DICERNA PHARMACEUTICALS, INC. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this section as well as factors described in Part II, Item 1A - "Risk Factors" and "Special Note Regarding Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q. OverviewDicerna Pharmaceuticals, Inc. ("we", "us," "our," "the Company," or "Dicerna") is a biopharmaceutical company focused on discovering, developing, and commercializing medicines that are designed to leverage ribonucleic acid interference ("RNAi") to silence genes selectively that cause or contribute to disease. Using our proprietary GalXC™ RNAi technology platform, Dicerna is committed to developing RNAi-based therapies with the potential to treat both rare and more prevalent diseases. By silencing disease-causing genes, Dicerna's GalXC platform has the potential to address conditions that are difficult to treat with other modalities. Initially focused on hepatocytes, Dicerna has continued to innovate and is exploring new applications of its RNAi technology beyond the liver, targeting additional tissues and enabling new therapeutic applications. In addition to our own pipeline of core discovery and clinical candidates, Dicerna has established collaborative relationships with some of the world's leading pharmaceutical companies, including Novo Nordisk A/S ("Novo"), Roche, Eli Lilly and Company ("Lilly"), Alexion Pharmaceuticals, Inc. (together with its affiliates, "Alexion"),Boehringer Ingelheim International GmbH ("BI"), and Alnylam Pharmaceuticals, Inc. ("Alnylam"). Between Dicerna and our collaborative partners, we currently have more than 20 active discovery, preclinical, or clinical programs focused on rare, cardiometabolic, viral, chronic liver, and complement-mediated diseases, as well as neurodegeneration and pain. All of our drug discovery and development efforts are based on the therapeutic modality of RNAi, a highly potent and specific mechanism for silencing the activity of a targeted gene. In this naturally occurring biological process, double-stranded RNA molecules induce the enzymatic destruction of the messenger ribonucleic acid ("mRNA") of a target gene that contains sequences that are complementary to one strand of the therapeutic double-stranded RNA molecule. Our approach is to design proprietary double-stranded RNA molecules that have the potential to engage the enzyme Dicer and initiate an RNAi process to silence a specific target gene. Our GalXC RNAi platform utilizes a proprietary GalNAc-mediated structure of double-stranded RNA molecules. For our current clinical programs, our GalXC RNAi platform has been configured for subcutaneous delivery to the liver. Due to the enzymatic nature of RNAi, a single GalXC molecule incorporated into the RNAi machinery can destroy hundreds or thousands of mRNAs from the targeted gene. The GalXC RNAi platform and other proprietary RNAi delivery technologies support Dicerna's long-term strategy to retain a full or substantial ownership stake in our programs, subject to the evaluation of potential licensing opportunities as they may arise, and to invest internally in programs for diseases with focused patient populations, such as certain rare diseases or diseases with well-characterized genetic targets. These certain rare disease programs, which include our nedosiran and A1AT product(s) programs, represent opportunities that we believe carry a relatively higher probability of success, with genetically and molecularly defined disease markers, high unmet medical need, a limited number of centers of excellence to facilitate reaching these patients, and the potential for more rapid clinical development paths to regulatory approval. For more complex diseases with multiple gene dysfunctions and/or larger patient populations, we continue to pursue collaborations that can provide the enhanced scale, resources, and commercial infrastructure required to maximize these prospects. We currently view our operations and manage our business as one segment which encompasses the discovery, research, and development of treatments based on our RNAi technology platform. Executive Summary Our results of operations for and liquidity and capital resources as of the nine months endedSeptember 30, 2020 include the following: • InJanuary 2020 , we entered into a non-cancelable real property lease agreement for 61,282 square feet of office space at75 Hayden Avenue inLexington, Massachusetts . The original term is estimated to commence during the fourth quarter of 2020 and is for 125 months with options to extend for two additional successive periods of five years thereafter. The aggregate total fixed rent is approximately$41.8 million . In addition, inJuly 2020 , we entered into an amendment to the75 Hayden Avenue lease. The75 Hayden Avenue lease amendment expands the square footage leased under the75 Hayden Avenue lease to contain a total of 91,728 rentable square feet. The75 Hayden Avenue lease amendment increases monthly base rent by an average of$0.2 million per month. 28 -------------------------------------------------------------------------------- Table of Contents • InJanuary 2020 , we received a$200.0 million upfront payment from Roche associated with a collaboration agreement executed inOctober 2019 to which we were a party. The agreement with Roche is to progress RG6346, the investigational therapy in Phase 1 clinical development, toward worldwide development and commercialization, and includes an option for the companies to collaborate in the discovery, development, and commercialization of oligonucleotide therapeutics intended for the treatment of chronic hepatitis B virus ("HBV") infection. InApril 2020 , Roche selected its first target under the research and development portion of the agreement. • InJanuary 2020 , we received a$175.0 million upfront payment from Novo associated with a collaboration agreement executed inNovember 2019 to which we were a party. The agreement with Novo is for the use of the Company's proprietary GalXC platform to progress novel therapies for the treatment of liver-related cardiometabolic diseases towards clinical development and commercialization. •InFebruary 2020 , we issued and sold