What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-27 compared with 2022-07-28 · 198 added, 123 removed, 608 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

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Total assets $ 3,535,255 $ 3,643,304

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

Current liabilities:

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Deferred revenue, net of current portion 132,930 152,360

Convertible debt 1,015,975 —

Long-term debt — 675,697

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Commitments and contingencies (Note 14)

Stockholders’ equity:

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

Stockholders’ (deficit) equity:

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

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

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

122,991 shares issued and outstanding as of September 30, 2022;

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

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Accumulated deficit ( 6,361,856 ) ( 5,438,193 )

Total stockholders’ equity 176,040 588,203

Total liabilities and stockholders’ equity $ 3,330,417 $ 3,643,304

Total stockholders’ (deficit) equity ( 67,638 ) 588,203

Total liabilities and stockholders’ (deficit) equity $ 3,535,255 $ 3,643,304

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

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Other (expense) income, net ( 30,233 ) 17,715 ( 120,873 ) 28,454

Loss on the extinguishment of debt ( 76,586 ) — ( 76,586 ) —

Total other expense, net ( 147,903 ) ( 22,559 ) ( 323,514 ) ( 77,751 )

Loss before income taxes ( 405,943 ) ( 204,236 ) ( 919,972 ) ( 591,842 )

Provision for income taxes ( 2,729 ) ( 1,228 ) ( 3,714 ) ( 2,244 )

Benefit from (provision for) income taxes 23 ( 278 ) ( 3,691 ) ( 2,522 )

Net loss $ ( 405,920 ) $ ( 204,514 ) $ ( 923,663 ) $ ( 594,364 )

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Unrealized loss on marketable securities ( 2,053 ) ( 64 ) ( 11,004 ) ( 312 )

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

Foreign currency translation gain 460 1,857 377 9,530

Defined benefit pension plans, net of tax 34 58 103 174

3 unchanged sentences

ALNYLAM PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

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Stockholders’

(Deficit) Equity

Shares Amount

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

Exercise of common stock options, net of tax withholdings 1,657 17 153,259 — — 153,276

Issuance of common stock under equity plans 342 3 — — — 3

Stock-based compensation expense — — 129,133 — — 129,133

Purchase of capped calls related to convertible debt — — ( 118,611 ) — — ( 118,611 )

Other comprehensive loss — — — ( 1,559 ) — ( 1,559 )

Net loss — — — — ( 405,920 ) ( 405,920 )

Balance as of September 30, 2022 122,991 $ 1,230 $ 6,336,771 $ ( 43,783 ) $ ( 6,361,856 ) $ ( 67,638 )

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

ALNYLAM PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

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Comprehensive

(Loss) Income

Deficit Total

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

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

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

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

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

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

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

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

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(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

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Realized and unrealized loss (gain) on marketable equity securities 40,108 ( 61,273 )

Loss on extinguishment of debt 76,586 —

Change in fair value of development derivative liability 70,776 19,654

Other 20,607 15,568

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Sales and maturities of marketable securities 1,626,848 1,172,100

Proceeds from maturity of restricted investments 89,951 25,975

Purchases of restricted investments ( 98,451 ) ( 26,140 )

Other investing activities ( 5,075 ) ( 4,198 )

Net cash (used in) provided by investing activities ( 4,626 ) 228,376

Net cash provided by investing activities 309,265 140,105

Cash flows from financing activities:

Proceeds from exercise of stock options and other types of equity, net 202,646 201,227

Proceeds from convertible debt, net 1,016,888 —

Repayment of term loan ( 762,107 ) —

Purchases of capped calls related to convertible debt ( 118,611 ) —

Proceeds from the sale of future royalties — 500,000

Proceeds from development derivative 23,500 16,100

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Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 9,049 ) ( 5,968 )

Net decrease in cash, cash equivalents and restricted cash ( 244,418 ) 249,019

Net increase in cash, cash equivalents and restricted cash 253,236 597,412

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

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Cash paid for interest $ 43,932 $ 17,703

Supplemental disclosure of noncash investing activities:

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

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

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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 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.

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

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

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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

Updates to our significant accounting policies, including the convertible debt policy, are discussed below.

Use of Estimates

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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 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.

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

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Specifically, ASU 2020-06 simplifies accounting for the issuance of convertible instruments by removing certain separation models required under existing guidance.

In addition, the standard removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, or EPS.

ASU 2020-06 is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted.

We adopted the new standard on January 1, 2022 and there was no impact on the date of adoption.

During the third quarter of 2022, we issued convertible notes as described in Note 10, Convertible Debt.

