What changed in this filing

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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 152 added, 130 removed, 579 unchanged (33% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Current assets:

27 unchanged sentences

Stockholders’ equity:

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

Preferred stock, $ 0.01 par value per share, 5,000 shares authorized and no shares issued and outstanding as of June 30, 2022 and December 31, 2021

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

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

120,992 shares issued and outstanding as of June 30, 2022;

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

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Statements of Operations

12 unchanged sentences

Interest expense ( 42,609 ) ( 33,416 ) ( 84,971 ) ( 65,931 )

Interest income 1,012 450

Other (expense) income, net ( 40,378 ) ( 8,755 ) ( 90,640 ) 10,739

Total other (expense) income, net ( 92,624 ) ( 13,021 )

Total other expense, net ( 82,987 ) ( 42,171 ) ( 175,611 ) ( 55,192 )

Loss before income taxes ( 274,673 ) ( 188,331 ) ( 514,029 ) ( 387,606 )

7 unchanged sentences

Unrealized loss on marketable securities ( 1,734 ) ( 247 ) ( 8,951 ) ( 248 )

Foreign currency translation gain 2,376 6,848

Foreign currency translation (loss) gain ( 2,459 ) 825 ( 83 ) 7,673

Defined benefit pension plans, net of tax 34 58 69 116

19 unchanged sentences

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 192 2 13,890 — — 13,892

Issuance of common stock under equity plans 71 1 8,089 — — 8,090

Stock-based compensation expense — — 34,453 — — 34,453

Other comprehensive loss — — — ( 4,159 ) — ( 4,159 )

Net loss — — — — ( 277,402 ) ( 277,402 )

Balance as of June 30, 2022 120,992 $ 1,210 $ 6,172,990 $ ( 42,224 ) $ ( 5,955,936 ) $ 176,040

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

12 unchanged sentences

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 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

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

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

12 unchanged sentences

Accounts payable, accrued expenses and other liabilities 19,407 2,374

Deferred revenue ( 12,325 ) ( 27,804 )

Operating lease liability ( 21,434 ) ( 19,217 )

Deferred revenue ( 12,167 ) ( 51,742 )

Net cash used in operating activities ( 294,012 ) ( 357,516 )

3 unchanged sentences

Sales and maturities of marketable securities 1,134,138 775,978

Purchases of restricted investments ( 9,400 ) ( 10,650 )

Proceeds from maturity of restricted investments 9,400 10,650

Other investing activities ( 8,575 ) ( 4,363 )

3 unchanged sentences

Proceeds from development derivative 15,667 8,400

Proceeds from term loan facility — 250,000

Other financing activities — ( 6,250 )

Net cash provided by financing activities 65,293 380,988

3 unchanged sentences

Cash, cash equivalents and restricted cash, end of period $ 577,735 $ 748,065

Supplemental disclosure of noncash investing and financing activities:

Supplemental disclosure of cash flows:

Cash paid for interest $ 29,060 $ 8,350

Supplemental disclosure of noncash investing activities:

Capital expenditures included in accounts payable and accrued expenses $ 6,518 $ 11,796

10 unchanged sentences

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 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.

As of June 30, 2022, we have five products that have received marketing approval, including one partnered product, and five late-stage investigational programs advancing towards potential commercialization.

As of June 30, 2022, we generated worldwide product revenues from three commercialized products, ONPATTRO, GIVLAARI and OXLUMO, primarily in the U.S., Europe and Japan.

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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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.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of June 30, 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

June 30, Six Months Ended

(In thousands) 2022 2021 2022 2021

1 unchanged sentence

Europe 56,787 44,904 109,968 85,557

Rest of World (primarily Japan) 21,521 11,827

Rest of World 25,556 16,544 47,077 28,371

Total $ 153,428 $ 113,839 $ 290,437 $ 215,790

9 unchanged sentences

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

(In thousands) As of March 31,

(In thousands) As of June 30,

2022 As of December 31,

4 unchanged sentences

Net revenues from collaborations consist of the following:

Three Months Ended March 31,

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

(In thousands) 2022 2021 2022 2021

5 unchanged sentences

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

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

(In thousands) As of June 30, 2022 As of December 31, 2021

Receivables included in “Accounts receivable, net” $ 9,074 $ 73,266

Contract liabilities included in “Deferred revenue” $ 80,647 $ 88,627

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.

We recognized revenue of $ 5.3 million in the six months ended June 30, 2022 and revenue of $ 29.2 million and $ 54.5 million in the three and six months ended June 30, 2021, respectively, that was included in the contract liability balance at the beginning of the period.

Revenue recognized from amounts included in the contract liability balance at the beginning of the period was immaterial for the three months ended June 30, 2022.

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.

1 unchanged sentence

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 March 31,

Three Months Ended June 30,

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

Regeneron Pharmaceuticals $ 1,677 $ 365 $ 9,645 $ 9,392 $ 168 $ 10,883

Vir Biotechnology 136 42 120 1,029 159 1,355

Other — 280 177 1,364 497 899

Total $ 1,677 $ 645 $ 9,822 $ 10,756 $ 665 $ 11,782

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 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

Regeneron Pharmaceuticals, Inc.

