Overview
We are a global commercial-stage biopharmaceutical company developing novel therapeutics based on RNA 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 disease-causing proteins, thus preventing them from being made. We believe this is a revolutionary approach with the potential to transform the care of patients with genetic and other diseases. To date, our efforts to advance this revolutionary approach have yielded the approval of two first-in-class RNAi-based medicines, ONPATTRO® (patisiran) and GIVLAARI® (givosiran). 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 lipid nanoparticle (LNP) or N-acetylgalactosamine (GalNAc) conjugate approach 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. Our focus is on clinical indications where there is a high unmet need, 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. We continue to execute on ourAlnylam 2020 strategy of building a multi-product, global, commercial biopharmaceutical company with a deep and sustainable clinical pipeline of RNAi therapeutics for future growth and a robust, organic research engine for sustainable innovation and great potential for patient impact. Based on our accomplishments to-date, we are confident we will achieve ourAlnylam 2020 goals by the end of 2020. Specifically, our broad pipeline of investigational RNAi therapeutics is focused in four Strategic Therapeutic Areas, or "STArs:" Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. We now have two marketed products that are within the Genetic Medicines STAr, ONPATTRO and GIVLAARI. ONPATTRO is approved by theUnited States Food and Drug Administration , or FDA, for the treatment of the polyneuropathy of hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, in adults and has also been approved in theEuropean Union , or EU, for the treatment of hATTR amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy,Japan for the treatment of transthyretin, or TTR, type familial amyloidosis with polyneuropathy, and in several additional countries, includingBrazil . Regulatory filings in other territories are pending and additional filings are planned for the remainder of 2020 and beyond. GIVLAARI is approved by the FDA for the treatment of adults with acute hepatic porphyria, or AHP, and inMarch 2020 , GIVLAARI was granted marketing authorisation by theEuropean Commission , or EC, for the treatment of AHP in adults and adolescents aged 12 years and older. InJuly 2020 , we received marketing authorisation approval for GIVLAARI inBrazil for the treatment of AHP in adults and inOctober 2020 , we received regulatory approval for GIVLAARI inCanada for the treatment of AHP in adult patients. We have also filed for regulatory approval for givosiran (the non-branded drug name for GIVLAARI) inSwitzerland andJapan and additional regulatory filings are pending or planned for the remainder of 2020 and beyond. We have six late-stage investigational programs, advancing toward potential commercialization. These programs include our wholly owned programs: givosiran for the treatment of adolescent patients with AHP, lumasiran for the treatment of primary hyperoxaluria type 1, or PH1, patisiran (the non-branded drug name for ONPATTRO) for the treatment of transthyretin amyloidosis, or ATTR amyloidosis, with cardiomyopathy, and vutrisiran for the treatment of ATTR amyloidosis. Inclisiran for the treatment of hypercholesterolemia and atherosclerotic cardiovascular disease, or ASCVD, is being advanced by our partner, The Medicines Company (acquired by Novartis AG inJanuary 2020 ), or MDCO, and fitusiran for the treatment of hemophilia is being advanced by our partner Sanofi Genzyme, the specialty care global business unit of Sanofi. InDecember 2019 , we reported positive topline results from our ILLUMINATE-A Phase 3 clinical trial for lumasiran, our investigational RNAi therapeutic targeting glycolate oxidase, for the treatment of PH1, and inSeptember 2020 , we reported positive topline results from our ILLUMINATE-B Phase 3 clinical trial for lumasiran for the treatment of PH1 in children under the age of six. Based on the data from the ILLUMINATE-A study, inApril 2020 , we submitted a New Drug Application, or NDA, which was accepted by the FDA and granted Priority Review. The FDA has set an action date ofDecember 3, 2020 under the Prescription Drug User Fee Act, and indicated that they were not currently planning an advisory committee meeting as part of the NDA review. Additionally, inMarch 2020 , we submitted a marketing authorisation application, or MAA, for lumasiran with theEuropean Medicines Agency , or EMA, which has been validated by the EMA. Lumasiran was previously granted an accelerated assessment by the EMA. InOctober 2020 , we announced that the Committee for Medicinal Products for Human Use, or CHMP, adopted a positive opinion recommending marketing authorisation of lumasiran for the treatment of PH1. If approved by the EC, lumasiran will be marketed inEurope under the brand name OXLUMO. The CHMP positive opinion was based on an evaluation of the effects of lumasiran in patients with PH1 and its safety profile as demonstrated in both our ILLUMINATE-A and ILLUMINATE-B Phase 3 studies. We expect a decision from the EC on the authorisation recommended by CHMP for lumasiran in the fourth quarter of 2020. 