ALNYLAM PHARMACEUTICALS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a global commercial-stage biopharmaceutical company developing novel therapeutics based on ribonucleic acid interference, or RNAi. RNAi is a naturally occurring biological pathway within cells for sequence-specific silencing and regulation of gene expression. By harnessing the RNAi pathway, we have developed a new class of innovative medicines, known as RNAi therapeutics. RNAi therapeutics are comprised of small interfering RNA, or siRNA, and function upstream of conventional medicines by potently silencing messenger RNA, or mRNA, that encode for proteins implicated in the cause or pathway of disease, thus preventing them from being made. We believe this is a revolutionary approach with the potential to transform the care of patients with rare and prevalent diseases. To date, our efforts to advance this revolutionary approach have yielded the approval of five first-in-class RNAi-based medicines, ONPATTRO ® (patisiran), GIVLAARI ® (givosiran), OXLUMO ® (lumasiran), AMVUTTRA™ (vutrisiran) and Leqvio ® (inclisiran). Our research and development strategy is to target genetically validated genes that have been implicated in the cause or pathway of human disease. We utilize a N-acetylgalactosamine (GalNAc) conjugate approach or lipid nanoparticle (LNP) to enable hepatic delivery of siRNAs. For delivery to the central nervous system, or CNS, and the eye (ocular delivery), we are utilizing an alternative conjugate approach based on a hexadecyl (C16) moiety as a lipophilic ligand. We are also advancing approaches for lung, muscle and adipose tissue delivery of siRNAs. Our focus is on clinical indications where there is a high unmet need, a genetically validated target, early biomarkers for the assessment of clinical activity in Phase 1 clinical studies, and a definable path for drug development, regulatory approval, patient access and commercialization. In early 2021, we launched our Alnylam P 5 x25 strategy, which focuses on our planned transition to a top five biotech company, as measured by market capitalization, by the end of 2025. With Alnylam P 5 x25 , we aim to deliver transformative rare and prevalent disease medicines for patients around the world through sustainable innovation, while delivering exceptional financial performance. We currently have five marketed products and over a dozen clinical programs, including five in late-stage development, across four Strategic Therapeutic Areas, or “STArs:” Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. Four of our marketed products are within the Genetic Medicines STAr, ONPATTRO, GIVLAARI, OXLUMO and AMVUTTRA. ONPATTRO is approved by the United States Food and Drug Administration, or FDA, for the treatment of the polyneuropathy of hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, in adults and has also been approved in the European Union, or EU, for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy, in Japan for the treatment of transthyretin, or TTR, type familial amyloidosis with polyneuropathy, and in multiple additional countries, including Brazil. Regulatory filings in other territories are pending and additional filings are planned for 2022 and beyond. GIVLAARI is approved in the U.S. for the treatment of adults with acute hepatic porphyria, or AHP, in the EU for the treatment of AHP in adults and adolescents aged 12 years and older, and in several additional countries, including Brazil, Canada, Switzerland and Japan. We have also filed for regulatory approval for givosiran (the non-branded drug name for GIVLAARI) in Colombia and additional regulatory filings are pending or planned for 2022 and beyond. In November 2020, we received regulatory approval for OXLUMO in the U.S. and EU for the treatment of primary hyperoxaluria type 1, or PH1, in all age groups. In June 2021, we received marketing authorization approval for OXLUMO in Brazil for the treatment of PH1 in both children and adult patients. In March 2022, we announced that the FDA accepted our supplemental New Drug Application for lumasiran (the non-branded drug name for OXLUMO), for the treatment of advanced PH1. The FDA has set an action date of October 6, 2022, under the Prescription Drug User Fee Act, or PDUFA. Regulatory filings in other territories are pending and additional filings are planned for 2022 and beyond. In June 2022, we received regulatory approval for AMVUTTRA in the U.S. for the treatment of the polyneuropathy of hATTR amyloidosis in adults. We have also filed for regulatory approval for vutrisiran (the non-branded name of AMVUTTRA) with the European Medicines Agency, or EMA, the Brazilian Health Regulatory Agency and the Japanese Pharmaceuticals and Medical Devices Agency, or PMDA. Additional regulatory filings are planned for 2022 and beyond. Our fifth product, Leqvio (inclisiran), is in the Cardio-Metabolic Diseases STAr. Leqvio is being developed and commercialized by our partner Novartis AG, or Novartis, and has received marketing authorization from the European Commission, or EC, for the treatment of adults with hypercholesterolemia or mixed dyslipidemia and from the FDA as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with heterozygous familial hypercholesterolemia, or HeFH, or clinical atherosclerotic cardiovascular disease, or ASCVD, who require additional lowering of LDL-C. As of the end of June 2022, Leqvio has been approved in 60 countries. In addition to our marketed products, we have multiple late-stage investigational programs advancing toward potential commercialization. These programs include our wholly owned programs: lumasiran for the treatment of advanced PH1 and recurrent renal stones; patisiran (the non-branded drug name for ONPATTRO) for the treatment of transthyretin amyloidosis, or ATTR amyloidosis, with cardiomyopathy; vutrisiran for the treatment of ATTR amyloidosis with cardiomyopathy and Stargardt Disease; as well as fitusiran for the treatment of hemophilia, which is being advanced by our partner Genzyme Corporation, a Sanofi Company, or Sanofi; and cemdisiran for the treatment of complement-mediated diseases, which we are 28 Table of Contents advancing as a monotherapy in a Phase 2 study, and our partner Regeneron Pharmaceuticals, Inc., or Regeneron, is advancing cemdisiran in combination with pozelimab in Phase 3 studies in myasthenia gravis and paroxysmal nocturnal hemoglobinuria. In further support of our Alnylam P 5 x25 strategy and in view of our evolving risk profile, we remain focused on continued evolution of our global infrastructure, including key objectives such as optimizing our global structure for execution in key markets, enhancing performance consistent with our values, and continuing to strengthen our culture. We maintain focus on our global compliance program to drive its evolution and enhancement in view of the Alnylam P 5 x25 strategy. Building from our global Code of Business Conduct and Ethics, our compliance program is designed to empower our employees and those with whom we work to execute on our strategy consistent with our values and in compliance with applicable laws. Comprised of components such as risk assessment and monitoring; policies, procedures, and guidance; training and communications; dedicated resources; and systems and processes supporting activities such as third party relationships and investigations and remediation; our program and related controls are built to enhance our business processes, structures, and controls across our global operations. Based on our expertise in RNAi therapeutics and broad intellectual property estate, we have formed alliances with leading pharmaceutical and life sciences companies to support our development and commercialization efforts, including Regeneron, Novartis (which acquired our partner The Medicines Company, or MDCO, in 2020), Sanofi, Vir Biotechnology, Inc., or Vir, Dicerna Pharmaceuticals, Inc. (acquired by Novo Nordisk A/S, or Novo Nordisk, in December 2021), or Dicerna, and PeptiDream, Inc., or PeptiDream. We have incurred significant losses since we commenced operations in 2002 and as of June 30, 2022, we had an accumulated deficit of $5.96 billion. Historically, we have generated losses principally from costs associated with research and development activities, acquiring, filing and expanding intellectual property rights, and selling, general and administrative costs. As a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical and commercial capabilities, including global commercial operations, continued management and growth of our patent portfolio, collaborations and general corporate activities, we expect to incur additional operating losses, however we expect 2019 represents our peak net loss year as we transition towards a self-sustainable financial profile. We anticipate that our operating results will continue to fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods. We currently have programs focused on a number of therapeutic areas and, as of July 15, 2022, we generate worldwide product revenues from four commercialized products, ONPATTRO, GIVLAARI, OXLUMO and AMVUTTRA, primarily in the U.S., Europe and Japan. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products and/or successfully market and sell ONPATTRO, GIVLAARI, OXLUMO, AMVUTTRA or any other approved products in the future. A portion of our total revenues in recent years has been derived from collaboration revenues from strategic alliances with Regeneron, Vir and Novartis. In addition to revenues from the commercial sales of our approved products and potentially from sales of future products, we expect our sources of potential funding for the next several years to continue to be derived in part from existing and new strategic alliances. Such alliances include, or may include in the future, license and other fees, funded research and development, milestone payments and royalties on product sales by our licensors, including royalties on sales of Leqvio made by our partner Novartis, as well as proceeds from the sale of equity or debt. The COVID-19 Pandemic In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic. More recently, other, more infectious, variants of COVID-19 have been identified, which continue to spread throughout the U.S. and worldwide. We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the current COVID-19 pandemic. Since the onset of the global pandemic in 2020, we have been closely monitoring the spread of COVID-19 and its variants, and plan to continue taking steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the ongoing COVID-19 pandemic. The spread of COVID-19 caused us to modify our business practices, including implementing a temporary global work from home policy in March 2020 for all employees who were able to perform their duties remotely and temporarily restricting all nonessential business travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the patients we serve and other business partners in light of COVID-19 and variants thereof. Where and to the extent permitted to be open under local regulations, our office sites are operational with appropriate safety precautions based on vaccination rates and local guidance, and in October 2021, we formally re-opened our offices in the U.S., following openings in other territories, to those employees who have been fully vaccinated or qualified for an approved exemption. The ongoing COVID-19 pandemic has continued to ebb and flow, with different jurisdictions having higher levels of infections than others and new variants of the virus (such as the Omicron-lineage variants) emerging and spreading more easily and quickly than other variants and, at this time, we cannot predict when certain restrictions that remain in place to protect our employees, customers and patients will no longer be needed. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and 29 Table of Contents cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, including the effectiveness of vaccination and booster vaccination campaigns, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19 and variants thereof. We will continue to work diligently with our partners and stakeholders to support patient access to our approved medicines, advance our product candidates under regulatory review as well as in our clinical studies to the extent safe to do so for patients, caregivers and healthcare practitioners, and ensure the continuity of our manufacturing and supply chain. For additional information related to the actual or potential impacts of COVID-19 on our business, please read Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q. Research and Development Since our inception, we have focused on drug discovery and development programs. Research and development expenses represent a substantial percentage of our total operating expenses, as reflected by our broad pipeline of clinical development programs, which includes multiple programs in late-stage development. Our Product Pipeline Our broad pipeline, including five approved products and multiple late and early-stage investigational RNAi therapeutics, is focused in four STArs: Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. The chart below is a summary of our commercial products and late- and early-stage development programs as of July 2022. It identifies those programs for which we have received marketing approval, the stage of our programs and our commercial rights to such programs: During the second quarter of 2022 and recent period, we reported the following updates from our commercially approved products and our late-stage clinical programs: Commercial TTR Franchise: ONPATTRO & AMVUTTRA • We achieved ONPATTRO global net product revenues for the second quarter of 2022 of $153.4 million. • Received 133 Start Forms in the U.S. for AMVUTTRA from launch through July 22, 2022. 