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

Six Months Ended June 30,

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

Regeneron Pharmaceuticals $ 3,114 $ 987 $ 18,953 $ 14,191 $ 262 $ 23,118

Other 156 322 337 2,404 708 3,116

Total $ 3,270 $ 1,309 $ 19,290 $ 16,595 $ 970 $ 26,234

The research and development expenses incurred for the agreements included 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 three and six months ended June 30, 2022 and 2021, we did not incur material selling, general and administrative expenses related to our collaboration agreements.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the Regeneron Master Agreement, which became effective on May 21, 2019.

In addition, we recognized a reduction to our research and development expenses of $ 3.5 million and $ 7.4 million for the three and six months ended June 30, 2022, respectively, and of $ 4.0 million and $ 9.4 million for the three and six months ended June 30, 2021, respectively, from cost reimbursement due under certain of our collaboration agreements with Regeneron Pharmaceuticals, Inc., or Regeneron, accounted for under Accounting Standards Codification, or ASC, Topic 808, Collaborative Arrangements, or ASC 808.

Product Alliances

Regeneron Pharmaceuticals, Inc.

In April 2019, we entered into a global, strategic collaboration with Regeneron to discover, develop and commercialize RNAi therapeutics for a broad range of diseases by addressing 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.

The C5 co-co collaboration and license agreements were executed in August 2019.

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.

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 research period of approximately five years , 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 five years , for a research term extension fee of up to $ 400.0 million.

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

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

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

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

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

The termination of the Regeneron Master Agreement does not affect the term of any license agreement or co-co collaboration agreement then in effect.

The termination of the Regeneron Master Agreement does not affect the term of any license agreement or co-co collaboration

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

agreement then in effect.

In addition, either party may terminate the Regeneron Master Agreement for a material breach by, or insolvency of, the other party.

4 unchanged sentences

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.

18 unchanged sentences

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We allocated the initial transaction price to each unit of account based on the applicable accounting guidance as follows, in thousands:

5 unchanged sentences

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

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.

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.

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.

5 unchanged sentences

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 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.

We re-evaluate the transaction price as of the end of each reporting period and as of June 30, 2022, the total transaction price was determined to be $ 557.0 million, an increase of $ 18.6 million from December 31, 2021.

As of June 30, 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.

2 unchanged sentences

Transaction Price Allocated Deferred Revenue

Performance Obligations As of March 31,

2022 As of March 31,

Performance Obligations As of June 30,

2022 As of June 30,

2022 As of December 31,

6 unchanged sentences

Performance Obligations Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021 Accounting Guidance

June 30, 2022 Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021 Accounting Guidance

Research Services Obligation $ 1,600 $ 10,200 $ 8,800 $ 20,000 ASC 606

2 unchanged sentences

$ ( 1,500 ) $ 37,300 $ 9,300 $ 63,100

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.

As of June 30, 2022, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied was $ 150.6 million, which is expected to be recognized through the term of the

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

4 unchanged sentences

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.

As of June 30, 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.

17 unchanged sentences

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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

3 unchanged sentences

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.

17 unchanged sentences

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.

As of June 30, 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.

1 unchanged sentence

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.

As of June 30, 2022, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 15.0 million, which is expected to be recognized through the term of the DC Workplan as the services are performed.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Vir Biotechnology, Inc.

4 unchanged sentences

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.

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Under the Vir Agreement, we have earned and received certain upfront and development milestone payments in the form of cash and Vir common stock, as well as sublicense revenue.

We may receive additional 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 additional milestone payments or any royalty payments under the Vir Agreement.

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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 $ 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.

Any changes to these estimates will be recognized in the period

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

in which they change as a cumulative catch up.

As of June 30, 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.

1 unchanged sentence

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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 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.

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 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.

At execution and as of June 30, 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.

3 unchanged sentences

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 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.

As of June 30, 2022, the carrying value of the liability related to the sale of future royalties was $ 1.24 billion, net of closing costs of $ 11.2 million.

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Interest expense recognized 55,300

Carrying value as of March 31, 2022

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Payments ( 596 )

Carrying value as of June 30, 2022

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 March 31, 2022 Quoted

(In thousands) As of June 30, 2022 Quoted

(Level 1) Significant

5 unchanged sentences

Commercial paper 1,497 — 1,497 —

government-sponsored enterprise securities 33,099 — 33,099 —

Marketable debt securities:

4 unchanged sentences

Certificates of deposit 2,500 — 2,500 —

Municipal securities 1,005 — 1,005 —

Marketable equity securities 30,901 30,901 — —

3 unchanged sentences

Development derivative liability $ 144,977 $ — $ — $ 144,977

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) As of December 31, 2021 Quoted

18 unchanged sentences

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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

The carrying amount of our debt as of June 30, 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 not record any impairment charges related to our marketable debt securities during the three months ended March 31, 2022 or 2021.

