What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-10-27 · 163 added, 326 removed, 480 unchanged (50% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Current assets:

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Total assets $ 3,391,940 $ 3,546,359

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

8 unchanged sentences

Convertible debt 1,017,887 1,016,942

Long-term debt — 675,697

Liability related to the sale of future royalties, net of current portion 1,285,200 1,252,015

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Commitments and contingencies (Note 13)

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

Stockholders’ deficit:

Preferred stock, $ 0.01 par value per share, 5,000 shares authorized and no shares issued and outstanding as of March 31, 2023 and December 31, 2022

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

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

124,241 shares issued and outstanding as of March 31, 2023;

123,925 shares issued and outstanding as of December 31, 2022

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Accumulated deficit ( 6,743,450 ) ( 6,569,349 )

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

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

Total stockholders’ deficit ( 259,240 ) ( 158,223 )

Total liabilities and stockholders’ deficit $ 3,391,940 $ 3,546,359

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Statements of Operations

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Interest expense ( 28,955 ) ( 42,362 )

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

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

Interest income 18,655 1,012

Other expense, net ( 12,255 ) ( 51,274 )

Total other expense, net ( 22,555 ) ( 92,624 )

Loss before income taxes ( 172,362 ) ( 239,356 )

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

Provision for income taxes ( 1,739 ) ( 985 )

Net loss $ ( 174,101 ) $ ( 240,341 )

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Net loss $ ( 174,101 ) $ ( 240,341 )

Other comprehensive (loss) income:

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

Other comprehensive income (loss):

Unrealized gain (loss) on marketable securities 4,125 ( 7,217 )

Foreign currency translation gain 1,410 2,376

Defined benefit pension plans, net of tax ( 5 ) 35

Total other comprehensive (loss) income ( 1,559 ) 1,851 ( 10,524 ) 9,392

Total other comprehensive income (loss) 5,530 ( 4,806 )

Comprehensive loss $ ( 168,571 ) $ ( 245,147 )

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Stockholders’

(Deficit) Equity

Shares Amount

3 unchanged sentences

Stock-based compensation expense — — 41,136 — — 41,136

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

Other comprehensive income — — — 5,530 — 5,530

Net loss — — — — ( 174,101 ) ( 174,101 )

Balance as of March 31, 2023 124,241 $ 1,243 $ 6,522,091 $ ( 39,124 ) $ ( 6,743,450 ) $ ( 259,240 )

Exercise of common stock options, net of tax withholdings 192 2 13,890 — — 13,892

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

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

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

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

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

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’ (DEFICIT) EQUITY

(In thousands)

Common Stock Additional

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

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

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

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

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

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

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

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

Other comprehensive income — — — 636 — 636

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

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

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

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

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

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

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

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

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

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(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Stock-based compensation 39,947 29,293

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

Loss on extinguishment of debt 76,586 —

Realized and unrealized loss on marketable equity securities 2,267 31,161

Change in fair value of development derivative liability 6,471 13,782

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Other investing activities — ( 75 )

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

Net cash used in investing activities ( 76,217 ) ( 147,419 )

Cash flows from financing activities:

Proceeds from exercise of stock options and other types of equity, net 42,371 27,123

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 4,000 7,833

Proceeds from term loan facility — 250,000

Other financing activities — ( 12,500 )

Net cash provided by financing activities 46,371 34,956

Effect of exchange rate changes on cash, cash equivalents and restricted cash 2,176 ( 2,238 )

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

Net decrease in cash, cash equivalents and restricted cash ( 194,145 ) ( 285,894 )

Cash, cash equivalents and restricted cash, beginning of period 868,556 822,153

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Cash paid for interest $ 13,912 $ 14,120

Supplemental disclosure of noncash investing activities:

Capital expenditures included in accounts payable and accrued expenses $ 4,034 $ 8,318

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

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

In early 2021, we launched our Alnylam P 5 x25 strategy, which focuses on our planned transition to a top five biotech company by the end of 2025.