30 Table of Contents GIVLAARI • We achieved GIVLAARI global net product revenues for the second quarter of 2022 of $45.2 million. OXLUMO • We achieved OXLUMO global net product revenues for the second quarter of 2022 of $14.9 million. Leqvio • Our partner, Novartis, continued the launch of Leqvio in the U.S. and in other markets, with focus on patient on-boarding, removing access hurdles and enhancing medical education. Late-Stage Clinical Development • We continued to advance vutrisiran, a subcutaneously administered investigational RNAi therapeutic in development for the treatment of ATTR amyloidosis and Stargardt Disease: ◦ Received FDA approval of AMVUTTRA for the treatment of the polyneuropathy of hATTR amyloidosis in adults; and ◦ Received a positive opinion from the CHMP of the EMA recommending approval of vutrisiran for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy. • We continued to advance lumasiran for the treatment of PH1 and in development for the treatment of recurrent kidney stone disease: ◦ Presented new results from the ILLUMINATE-A Phase 3 study in patients with PH1; ◦ Presented new results from the 12-month analysis of the ILLUMINATE-B Phase 3 open-label pediatric study in patients less than six years of age with PH1; and ◦ Presented new results from the ILLUMINATE-C Phase 3 study in patients with advanced PH1. • We continued to advance cemdisiran for the treatment of complement-mediated diseases, in collaboration with our partner, Regeneron: ◦ Reported positive topline results from the Phase 2 study in patients with immunoglobulin A nephropathy, or IgAN; and ◦ Announced that we are working with Regeneron to finalize plans for the Phase 3 clinical development of cemdisiran in IgAN, with the potential to initiate a program by late 2022. • Our partner, Sanofi, presented positive data from the ATLAS Phase 3 study evaluating the efficacy and safety of once-monthly fitusiran (80 mg) in adults and adolescents with severe hemophilia A or B who were previously treated with prior factor or bypassing agent, or BPA, prophylaxis: ◦ The study met the primary endpoint and demonstrated fitusiran prophylaxis significantly reduced bleeding episodes compared to prior factor or BPA prophylaxis. There is a risk that any drug discovery or development program may not produce revenue for a variety of reasons, including the possibility that we will not be able to adequately demonstrate the safety and effectiveness of the product candidate. Moreover, there are uncertainties specific to any new field of drug discovery, including RNAi. The success of ONPATTRO, GIVLAARI, OXLUMO, AMVUTTRA or any other product candidate we develop is highly uncertain. Due to the numerous risks associated with developing drugs, including those risks associated with the ongoing COVID-19 pandemic, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of any potential product candidate or indication, or the period, if any, in which material net cash inflows will commence from any approved product or indication. Any failure to complete any stage of the development of any potential products or any approved product for an expanded indication in a timely manner or successfully launch, market and sell any of our commercially approved products, could have a material adverse effect on our operations, financial position and liquidity. A discussion of some of the risks and uncertainties associated with completing our research and development programs within the planned timeline, or at all, and the potential consequences of failing to do so, are set forth in Part II, Item 1A below under the heading “Risk Factors.” Strategic Alliances Our business strategy is to develop and commercialize a broad pipeline of RNAi therapeutic products directed towards our four STArs. As part of this strategy, we have entered into, and expect to enter into additional, collaboration and licensing agreements as a means of obtaining resources, capabilities and funding to advance our investigational RNAi therapeutic programs. 31 Table of Contents Our collaboration strategy is to form alliances that create significant value for ourselves and our collaborators in the advancement of RNAi therapeutics as a new class of innovative medicines. Specifically, with respect to our CNS/Ocular Disease pipeline, in April 2019, we entered into a global, strategic collaboration with Regeneron to discover, develop and commercialize RNAi therapeutics for a broad range of diseases by addressing disease targets expressed in the eye and CNS, in addition to a select number of targets expressed in the liver. In July 2020, Regeneron exercised its co-development/co-commercialization option on our first CNS-targeted development candidate, ALN-APP, an investigational RNAi therapeutic in development for the treatment of hereditary cerebral amyloid angiopathy and autosomal dominant Alzheimer’s Disease, which we are leading. We are also advancing multiple other programs with Regeneron. With respect to our Cardio-Metabolic pipeline, in March 2013, we entered into an exclusive, worldwide license with MDCO (acquired by Novartis AG in January 2020) pursuant to which MDCO was granted the right to develop, manufacture and commercialize RNAi therapeutics targeting proprotein convertase subtilisin/kexin type 9 for the treatment of hypercholesterolemia and other human diseases, including inclisiran. In March 2018, we entered into a discovery collaboration with Regeneron to identify RNAi therapeutics for nonalcoholic