What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 210 added, 201 removed, 499 unchanged (45% of the section changed)

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(In thousands, except per share amounts)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets:

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Prepaid expenses and other current assets 115,065 88,078

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

Total current assets 2,589,677 2,808,576

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Stockholders’ equity:

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

Preferred stock, $ 0.01 par value per share, 5,000 shares authorized and no shares issued and outstanding as of March 31, 2022 and December 31, 2021

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

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

120,729 shares issued and outstanding as of March 31, 2022;

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Statements of Operations

22 unchanged sentences

Net loss $ ( 240,341 ) $ ( 200,291 )

Other comprehensive income (loss):

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

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

Other comprehensive (loss) income:

Unrealized loss on marketable securities ( 7,217 ) ( 1 )

Foreign currency translation gain 2,376 6,848

Defined benefit pension plans, net of tax 35 58

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

Total other comprehensive (loss) income ( 4,806 ) 6,905

Comprehensive loss $ ( 245,147 ) $ ( 193,386 )

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Stock-based compensation expense — — 30,051 — — 30,051

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

Other comprehensive loss — — — ( 4,806 ) — ( 4,806 )

Net loss — — — — ( 240,341 ) ( 240,341 )

Balance as of March 31, 2022 120,729 $ 1,207 $ 6,116,558 $ ( 38,065 ) $ ( 5,678,534 ) $ 401,166

Exercise of common stock options, net of tax withholdings 993 10 75,439 — — 75,449

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

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

Other comprehensive income — — — 636 — 636

Net loss — — — — ( 189,559 ) ( 189,559 )

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

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

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

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

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

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

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

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

ALNYLAM PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Common Stock Additional

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Comprehensive

(Loss) Income

Deficit Total

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Balance as of March 31, 2021 117,321 $ 1,173 $ 5,747,394 $ ( 36,717 ) $ ( 4,785,660 ) $ 926,190

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Stock-based compensation 29,293 55,690

Realized and unrealized gain on marketable equity securities ( 61,273 ) ( 66,626 )

Realized and unrealized loss (gain) on marketable equity securities 31,161 ( 47,016 )

Other 21,177 30,777

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Other investing activities ( 75 ) ( 4,198 )

Net cash provided by (used in) investing activities 140,105 ( 337,630 )

Net cash (used in) provided by investing activities ( 147,419 ) 71,352

Cash flows from financing activities:

Proceeds from exercise of stock options and other types of equity, net 27,123 46,977

Proceeds from the sale of future royalties 500,000 500,000

Proceeds from development derivative 7,833 4,200

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

Proceeds from term loan facility 250,000 —

Payment of transaction costs related to sale of future royalties and term loan facility ( 12,500 ) ( 8,128 )

Net cash provided by financing activities 34,956 51,177

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2,238 ) ( 3,910 )

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

Net decrease in cash, cash equivalents and restricted cash ( 285,894 ) ( 117,041 )

Cash, cash equivalents and restricted cash, beginning of period 822,153 499,046

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Capital expenditures included in accounts payable and accrued expenses $ 8,318 $ 7,289

Lease liabilities arising from obtaining right-of-use assets $ 7,876 $ 34,363

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

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

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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, as measured by market capitalization, by the end of 2025.

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

As of March 31, 2022, 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 U.S., Europe and Japan.

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Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Reclassification

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

Use of Estimates

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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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of March 31, 2022, 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 Quarterly Report on Form 10-Q.

NET PRODUCT REVENUES

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2022 2021

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Europe 9,688 6,873

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

Rest of World 1,914 38

Total $ 35,277 $ 24,673

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Europe 8,158 7,737

Rest of World 1,016 —

Total $ 14,586 $ 9,145

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

(In thousands) As of September 30,

(In thousands) As of March 31,

2022 As of December 31,

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Net revenues from collaborations consist of the following:

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

Three Months Ended March 31,

(In thousands) 2022 2021

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

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

(In thousands) As of March 31, 2022 As of December 31, 2021

Receivables included in “Accounts receivable, net” $ 23,421 $ 73,266

Contract liabilities included in “Deferred revenue” $ 78,683 $ 88,627

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

We recognized revenue of $ 9.5 million and $ 25.3 million in the three months ended March 31, 2022 and 2021, respectively, that was included in the contract liability balance at the beginning of the period.

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

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

Three Months Ended September 30,

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

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

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

Other 53 — 182 513 17 546

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

Nine Months Ended September 30,

Three Months Ended March 31,

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

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Total $ 1,593 $ 664 $ 9,468 $ 5,839 $ 305 $ 14,452

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

For the three months ended March 31, 2022 and 2021, we did not incur material selling, general and administrative expenses related to our collaboration agreements.