With Alnylam P 5 x25 , we aim to deliver transformative rare and prevalent disease medicines for patients around the world through sustainable innovation, delivering exceptional financial performance and driving profitability.

As of September 30, 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.

In early 2021, we launched our Alnylam P 5 x25 strategy, which focuses on our planned transition to a top-tier biotech company by the end of 2025.

With Alnylam P 5 x25 , we aim to deliver transformative rare and prevalent disease medicines for patients around the world through sustainable innovation, while delivering exceptional financial performance.

As of March 31, 2023, we have five marketed products, including one partnered product, and multiple late-stage investigational programs advancing towards potential commercialization.

We currently generate worldwide product revenues from four commercialized products, ONPATTRO, AMVUTTRA, GIVLAARI and OXLUMO, primarily in the United States, or 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, 2022.

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

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

In our condensed consolidated financial statements, we use estimates and assumptions related to our inventory valuation and related reserves, liability related to the sale of future royalties, development derivative liability, income taxes, revenue recognition, research and development expenses, and stock-based compensation.

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Actual results could differ from those estimates.

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

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

Actual results may differ from these estimates.

Changes in estimates are reflected in reported results in the period in which they become known.

Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of March 31, 2023, together with the cash we expect to generate from product sales and under our current alliances, will be sufficient to enable us to advance our Alnylam P 5 x25 strategy for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022

5 unchanged sentences

Europe 6,768 —

Rest of World 15,987 —

Total 101,768 —

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Total net product revenues $ 276,328 $ 186,872

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 September 30,

(In thousands) As of March 31,

2023 As of December 31,

Receivables included in “Accounts receivable, net” $ 190,931 $ 203,844

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NET REVENUES FROM COLLABORATIONS

Net revenues from collaborations consist of the following:

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

Three Months Ended March 31,

(In thousands) 2023 2022

1 unchanged sentence

Novartis AG 14,933 13,136

Vir Biotechnology 441 1,233 1,137 8,033

Other 1,539 397

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

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

(In thousands) As of March 31, 2023 As of December 31, 2022

Receivables included in “Accounts receivable, net” $ 22,572 $ 32,342

Contract liabilities included in “Deferred revenue” $ 226,789 $ 235,528

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.

We recognized revenue of $ 15.4 million and $ 9.5 million in the three months ended March 31, 2023 and 2022, respectively, that was included in the contract liability balance at the beginning of the period.

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

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

Three Months Ended September 30,

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

Regeneron Pharmaceuticals $ 9,812 $ 1,154 $ 8,982 $ 3,152 $ 285 $ 10,964

Other — 357 — 572 37 728

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

Nine Months Ended September 30,

Three Months Ended March 31,

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

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Total $ 8,828 $ 1,366 $ 9,723 $ 1,593 $ 664 $ 9,468

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

For the three months ended March 31, 2023 and 2022, 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 $ 5.7 million and $ 3.9 million for the three months ended March 31, 2023 and 2022, 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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The Regeneron Collaboration is governed by a Master Agreement, referred to as the Regeneron Master Agreement, which became effective on May 21, 2019.

In connection with the Regeneron Master Agreement, we and Regeneron entered into (i) a binding co-co collaboration term sheet covering the continued development of cemdisiran, our C5 small interfering RNA, or siRNA, currently in Phase 2 development for C5 complement-mediated diseases, as a monotherapy and (ii) a binding license term sheet to evaluate anti-C5 antibody-siRNA combinations for C5 complement-mediated diseases including evaluating the combination of Regeneron’s pozelimab (REGN3918), currently in Phase 3 development, and cemdisiran.

In connection with the Regeneron Master Agreement, we and Regeneron entered into (i) a binding co-co collaboration term sheet covering the continued development of cemdisiran, our C5 small

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

interfering RNA, or siRNA, currently in Phase 2 development for C5 complement-mediated diseases, as a monotherapy and (ii) a binding license term sheet to evaluate anti-C5 antibody-siRNA combinations for C5 complement-mediated diseases including evaluating the combination of Regeneron’s pozelimab (REGN3918), currently in Phase 3 development, and cemdisiran.