28 -------------------------------------------------------------------------------- Table of Contents 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 Pharmaceuticals, Inc., or Regeneron, MDCO, Sanofi Genzyme, Vir Biotechnology, Inc., or Vir, and Dicerna Pharmaceuticals, Inc., or Dicerna. InMarch 2020 , we announced an expansion of our exclusive licensing agreement with Vir for the development and commercialization of RNAi therapeutics for infectious diseases to include the development and commercialization of RNAi therapeutics targeting SARS-CoV-2, the virus that causes the disease COVID-19. InApril 2020 , we further expanded our collaboration with Vir to include up to three human host factor targets relating to susceptibility to coronaviruses, for use in connection with the treatment, palliation, diagnosis or prevention of SARS-CoV-2 and other diseases caused by coronaviruses. InApril 2020 , we and Dicerna formed a development and commercialization collaboration on investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin deficiency-associated liver disease, or alpha-1 liver disease. In addition, inApril 2020 , we and Dicerna entered into a Patent Cross-License Agreement, pursuant to which each party agreed to cross-license its respective intellectual property related to our lumasiran and Dicerna's nedosiran investigational programs for the treatment of primary hyperoxaluria. InApril 2020 , we entered into a strategic financing collaboration with certain affiliates ofThe Blackstone Group Inc. , or Blackstone, to accelerate our advancement of RNAi therapeutics. In connection with the collaboration, Blackstone will provide us up to$2.00 billion in financing, including$1.00 billion in committed payments to acquire 50% of royalties and 75% of commercial milestones payable to us in connection with sales of inclisiran, up to$750.0 million in a first lien senior secured term loan, and up to$150.0 million towards the development of vutrisiran and ALN-AGT pursuant to the agreement finalized inAugust 2020 and described below. As part of the strategic financing collaboration, Blackstone also purchased an aggregate of$100.0 million of our common stock. InAugust 2020 , we entered into the agreement, or 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 ALN-AGT. 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 for vutrisiran. In addition,Blackstone Life Sciences has the right, but is not obligated, to fund up to$26.0 million for development costs related to a Phase 2 clinical trial of ALN-AGT and up to$54.0 million for development costs related to a Phase 3 clinical trial of ALN-AGT. We retain sole responsibility for the development and commercialization of both vutrisiran and ALN-AGT. Please read Note 5 and Note 10 to our condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (Unaudited)," of this Quarterly Report on Form 10-Q for additional details on our transaction with Blackstone. We have incurred significant losses since we commenced operations in 2002 and expect such losses to continue for the foreseeable future. As ofSeptember 30, 2020 , we had an accumulated deficit of$4.34 billion . Historically, we have generated losses principally from costs associated with the establishment of late-stage clinical and commercial capabilities, including global commercial operations, research and development activities, acquiring, filing and expanding intellectual property rights, and selling, general and administrative costs. While we believe 2019 was our peak net loss year, and believe the funding provided by our strategic financing collaboration with Blackstone should enable us to achieve a self-sustainable financial profile without the need for future equity financing, we expect to continue to incur annual net operating losses for the foreseeable future as we expand our efforts to discover, develop and commercialize RNAi therapeutics. We also anticipate that our operating results will 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 ofSeptember 30, 2020 , we are generating net revenue from product sales for two marketed products, ONPATTRO and GIVLAARI. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products and/or successfully market and sell ONPATTRO, GIVLAARI or any other approved products in the future. A substantial portion of our total revenues in recent years has been derived from collaboration revenues from strategic alliances with Regeneron, Sanofi Genzyme and MDCO. In addition to revenues from the commercial sales of ONPATTRO and GIVLAARI and potentially from sales of future products, we expect our sources of potential funding for the next several years to continue to be derived in part from existing and new strategic alliances, which may include license and other fees, funded research and development, milestone payments and royalties on product sales by our licensees, as well as funding due or available to us under our strategic financing collaboration with Blackstone. The COVID-19 Pandemic InMarch 2020 , theWorld Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic, which continues to spread or resurge throughout theU.S. and worldwide. We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the current COVID-19 pandemic. We are continuing to monitor the global pandemic and spread of COVID-19 and plan to continue taking steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread 29 -------------------------------------------------------------------------------- Table of Contents and actions taken by governmental and health authorities to address the COVID-19 pandemic. The spread of COVID-19 has caused us to modify our business practices, including implementing a global work from home policy for all employeeswho are able to perform their duties remotely and restricting all nonessential business travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the patients we serve and other business partners in light of COVID-19. InSeptember 2020 , we initiated a voluntary program that allowed certain employees to return to physical locations in some geographies, including in theU.S. and certain countries inEurope , in accordance with local government laws, regulations and restrictions and our own safety procedures and practices. Our office sites are equipped and operational with physical distancing, temperature screening, contact tracing and cleaning measures in place, and we expect to adopt and implement additional precautions commensurate with any expansion of employees returning to our physical locations. At this time, we cannot predict when certain restrictions that are in place to protect our employees can be safely reduced or will no longer be needed. Given the fluidity of the COVID-19 pandemic and the uncertainty on whether a second wave of the COVID-19 pandemic will occur during the remainder of 2020 or in 2021, we do not yet know the full extent of the impact of COVID-19 on our business operations. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19. We will continue to work diligently with our partners and stakeholders to continue supporting patient access to our approved medicines, advancing our product candidates under regulatory review as well as in our clinical studies to the extent safe to do so for patients, caregivers and healthcare practitioners, and ensuring the continuity of our manufacturing and supply chain. For additional information related to the actual or potential impacts of COVID-19 on our business, please read Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q. Research and Development Since our inception, we have focused on drug discovery and development programs. Research and development expenses represent a substantial percentage of our total operating expenses, as reflected by our broad pipeline of clinical development programs, which includes multiple programs in late-stage development. Our broad pipeline, including two approved products and multiple investigational RNAi therapeutics across all stages of development, is focused in four STArs: Genetic Medicines; Cardio-Metabolic Diseases; Hepatic Infectious Diseases; and CNS/Ocular Diseases. 30 -------------------------------------------------------------------------------- Table of Contents Commercial Products and Late-Stage Clinical Development Pipeline The chart below is a summary of our commercial products and late-stage development programs as ofNovember 4, 2020 . It identifies those programs for which we have received marketing approval, those programs for which we have received Breakthrough Therapy Designation from the FDA, the stage of these programs and our commercial rights to such programs: [[Image Removed: alny-20200930_g1.jpg]] Early-Stage Clinical Development Pipeline The chart below is a summary of our early-stage development programs as ofNovember 4, 2020 . It identifies those programs in which we have achieved human proof-of-concept, or POC, by demonstrating target gene knockdown and/or additional evidence of activity in clinical studies, the stage of these programs, and our commercial rights to such programs, as well as programs which we believe could result in an IND or CTA filing in 2020: [[Image Removed: alny-20200930_g2.jpg]] 31 -------------------------------------------------------------------------------- Table of Contents During the third quarter of 2020 and recent period, we reported the following updates from ONPATTRO and GIVLAARI commercialization and our late-stage clinical programs: Commercial ONPATTRO •We achieved ONPATTRO global net product revenues for the third quarter of 2020 of$82.5 million , continued progress with market access efforts with a recent launch inPortugal , and continued global expansion with achievement of regulatory approval inIsrael . GIVLAARI •We achieved GIVLAARI global net product revenues for the third quarter