ALNYLAM PHARMACEUTICALS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a global commercial-stage biopharmaceutical company developing novel therapeutics based on ribonucleic acid interference, or RNAi. RNAi is a naturally occurring biological pathway within cells for sequence-specific silencing and regulation of gene expression. By harnessing the RNAi pathway, we have developed a new class of innovative medicines, known as RNAi therapeutics. RNAi therapeutics are comprised of small interfering RNA, or siRNA, and function upstream of conventional medicines by potently silencing messenger RNA, or mRNA, that encode for proteins implicated in the cause or pathway of disease, thus preventing them from being made. We believe this is a revolutionary approach with the potential to transform the care of patients with rare and prevalent diseases. To date, our efforts to advance this revolutionary approach have yielded the approval of five first-in-class RNAi-based medicines, ONPATTRO ® (patisiran), AMVUTTRA ® (vutrisiran), GIVLAARI ® (givosiran), OXLUMO ® (lumasiran) and Leqvio ® (inclisiran). Our research and development strategy is to target genetically validated genes that have been implicated in the cause or pathway of human disease. We utilize a N-acetylgalactosamine (GalNAc) conjugate approach or lipid nanoparticle (LNP) to enable hepatic delivery of siRNAs. For delivery to the central nervous system, or CNS, and the eye (ocular delivery), we are utilizing an alternative conjugate approach based on a hexadecyl (C16) moiety as a lipophilic ligand. We are also advancing approaches for heart, skeletal muscle and adipose tissue delivery of siRNAs. Our focus is on clinical indications where there is a high unmet need, a genetically validated target, early biomarkers for the assessment of clinical activity in Phase 1 clinical studies, and a definable path for drug development, regulatory approval, patient access and commercialization. In early 2021, we launched our Alnylam P 5 x25 strategy, which focuses on our planned transition to a top-tier biotech company, as measured by market capitalization, by the end of 2025. With Alnylam P 5 x25 , we aim to deliver transformative rare and prevalent disease medicines for patients around the world through sustainable innovation, while delivering exceptional financial performance. We currently have five marketed products and more than ten clinical programs, including several in late-stage development, across four Strategic Therapeutic Areas, or “STArs:” Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. Four of our marketed products are within the Genetic Medicines STAr, ONPATTRO, AMVUTTRA, GIVLAARI and OXLUMO. ONPATTRO is approved by the United States Food and Drug Administration, or the FDA, for the treatment of the polyneuropathy of hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, in adults and has also been approved in the European Union, or EU, for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy, in Japan for the treatment of transthyretin, or TTR, type familial amyloidosis with polyneuropathy, and in multiple additional countries, including Brazil. In August 2022, we reported positive results from the APOLLO-B Phase 3 study of patisiran (the non-branded name of ONPATTRO) in patients with transthyretin amyloidosis, or ATTR amyloidosis, with cardiomyopathy, and in December 2022, we submitted a supplemental New Drug Application, or sNDA, to the FDA for ONPATTRO as a potential treatment of the cardiomyopathy of ATTR amyloidosis. In February 2023, the FDA accepted the sNDA for filing and set an action date of October 8, 2023 under the Prescription Drug User Fee Act, or PDUFA. The FDA also indicated in the sNDA filing communication letter that it is planning to hold an advisory committee meeting to discuss the application and that it had not identified any potential review issues at such time. In March, 2023, we submitted an sNDA to the Brazilian Health Regulatory Agency (ANVISA) for ONPATTRO for the treatment of the cardiomyopathy of ATTR amyloidosis. AMVUTTRA is approved in the U.S. for the treatment of the polyneuropathy of hATTR amyloidosis in adults. In September 2022, AMVUTTRA was granted marketing authorization in Europe and the United Kingdom, or UK, for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy, and in Japan for the treatment of TTR type familial amyloidosis with polyneuropathy. In December 2022, AMVUTTRA was approved in Brazil for the treatment of hATTR amyloidosis in adults. Regulatory filings in other territories are currently under review and additional filings are pending or planned during 2023 and beyond. GIVLAARI is approved in the U.S. for the treatment of adults with acute hepatic porphyria, or AHP, in the EU for the treatment of AHP in adults and adolescents aged 12 years and older, and in several additional countries, including Brazil, Canada, Switzerland and Japan. Regulatory filings for givosiran (the non-branded drug name for GIVLAARI) in other territories are pending or planned during 2023 and beyond. OXLUMO is approved in the U.S. and EU for the treatment of primary hyperoxaluria type 1, or PH1, in all age groups, and in several additional countries including Brazil and Switzerland. In October 