Funding Agreement 19,600

Loss recorded from remeasurement 38,433

Carrying value as of December 31, 2021

FAIR VALUE MEASUREMENTS

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

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 December 31,

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Cash equivalents:

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

Money market funds $ 255,869 $ 255,869 $ — $ —

treasury securities 54,998 — 54,998 —

Marketable debt securities:

government-sponsored enterprise securities 245,214 — 245,214 —

treasury securities 1,030,578 — 1,030,578 —

Corporate notes 253,239 — 253,239 —

government-sponsored enterprise securities 177,741 — 177,741 —

Commercial paper 78,543 — 78,543 —

Certificates of deposit 7,501 — 7,501 —

Municipal securities 1,015 — 1,015 —

Marketable equity securities 66,972 66,972 — —

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Cash equivalents:

Commercial paper $ 3,439 $ — $ 3,439 $ —

treasury securities 336,693 — 336,693 —

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

treasury securities 20,000 — 20,000 —

Marketable debt securities:

Certificates of deposit 4,301 — 4,301 —

Commercial paper 36,474 — 36,474 —

Corporate notes 146,040 — 146,040 —

government-sponsored enterprise securities 32,488 — 32,488 —

treasury securities 1,087,968 — 1,087,968 —

government-sponsored enterprise securities 245,214 — 245,214 —

Marketable equity securities 44,633 44,633 — —

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Total financial assets $ 1,475,024 $ 121,842 $ 1,353,182 $ —

Financial liabilities

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

For the year ended December 31, 2021, there were no transfers between Level 1 and Level 2 financial assets.

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The carrying amounts reflected in our 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 December 31, 2020 approximates fair value as the debt was drawn on December 31, 2020 and has a variable interest rate.

The carrying amount of our debt as of December 31, 2021 and 2020 is subject to variable interest rates, which are based on current market rates, and as such, approximates fair value.

MARKETABLE DEBT SECURITIES

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Losses Fair Value

government-sponsored enterprise securities $ 245,113 $ 135 $ ( 34 ) $ 245,214

treasury securities $ 1,086,232 $ 6 $ ( 662 ) $ 1,085,576

Corporate notes 253,926 1 ( 688 ) 253,239

government-sponsored enterprise securities 178,027 2 ( 288 ) 177,741

Commercial paper 78,543 — — 78,543

Certificates of deposit 7,501 — — 7,501

Municipal securities 1,016 — ( 1 ) 1,015

Total $ 1,605,245 $ 9 $ ( 1,639 ) $ 1,603,615

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020

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Losses Fair Value

Certificates of deposit $ 4,303 $ — $ ( 2 ) $ 4,301

Commercial paper 39,913 — — 39,913

Corporate notes 146,016 58 ( 34 ) 146,040

government-sponsored enterprise securities 32,487 3 ( 2 ) 32,488

treasury securities $ 1,107,721 $ 328 $ ( 81 ) $ 1,107,968

government-sponsored enterprise securities 245,113 135 ( 34 ) 245,214

Total $ 1,352,834 $ 463 $ ( 115 ) $ 1,353,182

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

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Exercise of these options was not determined to be reasonably certain and thus was not included in the operating lease liability on the consolidated balance sheet as of December 31, 2021.

In connection with the 675 West Kendall Lease, we were required to provide a $ 14.8 million security deposit that is recorded as restricted investments on our consolidated balance sheet as of December 31, 2020.

300 Third Street

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Total rent expense, including operating expenses, under all of our real property leases was $ 59.5 million, $ 50.7 million and $ 52.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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The following table summarizes our costs included in operating expenses related to right of use lease assets we have entered into through December 31, 2021:

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Short-term lease costs were not material for the years ended December 31, 2021 and 2020.

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Net cash paid for the amounts included in the measurement of the operating lease liability in our consolidated balance sheet and included in change in operating lease liability within operating activities in our consolidated statement of cash flow was $ 41.9 million and $ 38.0 million for the years ended December 31, 2021 and 2020, respectively.

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As of December 31, 2021, our commitments over the next five years to make fixed and cancellable payments under existing license agreements were not material.

We in-license technology from a number of sources, including Ionis Pharmaceuticals, Inc., or Ionis, and Merck Sharp & Dohme Corp, or Merck.

In addition, we have collaboration agreements relating to the research, development and commercialization of certain of our product candidates.

Pursuant to these agreements, we will be required to make additional payments, including in some cases milestone payments if and when we achieve specified development, regulatory and commercialization events, as well as royalty payments on sales of our approved products.

Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent upon the successful achievement of such milestones.

Based on our current development plans, during the next 12 months from the filing of this annual report on Form 10-K, potential milestone payments due to third parties are immaterial in connection with our various collaboration and license agreements.

These milestones generally become due and payable upon achievement.

Because the achievement of these milestones was not considered probable as of December 31, 2020, such contingencies have not been recorded in our consolidated financial statements.

Legal Matters

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Ionis Arbitration

In June 2018, Ionis claimed it was owed payments under our second amended and restated strategic collaboration and license agreement as a result of the January 2018 restructuring of our Sanofi Genzyme collaboration and the related Exclusive TTR License and AT3 License Terms described above.

We disputed this and in November 2018, Ionis filed a Demand for Arbitration with the American Arbitration Association against us.

The hearing portion of the arbitration process was completed in June 2020, and in October 2020, a partial award was issued by the arbitration panel seeking additional information from us.

The arbitration panel issued its final award in December 2020 and required us to pay $ 41.2 million to Ionis.

For the year ended December 31, 2020, we increased our contingent liability related to our arbitration with Ionis by $ 38.2 million due to the issuance of this final award, and in January 2021 we paid $ 41.2 million to Ionis.

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 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.

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

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

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All defendants filed a joint motion to dismiss the New York Complaint in its entirety on December 20, 2019.

On November 2, 2020, the Court entered a Decision and Order denying defendants’ motion to dismiss.

Defendants filed a notice of appeal of that decision on November 12, 2020, and filed their opening appellate brief on January 4, 2021.

Plaintiff’s responsive appellate brief is due to be filed on or before March 3, 2021.

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

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

On November 2, 2020, the Supreme Court of the State of New York entered a Decision and Order denying defendants’ motion to dismiss.

In November 2020, defendants filed a notice of appeal of the Supreme Court's decision to the Appellate Division of the Supreme Court of the State of New York for the First Department.

In April 2021, the First Department entered a Decision and Order affirming in part and reversing in part the Supreme Court’s decision.

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.

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

A hearing is scheduled for April 12, 2022 in the Supreme Court of the State of New York regarding final approval of the settlement.

Proceedings in the First Department are adjourned until February 2022, subject to further adjournment, pending final approval of any settlement.

Government Investigation

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 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.

Indemnifications

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Under such agreements, we may be responsible for paying the costs of any litigation relating to the license agreements or the underlying intellectual property rights, including the costs associated with certain litigation regarding the licensed intellectual property.

We are also a party to a number of agreements entered into in the ordinary course of business, which contain typical provisions that obligate us to indemnify the other parties to such agreements upon the occurrence of certain events, including litigation.

For example, under the underwriting agreement entered into in connection with our November 2017 public offering, we have an obligation to indemnify the underwriters and each person, if any, who controls the underwriters, for certain costs and expenses arising in connection with the class action complaint filed against us and such

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underwriters in New York state court, described above.

In addition, we have agreed to indemnify our officers and directors for expenses, judgments, fines, penalties, excise taxes, and settlement amounts paid in connection with any threatened, pending or completed litigation proceedings, including, for example, the current government investigation, in which an officer or director was, is or will be involved as a party, on account of such person’s status as an officer or director, or by reason of any action taken by the officer or director while acting in such capacity, subject to certain limitations.

These indemnification costs are charged to selling, general and administrative expense.

Our maximum potential future liability under any such indemnification provisions is uncertain.

However, to date, other than certain costs associated with certain previously settled litigation, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

We have determined that the estimated aggregate fair value of our potential liabilities under all such indemnification provisions is minimal and had not recorded any liability related to such indemnification provisions as of December 31, 2021 or 2020.

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As of December 31, 2021 and 2020, there were no shares of preferred stock outstanding.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Blackstone Equity Placement

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In May 2020, our stockholders approved a second amendment to the 2018 Stock Incentive Plan, as amended, or the Amended 2018 Plan, to increase the number of shares authorized for issuance thereunder by 7,000,000 shares.

The Amended 2018 Plan provides for the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

granting of stock options, restricted stock and restricted stock units (together, restricted stock awards), stock appreciation rights and other stock-based awards, and has a fungible share pool.

The Amended 2018 Plan provides for the granting of stock options, restricted stock and restricted stock units (together, restricted stock awards), stock appreciation rights and other stock-based awards, and has a fungible share pool.