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

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

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

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

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

Under the C5 co-co collaboration agreement, we and Regeneron equally share costs and potential future profits on any monotherapy program.

Pursuant to the C5 co-co collaboration agreement, Regeneron notified us in November 2022 of its decision to exercise its right to opt-out of the further development and commercialization of cemdisiran monotherapy.

As a result, Regeneron no longer shares costs and potential future profits on any monotherapy program with us.

We continue to perform our obligations under the agreement and we are solely responsible for all development and commercialization costs.

Regeneron will be eligible to receive tiered double-digit royalties on net sales.

Under the C5 license agreement, for cemdisiran to be used as part of a combination product, Regeneron is solely responsible for all development and commercialization costs and we will receive low double-digit royalties and commercial milestones of up to $ 325.0 million on any potential combination product sales.

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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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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The licensee will pay to the licensor certain development and/or commercialization milestone payments totaling up to $ 150.0 million for each collaboration product.

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

In addition, following the first commercial sale of the applicable collaboration product under a license

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

agreement, the licensee is required to make certain tiered royalty payments, ranging from low double-digits up to 20 %, to the licensor based on the aggregate annual net sales of the collaboration product, subject to customary reductions.

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

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

Separately, the cemdisiran monotherapy co-co collaboration agreement is under the scope of ASC 808 as we and Regeneron are both active participants in the development and manufacturing activities and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement.

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

Separately, prior to Regeneron’s decision in November 2022 to exercise its right to opt-out of the further development and commercialization of cemdisiran monotherapy, the cemdisiran monotherapy co-co collaboration agreement was under the scope of ASC 808 as we and Regeneron were both active participants in the development and manufacturing activities and were exposed to significant risks and rewards that were dependent on commercial success of the activities of the arrangement.

Regeneron’s decision to exercise its right to opt-out of the arrangement caused a change in the role of Regeneron and its exposure to significant risks and rewards under the arrangement.

As a result, we determined that the arrangement no longer represents a collaborative arrangement.

The arrangement now represents a vendor-customer relationship under ASC 606 as we perform our obligation to provide development and manufacturing activities under the arrangement.

The transaction price allocated to the C5 Co-Co obligation unit of account will be recognized over time using an input method based on cost incurred relative to the total estimated costs for the identified performance obligation by determining the proportion of effort incurred as a percentage of total effort we expect to expend.

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

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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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

targets, if any;

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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Performance Obligations Standalone Selling Price Transaction Price Allocated Accounting Guidance

Research Services Obligation $ 130,700 $ 183,100 ASC 606

C5 License Obligation 97,600 92,500 ASC 606

C5 Co-Co Obligation 364,600 246,000 ASC 808

Performance Obligations Standalone Selling Price Transaction Price Allocated

Research Services Obligation $ 130,700 $ 183,100

C5 License Obligation 97,600 92,500

C5 Co-Co Obligation 364,600 246,000

The transaction price was allocated to the obligations based on the relative estimated standalone selling prices of each obligation, over which management has applied significant judgment.

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In developing such estimate, we applied judgment in determining the indications that will be pursued, the forecasted revenues for such indications, the probability of success and the discount rate.

For the Research Services Obligation and the C5 License Obligation accounted for under ASC 606, we measure proportional performance over time using an input method based on cost incurred relative to the total estimated costs for each of the identified obligations, on a quarterly basis, by determining the proportion of effort incurred as a percentage of total effort we expect to expend.

For the Research Services Obligation, the C5 License Obligation, and the C5 Co-Co Obligation accounted for under ASC 606, we measure proportional performance over time using an input method based on cost incurred relative to the total estimated costs for each of the identified obligations, on a quarterly basis, by determining the proportion of effort incurred as a percentage of total effort we expect to expend.