2022, we announced that the FDA approved our sNDA for lumasiran (the non-branded drug name for OXLUMO), for the treatment of PH1 to lower urinary oxalate and plasma oxalate levels in pediatric and adult patients. Regulatory filings in other territories are pending and additional filings are planned during 2023 and beyond. Our fifth product, Leqvio (inclisiran), is in the Cardio-Metabolic Diseases STAr. Leqvio is being developed and commercialized by our partner Novartis AG, or Novartis, and has received marketing authorization from the European 24 Table of Contents Commission, or EC, for the treatment of adults with hypercholesterolemia or mixed dyslipidemia and from the FDA as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with heterozygous familial hypercholesterolemia, or HeFH, or clinical atherosclerotic cardiovascular disease, or ASCVD, who require additional lowering of LDL-C. As of the end of March 2023, Leqvio has been approved in more than 75 countries. In addition to our marketed products, we have multiple late-stage investigational programs advancing toward potential commercialization. These programs include our wholly owned programs: patisiran (the non-branded drug name for ONPATTRO) for the treatment of ATTR amyloidosis, (wild-type or hereditary) with cardiomyopathy; vutrisiran (the non-branded drug name for AMVUTTRA) for the treatment of ATTR (wild-type or hereditary) amyloidosis with cardiomyopathy; as well as fitusiran for the treatment of hemophilia, which is being advanced by our partner Genzyme Corporation, a Sanofi Company, or Sanofi; and cemdisiran for the treatment of complement-mediated diseases, where our partner Regeneron Pharmaceuticals, Inc., or Regeneron, is advancing cemdisiran in combination with pozelimab in Phase 3 studies in myasthenia gravis and paroxysmal nocturnal hemoglobinuria. As part of our Alnylam P 5 x25 strategy, we have multiple drivers of future growth, including the development of transformative prevalent disease medicines. In addition to Leqvio, we are advancing zilebesiran, an investigational, subcutaneously administered RNAi therapeutic targeting angiotensinogen, or AGT, in development for the treatment of hypertension. In November 2021, we reported positive interim data from the ongoing Phase 1 study of zilebesiran, and initiated the KARDIA Phase 2 clinical studies for zilebesiran. KARDIA-1 is designed to evaluate zilebesiran as a monotherapy across different doses administered quarterly and biannually. KARDIA-2 will evaluate the safety and efficacy of zilebesiran administered biannually as a concomitant therapy in patients whose blood pressure is not adequately controlled by a standard of care antihypertensive medication. Topline results from the KARDIA-1 and KARDIA-2 Phase 2 studies are anticipated in mid-2023 and at or around year-end 2023, respectively. We are also advancing ALN-APP, an investigational RNAi therapeutic targeting amyloid precursor protein in development for the treatment of Alzheimer’s disease and cerebral amyloid angiopathy. In April 2023, we reported positive interim results from the ongoing single ascending dose part of the Phase 1 study of ALN-APP in patients with early-onset Alzheimer’s disease. These results establish the first human translation of our proprietary C16-siRNA conjugate platform for CNS delivery and are the first clinical demonstration of gene silencing in the human brain using an RNAi therapeutic. In further support of our Alnylam P 5 x25 strategy and in view of our evolving risk profile, we remain focused on the continued evolution of our global infrastructure, including key objectives such as optimizing our global structure for execution in key markets, enhancing performance consistent with our values, and continuing to strengthen our culture. We maintain focus on our global compliance program to drive its evolution and enhancement in view of the Alnylam P 5 x25 strategy . Building from our global Code of Business Conduct and Ethics, our compliance program is designed to empower our employees and those with whom we work to execute on our strategy consistent with our values and in compliance with applicable laws and regulations, and to mitigate risk. Comprised of components such as risk assessment and monitoring; policies, procedures, and guidance; training and communications; dedicated resources; and systems and processes supporting activities such as third party relationships and investigations and remediation; our program and related controls are built to enhance our business processes, structures, and controls across our global operations, and to empower ethical decision making. Based on our expertise in RNAi therapeutics and broad intellectual property estate, we have formed alliances with leading pharmaceutical and life sciences companies to support our development and commercialization efforts, including Regeneron, Novartis (which acquired our partner The Medicines Company, or MDCO, in 2020), Sanofi, Vir Biotechnology, Inc., or Vir, Dicerna Pharmaceuticals, Inc. (acquired by Novo Nordisk A/S, or Novo Nordisk, in December 2021), or Dicerna, and PeptiDream, Inc., or PeptiDream. We have incurred significant losses since we commenced operations in 2002 and as of March 31, 