In addition, we recognized a reduction to our research and development expenses of $ 3.9 million and $ 5.4 million for the three months ended March 31, 2022 and 2021, respectively, from cost reimbursement due under certain of our collaboration agreements accounted for under Accounting Standards Codification, or ASC, Topic 808, Collaborative Arrangements, or ASC 808.

Product Alliances

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

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

The Regeneron Collaboration is governed by a Master Agreement, referred to as

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 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.

Regeneron leads 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 are alternating 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 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.

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

For each program, Regeneron will provide us with $ 2.5

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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In addition, following the first commercial sale of the applicable collaboration product under a license agreement, the licensee is required to make certain tiered royalty payments, ranging from low double-digits up to 20 %, to the licensor based on the aggregate annual net sales of the collaboration product, subject to customary reductions.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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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 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.

The development and manufacturing activities are a combined unit of account under the scope of ASC 808 and are not deliverables under ASC Topic 606, Revenue from Contracts with Customers, or ASC 606.

The total transaction price is comprised of the $ 400.0 million upfront payment and additional variable consideration related to research, development, manufacturing and supply activities related to the Research Services Obligation and the C5 License Obligation.

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We are also eligible to receive royalties on future commercial sales for certain eye, CNS or liver targets, if any;

however, these amounts are excluded from variable consideration under the Regeneron Collaboration as we are only eligible to receive such amounts if, after a drug candidate is identified, the form of license agreement is subsequently

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

executed resulting in a license that is granted to Regeneron.

Any such subsequently granted license would represent a separate transaction under ASC 606.

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We developed the estimated standalone selling price for the licenses included in the Research Services Obligation and the C5 License Obligation primarily based on the probability-weighted present value of expected future cash flows associated with each license related to each specific program.

In developing such estimate, we applied judgment in the determination of the forecasted revenues, taking into consideration the applicable market conditions and relevant entity-specific factors, the expected number of targets or indications expected to be pursued under each license, the probability of success, the time needed to develop a product candidate pursuant to the associated license and the discount rate.

In developing such estimate, we applied judgment in the determination of the forecasted revenues, taking into consideration the

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

applicable market conditions and relevant entity-specific factors, the expected number of targets or indications expected to be pursued under each license, the probability of success, the time needed to develop a product candidate pursuant to the associated license and the discount rate.

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

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

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

We re-evaluate the transaction price as of the end of each reporting period and as of March 31, 2022 and December 31, 2021, the total transaction price was determined to be $ 538.4 million.

As of March 31, 2022, the transaction price is comprised of the upfront payment and variable consideration related to development, manufacture and supply activities.

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

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Transaction Price Allocated Deferred Revenue

Performance Obligations As of September 30,

2021 As of September 30,

Performance Obligations As of March 31,

2022 As of March 31,

2022 As of December 31,

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$ 538,380 $ 276,300 $ 281,700

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognized During

Performance Obligations Three Months Ended

September 30, 2021 Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2021 Nine Months Ended

September 30, 2020 Accounting Guidance

March 31, 2022 Three Months Ended

March 31, 2021 Accounting Guidance

Research Services Obligation $ 7,200 $ 9,800 ASC 606

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$ 10,800 $ 25,800

As of September 30, 2021, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied was $ 161.5 million, which is expected to be recognized through the term of the Regeneron Collaboration as the services are performed.

As of March 31, 2022, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied was $ 128.8 million, which is expected to be recognized through the term of the Regeneron Collaboration as the services are performed.

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

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

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.

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

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

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

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

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2022, 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.

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 by 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, Japan and elsewhere between 2033 and 2036.

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 Leqvio (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.

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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 siRNA 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.

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 (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.

During 2018, we completed the performance obligations identified in the MDCO License Agreement.

However, we continue to receive additional orders for supply of certain material.

Given Novartis now has the ability to manufacture on its own through its own vendors, such orders will be treated as separate agreements and any associated revenue will be recognized upon transfer of control.

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

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

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

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

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

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

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

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

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

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

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 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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to the Novartis License Agreement, we received 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 are developing and testing 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 siRNA 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 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 March 31, 2022, 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 March 31, 2022, 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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Under the Vir Agreement, we may also receive milestone payments upon the achievement of certain development, regulatory and commercial milestones, as well as royalties on the net sales of licensed products ranging from high-single-digit to sub-teen double-digit percentages.

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

In March 2020, we achieved a development milestone relating to ALN-HBV02 and

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earned a $ 15.0 million cash milestone and 1,111,111 shares of Vir's common stock, which were received in the second quarter of 2020.

In June 2020, we earned and received a $ 10.0 million payment from Vir related to Vir's sublicense for ALN-HBV02 in China.