This ratio is applied to the transaction price allocated to each obligation.

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

We re-evaluate the transaction price as of the end of each reporting period and as of September 30, 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.

Revenue recognized under this agreement, inclusive of the amount allocated to the C5 Co-Co Obligation, is accounted for as collaboration revenue.

We re-evaluate the transaction price as of the end of each reporting period and as of March 31, 2023, the total transaction price was determined to be $ 559.6 million.

Revenue recognized under this agreement is accounted for as collaboration revenue.

The following tables provide a summary of the transaction price allocated to each unit of account based on the applicable accounting guidance, in addition to revenue activity during the period, in thousands:

Transaction Price Allocated Deferred Revenue

Performance Obligations As of September 30,

2022 As of September 30,

Performance Obligations As of March 31,

2023 As of March 31,

2023 As of December 31,

2021 Accounting Guidance

Research Services Obligation $ 215,680 $ 33,200 $ 42,300 ASC 606

C5 License Obligation 96,700 30,300 26,900 ASC 606

C5 Co-Co Obligation 246,000 203,100 212,500 ASC 808

Research Services Obligation $ 215,680 $ 23,000 $ 26,200

C5 License Obligation 97,900 6,000 7,000

C5 Co-Co Obligation 246,000 191,100 193,600

$ 559,580 $ 220,100 $ 226,800

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognized During

Performance Obligations Three Months Ended

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

C5 License Obligation 1,400 1,200 ( 2,100 ) 30,400 ASC 606

C5 Co-Co Obligation 5,400 2,500 9,400 16,400 ASC 808

March 31, 2023 Three Months Ended

March 31, 2022

Research Services Obligation $ 10,700 $ 7,200

C5 License Obligation 2,200 1,300

C5 Co-Co Obligation 2,500 2,300

$ 15,400 $ 10,800

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.

As of March 31, 2023, the aggregate amount of the transaction price allocated to the remaining Research Services Obligation, C5 License Obligation and C5 Co-Co Obligation that was unsatisfied was $ 274.4 million, which is expected to be recognized through the term of the Regeneron Collaboration as the services are performed.

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

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2013 Collaboration with The Medicines Company

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

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 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

In addition, we

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

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

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

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

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

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

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

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

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

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

Additional details regarding the terms, milestones earned upon the achievement of certain events and additional milestones we are entitled to receive upon the achievement of future events under the MDCO License Agreement are described in Note 4 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 23, 2023.

Novartis License Agreement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We measure proportional performance over time using an input method based on cost incurred relative to the total estimated costs for the identified performance obligation, on a quarterly basis, by determining the proportion of effort incurred as a percentage of total effort we expect to expend.

This ratio is applied to the total transaction price.

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

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

As of 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

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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.

In October 2017, we and Vir Biotechnology, Inc., or Vir, entered into a collaboration and license agreement, or the Vir Agreement, for the development and commercialization of RNAi therapeutics for infectious diseases, including chronic hepatitis B virus, or HBV, infection.

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

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

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

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

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

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

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

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

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

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

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

In July 2021, we notified Vir that we elected to discontinue ALN-COV, in development for the treatment of COVID-19, and all other COVID-19 research and development activities, based on a portfolio prioritization decision in view of the availability of highly effective vaccines and alternative treatment options, in accordance with our rights under the letter agreement with Vir.

Following such discontinuation of COVID-19 related activities, we have no further obligations to work on the COVID-related targets and Vir has no further rights to such targets under the Vir Agreement.

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

If Vir does not exercise its option for an infectious disease program, the Vir Agreement will expire upon the expiration of the applicable option period with respect to such program.

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

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

In addition, Vir has the right to terminate the agreement on a program-by-program basis or in its entirety for any reason on 90 days’ written notice.

We identified one performance obligation under the Vir Agreement, as amended, comprised of:

i) the exclusive license to develop, manufacture and commercialize RNAi therapeutics (including ALN-HBV02);

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

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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.