steatohepatitis, or NASH, and potentially other related diseases, and in November 2018, we and Regeneron entered into a separate, fifty-fifty collaboration to further research, co-develop and commercialize any therapeutic product candidates that emerge from these discovery efforts. In April 2020, we entered into a development and commercialization collaboration with Dicerna to advance investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin deficiency-associated liver disease, or alpha-1 liver disease. With respect to our Hepatic Infectious Disease pipeline, in October 2017, we announced an exclusive licensing agreement with Vir for the development and commercialization of RNAi therapeutics for infectious diseases, including chronic HBV infection. In March 2020, we announced an expansion of our exclusive licensing agreement with Vir to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19, which we further expanded in April 2020 to include up to three additional targets focused on host factors for SARS-CoV-2, including angiotensin converting enzyme-2, and transmembrane protease, serine 2, and potentially a third mutually selected host factor target. In July 2021, we notified Vir that we elected to discontinue ALN-COV, in development for the treatment of COVID-19, and all other COVID-19 research and development activities, based on a portfolio prioritization in view of the availability of highly effective vaccines and alternative treatment options. Following such discontinuation of COVID-19 related activities, we have no further obligations to work on the COVID-related targets and Vir has no further rights to such targets under our exclusive licensing agreement. With respect to our Genetic Medicine pipeline, we formed a broad strategic alliance with Sanofi in 2014. In January 2018, we and Sanofi amended our 2014 collaboration and entered into the Exclusive License Agreement, referred to as the Exclusive TTR License, under which we have the exclusive right to pursue the further global development and commercialization of all TTR products, including ONPATTRO, AMVUTTRA and any back-up products, and the ALN-AT3 Global License Terms, referred to as the AT3 License Terms, under which Sanofi has the exclusive right to pursue the further global development and commercialization of fitusiran and any back-up products. In April 2019, we and Sanofi agreed to further amend the 2014 Sanofi collaboration to conclude the research and option phase and to amend and restate the AT3 License Terms to modify certain of the business terms. We intend to continue to evaluate and explore partnership opportunities through collaboration and licensing arrangements, and may enter into new collaborations to advance certain products or disease areas. For example, in January 2022, we announced that we and Novartis agreed to collaborate on the discovery and development of an siRNA-based targeted therapy to restore functional liver cells in patients with end-stage liver diseases. We also have entered into license agreements to obtain rights to intellectual property in the field of RNAi. In addition, because delivery of RNAi therapeutics has historically been an important objective of our research activities, we have entered into various collaboration and licensing arrangements with other companies and academic institutions to gain access to delivery technologies, including various LNP delivery technologies, and we may enter into such agreements in the future to gain access to products or technologies. For example, in 2021, we entered into a license and collaboration agreement with PeptiDream to discover and develop peptide-siRNA conjugates leveraging PeptiDream's proprietary Peptide Discovery Platform System technology. Critical Accounting Policies and Estimates Our critical accounting policies are described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2021, which we filed with the SEC on February 10, 2022. There have been no significant changes to our critical accounting policies since the beginning of this fiscal year. 32 Table of Contents Results of Operations The following data summarizes the results of our operations: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change Total revenues $ 224,818 $ 220,553 $ 4,265 2 % $ 438,077 $ 398,119 $ 39,958 10 % Operating costs and expenses $ 416,504 $ 366,713 $ 49,791 14 % $ 776,495 $ 730,533 $ 45,962 6 % Loss from operations $ (191,686) $ (146,160) $ (45,526) 31 % $ (338,418) $ (332,414) $ (6,004) 2 % Net loss $ (277,402) $ (189,559) $ (87,843) 46 % $ (517,743) $ (389,850) $ (127,893) 33 % Discussion of Results of Operations Revenues Total revenues consist of the following: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change Net product revenues $ 213,515 $ 160,811 $ 52,704 33 % $ 400,387 $ 296,580 $ 103,807 35 % Net revenues from collaborations 9,025 