We did not record any impairment charges related to our marketable debt securities during the three or six months ended June 30, 2022 or 2021.

The following tables summarize our marketable debt securities:

As of March 31, 2022

As of June 30, 2022

(In thousands) Amortized

5 unchanged sentences

Certificates of deposit 2,500 — — 2,500

Municipal securities 1,006 — ( 1 ) 1,005

Total $ 1,604,309 $ 23 $ ( 10,604 ) $ 1,593,728

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021

9 unchanged sentences

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

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

(In thousands) As of June 30, 2022 As of December 31, 2021

Marketable debt securities $ 1,504,154 $ 1,548,617

1 unchanged sentence

Total $ 1,593,728 $ 1,603,615

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OTHER BALANCE SHEET DETAILS

The components of inventory are summarized as follows:

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

(In thousands) As of June 30, 2022 As of December 31, 2021

Raw materials $ 19,140 $ 14,754

2 unchanged sentences

Total $ 132,523 $ 122,701

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.

As of June 30, 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.

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 March 31,

As of June 30,

(In thousands) 2022 2021

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$ 577,735 $ 748,065

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive (Loss) Income

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Adjustment Total Accumulated Other

Comprehensive (Loss) Income

Comprehensive Loss

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

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Net other comprehensive income (loss) — 69 ( 8,951 ) ( 83 ) ( 8,965 )

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

Balance as of June 30, 2022 $ ( 32,792 ) $ ( 2,742 ) $ ( 10,581 ) $ 3,891 $ ( 42,224 )

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

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Net other comprehensive income (loss) — 116 ( 248 ) 7,673 7,541

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

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 other income in the condensed consolidated statements of operations and comprehensive loss.

CREDIT AGREEMENT

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

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

As of 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.

As of June 30, 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 9 % and 8 % as of June 30, 2022 and December 31, 2021, respectively.

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.

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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.

(i) intellectual property owned by us relating to ONPATTRO, GIVLAARI, and AMVUTTRA, (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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

As of June 30, 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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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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 vutrisiran clinical development costs, we have agreed to pay Blackstone Life Sciences a 1 % royalty on net sales of AMVUTTRA (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 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.

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 AMVUTTRA 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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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.

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 AMVUTTRA, should we obtain regulatory approval for zilebesiran or vutrisiran for ATTR-cardiomyopathy following termination.

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 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 change in fair value due to the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

remeasurement of the development derivative liability is recorded as other expense on our condensed consolidated statements of operations and comprehensive loss.

As of June 30, 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 AMVUTTRA, assuming regulatory approval for ATTR-cardiomyopathy, (iv) our cost of borrowing ( 13 %), and (v) Blackstone Life Sciences' cost of borrowing ( 4 %).

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

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Loss recorded from remeasurement 45,692

Carrying value as of March 31, 2022

Carrying value as of June 30, 2022

STOCK-BASED COMPENSATION

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

Three Months Ended March 31,

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

(In thousands) 2022 2021 2022 2021

2 unchanged sentences

Total $ 30,471 $ 32,078 $ 59,764 $ 87,768

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31,

As of June 30,

(In thousands) 2022 2021

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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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Legal Matters

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Our accounting policy for accrual of legal costs is to recognize such expenses as incurred.

Securities Litigation

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.

On November 7, 2019, plaintiff filed an amended complaint, or the New York Complaint.

The New York Complaint is brought on behalf of an alleged class of those who purchased our securities pursuant and/or traceable to our November 14, 2017 public stock offering.

The New York Complaint purports to allege claims arising under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, and generally alleges that the defendants violated the federal securities laws by, among other things, making material misstatements or omissions concerning the results of our APOLLO Phase 3 clinical trial of patisiran.

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On May 23, 2022, Moderna filed a partial motion to dismiss, asserting an affirmative defense under Section 1498(a).

We responded on May 27, 2022, opposing their motion arguing Moderna had significant non-government sales and the government contract ended in April 2022.

Moderna responded on June 13, 2022, requesting a partial motion to dismiss those claims for sales under 1498(a).

This motion is fully briefed and pending before the court.

On May 27, 2022, Pfizer filed an answer to our complaint, denying the allegations, and asserting invalidity and non-infringement defenses.

In addition, Pfizer added BioNTech SE to the suit and added counter-claims seeking a declaratory judgment that our patent is invalid and a second claim alleging that our patent is invalid due to patent misuse.

We believe their defenses and counter-claims have no merit and responded on June 10, 2022, with substantive arguments as to the validity of our claims and the lack of merit of their patent misuse claim.

On July 12, 2022, we filed a new lawsuit against each of Pfizer and Moderna seeking damages for infringing our newly granted U.S.

11,382,979 in Pfizer’s and Moderna’s manufacture and sale of their mRNA COVID-19 vaccines.

Indemnifications

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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.

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,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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