2023, we had an accumulated deficit of $6.74 billion. Historically, we have generated losses principally from costs associated with research and development activities, acquiring, filing and expanding intellectual property rights, and selling, general and administrative costs. As a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical and commercial capabilities, including global commercial operations, continued management and growth of our patent portfolio, collaborations and general corporate activities, we expect to incur additional operating losses, however we expect 2019 represents our peak operating loss year as we transition towards a self-sustainable financial profile. We anticipate that our operating results will continue to fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods. We currently have programs focused on a number of therapeutic areas and, as of March 31, 2023, we generate worldwide product revenues from four commercialized products, ONPATTRO, AMVUTTRA, GIVLAARI and OXLUMO, primarily in the U.S., Europe and Japan. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products and/or successfully market and sell our approved products or any other products approved in the future. A portion of our total revenues in recent years has been derived from collaboration revenues from strategic alliances with Regeneron, Vir and Novartis. In addition to revenues from the commercial sales of our approved products and potentially from sales of future products, we expect our sources of potential funding for the next several years to 25 Table of Contents continue to be derived in part from existing and new strategic alliances. Such alliances include, or may include in the future, license and other fees, funded research and development, milestone payments and royalties on product sales by our licensors, including royalties on sales of Leqvio made by our partner Novartis, as well as proceeds from the sale of equity or debt. Convertible Senior Notes In September 2022, we issued $1.04 billion aggregate principal amount of 1.00% Convertible Senior Notes due 2027, or Notes. The Notes will mature on September 15, 2027, unless earlier converted, redeemed or repurchased. Before June 15, 2027, noteholders will have the right to convert their Notes in certain circumstances and during specified periods. From and after June 15, 2027, the Notes will be convertible at the option of the noteholders at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. We will settle any conversions of Notes by paying or delivering, as applicable, cash shares of our common stock, par value $0.01 per share, or Common Stock, or a combination of cash and shares of Common Stock, at our election. In connection with the issuance of the Notes, we paid $118.6 million, including expenses, to enter into privately negotiated capped call transactions with certain initial purchasers of the Notes or their respective affiliates and certain other financial institutions, or capped call transactions. The capped call transactions are expected generally to reduce the potential dilution upon conversion of the Notes in the event that the market price per share of our common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the Notes. The cap price of the capped call transactions will initially be $424.00 per share, which represents a premium of approximately 100% based on the last reported sale price of our 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. If, however, the market price per share of our common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, there would nevertheless be dilution upon conversion of the Notes to the extent that such market price exceeds the cap price of the capped call transactions. We used approximately $762.0 million of the net proceeds from the offering of the Notes to repay borrowings, inclusive of prepayment premiums, under our credit agreement with Blackstone, and we intend to use the remainder of the net proceeds for general corporate purposes. Research and Development Since our inception, we have focused on drug discovery and development programs. Research and development expenses represent a substantial percentage of our total operating expenses, as reflected by our broad pipeline of clinical development programs, which includes multiple programs in late-stage development. Our Product Pipeline Our broad pipeline, including five approved products and multiple late and early-stage investigational RNAi therapeutics, is focused in four STArs: Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. 