59,395 (50,370) (85) % 34,970 101,192 (66,222) (65) % Royalty revenue 2,278 347 1,931 556 % 2,720 347 2,373 684 % Total $ 224,818 $ 220,553 $ 4,265 2 % $ 438,077 $ 398,119 $ 39,958 10 % Net Product Revenues Net product revenues consist of the following, by product and region: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change ONPATTRO United States $ 71,085 $ 52,391 $ 18,694 36 % $ 133,392 $ 101,862 $ 31,530 31 % Europe 56,787 44,904 11,883 26 % 109,968 85,557 24,411 29 % Rest of World 25,556 16,544 9,012 54 % 47,077 28,371 18,706 66 % Total $ 153,428 $ 113,839 $ 39,589 35 % $ 290,437 $ 215,790 $ 74,647 35 % GIVLAARI United States $ 29,661 $ 22,368 $ 7,293 33 % $ 53,336 $ 40,130 $ 13,206 33 % Europe 13,894 8,020 5,874 73 % 23,582 14,893 8,689 58 % Rest of World 1,595 242 1,353 559 % 3,509 280 3,229 1153 % Total $ 45,150 $ 30,630 $ 14,520 47 % $ 80,427 $ 55,303 $ 25,124 45 % OXLUMO United States $ 7,121 $ 6,512 $ 609 9 % $ 12,533 $ 7,920 $ 4,613 58 % Europe 7,593 9,830 (2,237) (23) % 15,751 17,567 (1,816) (10) % Rest of World 223 — 223 N/A 1,239 — 1,239 N/A Total $ 14,937 $ 16,342 $ (1,405) (9) % $ 29,523 $ 25,487 $ 4,036 16 % Total net product revenues $ 213,515 $ 160,811 $ 52,704 33 % $ 400,387 $ 296,580 $ 103,807 35 % 33 Table of Contents Net product revenues increased during the three and six months ended June 30, 2022, compared to the same periods in 2021, as a result of increased patients on ONPATTRO, GIVLAARI, and OXLUMO therapies, offset by an unfavorable impact from foreign exchange rates on our international revenues. We expect net product revenues to increase during 2022, as compared to 2021, as we continue to add new patients onto our commercial products, including AMVUTTRA which was recently approved, as well as launch these products into additional markets, assuming regulatory approvals. Net Revenues from Collaborations and Royalty Revenue Net revenues from collaborations consist of the following: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change Regeneron Pharmaceuticals $ 14 $ 46,404 $ (46,390) (100) % $ 12,426 $ 76,747 $ (64,321) (84) % Novartis AG 8,533 8,908 (375) (4) % 21,669 17,019 4,650 27 % Vir Biotechnology 433 3,978 (3,545) (89) % 696 6,800 (6,104) (90) % Other 45 105 (60) (57) % 179 626 (447) (71) % Total $ 9,025 $ 59,395 $ (50,370) (85) % $ 34,970 $ 101,192 $ (66,222) (65) % Net revenues from collaborations decreased during the three and six months ended June 30, 2022, as compared to the same periods in 2021, primarily due to a decrease in revenue recognized in connection with our collaboration agreement with Regeneron, attributed to reduced research and manufacturing activities and timing of reimbursable activities. We earn royalty revenue from global net sales of Leqvio by our partner, Novartis. In December 2020, Leqvio received marketing authorization from the EC for the treatment of adults with hypercholesterolemia or mixed dyslipidemia, and in December 2021, Leqvio was approved by the FDA for the treatment of adults with HeFH or ASCVD. During the quarter ended June 30, 2022, we recorded $2.3 million in royalty revenue. Recognition of our combined net revenues from collaborations and royalty revenue is dependent on a variety of factors including the level of work reimbursed by partners, achievement of milestones under our collaboration agreements, and royalties associated with sales of Leqvio. As a result, there may be variability in revenue recognized from collaborations and royalties in 2022. Operating Costs and Expenses Operating costs and expenses consist of the following: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change Cost of goods sold $ 34,038 $ 30,256 $ 3,782 13 % $ 57,495 $ 53,279 $ 4,216 8 % Cost of collaborations and royalties 6,770 8,499 (1,729) (20) % 18,940 16,538 2,402 15 % Research and development 205,712 182,635 23,077 13 % 375,605 368,534 7,071 2 % Selling, general and administrative 169,984 145,323 24,661 17 % 324,455 292,182 32,273 11 % Total $ 416,504 $ 366,713 $ 49,791 14 % $ 776,495 $ 730,533 $ 45,962 6 % Cost of goods sold . Cost of goods sold as a percentage of net product revenues decreased to 15.9% and 14.4% for the three and six months ended June 30, 2022, respectively, as compared to 18.8% and 18.0% for the three and six months ended June 30, 2021, respectively, primarily due to fully amortized intangible assets. We anticipate variability in our cost of goods sold as a percentage of net product revenues due to the timing of manufacturing runs and utilization and the depletion of zero-cost inventories, as well as launch our approved products into additional markets, assuming regulatory approvals. We expect cost of goods sold will increase during 2022, as compared to 2021, primarily as a result of an expected increase in net product sales as well as the sale of capitalized inventory. 