approximately$40.0 million of shares of our common stock to a single institutional investor through our "at-the-market" sales facility withCowen and Company, LLC . In this transaction, we sold an aggregate of 2,077,500 shares of common stock at a price of$19.25 per share, resulting in approximately$39.2 million after a deduction of approximately$0.8 million in sales commissions. The shares in the offering were sold pursuant to a shelf registration statement declared effective by theSecurities and Exchange Commission ("SEC") onMay 31, 2018 and a prospectus supplement filed with theSEC onJune 1, 2018 . •InApril 2020 , we and Alnylam entered into a collaboration and license agreement (the "A1AT Agreement") and a patent cross-license agreement (the "PH Agreement"). Under the A1AT Agreement, we and Alnylam will work to develop and commercialize investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin ("A1AT") deficiency-associated liver disease ("alpha-1 liver disease"). Under the PH Agreement, we and Alnylam cross-license our respective intellectual property related to Alnylam's lumasiran and our nedosiran investigational programs for the treatment of primary hyperoxaluria ("PH"). The non-exclusive license agreement provides for Alnylam to pay mid- to high-single-digit royalties to Dicerna based on global net sales of lumasiran and for Dicerna to pay low-single-digit royalties to Alnylam on global net sales of nedosiran. The non-exclusive cross-license agreement ensures that each party has the freedom to develop and commercialize its respective product candidate. •InJune 2020 , theFood and Drug Administration ("FDA") granted rare pediatric disease designation for nedosiran for the treatment of PH. Under theFDA's rare pediatric disease designation program, the FDA may grant a priority review voucher to a Sponsorwho receives a product approval for a "rare pediatric disease." Subject to FDA approval of nedosiran for the treatment of PH, we would be eligible to receive a voucher that may be redeemed to receive priority review for a subsequent marketing application for a different product candidate or which could be sold or transferred. •InJuly 2020 , we entered into a second amendment to the lease agreement for our facility inColorado . TheColorado facility lease amendment approves Dicerna to operate a biotechnology laboratory on the premises. •InAugust 2020 , we provided updated guidance related to the enrollment completion timeline for our PHYOX2 pivotal trial of nedosiran in patients with PH after previously removing formal guidance due to COVID-19 impacts. Revised guidance anticipates enrollment completion in PHYOX2 in the fourth quarter of 2020. •We believe we have sufficient capital, along with anticipated milestone and other payments from existing collaborations, to fund the execution of our current clinical and operating plans into 2023. •The following table provides a summary of revenue recognized for the three and nine months endedSeptember 30, 2020 and 2019: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2020 2019 2020 2019 Novo$ 3,552 $ -$ 7,604 $ - Roche 18,686 - 58,670 - Lilly 12,073 5,274 31,142 8,346 Alexion 13,639 1,451 23,464 2,954 BI 925 1,310 2,471 5,524 Total$ 48,875 $ 8,035 $ 123,351 $ 16,824 COVID-19 Update OnMarch 11, 2020 , theWorld Health Organization declared COVID-19 a pandemic. The global spread of COVID-19 has created significant volatility, uncertainty, and economic disruption worldwide. Governments in affected regions have implemented, 29 -------------------------------------------------------------------------------- Table of Contents and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, and other public health safety measures. We have been impacted by mandatory work from home edicts directed by local governments in the jurisdictions in which we operate. However, essential work exemptions continue to permit critical research and development and laboratory activities for limited personnel. Those exemptions enable some continued discovery research and activities supporting our collaborative agreements and our own programs. Externally, the COVID-19 pandemic has resulted in slower enrollment in our clinical trials, and we have undertaken efforts to mitigate potential impacts to our business including those related to conducting clinical trials and managing our supply chain. Our operating results could be affected by delays or suspensions of clinical development associated with COVID-19, which have impacted and may continue to impact global healthcare systems and our trial sites' enrollment in our clinical trials, such as we have seen in the nedosiran pivotal PHYOX2 and DCR-A1AT Phase 1/2 studies, and delays in the supply chain related to COVID-19. We continue to be alert to the potential for disruptions that could arise from COVID-19 and monitor theFood and Drug Administration's and other health authorities' guidance for the conduct of clinical trials during this time. The current supply of our investigational medicines continues to be sufficient to support ongoing and planned clinical trials. Based on current evaluations, our supply chain continues to appear intact at this time and able to meet the next 12 months of clinical, nonclinical, and chemistry, manufacturing, and control ("CMC") supply demands across all programs. We have undertaken efforts to mitigate potential future impacts to the supply chain by increasing our stock of critical starting materials required to meet our needs and our collaborative partners' needs through 2021 and by identifying and engaging alternative suppliers. We continue to be alert to the potential for disruptions that could arise from COVID-19 and remain in close contact with suppliers. It is difficult to predict what the lasting impact of the pandemic will be, and if we or any of the third parties with whom we engage were to experience additional shutdowns or other prolonged business disruptions. Our ability to conduct our business in the manner and on the timelines presently planned could have a material adverse impact on our business, results of operations, and financial condition. In addition, a recurrence or "second wave" of COVID-19 cases could