of 2020 of$16.7 million , continued progress with market access efforts with ongoing launch inGermany , and continued global expansion with approval inCanada and submission of a new drug application inJapan .Late-Stage Clinical Development •We continued to advance patisiran, in development for the treatment of the cardiomyopathy of both hereditary and wild-type ATTR amyloidosis, and continued enrollment in the APOLLO-B Phase 3 study in ATTR amyloidosis patients with cardiomyopathy. •We presented new interim data from the Phase 1/2 open-label extension study of givosiran in AHP. •We continued to advance lumasiran for the treatment of PH1: •Received a positive CHMP opinion from the EMA recommending approval of lumasiran for the treatment of PH1 in patients of all ages; •Received a positive scientific opinion from theUK's Medicines and Healthcare Products Regulatory Agency through the Early Access to Medicines Scheme; •Presented positive complete results from ILLUMINATE-B, a global Phase 3 pediatric study of lumasiran in PH1 patients less than six years of age, including infants, with preserved renal function; and •Continued enrollment in the ILLUMINATE-C Phase 3 study of lumasiran for the treatment of advanced PH1 in patients of all ages. •We continued to advance vutrisiran, a subcutaneously administered investigational RNAi therapeutic in development for the treatment of ATTR amyloidosis: •Continued treating patients in the fully enrolled HELIOS-A Phase 3 study of vutrisiran in hATTR amyloidosis patients with polyneuropathy, and remain on track to report topline results in early 2021; and •Continued enrollment in the HELIOS-B Phase 3 study in ATTR amyloidosis patients with cardiomyopathy. •Inclisiran continued to advance under our partner, MDCO (which was acquired by Novartis AG inJanuary 2020 ), and is undergoing review for approval in theU.S. and EU: •Received a positive CHMP opinion from the EMA recommending approval of inclisiran for the treatment of adults with hypercholesterolemia or mixed dyslipidemia. If approved, inclisiran will be marketed under the brand name LEQVIO®. •Our partner, Sanofi Genzyme, continued advancement of the ATLAS Phase 3 program for fitusiran in patients with hemophilia A or B with and without inhibitors. There is a risk that any drug discovery or development program may not produce revenue for a variety of reasons, including the possibility that we will not be able to adequately demonstrate the safety and effectiveness of the product candidate. Moreover, there are uncertainties specific to any new field of drug discovery, including RNAi. The success of ONPATTRO, GIVLAARI or any other product candidate we develop is highly uncertain. Due to the numerous risks associated with developing drugs, including those risks associated with the COVID-19 pandemic, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of any potential product candidate or indication, or the period, if any, in which material net cash inflows will commence from any approved product or indication. Any failure to complete any stage of the development of any potential products or any approved product for an expanded indication in a timely manner or successfully launch, market and sell any approved product, including ONPATTRO and GIVLAARI, 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." 32 -------------------------------------------------------------------------------- Table of Contents 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, inApril 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. InJuly 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 will lead. With respect to our Cardio-Metabolic pipeline, inMarch 2013 , we entered into an exclusive, worldwide license with MDCO (acquired by Novartis AG inJanuary 2020 ) pursuant to which MDCO was granted the right to develop, manufacture and commercialize RNAi therapeutics targeting PCSK9 for the treatment of hypercholesterolemia and other human diseases, including inclisiran. InMarch 2018 , we entered into a discovery collaboration with Regeneron to identify RNAi therapeutics for nonalcoholic steatohepatitis, or NASH, and potentially other related diseases, and inNovember 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. InApril 2020 , we entered into a development and commercialization collaboration with Dicerna to advance investigational RNAi therapeutics for the treatment of alpha-1 liver disease. With respect to our Hepatic Infectious Disease pipeline, inOctober 2017 , we announced an exclusive licensing agreement with Vir for the development and commercialization of RNAi therapeutics for infectious diseases, including chronic hepatitis B virus, or HBV, infection. InMarch 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. InApril 2020 , we further expanded our broad multi-target existing collaboration for the development and commercialization of RNAi therapeutics for infectious diseases to include up to three additional targets focused on host factors for SARS-CoV-2, including angiotensin converting