26 Table of Contents The chart below is a summary of our commercial products and late- and early-stage development programs as of April 2023. It identifies those programs for which we have received marketing approval, the stage of our programs and our commercial rights to such programs: During the first quarter of 2023 and recent period, we reported the following updates from our commercially approved products and our late-stage clinical programs: Commercial Total TTR: ONPATTRO & AMVUTTRA • We achieved global net product revenues for ONPATTRO and AMVUTTRA for the first quarter of 2023 of $102.5 million and $101.8 million, respectively. Total Ultra-Rare: GIVLAARI & OXLUMO • We achieved global net product revenues for GIVLAARI and OXLUMO for the first quarter of 2023 of $47.9 million and $24.2 million, respectively. Leqvio • Our partner, Novartis, continued the launch of Leqvio in the U.S. and in other markets, with focus on patient on-boarding, removing access hurdles and enhancing medical education. Late-Stage Clinical Development • We continued to advance patisiran, in development for the treatment of ATTR amyloidosis: ◦ Submitted 18-month data from the APOLLO-B Phase 3 study to the U.S. FDA as part of the sNDA review for ONPATTRO (patisiran) for the treatment of the cardiomyopathy of ATTR amyloidosis. • Our partner, Sanofi, announced results from ATLAS-INH and ATLAS-A/B Phase 3 studies of fitusiran were published in The Lancet and The Lancet Haematology. • Our partner, Regeneron, announced that it has initiated a Phase 2 study of ALN-HSD in patients with NASH. There is a risk that any drug discovery or development program may not produce revenue for a variety of reasons, including the possibility that we will not be able to adequately demonstrate the safety and effectiveness of the product candidate or obtain approval or the desired labeling for the product candidate from regulatory authorities. Moreover, there are 27 Table of Contents uncertainties specific to any new field of drug discovery, including RNAi. The success of ONPATTRO, AMVUTTRA, GIVLAARI, OXLUMO or any other product candidate we develop is highly uncertain. Due to the numerous risks associated with developing drugs, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of any potential product candidate or indication, or the period, if any, in which material net cash inflows will commence from any approved product or indication. Any failure to complete any stage of the development of any potential products or any approved product for an expanded indication in a timely manner or successfully launch, market and sell any of our commercially approved products, could have a material adverse effect on our operations, financial position and liquidity. A discussion of some of the risks and uncertainties associated with completing our research and development programs within the planned timeline, or at all, and the potential consequences of failing to do so, are set forth in Part II, Item 1A below under the heading “Risk Factors.” Strategic Alliances Our business strategy is to develop and commercialize a broad pipeline of RNAi therapeutic products directed towards our four STArs. As part of this strategy, we have entered into, and expect to enter into additional, collaboration and licensing agreements as a means of obtaining resources, capabilities and funding to advance our investigational RNAi therapeutic programs. Our collaboration strategy is to form alliances that create significant value for ourselves and our collaborators in the advancement of RNAi therapeutics as a new class of innovative medicines. Specifically, with respect to our CNS/Ocular Disease pipeline, in April 2019, we entered into a global, strategic collaboration with Regeneron to discover, develop and commercialize RNAi therapeutics for a broad range of diseases by addressing disease targets expressed in the eye and CNS, in addition to a select number of targets expressed in the liver. In July 2020, Regeneron exercised its co-development/co-commercialization option on our first CNS-targeted development candidate, ALN-APP, an investigational RNAi therapeutic in development for the treatment of hereditary cerebral amyloid angiopathy and autosomal dominant Alzheimer’s Disease, which we are leading. We are also advancing multiple other programs with Regeneron. With respect to our Cardio-Metabolic pipeline, in March 2013, we entered into an exclusive, worldwide license with MDCO (acquired by Novartis AG in January 2020) pursuant to which MDCO was granted the right to develop, manufacture and commercialize RNAi therapeutics targeting proprotein convertase subtilisin/kexin type 9 for the treatment of hypercholesterolemia and other human diseases, including inclisiran. In March 2018, we entered into a discovery collaboration with Regeneron to identify RNAi therapeutics for nonalcoholic steatohepatitis, or NASH, and potentially other related diseases, and in November 2018, we and Regeneron entered into a separate, fifty-fifty collaboration to further research, co-develop and commercialize any therapeutic product candidates that emerge from these discovery efforts. In April 2020, we entered into a development and commercialization collaboration with Dicerna to advance investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin deficiency-associated liver disease, or alpha-1 liver disease. With respect to our Hepatic Infectious Disease pipeline, in October 2017, we announced an exclusive licensing agreement with Vir for the development and commercialization of RNAi therapeutics for infectious diseases, including chronic HBV infection. In March 2020, we announced an expansion of our exclusive licensing agreement with Vir to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19, which we further expanded in April 2020 to include up to three additional targets focused on host factors for SARS-CoV-2, including angiotensin converting enzyme-2, and