This ratio is applied to the total transaction price.

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

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

As of 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.

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 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

PeptiDream, Inc.

In July 2021, we entered into a license and collaboration agreement with PeptiDream, Inc., or PeptiDream, to discover and develop peptide-siRNA conjugates to create multiple opportunities to deliver RNAi therapeutics to tissues outside the liver.

Through this collaboration, the companies will collaborate to select and optimize peptides for targeted delivery of small siRNA molecules to a wide range of cell types and tissues via specific interactions with receptors expressed on the target cells.

Under the terms of the agreement, PeptiDream received an upfront payment from us of $ 10.0 million and we will provide research and development funding over the term of the research collaboration, according to the terms of the PeptiDream agreement.

Due to the early stage of these assets, we recorded research and development expense for the upfront payment of $ 10.0 million during the third quarter of 2021.

PeptiDream may also receive payments based on the achievement of specified development, regulatory, and commercial milestones potentially totaling up to $ 247.0 million for each product developed by us that utilizes PeptiDream’s technology, as well as low-to-mid single digit royalties on sales, if any, of any such products.

Additional details regarding the terms and transaction price under the Novartis License Agreement are described in Note 4 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 23, 2023.

In addition to the collaboration agreements discussed above, we have various other collaboration agreements that are not individually significant to our operating results or financial condition at this time.

Pursuant to the terms of those agreements, we may be required to pay, or we may receive, additional amounts contingent upon the occurrence of various future events (e.g., upon the achievement of various development and commercial milestones) which in the aggregate could be significant.

We may also incur, or be reimbursed for, significant research and development costs.

In addition, if any products related to these collaborations are approved for sale, we may be required to pay, or we may receive, royalties on future sales.

The payment or receipt of these amounts, however, is contingent upon the occurrence of various future events.

LIABILITY RELATED TO THE SALE OF FUTURE ROYALTIES

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

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

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

If Blackstone Royalties does not receive payments in respect of the Royalty Interest by December 31, 2029, equaling at least $ 1.00 billion, Blackstone Royalties will receive 55 % of the Royalty Interest beginning on January 1, 2030.

In consideration for the sale of the Purchased Interest, Blackstone Royalties paid us $ 500.0 million in April 2020 and $ 500.0 million in September 2021.

In consideration for the sale of the Purchased Interest, Blackstone Royalties paid us $ 1.00 billion.

We continue to own or control all inclisiran intellectual property rights and are responsible for certain ongoing manufacturing and supply obligations related to the generation of the Purchased Interest.

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

As of March 31, 2023, our estimate of this total interest expense resulted in an effective annual interest rate of 8 %.

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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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.

As of March 31, 2023, the carrying value of the liability related to the sale of future royalties was $ 1.31 billion, net of closing costs of $ 10.6 million.

The carrying value of the liability related to the sale of future royalties approximates fair value as of March 31, 2023 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 ( 8,673 )

Carrying value as of September 30, 2022

Carrying value as of March 31, 2023

FAIR VALUE MEASUREMENTS

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

(In thousands) As of September 30, 2022 Quoted

(In thousands) As of March 31, 2023 Quoted

(Level 1) Significant

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Money market funds $ 214,257 $ 214,257 $ — $ —

treasury securities 62,863 — 62,863 —

Corporate notes 2,494 — 2,494 —

Commercial paper 1,694 — 1,694 —

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treasury securities 742,312 — 742,312 —

Corporate notes 166,384 — 166,384 —

government-sponsored enterprise securities 335,557 — 335,557 —

Corporate notes 190,651 — 190,651 —

Commercial paper 90,556 — 90,556 —

Certificates of deposit 13,498 — 13,498 —

Marketable equity securities 25,856 25,856 — —

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treasury securities 44,817 — 44,817 —

government-sponsored enterprise securities 41,763 — 41,763 —

Commercial paper 22,350 — 22,350 —

Certificates of deposit 3,289 — 3,289 —

Corporate notes 1,024 — 1,024 —

Marketable debt securities:

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Certificates of deposit 1,130 — 1,130 —

Municipal securities 1,015 — 1,015 —

Marketable equity securities 28,122 28,122 — —

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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 nine months ended September 30, 2022 or 2021.