enzyme-2, or ACE2, and transmembrane protease, serine 2, or TMPRSS2. With respect to our Genetic Medicine pipeline, we formed a broad strategic alliance with Sanofi Genzyme in 2014. InJanuary 2018 , we and Sanofi Genzyme 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, vutrisiran and any back-up products, and the ALN-AT3 Global License Terms, referred to as the AT3 License Terms, under which Sanofi Genzyme has the exclusive right to pursue the further global development and commercialization of fitusiran and any back-up products. InApril 2019 , we and Sanofi Genzyme agreed to further amend the 2014 Sanofi Genzyme collaboration to conclude the research and option phase and to amend and restate the AT3 License Terms to modify certain of the business terms. Critical Accounting Policies and Estimates Liability Related to the Sale of Future Royalties InApril 2020 , we entered into a purchase and sale agreement with Blackstone, prompting our adoption of a new accounting policy associated with the liability related to the sale of future royalties. Please read Note 2 and Note 5 to our condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (Unaudited)," of this Quarterly Report on Form 10-Q for a discussion of the policy and the accounting implications of this agreement, respectively. Development Derivative Liability InAugust 2020 , we entered into the Funding Agreement withBlackstone Life Sciences, prompting our adoption of a new accounting policy associated with the development derivative liability. Please read Note 2 and Note 10 to our condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (Unaudited)," of this Quarterly Report on Form 10-Q for a discussion of the policy and the accounting implications of this agreement, respectively. 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 endedDecember 31, 2019 , which we filed with theSEC onFebruary 13, 2020 . There have been no significant changes to our critical accounting policies since the beginning of this fiscal year other than with respect to the liability related to the sale of future royalties and the development derivative liability described above. 33 -------------------------------------------------------------------------------- Table of Contents Results of Operations The following data summarizes the results of our operations: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change Total revenues$ 125,853 $ 70,061 $ 55,792 80 %$ 329,291 $ 148,069 $ 181,222 122 %
Operating costs and expenses
64,692 23 %$ 963,507 $ 789,427 $ 174,080 22 % Loss from operations$ (225,199) $ (216,299) $ (8,900) 4 %$ (634,216) $ (641,358) $ 7,142 (1) %
Total other (expense) income
(34,623) (470) %$ 22,215 $ 32,688 $ (10,473) (32) % Net loss$ (253,291) $ (208,535) $ (44,756) 21 %$ (614,741) $ (609,931) $ (4,810) 1 % Discussion of Results of Operations Revenues Total revenues consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change Net product revenues$ 99,206 $ 46,066 $ 53,140 115 %$ 248,677 $ 110,588 $ 138,089 125 % Net revenues from collaborations 26,647 23,995 2,652 11 % 80,614 37,481 43,133 115 % Total$ 125,853 $ 70,061 $ 55,792 80 %$ 329,291 $ 148,069 $ 181,222 122 % Net product revenues Net product revenues consist of the following, by product and region: Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change ONPATTRO United States$ 39,027 $ 33,591 $ 5,436 16 %$ 108,491 $ 80,543 $ 27,948 35 % Europe 30,478 10,857 19,621 181 % 74,664 28,311 46,353 164 % Rest of World (primarily Japan) 13,011 1,618 11,393 704 % 32,560 1,734 30,826 1778 % Total$ 82,516 $ 46,066 $ 36,450 79 %$ 215,715 $ 110,588 $ 105,127 95 % GIVLAARI United States$ 12,108 $ -$ 12,108 N/A$ 26,043 $ -$ 26,043 N/A Europe 4,582 - 4,582 N/A 6,919 - 6,919 N/A Total$ 16,690 $ -$ 16,690 N/A$ 32,962 $ -$ 32,962 N/A Total net product revenues$ 99,206 $ 46,066 $ 53,140 115 %$ 248,677 $ 110,588 $ 138,089 125 % Net product revenues increased during the three and nine months endedSeptember 30, 2020 , as compared to the same periods in the prior year, as a result of the continued, global expansion of ONPATTRO, in addition to sales generated from our second marketed product, GIVLAARI, following commercial launch in theU.S. in the fourth quarter of 2019 and initial European launch in the second quarter of 2020. We expect net product revenues to increase for the twelve-month period endingDecember 31, 2020 , as compared to the same period in 2019, as we continue to add new patients onto ONPATTRO and GIVLAARI therapy, as well as launch our approved products into additional markets, assuming regulatory approvals. 