Any award that is not a full value award is counted against the authorized share limits specified as one share for each share of common stock subject to the award, and all full value awards, defined as restricted stock awards or other stock-based awards, are counted as one and a half shares for each one share of common stock subject to such full value award.

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Time-based stock options granted to employees generally vest as to 25 % of the shares on the first anniversary of the grant date and 6.25 % of the shares at the end of each successive three-month period thereafter until fully vested.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

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Time-based stock options $ 118,635 $ 112,971 $ 99,097

Performance-based stock options 6,340 48,207 56,419

Time-based restricted stock units 4,231 6,909 2,351

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__________________________________________

* Performance-based stock options and performance-based restricted stock units are recorded as expense beginning when vesting events are determined to be probable.

* Performance-based restricted stock units are recorded as expense beginning when vesting events are determined to be probable.

Valuation Assumptions for Stock Options

The fair value of stock options, at date of grant, based on the following assumptions, was estimated using the Black-Scholes option-pricing model.

Our expected stock-price volatility assumption is based on the historical volatility of our publicly

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traded stock.

Our expected stock-price volatility assumption is based on the historical volatility of our publicly traded stock.

The expected life assumption is based on our historical data.

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The risk-free interest rate used for each grant is equal to the zero coupon rate for instruments with a similar expected life.

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The following table summarizes the Black-Scholes valuation assumption inputs for employee stock options granted:

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Performance-Based Stock Options

With respect to the performance-based portion of the annual stock option awards, a portion of the shares subject to the performance-based stock option will vest upon the later of the one-year anniversary of the date of grant and the achievement of specific clinical development, regulatory and/or commercial events, as approved by our people, culture and compensation committee.

The following table summarizes the activity of our performance-based stock options granted under our equity plans:

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Restricted Stock Units and Awards

The following table summarizes the activity of our restricted stock units and awards, excluding performance-based restricted stock units:

The following table summarizes the activity of our restricted stock units and awards granted under our equity plans, excluding performance-based restricted stock units:

(in thousands) Weighted-

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Outstanding as of December 31, 2021 1,136 $ 143.13

The performance-based restricted stock units granted in 2020 and 2019 will vest upon the later of the one-year anniversary of the date of grant and the achievement of specific clinical development, regulatory and/or commercial events, as approved by our people, culture and compensation committee.

The performance-based restricted stock units granted in 2021 and 2020 will vest upon the later of the one-year anniversary of the date of grant and the achievement of specific clinical development, regulatory, commercial and/or financial performance events, as approved by our people, culture and compensation committee.

Employee Stock Purchase Plan

In 2004, we adopted the 2004 Employee Stock Purchase Plan and in May 2017, our stockholders approved the Amended and Restated ESPP, providing the authorization of 1,215,789 shares for issuance.

In May 2020 our stockholders approved an amendment to the Amended and Restated ESPP, to further increase the number of shares authorized for issuance thereunder from 1,215,789 shares to 1,965,789 shares.

In 2004, we adopted the 2004 Employee Stock Purchase Plan and in 2017, our stockholders approved the Amended and Restated ESPP.

In 2020, our stockholders approved an amendment to the Amended and Restated ESPP, to increase the number of shares authorized for issuance to 1,965,789 shares.

Under the Amended and Restated ESPP, as amended, each offering period is six months , at the end of which employees may purchase shares of common stock through payroll deductions made over the term of the offering.

The per-share purchase price at the end of each offering period is equal to the lesser of 85 % of the closing price of our common stock at the beginning or end of the offering period.

We issued 129,394 , 109,590 and 78,085 shares during the years ended December 31, 2020, 2019 and 2018, respectively, and as of December 31, 2020, we had 960,158 shares available for issuance under the Amended and Restated ESPP, as amended.

We issued 124,101 and 129,394 shares during the years ended December 31, 2021 and 2020, respectively.

We estimate the fair value of shares to be issued under the Amended and Restated ESPP, as amended, using the Black-Scholes option-pricing model on the date of grant, or first day of the offering period, using the same methodology approach as the employee stock option grants.

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Total provision for income taxes $ 680 $ 2,681 $ 863

During the year ended December 31, 2021, we recorded a net provision for income taxes of $ 0.7 million.

This is primarily comprised of $ 3.2 million of foreign current provision offset by $ 2.8 million of deferred provision, primarily related to foreign jurisdictions.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes.

We establish a valuation allowance when uncertainty exists as to whether all or a portion of the net deferred tax assets will be realized.