NET PRODUCT REVENUES

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2022 2021 2022 2021

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Europe 169 — 169 —

Total 25,229 — 25,229 —

United States 31,169 22,372 84,505 62,502

Europe 12,477 7,568 36,059 22,461

Rest of World 2,013 1,893 5,522 2,173

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Total net product revenues $ 232,267 $ 167,044 $ 632,654 $ 463,624

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(In thousands) As of June 30,

(In thousands) As of September 30,

2022 As of December 31,

Receivables included in “Accounts receivable, net” $ 160,162 $ 124,906

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NET REVENUES FROM COLLABORATIONS

Net revenues from collaborations consist of the following:

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

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

(In thousands) 2022 2021 2022 2021

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

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

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

Receivables included in “Accounts receivable, net” $ 21,933 $ 73,266

Contract liabilities included in “Deferred revenue” $ 73,625 $ 88,627

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.

We recognized revenue of $ 11.7 million and $ 17.0 million in the three and nine months ended September 30, 2022, respectively, and revenue of $ 12.7 million and $ 65.2 million in the three and nine months ended September 30, 2021, respectively, that was included in the contract liability balance at the beginning of the period.

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

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

Three Months Ended June 30,

Three Months Ended September 30,

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

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Total $ 9,812 $ 1,511 $ 8,982 $ 3,724 $ 322 $ 11,692

Six Months Ended June 30,

Nine Months Ended September 30,

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

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Total $ 13,082 $ 2,820 $ 28,272 $ 20,319 $ 1,292 $ 37,926

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

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.

For the three and nine months ended September 30, 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 $ 2.3 million and $ 9.7 million for the three and nine months ended September 30, 2022, respectively, and of $ 3.3 million and $ 12.7 million for the three and nine months ended September 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

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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 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

We and Regeneron plan to advance programs directed to up to 30 targets in

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

agreement then in effect.

the first five years under the Regeneron Collaboration during the Initial Research Term.

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.

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

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In addition, we are eligible to receive future milestones upon the achievement of certain criteria during early clinical development for the eye and CNS programs.

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

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

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

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

targets, if any;

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

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

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

We re-evaluate the transaction price as of the end of each reporting period and as of 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.

We re-evaluate the transaction price as of the end of each reporting period and as of September 30, 2022, the total transaction price was determined to be $ 558.4 million, an increase of $ 20.0 million from December 31, 2021.

As of September 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.

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Transaction Price Allocated Deferred Revenue

Performance Obligations As of June 30,

2022 As of June 30,

Performance Obligations As of September 30,

2022 As of September 30,

2022 As of December 31,

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$ 558,380 $ 266,600 $ 281,700

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognized During

Performance Obligations Three Months Ended

June 30, 2022 Three Months Ended

June 30, 2021 Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021 Accounting Guidance

September 30, 2022 Three Months Ended

September 30, 2021 Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021 Accounting Guidance

Research Services Obligation $ 10,300 $ 8,900 $ 19,100 $ 28,900 ASC 606

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$ 17,100 $ 12,600 $ 26,400 $ 75,700

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.

As of September 30, 2022, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation and C5 License Obligation that was unsatisfied was $ 140.3 million, which is expected to be recognized through the term of the Regeneron Collaboration as the services are performed.

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

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

As of 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.

As of September 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.

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

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

In addition, we

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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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

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.

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

As of 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.

As of September 30, 2022, the total transaction price was determined to be approximately $ 16.0 million, comprised of the $ 12.5 million upfront payment and estimated variable consideration attributed to work to be performed under the DC Workplan.

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

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

We determined any variable consideration related to sales-based royalties and milestones related to the exclusive license to be constrained and therefore excluded such consideration from the transaction price.

As of 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.

We determined any variable consideration related to

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

sales-based royalties and milestones related to the exclusive license to be constrained and therefore excluded such consideration from the transaction price.

As of September 30, 2022, the aggregate amount of the transaction price allocated to the performance obligation that was unsatisfied was $ 13.0 million, which is expected to be recognized through the term of the DC Workplan as the services are performed.

Vir Biotechnology, Inc.

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

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

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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.

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

As of September 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.

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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.

As of September 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 June 30, 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 September 30, 2022, our estimate of this total interest expense resulted in an effective annual interest rate of 11 % and 8 %, respectively.

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

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

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

As of 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.

We will periodically assess the expected payments to Blackstone Royalties

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

As of September 30, 2022, the carrying value of the liability related to the sale of future royalties was $ 1.27 billion, net of closing costs of $ 11.0 million.

The carrying value of the liability related to the sale of future royalties approximates fair value as of September 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.