34 -------------------------------------------------------------------------------- Table of Contents Net revenues from collaborations Net revenues from collaborations consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except Dollar percentages) 2020 2019 Change % of Change 2020 2019 Dollar Change % of Change Regeneron$ 14,874 $ 15,261 $ (387) (3) %$ 49,790 $ 15,961 $ 33,829 212 % Vir 8,512 5,869 2,643 45 % 21,476 7,888 13,588 172 % MDCO 1,091 528 563 107 % 6,029 2,273 3,756 165 % Sanofi 420 1,882 (1,462) (78) % 793 10,382 (9,589) (92) % Other 1,750 455 1,295 285 % 2,526 977 1,549 159 % Total$ 26,647 $ 23,995 $ 2,652 11 %$ 80,614 $ 37,481 $ 43,133 115 % Net revenues from collaborations increased during the three months endedSeptember 30, 2020 , as compared to the same period in the prior year, primarily due to an increase in revenue recognized in connection with our collaboration agreement with Vir as a result of increased reimbursable activities associated with the development of RNAi therapeutics targeting SARS-CoV-2. Net revenues from collaborations increased during the nine months endedSeptember 30, 2020 , as compared to the same period in the prior year, primarily due to the increase in revenue recognized in connection with our collaboration agreements with Regeneron and Vir as a result of increased reimbursable activities and the achievement of milestones, respectively, offset by a decrease in reimbursable activities in connection with our collaboration agreements with Sanofi Genzyme. We expect net revenues from collaborations to increase for the twelve-month period endingDecember 31, 2020 , as compared to the same period in 2019, primarily due to increased reimbursable activities and anticipated achievement of milestones under our collaborations with Regeneron, Vir, and MDCO. Operating Costs and Expenses Operating costs and expenses consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change Cost of goods sold$ 21,797 $ 5,213 $ 16,584 318 %$ 55,028 $ 12,886 $ 42,142 327 % Research and development 161,783 160,796 987 1 % 486,350 453,813 32,537 7 % Selling, general and administrative 167,472 120,351 47,121 39 % 422,129 322,728 99,401 31 % Total$ 351,052 $ 286,360 $ 64,692 23 %$ 963,507 $ 789,427 $ 174,080 22 % Cost of goods sold. Cost of goods sold includes the cost of producing and distributing inventories that are related to product revenues, costs related to sales of product supply under our collaboration agreements, third-party royalties and amortization of licensing rights. Based on our inventory policy, we record costs associated with the manufacturing of our products as research and development expense until we determine it is probable that these costs will be recovered through commercial sale (zero-cost inventory). Cost of goods sold increased during the three and nine months endedSeptember 30, 2020 , as compared to the same periods in the prior year, due to the increase in third-party royalties and sales of capitalized inventory. During the three and nine months endedSeptember 30, 2020 , product sold and recognized as revenue was substantially from capitalized inventory, whereas during the three and nine months endedSeptember 30, 2019 , all units of product sold and recognized as revenue were zero-cost inventory. We will continue to sell our zero-cost inventory of GIVLAARI throughout the remainder of 2020. We anticipate variability in our cost of goods sold as a percentage of net product revenues due to the timing of manufacturing runs and utilization and the depletion of zero-cost inventories, as well as future product launches. We expect that cost of goods sold will increase for the twelve-month period endingDecember 31, 2020 , as compared to the same period in 2019, primarily as a result of an expected increase in net product sales as well as the sale of capitalized inventory. 35
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Table of
Three Months EndedSeptember 30 ,
Nine Months Ended
Dollar (In thousands, except percentages) 2020 2019 Change % of Change 2020 2019 Dollar Change % of Change Clinical trial and manufacturing$ 54,705 $ 46,417 $ 8,288 18 %$ 155,757 $ 133,064 $ 22,693 17 % Compensation and related 47,982 41,486 6,496 16 % 145,459 113,173 32,286 29 % External services 17,512 20,703 (3,191) (15) % 53,450 51,311 2,139 4 % Facilities-related 18,256 13,050 5,206 40 % 51,658 38,455 13,203 34 % Stock-based compensation 13,703 22,737 (9,034) (40) % 45,542 54,144 (8,602) (16) % Lab supplies, materials and other 9,625 8,416 1,209 14 % 32,071 27,848 4,223 15 % License Fees - 7,987 (7,987) (100) % 2,413 35,818 (33,405) (93) % Total$ 161,783 $ 160,796 $ 987 1 %$ 486,350 $ 453,813 $ 32,537 7 % For the three months endedSeptember 30, 2020 , research and development expenses were relatively flat, as compared to the same period in the prior year, primarily due to the following: •Increased clinical trial and manufacturing expenses associated with material manufactured for clinical and preclinical activities; •Increased compensation and related expenses as a result of increased headcount to support long-term strategic growth; and •Increased facilities-related expenses as a result of costs recognized in connection with placing portions of our cGMP manufacturing facility into service. Offset by: •Decreased stock-based compensation primarily due to the achievement of a performance-based milestone related to positive top-line Phase 3 results in the third quarter of 2019; and •License fees associated