transmembrane protease, serine 2, and potentially a third mutually selected host factor target. In July 2021, we notified Vir that we elected to discontinue ALN-COV, in development for the treatment of COVID-19, and all other COVID-19 research and development activities, based on a portfolio prioritization in view of the availability of highly effective vaccines and alternative treatment options. Following such discontinuation of COVID-19 related activities, we have no further obligations to work on the COVID-related targets and Vir has no further rights to such targets under our exclusive licensing agreement. With respect to our Genetic Medicine pipeline, we formed a broad strategic alliance with Sanofi in 2014. In January 2018, we and Sanofi amended our 2014 collaboration and entered into the Exclusive License Agreement, referred to as the Exclusive TTR License, under which we have the exclusive right to pursue the further global development and commercialization of all TTR products, including ONPATTRO, AMVUTTRA and any back-up products, and the ALN-AT3 Global License Terms, referred to as the AT3 License Terms, under which Sanofi has the exclusive right to pursue the further global development and commercialization of fitusiran and any back-up products. In April 2019, we and Sanofi agreed to further amend the 2014 Sanofi collaboration to conclude the research and option phase and to amend and restate the AT3 License Terms to modify certain of the business terms. We intend to continue to evaluate and explore partnership opportunities through collaboration and licensing arrangements, and may enter into new collaborations to advance certain products or disease areas. For example, in January 2022, we announced that we and Novartis agreed to collaborate on the discovery and development of an siRNA-based targeted therapy to restore functional liver cells in patients with end-stage liver diseases. We also have entered into license agreements to obtain rights to intellectual property in the field of RNAi. In addition, because delivery of RNAi therapeutics has historically been an important objective of our research activities, we have entered 28 Table of Contents into various collaboration and licensing arrangements with other companies and academic institutions to gain access to delivery technologies, including various LNP delivery technologies, and we may enter into such agreements in the future to gain access to products or technologies. For example, in 2021, we entered into a license and collaboration agreement with PeptiDream to discover and develop peptide-siRNA conjugates leveraging PeptiDream's proprietary Peptide Discovery Platform System technology. Critical Accounting Policies and Estimates Our critical accounting policies are described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2022, which we filed with the SEC on February 23, 2023. There have been no significant changes to our critical accounting policies since the beginning of this fiscal year. Results of Operations The following data summarizes the results of our operations: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change Total revenues $ 319,290 $ 213,259 $ 106,031 50 % Operating costs and expenses $ 469,097 $ 359,991 $ 109,106 30 % Loss from operations $ (149,807) $ (146,732) $ (3,075) 2 % Net loss $ (174,101) $ (240,341) $ 66,240 (28) % Discussion of Results of Operations Revenues Total revenues consist of the following: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change Net product revenues $ 276,328 $ 186,872 $ 89,456 48 % Net revenues from collaborations 36,462 25,945 10,517 41 % Royalty revenue 6,500 442 6,058 1,371 % Total $ 319,290 $ 213,259 $ 106,031 50 % 29 Table of Contents Net Product Revenues Net product revenues consist of the following, by product and region: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change ONPATTRO United States $ 29,817 $ 62,307 $ (32,490) (52) % Europe 59,678 53,181 6,497 12 % Rest of World 12,998 21,521 (8,523) (40) % Total 102,493 137,009 (34,516) (25) % AMVUTTRA United States 79,013 — 79,013 N/A Europe 6,768 — 6,768 N/A Rest of World 15,987 — 15,987 N/A Total 101,768 — 101,768 N/A GIVLAARI United States 30,291 23,675 6,616 28 % Europe 14,471 9,688 4,783 49 % Rest of World 3,144 1,914 1,230 64 % Total 47,906 35,277 12,629 36 % OXLUMO United States 9,057 5,412 3,645 67 % Europe 13,309 8,158 5,151 63 % Rest of World 1,795 1,016 779 77 % Total 24,161 14,586 9,575 66 % Total net product revenues $ 276,328 $ 186,872 $ 89,456 48 % Net product revenues increased during the three months ended March 31, 2023, compared to the same period in 2022, primarily due to the U.S. launch of AMVUTTRA in the third quarter of 2022, partially offset by a decrease of demand for ONPATTRO due to patient switches to AMVUTTRA. Additional growth was provided by an increase in patients on GIVLAARI and OXLUMO therapies. We expect net product revenues to increase during 2023, as compared to 2022, as we continue to add new patients onto our commercial products, as well as launch these products into additional markets, assuming regulatory approvals. Net Revenues from Collaborations and Royalty Revenue Net revenues from collaborations consist of the