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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
____________________________________________
FORM 10-Q
____________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 001-36407
__________________________________________
ALNYLAM PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
__________________________________________
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
77-0602661
(I.R.S. Employer
Identification No.)

675 West Kendall Street,
Henri A. Termeer Square
Cambridge, MA
(Address of Principal Executive Offices)
02142
(Zip Code)
(617) 551-8200
(Registrant’s Telephone Number, Including Area Code)
__________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per shareALNYThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x   No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  x   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No  x
At October 25, 2019, the registrant had 111,489,744 shares of Common Stock, $0.01 par value per share, outstanding.

1


INDEX
PAGE
NUMBER
PART I.  FINANCIAL INFORMATION

“Alnylam,” ONPATTRO®, Alnylam Act® and Alnylam Assist® are registered trademarks of Alnylam Pharmaceuticals, Inc. Our logo, trademarks and service marks are property of Alnylam. All other trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.



2

Table of Contents
ALNYLAM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
September 30, 2019December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents$923,304  $420,146  
Marketable debt securities797,754  662,803  
Accounts receivable, net48,109  18,760  
Inventory54,562  24,068  
Prepaid expenses and other current assets73,536  74,919  
Total current assets1,897,265  1,200,696  
Property, plant and equipment, net396,456  320,658  
Operating lease right-of-use assets223,444  —  
Restricted investments14,825  44,825  
Other assets9,632  8,623  
Total assets$2,541,622  $1,574,802  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$39,392  $59,708  
Accrued expenses177,948  112,719  
Operating lease liability28,165  —  
Deferred rent  3,571  
Deferred revenue107,359  3,496  
Total current liabilities352,864  179,494  
Operating lease liability, net of current portion276,456  —  
Deferred rent, net of current portion  57,920  
Deferred revenue, net of current portion296,179  458  
Long-term debt  30,000  
Other liabilities9,036  4,965  
Total liabilities934,535  272,837  
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 5,000 shares authorized and no shares issued and outstanding as of September 30, 2019 and December 31, 2018
    
Common stock, $0.01 par value per share, 250,000 and 125,000 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 111,325 shares issued and outstanding as of September 30, 2019; 101,177 shares issued and outstanding as of December 31, 2018
1,113  1,011  
Additional paid-in capital5,091,248  4,175,139  
Accumulated other comprehensive loss(34,371) (33,213) 
Accumulated deficit(3,450,903) (2,840,972) 
Total stockholders’ equity1,607,087  1,301,965  
Total liabilities and stockholders’ equity$2,541,622  $1,574,802  
The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents
ALNYLAM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2019201820192018
Revenues:
Product revenues, net$46,066  $460  $110,588  $460  
Net revenue from collaborators23,995  1,609  37,481  53,415  
Total revenues70,061  2,069  148,069  53,875  
Costs and expenses:
Cost of goods sold5,213  137  12,886  137  
Research and development160,796  139,945  453,813  374,384  
Selling, general and administrative120,351  116,545  322,728  273,671  
Total costs and expenses286,360  256,627  789,427  648,192  
Loss from operations(216,299) (254,558) (641,358) (594,317) 
Other income (expense):
Interest income9,889  6,796  26,195  18,691  
Other (expense) income(2,519) 2,925  (2,929) 5,468  
Change in fair value of liability obligation    9,422    
Gain on litigation settlement      20,564  
Total other income7,370  9,721  32,688  44,723  
Loss before income taxes(208,929) (244,837) (608,670) (549,594) 
Benefit (provision) for income taxes394  (445) (1,261) (462) 
Net loss$(208,535) $(245,282) $(609,931) $(550,056) 
Net loss per common share - basic and diluted$(1.92) $(2.43) $(5.63) $(5.48) 
Weighted-average common shares used to compute basic and diluted net loss per common share108,701  100,783  108,427  100,430  
Comprehensive loss:
Net loss$(208,535) $(245,282) $(609,931) $(550,056) 
Unrealized (loss) gain on marketable securities, net of tax(50) 415  772  1,041  
Foreign currency translation1,439    2,281    
Defined benefit pension plans71    (4,211)   
Comprehensive loss$(207,075) $(244,867) $(611,089) $(549,015) 