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

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

In July 2021, we notified Vir that we have elected to discontinue ALN-COV, in development for the treatment of COVID-19, and all other COVID-19 research and development activities, based on a portfolio prioritization 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.

Under the Vir amendments, we and Vir were each responsible for our own pre-clinical development costs incurred in performing our allocated responsibilities under an agreed-upon initial pre-clinical development plan.

Under the original agreements, we and Vir agreed to equally share certain costs incurred in connection with the manufacture of non-GMP drug product required for pre-clinical development prior to filing an IND for the first product in the coronavirus program.

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 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 has 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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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 September 30, 2021, the total transaction price was determined to be $ 110.8 million, and is comprised of the upfront payment, fair value of non-cash equity consideration at contract inception, milestones achieved and variable consideration related to development, manufacture and supply activities.

We utilized the

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

As of March 31, 2022, the total transaction price was determined to be $ 111.1 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.

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

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

As of March 31, 2022, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 36.3 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

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

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

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

At execution and as of March 31, 2022, our estimate of this total interest expense resulted in an effective annual interest rate of 11 % and 9 %, respectively.

These estimates contain assumptions that impact both the amount recorded at execution and the interest expense that will be recognized in future periods.

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

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.

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

The carrying value of the liability related to the sale of future royalties approximates fair value as of September 30, 2021 and is based on our current estimates of future royalties and commercial milestones expected to be paid to Blackstone Royalties over the life of the arrangement, which are considered Level 3 inputs.

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As of March 31, 2022, the carrying value of the liability related to the sale of future royalties was $ 1.22 billion, net of closing costs of $ 11.4 million.

The carrying value of the liability related to the sale of future royalties approximates fair value as of March 31, 2022 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.

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

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

Carrying value as of December 31, 2021

Interest expense recognized 27,702

Payments ( 152 )

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

Carrying value as of March 31, 2022

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FAIR VALUE MEASUREMENTS

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

(In thousands) As of September 30, 2021 Quoted

(In thousands) As of March 31, 2022 Quoted

(Level 1) Significant

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treasury securities 48,967 — 48,967 —

Commercial paper 4,999 — 4,999 —

Marketable debt securities:

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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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Development derivative liability $ 83,618 $ — $ — $ 83,618

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

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

amount of our debt as of March 31, 2022 is subject to variable interest rates, which are based on current market rates, and as such, approximates fair value.

MARKETABLE DEBT SECURITIES

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

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

We did not record any impairment charges related to our marketable debt securities during the three months ended March 31, 2022 or 2021.

The following tables summarize our marketable debt securities:

As of September 30, 2021

As of March 31, 2022

(In thousands) Amortized

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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

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

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

(In thousands) As of March 31, 2022 As of December 31, 2021

Marketable debt securities $ 1,673,485 $ 1,548,617

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The components of inventory are summarized as follows:

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

(In thousands) As of March 31, 2022 As of December 31, 2021

Raw materials $ 20,372 $ 14,754

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Total $ 122,062 $ 122,701

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

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

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

As of March 31, 2022 and December 31, 2021, we had $ 43.5 million and $ 36.3 million of long-term inventory, respectively, included within other assets in our condensed consolidated balance sheet as we anticipate it being consumed beyond our normal operating cycle.

As of March 31, 2022 and December 31, 2021, we had $ 7.0 million and $ 7.1 million of capitalized inventory, respectively, produced for commercial sale for products awaiting regulatory approval.

Cash, Cash Equivalents and Restricted Cash

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

As of September 30,

As of March 31,

(In thousands) 2022 2021

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Accumulated Other Comprehensive (Loss) Income

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

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

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

Plans Unrealized Gains (Losses) from Debt

Plans Unrealized (Losses) Gains from Debt

Foreign Currency Translation

Adjustment Total Accumulated Other

Comprehensive Loss

Comprehensive (Loss) Income

Balance as of December 31, 2021 $ ( 32,792 ) $ ( 2,811 ) $ ( 1,630 ) $ 3,974 $ ( 33,259 )

Other comprehensive income before reclassifications — — 1 2,376 2,377

Amounts reclassified from other comprehensive income — 174 ( 93 ) — 81

Amounts reclassified from other comprehensive income (loss) — 35 ( 7,218 ) — ( 7,183 )

Net other comprehensive income (loss) — 35 ( 7,217 ) 2,376 ( 4,806 )

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

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Balance as of March 31, 2022 $ ( 32,792 ) $ ( 2,776 ) $ ( 8,847 ) $ 6,350 $ ( 38,065 )