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

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Payments ( 1,722 )

Carrying value as of June 30, 2022

Carrying value as of September 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 June 30, 2022 Quoted

(In thousands) As of September 30, 2022 Quoted

(Level 1) Significant

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Commercial paper 6,215 — 6,215 —

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

Marketable debt securities:

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Commercial paper 9,830 — 9,830 —

Certificates of deposit 2,500 — 2,500 —

Marketable equity securities 23,051 23,051 — —

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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.

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 or six months ended June 30, 2022 or 2021.

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

The following tables summarize our marketable debt securities:

As of June 30, 2022

As of September 30, 2022

(In thousands) Amortized

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Commercial paper 16,045 — — 16,045

Certificates of deposit 2,500 — — 2,500

Total $ 1,250,762 $ 38 $ ( 12,672 ) $ 1,238,128

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Marketable debt securities $ 1,169,050 $ 1,548,617

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The components of inventory are summarized as follows:

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

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

Raw materials $ 17,718 $ 14,754

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Total $ 141,648 $ 122,701

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.

As of September 30, 2022 and December 31, 2021, we had $ 26.2 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 June 30,

As of September 30,

(In thousands) 2022 2021

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$ 1,075,389 $ 1,096,458

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive (Loss) Income

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Adjustment Total Accumulated Other

Comprehensive Loss

Comprehensive (Loss) Income

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

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Net other comprehensive income (loss) — 103 ( 11,004 ) 377 ( 10,524 )

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

Balance as of September 30, 2022 $ ( 32,792 ) $ ( 2,708 ) $ ( 12,634 ) $ 4,351 $ ( 43,783 )

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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Other comprehensive (loss) income before reclassifications — — ( 219 ) 9,530 9,311

Amounts reclassified from other comprehensive income — 116 ( 249 ) — ( 133 )

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

Net other comprehensive income (loss) — 174 ( 312 ) 9,530 9,392

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

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

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.

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

The Credit Agreement provides for a senior secured delayed draw term loan facility, referred to as the Term Loans, which consists of three tranches providing funding of $ 700.0 million .

The Credit Agreement provided for a senior secured delayed draw term loan facility, referred to as the Term Loans, which consisted 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.

In addition to the $ 700.0 million previously drawn under the Credit Agreement, we may also request an increase in an amount not to exceed $ 50.0 million on terms to be agreed and subject to the consent of the Lenders providing such increase.

The Term Loans mature in December 2027.

We 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 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.

As of September 30, 2022, we extinguished the Term Loans and paid all outstanding balances, including principal of $ 700.0 million and prepayment premiums of $ 62.1 million and terminated the Credit Agreement.

The Term Loans were initially set to mature in December 2027.

During the period the Term Loans were outstanding , 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.

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

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

We were obligated to pay interest due on the Term Loans calculated through December 31, 2022 notwithstanding prepayment.

Prepayment of Term Loans was subject to a fee of 5 % of the loan principal.

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

(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.

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

Upon payment of the Term Loans all security interest were terminated.

The Credit Agreement contained negative covenants that, among other things and subject to certain exceptions, could have restricted 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.

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

failure to comply with covenants;

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and certain insolvency and ERISA events.

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

As of June 30, 2022, we were in compliance with the applicable terms and conditions of the covenants under the Credit Agreement.

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

CONVERTIBLE DEBT

Convertible Senior Notes Due 2027

On September 12, 2022, we commenced a private offering of $ 900.0 million in aggregate principal amount of 1 % Convertible Senior Notes due 2027, or the Initial Notes.

On September 13, 2022, the initial purchasers in such offering exercised their option to purchase an additional $ 135.0 million in aggregate principal amount of our 1 % Convertible Senior

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes due 2027, or the Additional Notes, and together with the Initial Notes collectively referred to as the Notes, bringing the total aggregate principal amount of the Notes to $ 1.04 billion.

The Notes were issued pursuant to an indenture, dated September 15, 2022, or the Indenture.

The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable.

The Notes will mature on September 15, 2027, unless earlier converted, redeemed or repurchased.

The Notes will bear interest from September 15, 2022 at a rate of 1 % per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2023.

The Notes are convertible at the option of the noteholder on or after June 15, 2027.

Prior to June 15, 2027, the Notes are convertible only under the following circumstances:

(1) During any calendar quarter commencing after the calendar quarter ending on December 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(2) During the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each trading day of that ten consecutive trading day period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate of the Notes on such trading day;

(3) If we call any or all of the Notes for redemption;

or (4) Upon the occurrence of specific corporate events as set forth in the Indenture governing the Notes.

We will settle any conversions of Notes by paying or delivering, as applicable, cash, shares of our common stock, or a combination of cash and shares of common stock, at our election.

The conversion rate for the Notes will initially be 3.4941 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $ 286.20 per share of common stock.