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

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ALNYLAM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2018101,177  $1,011  $4,175,139  $(33,213) $(2,840,972) $1,301,965  
Exercise of common stock options, net of tax withholdings207  3  11,406  —  —  11,409  
Issuance of common stock under equity plans4  —  (58) —  —  (58) 
Issuance of common stock under benefit plans12  —  784  —  —  784  
Issuance of common stock, net of offering costs5,000  50  381,850  —  —  381,900  
Stock-based compensation expense related to equity-classified awards—  —  32,541  —  —  32,541  
Other comprehensive gain, net of tax—  —  —  360  —  360  
Net loss—  —  —  —  (181,915) (181,915) 
Balance as of March 31, 2019106,400  1,064  4,601,662  (32,853) (3,022,887) 1,546,986  
Exercise of common stock options, net of tax withholdings203  2  6,180  —  —  6,182  
Issuance of common stock under equity plans55  —  4,022  —  —  4,022  
Issuance of common stock under benefit plans12  —  1,089  —  —  1,089  
Issuance of common stock, net of offering costs4,444  44  390,533  —  —  390,577  
Stock-based compensation expense related to equity-classified awards—  —  30,798  —  —  30,798  
Other comprehensive loss, net of tax—  —  —  (2,978) —  (2,978) 
Net loss—  —  —  —  (219,481) (219,481) 
Balance as of June 30, 2019111,114  1,110  5,034,284  (35,831) (3,242,368) 1,757,195  
Exercise of common stock options, net of tax withholdings191  2  9,298  —  —  9,300  
Issuance of common stock under equity plans6  —  —  —  —  —  
Issuance of common stock under benefit plans14  1  1,001  —  —  1,002  
Stock-based compensation expense related to equity-classified awards—  —  46,665  —  —  46,665  
Other comprehensive gain, net of tax—  —  —  1,460  —  1,460  
Net loss—  —  —  —  (208,535) (208,535) 
Balance as of September 30, 2019111,325  $1,113  $5,091,248  $(34,371) $(3,450,903) $1,607,087  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ALNYLAM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 201799,667  $997  $3,947,552  $(34,433) $(2,147,685) $1,766,431  
Cumulative effect adjustment from the adoption of new revenue standard—  —  —  —  68,210  68,210  
Exercise of common stock options, net of tax withholdings795  8  41,882  —  —  41,890  
Issuance of common stock under equity plans2  —  (123) —  —  (123) 
Issuance of common stock under benefit plans4  —  568  —  —  568  
Stock-based compensation expense related to equity-classified awards—  —  19,463  —  —  19,463  
Other comprehensive loss, net of tax—  —  —  (420) —  (420) 
Net loss—  —  —  —  (141,214) (141,214) 
Balance as of March 31, 2018100,468  1,005  4,009,342  (34,853) (2,220,689) 1,754,805  
Exercise of common stock options, net of tax withholdings53  —  2,561  —  —  2,561  
Issuance of common stock under equity plans41  —  3,124  —  —  3,124  
Issuance of common stock under benefit plans7  —  829  —  —  829  
Stock-based compensation expense related to equity-classified awards—  —  21,997  —  —  21,997  
Other comprehensive gain, net of tax—  —  —  1,046  —  1,046  
Net loss—  —  —  —  (163,560) (163,560) 
Balance as of June 30, 2018100,569  1,005  4,037,853  (33,807) (2,384,249) 1,620,802  
Exercise of common stock options, net of tax withholdings261  3  13,494  —  —  13,497  
Issuance of common stock under equity plans130  1  (546) —  —  (545) 
Issuance of common stock under benefit plans8  —  820  —  —  820  
Stock-based compensation expense related to equity-classified awards—  —  88,412  —  —  88,412  
Other comprehensive gain, net of tax—  —  —  415  —  415  
Net loss—  —  —  —  (245,282) (245,282) 
Balance as of September 30, 2018100,968  $1,009  $4,140,033  $(33,392) $(2,629,531) $1,478,119  
The accompanying notes are an integral part of these condensed consolidated financial statements.