Components of the net deferred tax (liability) asset are as follows:

Components of the net deferred tax asset are as follows:

As of December 31,

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Net operating loss carryforwards $ 745,985 $ 537,382

Research and development and ODC credits 301,792 261,616

Research and development and other credit carryforwards 342,431 301,792

Sale of future royalties 302,217 259,014

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Internal reorganization of certain intellectual property rights 20.1 12.3 —

Revaluation of deferred credits due to rate change — — ( 3.5 )

Other ( 0.1 ) ( 2.7 ) ( 0.1 )

Revaluation of deferred due to rate change 1.1 — —

Valuation allowance ( 53.8 ) ( 35.9 ) ( 21.0 )

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We re-evaluate the positive and negative evidence on a quarterly basis.

The valuation allowance increased by $ 303.7 million, $ 185.9 million and $ 171.8 million for the years ended December 31, 2020, 2019 and 2018, respectively, primarily due to the liability related to the sale of future royalties for the year ended December 31, 2020 and additional net operating losses for the years ended December 31, 2019 and 2018.

During the year ended December 31, 2020, we recorded a net provision for income taxes of $ 2.7 million.

This is primarily comprised of $ 5.8 million of foreign current provision offset by $ 3.6 million of deferred provision, primarily related to foreign jurisdictions.

The valuation allowance increased by $ 459.3 million, $ 303.7 million and $ 185.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The increase in our valuation allowance is primarily due to additional net operating losses for the years ended December 31, 2021 and 2019 and primarily due to the liability related to the sale of future royalties for the year ended December 31, 2020.

As of December 31, 2021, we had federal and state net operating loss carryforwards of $ 2.8 billion and $ 2.5 billion, respectively, to reduce future taxable income.

As of December 31, 2020, approximately $ 0.9 billion of our federal net operating loss carryforward can be carried forward indefinitely while the remaining federal net operating loss of $ 1.1 billion expires at various dates through 2037.

Federal NOLs of $ 1.1 billion, generated before 2018, will begin expiring in varying amounts through 2037 unless utilized.

The remaining federal NOLs of $ 1.7 billion, generated after 2017, will be carried forward indefinitely and could be used to offset up to 100% of taxable income of each future tax year for tax years before January 1, 2021 and up to 80% of taxable income in all other future tax years.

As of December 31, 2021, we had federal and state research and development, including Orphan Drug, and state investment tax credit carryforwards of $ 312.2 million and $ 50.5 million, respectively, available to reduce future tax liabilities that expire at various dates through 2041.

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We apply the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes.

Our reserves related to income taxes are based on a determination of whether, and how much of, a tax benefit taken by us in our tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to tax benefit.

Our reserves related to income taxes are based on a determination of whether, and how much of, a tax benefit taken by us in our tax filings or positions is more likely than not to be realized and ultimately sustained upon challenge by a taxing authority based upon its technical merits and subject to certain recognition and measurement criteria.

We recognize potential interest and penalties related to unrecognized tax benefits in our provision for income taxes.

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The total net periodic benefit cost for the years ended December 31, 2021, 2020 and 2019 were not material.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following information has been derived from unaudited consolidated financial statements that, in the opinion of management, include all recurring adjustments necessary for a fair statement of such information:

Three Months Ended

March 31, 2020

June 30, 2020

September 30, 2020

(In thousands, except per share data)

Total revenues $ 99,476 $ 103,962 $ 125,853 $ 163,562

Operating costs and expenses 309,634 302,821 351,052 357,784

Net loss $ ( 182,221 ) $ ( 179,229 ) $ ( 253,291 ) $ ( 243,540 )

Net loss per common share — basic and diluted $ ( 1.62 ) $ ( 1.56 ) $ ( 2.18 ) $ ( 2.09 )

Weighted-average common shares — basic and diluted 112,748 114,911 115,986 116,274

Three Months Ended

March 31, 2019

June 30, 2019

September 30, 2019

(In thousands, except per share data)

Total revenues $ 33,294 $ 44,714 $ 70,061 $ 71,681

Operating costs and expenses 222,082 280,985 286,360 369,754

Net loss $ ( 181,915 ) $ ( 219,481 ) $ ( 208,535 ) $ ( 276,185 )

Net loss per common share — basic and diluted $ ( 1.73 ) $ ( 2.02 ) $ ( 1.92 ) $ ( 2.47 )

Weighted-average common shares — basic and diluted 105,400 108,576 108,701 111,750

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data