following: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change Regeneron Pharmaceuticals $ 19,990 $ 12,412 $ 7,578 61 % Novartis AG 14,933 13,136 1,797 14 % Other 1,539 397 1,142 288 % Total $ 36,462 $ 25,945 $ 10,517 41 % 30 Table of Contents Net revenues from collaborations increased during the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to an increase in revenue recognized in connection with our collaboration agreement with Regeneron, attributed to an increase in reimbursable activities under our research services arrangement in addition to an increase in revenue recognized associated with our licensed programs within the collaboration. Royalty revenue increased during the three months ended March 31, 2023, as compared to the same period in 2022, due to increased royalties received from global net sales of Leqvio by our partner, Novartis. Recognition of our combined net revenues from collaborations and royalty revenue is dependent on a variety of factors including the level of work reimbursed by partners, achievement of milestones under our collaboration agreements, and royalties associated with sales of Leqvio. We expect variability in net revenues from collaboration and royalty revenue in 2023, as compared to 2022, due to the timing of manufacturing activities, achievement of milestones under our collaboration agreements, and royalties associated with sales of Leqvio. Operating Costs and Expenses Operating costs and expenses consist of the following: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change Cost of goods sold $ 41,432 $ 23,457 $ 17,975 77 % Cost of goods sold as a percentage of net product revenues 15.0 % 12.6 % Cost of collaborations and royalties 13,437 12,170 1,267 10 % Research and development 230,569 169,893 60,676 36 % Selling, general and administrative 183,659 154,471 29,188 19 % Total $ 469,097 $ 359,991 $ 109,106 30 % Cost of goods sold Cost of goods sold as a percentage of net product revenues increased during the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to increased royalties due to third-parties driven by the increase in sales of AMVUTTRA partially offset by lower manufacturing costs for AMVUTTRA compared with ONPATTRO. We expect cost of goods sold and cost of goods sold as a percentage of net product revenues will increase during 2023, as compared to 2022, primarily as a result of an expected increase in total net product sales as well as increased AMVUTTRA royalties. Cost of collaborations and royalties Cost of collaborations and royalties increased during the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to timing and demand of GalNAc material supply to our collaboration partners to support certain product manufacturing and ongoing clinical trials. We anticipate variability in the cost of collaborations and royalties during 2023, as compared to 2022, due to the timing and demand of GalNAc material to be supplied to our collaboration partners. Research and development Research and development expenses consist of the following: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change Clinical research and outside services $ 111,597 $ 76,880 $ 34,717 45 % Compensation and related 64,720 51,300 13,420 26 % Occupancy and all other costs 38,020 30,096 7,924 26 % Stock-based compensation 16,232 11,617 4,615 40 % Total $ 230,569 $ 169,893 $ 60,676 36 % 31 Table of Contents For the three months ended March 31, 2023, the increase in research and development expenses, as compared to the same period in 2022, was primarily due to the following: • Increased clinical research and outside services associated with the APOLLO-B (patisiran), HELIOS-B (vutrisiran), and KARDIA-1/KARDIA-2 (zilebesiran) clinical studies, and manufacturing related expenses associated with our pre-clinical activities; and • Increased compensation and related expenses as a result of increased headcount to support our R&D pipeline and development expenses. During the three months ended March 31, 2023 and 2022, in connection with advancing activities under our collaboration agreements, we incurred research and development expenses, primarily related to external development and clinical expenses, including the manufacture of clinical product. The following table summarizes research and development expenses incurred, for which we recognize net revenue, that are directly attributable to our collaboration agreements, by collaboration partner: Three Months Ended March 31, (In thousands) 2023 2022 Regeneron Pharmaceuticals $ 19,119 $ 11,367 Other 798 358 Total $ 19,917 $ 11,725 Selling, general and administrative Selling, general and administrative expenses consist of the following: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change Compensation and related $ 74,326 $ 60,283 $ 14,043 23 % Consulting and professional services 50,688 44,461 6,227 14 % Occupancy and all other costs 34,930 32,051 2,879 9 % Stock-based compensation 23,715 17,676 6,039 34 % Total $ 183,659 $ 154,471 $ 29,188 19 % For the three months ended March 31, 2023, the increase in selling, general and administrative expenses, as compared to the same period in 2022, was primarily due to increased compensation and related expenses as a result of increased headcount and other strategic investments in support