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ALNYLAM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
20192018
Cash flows from operating activities:
Net loss$(609,931) $(550,056) 
Non-cash adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, net11,733  5,822  
Amortization and interest accretion related to operating leases27,873    
Stock-based compensation108,644  129,779  
Gain on litigation settlement  (10,000) 
Charge for 401(k) company stock match3,268  3,612  
Change in fair value of liability obligation(9,422)   
Other(4,415) (2,163) 
Changes in operating assets and liabilities:
Accounts receivable, net(29,717) 30,640  
Proceeds from landlord lease incentive for tenant improvements29,064  11,597  
Inventory(28,095) (10,354) 
Prepaid expenses and other assets(13,662) (34,125) 
Accounts payable(3,719) (650) 
Accrued expenses and other liabilities36,348  25,242  
Deferred revenue399,584  (11,503) 
Net cash used in operating activities(82,447) (412,159) 
Cash flows from investing activities:
Purchases of property, plant and equipment(101,351) (89,374) 
Purchases of restricted investments  (14,825) 
Proceeds from maturity of restricted investments30,000    
Purchases of marketable debt securities(1,445,632) (992,385) 
Sales and maturities of marketable securities1,320,156  1,120,565  
Net cash (used in) provided by investing activities(196,827) 23,981  
Cash flows from financing activities:
Proceeds from exercise of stock options and other types of equity, net30,942  60,092  
Repayment of term loan(30,000)   
Offering proceeds, net of costs381,900    
Proceeds from issuance of common stock to Regeneron400,000    
Net cash provided by financing activities782,842  60,092  
Effect of exchange rate changes on cash, cash equivalents and restricted cash(449)   
Net increase (decrease) in cash, cash equivalents and restricted cash503,119  (328,086) 
Cash, cash equivalents and restricted cash, beginning of period422,631  646,832  
Cash, cash equivalents and restricted cash, end of period$925,750  $318,746  
Supplemental disclosure of noncash investing activities:
Capital expenditures included in accounts payable and accrued expenses$18,923  $19,739  
The accompanying notes are an integral part of these condensed consolidated financial statements.