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

Plans Unrealized Gains from Debt

Plans Unrealized Gains (Losses) from Debt

Securities Foreign Currency Translation

Adjustment Total Accumulated Other

Comprehensive Loss

Comprehensive (Loss) Income

Balance as of December 31, 2020 $ ( 32,792 ) $ ( 3,754 ) $ 348 $ ( 7,424 ) $ ( 43,622 )

Other comprehensive income before reclassifications — — 7 ( 1,665 ) ( 1,658 )

Other comprehensive (loss) income before reclassifications — — ( 1 ) 6,848 6,847

Amounts reclassified from other comprehensive income — 58 — — 58

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

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

Net other comprehensive income (loss) — 58 ( 1 ) 6,848 6,905

Balance as of March 31, 2021 $ ( 32,792 ) $ ( 3,696 ) $ 347 $ ( 576 ) $ ( 36,717 )

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

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

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

In addition, we may request an increase in respect of the unfunded commitments in an amount not to exceed $ 50.0 million on terms to be agreed and subject to the consent of the Lenders providing such increase.

The Tranche 3 Loan is subject to customary terms and conditions, including 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.

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

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 condensed consolidated balance sheets as of March 31, 2022.

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 .

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

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

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

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

We are obligated to pay interest due on the Term Loans from 2021 through 2022 which will be calculated without regard to the Term Loans being prepaid or an unfunded tranche being terminated during this period (in whole or in part).

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 March 31, 2022, 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 March 31, 2022 and December 31, 2021.

We are obligated to pay interest due on the Term Loans 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:

(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

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agreements or organizational documents and make payments of certain subordinated indebtedness.

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

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

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

As of March 31, 2022, we were in compliance with the applicable terms and conditions of the covenants under the Credit Agreement.

DEVELOPMENT DERIVATIVE LIABILITY

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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 zilebesiran and up to $ 54.0 million for development costs related to a Phase 3 clinical trial of zilebesiran.

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 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.

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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 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.

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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 condensed consolidated balance sheets.

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

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

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

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

As of March 31, 2022, 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 ( 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 December 31, 2020

Carrying value as of December 31, 2021

Amount received under the Funding Agreement 7,833

Loss recorded from remeasurement of development derivative liability 19,655

Development derivative liability as of September 30, 2021

Blackstone Equity Placement

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

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

Loss recorded from remeasurement 13,782

Carrying value as of March 31, 2022

STOCK-BASED COMPENSATION

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

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

Three Months Ended March 31,

(In thousands) 2022 2021

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Total $ 29,293 $ 55,690

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NET LOSS PER COMMON SHARE

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

As of September 30,

As of March 31,

(In thousands) 2022 2021

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COMMITMENTS AND CONTINGENCIES

Technology License and Other Commitments

We have licensed from third parties the rights to use certain technologies and information in our research processes as well as in any other products we may develop.

In accordance with the related license or technology agreements, we are required to make certain fixed payments to the licensor or a designee of the licensor over various agreement terms.

Many of these agreement terms are consistent with the remaining lives of the underlying intellectual property that we have licensed.

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.

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.

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

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validity or enforceability of the patents held by others.

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

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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.

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

In August 2021, the parties reached an agreement in

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principle to resolve the matter.

At a hearing on April 12, 2022, the Supreme Court of the State of New York granted final approval to the settlement.

Proceedings in the First Department were adjourned until April 2022, pending final approval of any settlement, and were withdrawn as a result of final approval on April 18, 2022.

Government Investigation

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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.

Patent Infringement Lawsuits

In March 2022, we filed separate lawsuits in the U.S.

District Court for the District of Delaware against (1) Pfizer, Inc.

and its subsidiary Pharmacia & Upjohn Co.

LLC, collectively referred to as Pfizer, and (2) Moderna, Inc., and its subsidiaries ModernaTX, Inc., and Moderna US, Inc., collectively referred to as Moderna.

The lawsuits seek damages for infringement of U.S.

11,246,933, or ‘933 Patent, in Pfizer’s and Moderna’s manufacture and sale of their messenger RNA, or mRNA, COVID-19 vaccines.

The patent relates to the Company’s biodegradable cationic lipids that are foundational to the success of the mRNA COVID-19 vaccines.

We are seeking judgment that each of Pfizer and Moderna is infringing the ‘933 Patent, as well as damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the unlicensed uses made of our patented lipids by Pfizer and Moderna, together with interest and costs as may be awarded by the court.

As stated in the filed complaints, we are not seeking injunctive relief in these lawsuits.

Indemnifications

In connection with license agreements we may enter with companies to obtain rights to intellectual property, we may be required to indemnify such companies for certain damages arising in connection with the intellectual property rights licensed under the agreements.

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 or other legal proceedings.

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.

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 obligations as of March 31, 2022.

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

What changed 10-Q

Item 1. Financial Statements