of the global launch of AMVUTTRA and other expenses to support our strategic growth. We expect that research and development expenses combined with selling, general and administrative expenses will increase during 2023, as compared to 2022, as we continue to advance and develop our platform and pipeline, advance our product candidates, including partnered programs, into later-stage development, prepare regulatory submissions and continue to build-out our global commercial and compliance infrastructure and field team to support our commercial portfolio as well as launch our commercial products into additional markets, assuming regulatory approvals. However, we expect that certain expenses will be variable depending on the timing of manufacturing batches, clinical trial enrollment and results, regulatory review of our product candidates and programs, and stock-based compensation expenses due to our determination regarding the probability of vesting for performance-based awards. 32 Table of Contents Other (Expense) Income Other (expense) income consists of the following: Three Months Ended March 31, (In thousands, except percentages) 2023 2022 $ Change % Change Interest expense $ (28,955) $ (42,362) $ 13,407 (32) % Interest income 18,655 1,012 17,643 1,743 % Other expense, net Realized and unrealized losses on marketable equity securities (2,267) (31,161) 28,894 (93) % Change in fair value of development derivative liability (6,471) (13,782) 7,311 (53) % Other (3,517) (6,331) 2,814 (44) % Total $ (22,555) $ (92,624) $ 70,069 (76) % Total other expense decreased during the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to the following: • Decreased realized and unrealized losses on our marketable equity securities holdings; • Decreased interest expense as a result of a more favorable interest rate under the Notes compared with the interest rate under the credit facility held with Blackstone as executed and extinguished in September 2022, respectively; and • Increased interest income driven by higher market interest rates on our marketable debt securities. Liquidity and Capital Resources The following table summarizes our cash flow activities: Three Months Ended March 31, (In thousands) 2023 2022 Net cash used in operating activities $ (166,475) $ (171,193) Net cash used in investing activities $ (76,217) $ (147,419) Net cash provided by financing activities $ 46,371 $ 34,956 Operating activities Net cash used in operating activities decreased during the three months ended March 31, 2023, compared to the same period ended 2022, primarily due to decreased cash disbursements related to working capital payments. Investing activities Net cash used in investing activities decreased during the three months ended March 31, 2023, compared to the same period ended 2022, primarily due to net activities related to our marketable debt securities. Financing activities Net cash provided by financing activities increased during the three months ended March 31, 2023, compared to the same period ended 2022, primarily due to increased net proceeds from the issuance of common stock in connection with stock option exercises and other types of equity. Additional Capital Requirements We currently have programs focused on a number of therapeutic areas and, as of March 31, 2023, have received regulatory approval and commercially launched four products. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products or successfully expand the indications for our approved products, including ONPATTRO and AMVUTTRA in the future. In addition, we anticipate that we will continue to generate losses as a result of planned expenditures for research and development activities relating to our research platform, our drug development programs, including clinical trial and manufacturing costs, the establishment of late-stage clinical, manufacturing, commercial and compliance capabilities, including global operations, continued management and growth of our intellectual property including our patent portfolio, collaborations and general corporate activities. Our expected working and other capital requirements are described in our 2022 Annual Report on Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of March 31, 2023, other than the changes disclosed in the “Notes to Condensed Consolidated Financial Statements” and “Liquidity and Capital 33 Table of Contents Resources” section in this Quarterly Report on Form 10-Q, there have been no other material changes to our expected working and other capital requirements as described in our 2022 Annual Report on Form 10-K. Based on our current operating plan, we believe that our cash, cash equivalents and marketable equity and debt 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 satisfy our near-term capital and operating needs for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q. However, due to numerous factors described in more detail under the caption Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q, we may require significant additional funds earlier than we currently expect in order to continue to commercialize our approved products, and to develop, conduct clinical trials for, manufacture and, if approved, commercialize additional product candidates.