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ALNYLAM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. NATURE OF BUSINESS
Alnylam Pharmaceuticals, Inc. (also referred to as Alnylam, we, our or us) commenced operations on June 14, 2002 as a biopharmaceutical company seeking to develop and commercialize novel therapeutics based on RNA interference, or RNAi. We are committed to the advancement of our company strategy of building a multi-product, commercial biopharmaceutical company with a sustainable pipeline of RNAi therapeutics to address the needs of patients who have limited or inadequate treatment options. Since inception, we have focused on discovering, developing and commercializing RNAi therapeutics by establishing and maintaining a strong intellectual property position in the RNAi field, establishing strategic alliances with leading pharmaceutical and life sciences companies, generating revenues through licensing agreements, and ultimately developing and commercializing RNAi therapeutics globally, either independently or with our strategic partners. 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 August 2018, we received approval for ONPATTRO® (patisiran), our first product, from the United States Food and Drug Administration and began commercializing and generating product revenues in the U.S. In October 2018, we began commercializing and generating product revenues outside of the U.S. and, as of September 30, 2019, we have launched ONPATTRO in Japan, Canada and in several countries in Europe. Regulatory filings in additional markets in Europe and elsewhere are pending or planned for the remainder of 2019 and beyond.
2. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements of Alnylam Pharmaceuticals, Inc. are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, applicable to interim periods and, in the opinion of management, include all normal and recurring adjustments that are necessary to state fairly the results of operations for the reported periods. Our condensed consolidated financial statements have also been prepared on a basis substantially consistent with, and should be read in conjunction with, our audited consolidated financial statements for the year ended December 31, 2018, which were included in our Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on February 14, 2019. The year-end condensed consolidated balance sheet data was derived from our audited financial statements but does not include all disclosures required by GAAP. The results of our operations for any interim period are not necessarily indicative of the results of our operations for any other interim period or for a full fiscal year.
The accompanying condensed consolidated financial statements reflect the operations of Alnylam and our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
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, 2018. Updates to our significant accounting policies, including the updated lease accounting policy due to the adoption of the new leasing accounting standard, are discussed below and under “Recent Accounting Pronouncements.”
Reclassification
Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current period presentation.
Liquidity
Based on our current operating plan, we believe that our cash, cash equivalents and marketable debt securities as of September 30, 2019, together with the cash we expect to generate from product sales and under our alliances, will be sufficient to enable us to advance our Alnylam 2020 strategy for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q.
Leases
We determine whether a contract is, or contains, a lease at inception. We classify each of our leases as operating or financing considering factors such as the length of the lease term, the present value of the lease payments, the nature of the asset being leased, and the potential for ownership of the asset to transfer during the lease term. Leases with terms greater than one-year are recognized on the condensed consolidated balance sheets as right-of-use assets and lease liabilities and are measured at the present value of the fixed payments due over the expected lease term minus the present value of any incentives, rebates or abatements we expect to receive from the lessor. Options to extend a lease are included in the expected lease term if exercise of the option is deemed reasonably certain. Costs determined to be variable and not based on an index or rate are not included in
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ALNYLAM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the measurement of the lease liability and are expensed as incurred. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis an amount equal to the lease payments over a similar term and in a similar economic environment. We record expense to recognize fixed lease payments on a straight-line basis over the expected lease term. We have elected the practical expedient not to separate lease and non-lease components for real estate leases.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board, or FASB, issued a new leasing standard which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the condensed consolidated balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted the new standard on January 1, 2019, using a modified retrospective basis and did not restate comparative periods. In addition, we did not elect the package of practical expedients permitted under the transition guidance that permits companies to carry forward prior conclusions related to (1) whether any expired or existing contracts are, or contain, leases, (2) the lease classification for expired or existing leases, and (3) initial direct costs for existing leases. All our leases have been classified as operating leases under the new leasing standard. We elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the condensed consolidated balance sheets and recognize the associated lease payments in the condensed consolidated statements of comprehensive loss on a straight-line basis over the lease term. Please read Note 8 for additional disclosures related to accounting for leases under this new standard.
The adoption of ASC 842 had a material impact on our condensed consolidated balance sheet as the standard requires us to measure and recognize a right of use asset and lease liability. As most leases do not provide an implicit rate, our incremental borrowing rate was determined based on the information available at the date of adoption to measure our lease liability. Costs determined to be variable and not based on an index or rate were not included in the measurement of the lease liability. We recognized approximately $290.0 million of operating lease liabilities and approximately $230.0 million of operating lease right-of-use assets on our condensed consolidated balance sheet as of January 1, 2019, which are presented as separate line items on the condensed consolidated balance sheet. Had we not adopted the new leasing standard, we would not have had operating lease right-of-use assets or operating lease liabilities on our condensed consolidated balance sheet. The adoption of the standard did not have a material impact on our condensed consolidated statement of comprehensive income.
In June 2016, the FASB issued a new standard which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The new standard is effective for interim and annual periods beginning after December 15, 2019, however, early adoption is permitted. We are currently evaluating the timing of our adoption and the expected impact this guidance could have on our condensed consolidated financial statements and related disclosures.
In March 2017, the FASB issued a new standard that amends the amortization period for certain purchased callable debt securities held at a premium by shortening the amortization period for the premium to the earliest call date. The new standard became effective for us on January 1, 2019. This standard did not have a significant impact on our condensed consolidated financial statements and related disclosures.
In August 2018, the FASB issued amendments that eliminate, add and modify certain disclosure requirements on fair value measurements. The amendments become effective for our fiscal year, including interim periods, beginning January 1, 2020. Early adoption of the amendments in full or only the provisions that eliminate or modify the disclosure requirements for fair value measurements is permitted. We are currently evaluating the timing of our adoption and the expected impact this guidance could have on our condensed consolidated financial statements and related disclosures.
In August 2018, the FASB issued new accounting guidance to clarify the accounting for implementation costs in cloud computing arrangements (hosting arrangements). The new standard requires a customer in a cloud computing arrangement to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. The new standard is effective for interim and annual periods beginning after December 15, 2019, however, early adoption is permitted. We are currently evaluating the timing of our adoption and the expected impact this guidance could have on our condensed consolidated financial statements and related disclosures.
In November 2018, the FASB issued guidance to clarify the interaction between the accounting guidance for collaborative arrangements and revenue from contracts with customers. The amendments become effective for our fiscal year, including interim periods, beginning January 1, 2020. Early adoption, including adoption in any interim period, is permitted. This
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ALNYLAM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
guidance is required to be applied retrospectively as of the date of our adoption of the new revenue standard on January 1, 2018. We are currently evaluating the timing of our adoption and the expected impact this guidance could have on our condensed consolidated financial statements and related disclosures.
3. PRODUCT REVENUES, NET
Net product revenues (in thousands) consist of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2019201820192018
United States$33,591  $460  $