34 Table of Contents Cost of collaborations and royalties. Cost of collaborations and royalties decreased during the three months ended June 30, 2022 and increased during the six months ended June 30, 2022, as compared to the same periods in 2021. Fluctuations year over year are primarily due to timing and demand of GalNAc material supply to Novartis to support its continued, global launch of Leqvio, as well as its ongoing clinical trials. We expect cost of collaborations and royalties to remain relatively consistent during 2022, as compared to 2021, due to consistency in planned GalNAc material to be supplied to Novartis to support the manufacturing of Leqvio. Research and development . Research and development expenses consist of the following: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change Clinical research and outside services $ 107,191 $ 94,366 $ 12,825 14 % $ 184,071 $ 181,776 $ 2,295 1 % Compensation and related 53,739 47,007 6,732 14 % 105,039 95,379 9,660 10 % Stock-based compensation 10,638 13,086 (2,448) (19) % 22,255 37,461 (15,206) (41) % Occupancy and all other costs 34,144 28,176 5,968 21 % 64,240 53,918 10,322 19 % Total $ 205,712 $ 182,635 $ 23,077 13 % $ 375,605 $ 368,534 $ 7,071 2 % For the three and six months ended June 30, 2022, the increases in research and development expenses, as compared to the same periods in the prior year, were primarily due to the following: • Increased early development and study activities; and • Increased compensation and related expenses as a result of increased headcount to support our development activities. For the six months ended June 30, 2022, these increases were offset by decreased stock-based compensation expense primarily due to the accounting for certain performance-based awards in the prior period. During the three and six months ended June 30, 2022 and 2021, in connection with advancing activities under our collaboration agreements, we incurred research and development expenses, primarily related to external development and clinical expenses, including manufacturing of clinical product. The following table summarizes research and development expenses incurred, for which we recognize net revenue, that are directly attributable to our collaboration agreements, by collaboration partner: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 Regeneron Pharmaceuticals $ 11,687 $ 20,443 $ 23,054 $ 37,571 Other 457 2,760 815 6,228 Total $ 12,144 $ 23,203 $ 23,869 $ 43,799 Selling, general and administrative . Selling, general and administrative expenses consist of the following: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change Compensation and related $ 66,702 $ 54,369 $ 12,333 23 % $ 126,985 $ 110,441 $ 16,544 15 % Consulting and professional services 51,120 47,559 3,561 7 % 95,581 84,265 11,316 13 % Stock-based compensation 19,833 18,992 841 4 % 37,509 50,307 (12,798) (25) % Occupancy and all other costs 32,329 24,403 7,926 32 % 64,380 47,169 17,211 36 % Total $ 169,984 $ 145,323 $ 24,661 17 % $ 324,455 $ 292,182 $ 32,273 11 % 35 Table of Contents For the three months ended June 30, 2022, the increase in selling, general and administrative expenses, as compared to the same period in the prior year, was primarily due to increased compensation and related expenses as a result of increased headcount and increased other expenses to support our commercial portfolio. For the six months ended June 30, 2022, the increase in selling, general and administrative expenses, as compared to the same period in the prior year, was primarily due to the following: • Increased compensation and related expenses as a result of increased headcount; and • Increased legal expenses, charitable contributions and other expenses to support our commercial portfolio. Offset by: • Decreased stock-based compensation expense primarily due to the accounting for certain performance-based awards in the prior period. We expect that research and development expenses combined with selling, general and administrative expenses will increase during 2022, as compared to 2021, as we continue to advance and develop our platform and pipeline, advance our product candidates, including partnered programs, into later-stage development, prepare regulatory submissions and continue to build-out our global commercial and compliance infrastructure and field team to support ONPATTRO, GIVLAARI, OXLUMO, and the initial launch of AMVUTTRA, as well as launch these products into additional markets, assuming regulatory approvals. However, we expect that certain expenses will be variable depending on the timing of manufacturing batches, clinical trial enrollment and results, regulatory review of our product candidates and programs, and stock-based compensation expenses due to our determination regarding the probability of vesting for performance-based awards. Other (Expense) Income. Other (expense) income consists of the following: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except percentages) 2022 2021 $ Change % Change 2022 2021 $ Change % Change Interest expense $ (42,609) $ (33,416) $ (9,193) 28 % $ (84,971) $ (65,931) $ (19,040) 29 % Other (expense) income, net Interest income 1,899 409 1,490 364 % 2,911 859 2,052 239 % Realized and unrealized (losses) gains on marketable equity securities (1,097) (4,434) 3,337 (75) % (32,258) 42,582 (74,840) (176) % Change in fair value of development derivative liability (31,910) (4,590) (27,320) 595 % (45,692) (22,843) (22,849) 100 % Other (9,270) (140) (9,130) 6,521 % (15,601) (9,859) (5,742) 58 % Total $ (82,987) $ (42,171) $ (40,816) 97 % $ (175,611) $ (55,192) $ (120,419) 218 % Total other expense increased during the three and six months ended June 30, 2022, as compared to the same periods in 2021, primarily due to increased loss as a result of a mark-to-market adjustment related to the development derivative liability and increased interest expenses due to additional draws on our term loan facility. For the six months ended June 30, 2022, additional increases, compared to the same period in 2021, were primarily due to realized and unrealized losses on our marketable equity securities holdings. 36 Table of Contents Liquidity and Capital Resources The following table summarizes our cash flow activities: Six Months Ended June 30, (In thousands) 2022 2021 Net loss $ (517,743) $ (389,850) Non-cash adjustments to reconcile net loss to net cash used in operating activities: 250,263 179,581 Changes in operating assets and liabilities (26,532) (147,247) Net cash used in operating activities (294,012) (357,516) Net cash (used in) provided by investing activities (4,626) 228,376 Net cash provided by financing activities 65,293 380,988 Effect of exchange rate changes on cash, cash equivalents and restricted cash (11,073) (2,829) Net decrease in cash, cash equivalents and restricted cash (244,418) 249,019 Cash, cash equivalents and restricted cash, beginning of period 822,153 499,046 Cash, cash equivalents and restricted cash, end of period $ 577,735 $ 748,065 Operating activities Net cash used in operating activities decreased during the six months ended June 30, 2022, compared to the same periods ended June 30, 2021, primarily due to decreased cash disbursements related to working capital payments and stronger cash receipts from increased product sales. Investing activities Net cash used in investing activities increased during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to net activities related to our marketable debt securities. Financing activities Net cash provided by financing activities decreased during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due proceeds of $250.0 million in connection with the second drawdown on our credit agreement, received in June 2021 and a decrease of $79.2 million in net proceeds from the issuance of common stock in connection with stock option exercises and other types of equity. Additional Capital Requirements We currently have programs focused on a number of therapeutic areas and, as of June 30, 2022, have received regulatory approval and commercially launched four products: ONPATTRO, GIVLAARI, OXLUMO and AMVUTTRA. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products or successfully expand the indication for our approved products, including ONPATTRO, AMVUTTRA and OXLUMO in the future. In addition, we anticipate that we will continue to generate losses as a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical, manufacturing, commercial and compliance capabilities, including global operations, continued management and growth of our intellectual property including our patent portfolio, collaborations and general corporate activities Our expected working and other capital requirements are described in our 2021 Annual Report on Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of June 30, 2022, other than the changes disclosed in the “Notes to Condensed Consolidated Financial Statements” and “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q, there have been no other material changes to our expected working and other capital requirements as described in our 2021 Annual Report on Form 10-K. 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 long-term strategic goals for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q. However, due to numerous factors described in more detail under the caption Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q, we may require significant additional funds earlier than we currently expect in order to continue to commercialize ONPATTRO, GIVLAARI, OXLUMO and AMVUTTRA, and to develop, conduct clinical trials for, manufacture and, if approved, commercialize additional product candidates. 37 Table of Contents