We did not record any impairment charges related to our marketable debt securities during the three months ended March 31, 2023 or 2022.

The following tables summarize our marketable debt securities:

As of September 30, 2022

As of March 31, 2023

(In thousands) Amortized

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treasury securities $ 744,326 $ 377 $ ( 2,391 ) $ 742,312

Corporate notes 169,358 — ( 2,974 ) 166,384

government-sponsored enterprise securities 337,614 194 ( 2,251 ) 335,557

Corporate notes 194,419 50 ( 1,324 ) 193,145

Commercial paper 92,250 — — 92,250

Certificates of deposit 13,498 — — 13,498

Total $ 1,382,107 $ 621 $ ( 5,966 ) $ 1,376,762

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022

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treasury securities $ 870,033 $ 79 $ ( 4,382 ) $ 865,730

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

government-sponsored enterprise securities 275,610 24 ( 3,101 ) 272,533

Corporate notes 211,398 16 ( 2,106 ) 209,308

Commercial paper 59,143 — — 59,143

Certificates of deposit 4,419 — — 4,419

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

Total $ 1,420,603 $ 119 $ ( 9,589 ) $ 1,411,133

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 September 30, 2022 As of December 31, 2021

(In thousands) As of March 31, 2023 As of December 31, 2022

Marketable debt securities $ 1,372,574 $ 1,297,890

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The components of inventory are summarized as follows:

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

(In thousands) As of March 31, 2023 As of December 31, 2022

Raw materials $ 22,875 $ 22,315

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Total $ 163,385 $ 161,704

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.

As of March 31, 2023 and December 31, 2022, we had $ 31.5 million and $ 32.7 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 September 30,

As of March 31,

(In thousands) 2023 2022

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$ 674,411 $ 536,259

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive (Loss) Income

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Balance as of December 31, 2022 $ ( 32,792 ) $ ( 1,092 ) $ ( 9,470 ) $ ( 1,300 ) $ ( 44,654 )

Other comprehensive income before reclassifications — — 6 377 383

Other comprehensive (loss) income before reclassifications — — ( 9 ) 1,410 1,401

Amounts reclassified from other comprehensive income (loss) — ( 5 ) 4,134 — 4,129

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

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

Net other comprehensive (loss) income — ( 5 ) 4,125 1,410 5,530

Balance as of March 31, 2023 $ ( 32,792 ) $ ( 1,097 ) $ ( 5,345 ) $ 110 $ ( 39,124 )

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

Plans Unrealized Gains (Losses) from Debt

Securities Foreign Currency Translation

Plans Unrealized (Losses) Gains from Debt

Foreign Currency Translation

Adjustment Total Accumulated Other

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

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

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

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

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

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

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

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

CREDIT AGREEMENT

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

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

The Credit Agreement 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.

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 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.

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;

the rendering of judgments or orders or default by us in respect of other material indebtedness;

and certain insolvency and ERISA events.

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

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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.

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 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.

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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.

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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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.

We may redeem for cash equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest of 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.

As of March 31, 2023, 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 March 31, 2023, the estimated fair value of the Notes was approximately $ 1.03 billion.

The fair value was determined based on the last actively traded price per $100 of the Notes for the three months ended March 31, 2023 (Level 2).

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 %.

As of March 31, 2023, the effective interest rate of the Notes is 1 %.

Capped Call Transactions

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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

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 March 31, 2023 as the Capped Call Transactions are indexed to our own stock and met the criteria to be classified in stockholders' equity.