The initial conversion price of the Notes represents a premium of approximately 35 % over the $ 212.00 per share last reported sale price of common stock on September 12, 2022.

The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

We may not redeem the Notes prior to September 20, 2025.

We may redeem for cash equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest all or any portion of the Notes, at our option, on or after September 20, 2025, if the last reported sales price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period.

No sinking fund is provided for the Notes and therefore we are not required to redeem or retire the Notes periodically.

If we undergo a fundamental change, as defined in the indenture agreement, then subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest.

In addition, if specific corporate events occur prior to the maturity date or if we issue a notice of redemption, we will increase the conversion rate by pre-defined amounts for holders who elect to convert their notes in connection with such a corporate event.

The conditions allowing holders of the Notes to convert were not met this quarter.

As of September 30, 2022, the Notes are classified as a long-term liability, net of issuance costs of $ 19.2 million, on the condensed consolidated balance sheets.

As of September 30, 2022, the net carrying amount of the Notes approximates fair value as the Notes were issued on September 15, 2022.

Interest expense recognized related to the Notes for the three months ended September 30, 2022 was immaterial.

The Notes were issued at par and costs associated with the issuance of the Notes are amortized to interest expense over the contractual term of the Notes.

As of September 30, 2022, the effective interest rate of the Notes is 1 %.

Capped Call Transactions

In September 2022, in connection with the pricing of the Initial Notes and the initial purchasers’ exercise of their option to purchase the Additional Notes, we entered into privately negotiated capped call transactions, or Capped Call Transactions.

The Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the number of shares of common stock that underlie the Notes.

The cap price of the Capped Call Transactions is initially $ 424.00 per share, which represents a premium of 100 % over the last reported sale price of common stock of $ 212.00 per share on September 12, 2022, and is subject to certain adjustments under the terms of the capped call transactions.

We used approximately $ 118.6 million of the proceeds from the offering of Notes to pay the cost of the Capped Call Transactions.

We evaluated the Capped Call Transactions and determined that they should be accounted for separately from the Notes.

The cost of $ 118.6 million to purchase the Capped Call Transactions was recorded as a reduction to additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2022 as the Capped Call Transactions are indexed to our own stock and met the criteria to be classified in stockholders' equity.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DEVELOPMENT DERIVATIVE LIABILITY

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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

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

As of September 30, 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 %).

ALNYLAM PHARMACEUTICALS, INC.

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

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Loss recorded from remeasurement 70,776

Carrying value as of June 30, 2022

Carrying value as of September 30, 2022

STOCK-BASED COMPENSATION

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

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

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

(In thousands) 2022 2021 2022 2021

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We compute diluted net loss per common share by dividing net loss by the weighted-average number of common shares and dilutive potential common share equivalents outstanding during the period.

In the diluted net loss per share calculation, net loss would be adjusted for the elimination of interest expense on the Convertible debt.

Potential common shares consist of shares issuable upon the exercise of stock options (the proceeds of which are then assumed to have been used to repurchase outstanding shares using the treasury stock method) or upon conversion of the convertible debt outstanding during the period (calculated using the if-converted method assuming the conversion of the convertible debt as of the earliest period reported or at the date of issuance, if later).

Because the inclusion of potential common shares would be anti-dilutive for all periods presented, diluted net loss per common share is the same as basic net loss per common share.

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 June 30,

As of September 30,

(In thousands) 2022 2021

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Unvested restricted common stock 1,617 1,246

Convertible debt 3,616 —

Total 15,974 12,961

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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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Legal Matters

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

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

These include claims by third parties that we infringe their patents or

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

breach our license or other agreements with such third parties.

The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain.

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Attorney’s Office for the District of Massachusetts or other government entities may request other information from, or issue other subpoenas, findings or similar documents to, us, our related entities and their respective directors, officers and employees.

In light of the relatively early stage and ongoing nature of the investigation, no determination has been made that a loss, if any, arising from this matter is probable or that the amount of any such loss, or range of loss, is reasonably estimable.

In light of the ongoing nature of the investigation, no determination has been made that a loss, if any, arising from this matter is probable or that the amount of any such loss, or range of loss, is reasonably estimable.

We also previously disclosed that since learning of this federal government investigation, our nominating and corporate governance committee is directing our review of and response to the matter.

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

The parties agreed to combine the two patents in one lawsuit, separately against each of Moderna and Pfizer/BioNTech.

The court has set a trial date of November 12, 2024 for Alnylam v.

Moderna and November 18, 2024 for Alnylam v.

Pfizer/BioNTech.

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,

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

ALNYLAM PHARMACEUTICALS, INC.

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.

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 June 30, 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