with regulatory filings in 2019. For the nine months endedSeptember 30, 2020 , the increase in research and development expenses, as compared to the same period in the prior year, was primarily related to the following: •Increased compensation and related expenses as a result of increased headcount to support long-term strategic growth; •Increased clinical trials and manufacturing and lab supplies, materials and other expenses as a result of increased preclinical and clinical services related to the advancement of our early- and late-stage programs to support our long-term strategic goals; and •Increased facilities-related expenses as a result of costs recognized in connection with placing portions of our cGMP manufacturing facility into service. Partially offset by: •Decreased license fees associated with the execution of our collaboration agreement with Regeneron and regulatory milestones occurring in 2019 with no corresponding activity in 2020. During the three and nine months endedSeptember 30, 2020 and 2019, in connection with advancing activities under our collaboration agreements, we incurred research and development expenses, primarily related to external development and manufacturing services. 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 September 30, Nine Months Ended September 30, (In thousands) 2020 2019 2020 2019 Regeneron $ 12,565$ 11,114 $ 44,108$ 12,105 Vir 4,903 7,256 11,782 8,386 MDCO 67 6,737 1,609 8,484 Sanofi 1,009 4,960 1,633 13,040 Total $ 18,544$ 30,067 $ 59,132$ 42,015 36
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Table of Contents Selling, general and administrative. Selling, general and administrative expenses consist of the following:
Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change Compensation and related$ 53,532 $ 36,991 $ 16,541 45 %$ 148,502 $ 107,706 $ 40,796 38 % Consulting and professional services 40,008 39,670 338 1 % 120,318 100,307 20,011 20 % Stock-based compensation 23,561 23,272 289 1 % 60,055 54,500 5,555 10 % Facilities-related 11,299 9,123 2,176 24 % 32,695 26,188 6,507 25 % Other 39,072 11,295 27,777 246 % 60,559 34,027 26,532 78 % Total$ 167,472 $ 120,351 $ 47,121 39 %$ 422,129 $ 322,728 $ 99,401 31 % For the three and nine months endedSeptember 30, 2020 , the increase in selling, general and administrative expenses, as compared to the same periods in the prior year, was primarily related to the following: •Increased compensation and related and consulting and professional services expenses as a result of increased headcount to support long-term strategic growth and potential additional product launches in 2020 and thereafter, as well as the continued commercialization of ONPATTRO and GIVLAARI; and •Increased other expenses primarily due to a change in an estimated accrual for our contingent liability related to our arbitration with Ionis Pharmaceuticals, Inc., or Ionis. We expect that research and development expenses combined with selling, general and administrative expenses will increase for the twelve-month period endingDecember 31, 2020 , as compared to the same period in 2019, as we continue to develop our pipeline, advance our product candidates, including partnered programs, into later-stage development, prepare regulatory submissions and build-out of our global commercial infrastructure and field team to support ONPATTRO, GIVLAARI and potentially additional product launches. 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. Total Other (Expense) Income. Total other (expense) income consists of the following: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except percentages) 2020 2019 Dollar Change % of Change 2020 2019 Dollar Change % of Change Interest expense$ (28,731) $ -$ (28,731) N/A$ (55,979) $ -$ (55,979) N/A Interest income 2,072 9,889 (7,817) (79) % 10,717 26,195 (15,478) (59) % Other (expense) income (594) (2,519) 1,925 (76) % 67,477 (2,929) 70,406 (2,404) % Change in fair value of liability obligation - - - N/A - 9,422 (9,422) (100) % Total$ (27,253) $ 7,370 $ (34,623) (470) %$ 22,215 $ 32,688 $ (10,473) (32) % For the three months endedSeptember 30, 2020 , total other expense increased, as compared to the same period in the prior year, primarily due to$28.7 million of interest expense associated with the sale of future royalties and a$7.8 million decrease in interest income as a result of Federal interest rate cuts. For the nine months endedSeptember 30, 2020 , total other income decreased, as compared to the same period in the prior year, due to$56.0 million of interest expense associated with the sale of future royalties, a$15.5 million decrease of interest income as a result of Federal interest rate cuts and a$9.4 million gain in 2019 as a result of the final mark-to-market adjustment of a liability obligation, for which there was no corresponding gain in 2020, offset by an increase in other income due to realized and unrealized gains in marketable equity securities of$66.6 million . 37 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources The following table summarizes our cash flow activities: Nine Months Ended September 30, (In thousands) 2020 2019 Net loss $