DEVELOPMENT DERIVATIVE LIABILITY

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

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

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

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As consideration for Blackstone Life Sciences’ funding for Phase 2 clinical development costs of zilebesiran, we have agreed to pay Blackstone Life Sciences fixed payments of up to 3.25 times their Phase 2 investment over a four-year period upon the successful completion of the zilebesiran Phase 2 clinical trial, unless certain regulatory events affecting the continued development of zilebesiran occur.

As consideration for Blackstone Life Sciences’ funding for Phase 3 clinical development costs of zilebesiran, we have agreed to pay Blackstone Life Sciences fixed payments of up to 4.5 times their Phase 3 investment over a four-year period upon regulatory approval of zilebesiran in specified countries, unless it is later withdrawn from the market following a mandatory recall.

Our payment obligations under the Funding Agreement will be secured, subject to certain exceptions, by security interests in intellectual property owned by us relating to AMVUTTRA and zilebesiran, as well as in our bank account in which the funding deposits will be made.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

consideration for Blackstone Life Sciences’ funding for Phase 3 clinical development costs of zilebesiran, we have agreed to pay Blackstone Life Sciences fixed payments of up to 4.5 times their Phase 3 investment over a four-year period upon regulatory approval of zilebesiran in specified countries, unless it is later withdrawn from the market following a mandatory recall.

Our payment obligations under the Funding Agreement will be secured, subject to certain exceptions, by security interests in intellectual property owned by us relating to vutrisiran and zilebesiran, as well as in our bank account in which the funding deposits will be made.

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

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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.

As of March 31, 2023, 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 ( 12 %), and (v) Blackstone Life Sciences' cost of borrowing ( 4 %).

ALNYLAM PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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Loss recorded from remeasurement 6,471

Carrying value as of September 30, 2022

Carrying value as of March 31, 2023

STOCK-BASED COMPENSATION

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

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

Three Months Ended March 31,

(In thousands) 2023 2022

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NET LOSS PER COMMON SHARE

We compute basic net loss per common share by dividing net loss by the weighted-average number of common shares outstanding during the period.

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.

We compute basic net loss per common share by dividing net loss by the weighted-average number of common shares outstanding.

We compute diluted net loss per common share by dividing net loss by the weighted-average number of common

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

shares and dilutive potential common share equivalents then 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).

Potential common shares consist of shares issuable upon the vesting of restricted stock units, 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) and 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 September 30,

The following table sets forth the potential common shares (prior to consideration of the treasury stock or if-converted methods) excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive:

As of March 31,

(In thousands) 2023 2022

Options to purchase common stock 10,741 11,715

Unvested restricted common stock 1,617 1,246

Options to purchase common stock, inclusive of performance-based stock options 8,428 12,785

Unvested restricted stock units, inclusive of performance-based restricted stock units 2,547 1,918

Convertible debt 3,616 —

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

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

As of March 31, 2023, our commitments over the next five years to make fixed and cancellable payments under existing license agreements were not material.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

breach our license or other agreements with such third parties.

These include claims by third parties that we infringe their patents or 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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and its subsidiary Pharmacia & Upjohn Co.

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ModernaTX, Inc., and Moderna US, Inc., collectively referred to as Moderna.

The lawsuits seek damages for infringement of U.S.

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

This motion is fully briefed and pending before the court.

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

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

On February 8, 2023, we received notification from the U.S.

Patent Office that a third patent would issue on February 28, 2023, as U.S.

11,590,229, which we also believe Pfizer and Moderna’s COVID-19 vaccines infringe upon.

On February 15, 2023, we filed a motion with the court to add this patent to the existing cases against Pfizer and Moderna.

On April 26, 2023, the court held a hearing and denied Moderna’s partial motion to dismiss those claims for sales under 1498(2), our motion to add the 11,590,229 patent to the current lawsuits as well as a motion filed by Moderna to add certain invalidity arguments made by Pfizer in our case to supplement Moderna’s invalidity arguments previously made.

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 September 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