(614,741)
150,133 136,767 Changes in operating assets and liabilities (27,209) 390,717 Net cash used in operating activities (491,817) (82,447) Net cash used in investing activities (337,630) (196,827) Net cash provided by financing activities 777,029 782,842
Effect of exchange rate changes on cash, cash equivalents and restricted cash
1,946 (449)
Net (decrease) increase in cash, cash equivalents and restricted cash
(50,472) 503,119
Cash, cash equivalents and restricted cash, beginning of period
549,628 422,631
Cash, cash equivalents and restricted cash, end of period
Since we commenced operations in 2002, we have generated significant losses. As ofSeptember 30, 2020 , we had an accumulated deficit of$4.34 billion . As ofSeptember 30, 2020 , we had cash, cash equivalents and marketable securities of$1.83 billion , compared to$1.54 billion as ofDecember 31, 2019 . Operating activities Net cash used in operating activities increased during the nine months endedSeptember 30, 2020 , compared to the same period in 2019, primarily due to the receipt of$400.0 million inMay 2019 for the upfront payment associated with our strategic collaboration with Regeneron. Investing activities Net cash used in investing activities increased during the nine months endedSeptember 30, 2020 , compared to the same period in the prior year, primarily due to an increase in the purchase of marketable debt securities and a decrease in the proceeds from the sales and maturities of marketable securities. Financing activities Net cash provided by financing activities decreased during the nine months endedSeptember 30, 2020 , compared to the same period in the prior year, primarily due to proceeds of$400.0 million from our issuance of common stock to Regeneron inApril 2019 and$381.9 million received from ourJanuary 2019 underwritten public offering, offset by$500.0 million received from our sale of the MDCO royalty interest inApril 2020 and an increase in the proceeds from the issuance of common stock in connection with stock option exercises and other types of equity during the nine months endedSeptember 30, 2020 . Operating Capital Requirements We currently have programs focused on a number of therapeutic areas and, as ofSeptember 30, 2020 , have two globally marketed products, ONPATTRO and GIVLAARI. However, our ongoing development efforts may not be successful and we may not be able to commence sales of any other products in the future. In addition, we anticipate that we will continue to generate significant losses for the foreseeable future 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 operations, continued management and growth of our intellectual property including our patent portfolio, collaborations and general corporate activities. Based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as ofSeptember 30, 2020 , together with the cash we expect to generate from product sales, and under our current alliances, as well as the funds due or available to us as a result of the strategic financing collaboration with Blackstone, will be sufficient to enable us to advance our long-term strategic goals for multiple years from the filing of this Quarterly Report on Form 10-Q. Although we believe the strategic financing collaboration with Blackstone will enable us to achieve a self-sustainable financial profile without the need for further equity financing, in the future, we may seek additional funding through new collaborative arrangements, public or private debt financings, royalty or other monetization transactions or a combination of one or more of these funding sources. Additional funding may not be available to us on acceptable terms or at all. Moreover, the terms of any additional financing may adversely affect the holdings or the rights of our stockholders. 38
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Table of Contents Contractual Obligations and Commitments The disclosure of our contractual obligations and commitments is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . InApril 2020 , we entered into a purchase and sale agreement with Blackstone, resulting in an initial recognition of$1.00 billion liability related to the sale of future royalties. InAugust 2020 , we entered into the Funding Agreement with Blackstone, resulting in the recognition of a$5.4 million development derivative liability. Please read Note 5 and Note 10, respectively, to our condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q for a description of these agreements. As a result, we expect our contractual obligations through 2036 will increase from the amounts previously disclosed in our 2019 Annual Report on Form 10-K due to payments under these agreements. Recent Accounting Pronouncements Please read Note 2 to our condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (Unaudited)," of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.
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