cause other widespread or more severe impacts depending on where infection rates are highest. We will continue to monitor developments as we deal with the disruptions and uncertainties relating to the COVID-19 pandemic. Please refer to the "Financial Operations Overview" section below for specific anticipated effects on our financial statement line items. Development Programs In choosing which development programs to internally advance, we apply the scientific, clinical, and commercial criteria that we believe allow us to best leverage our GalXC RNAi platform and maximize value. Using our GalXC RNAi technology, and applying the criteria of our development focus, we have created a pipeline of core liver-focused therapeutic programs for development by Dicerna. For opportunities that were not selected as a core program opportunity, we have sought partners to fund the discovery, and subsequently drive the development of, these non-core opportunities in exchange for upfront payments, milestone payments, royalties on product sales, and potentially other economic and operational arrangements. Our current collaborations with Novo, Lilly, Alexion, and BI resulted from this effort. For core programs targeting rare diseases, we intend to develop these programs internally through approval, subject to partnership opportunities that arise, such as our collaboration with Alnylam. For core programs targeting larger populations, we may seek development partners, such as our collaboration with Roche on RG6346, under various economic and operational arrangements. Together, our core program pipeline and our pipeline of non-core collaborative programs constitute a broad and growing therapeutic pipeline that we believe may result in multiple valuable approved products based on our GalXC technology. In addition to the programs listed in our pipeline, we are exploring a variety of potential programs involving gene targets in the liver, central nervous system ("CNS"), and other tissues, which we may elevate in the future to be either a core program or a non-core collaborative program. Under our collaborations with Novo, Roche, and Lilly, our collaborators have rights to nominate additional programs for discovery by Dicerna and subsequent development by the nominating collaborator, which will become part of our non-core pipeline. Our four core programs are: nedosiran for the treatment of PH, RG6346 for the treatment of HBV infection, DCR-A1AT and ALN-AAT02 for the treatment of A1AT deficiency-associated liver disease, and a program for the treatment of a more prevalent condition involving the liver. We conduct clinical trials in various countries around the world, including theU.S. and other areas heavily impacted by the COVID-19 pandemic. The current supply of our investigational medicines is sufficient to support ongoing and planned clinical trials. Based on current evaluations, our supply chains continue to appear intact to meet the next 12 months of clinical, nonclinical, and CMC supply demands across all programs. We have undertaken efforts to mitigate potential future impacts to the supply chain by increasing our stock of critical starting materials required to meet our needs and our collaborative partners' needs through 2021 and by identifying and engaging alternative suppliers. Additionally, there have been delays in the nedosiran pivotal PHYOX2 and DCR?-?A1AT Phase 1/2 studies. As a result, and based on the most recent updates from clinical sites impacted by COVID-19 and 30 -------------------------------------------------------------------------------- Table of Contents precautionary measures related to the pandemic, the Company regularly evaluates its expectations related to clinical development milestones. The tables below set forth the stage of development of our various GalXC RNAi platform product candidates as ofNovember 5, 2020 : [[Image Removed: drna-20200930_g1.jpg]] Status of Dicerna Programs Research We continue to advance the GalXC RNAi platform as it is applied to therapeutic targets expressed in hepatocytes using GalNAc conjugates for both our partnered research and development programs and our internal liver-targeted programs. All Dicerna-partnered programs include one or more liver-targeted applications of the GalXC RNAi platform. In addition, we continue to explore applications of our RNAi technology against therapeutic gene targets expressed in tissues other than the liver, including targets expressed in the CNS and other extrahepatic tissues and organs of high therapeutic interest, and have made significant progress. Significant gene target knockdown has been achieved in multiple cell types and regions of the CNS and other extrahepatic tissues, in both rodents and nonhuman primates. These extrahepatic applications are based on structurally and chemically modified and/or alternatively conjugated forms of our RNAi platform as initially applied to the liver in our ongoing clinical programs. OnAugust 6, 2020 , we presented our first preclinical data demonstrating expansion of our technology and discovery efforts beyond our hepatocyte-focused GalXC RNAi technology to CNS, skeletal muscle, and adipose tissues. Results from preclinical assays demonstrated consistent and durable CNS-wide target mRNA knockdown using novel constructs regardless of route of administration (intrathecal [IT] or intracisterna magna [ICM]), and reduction in target mRNA in skeletal muscle and adipose tissue using optimized chemistries, resulting in equivalent and potentially highly durable target knockdown regardless of dosing regimens. Our current core GalXC RNAi platform development programs are as follows: Nedosiran for Primary Hyperoxaluria We are developing our lead GalXC product candidate, nedosiran, which is in pivotal clinical development, for the treatment of PH type 1 ("PH1"), PH type 2 ("PH2"), and PH type 3 ("PH3"). PH is a family of severe, ultra-rare, genetic liver disorders characterized by the overproduction of oxalate, a highly insoluble metabolic end-product that is eliminated from the body mainly by the kidneys. In patients with PH, the kidneys are unable to eliminate fully the large amount of oxalate that is produced. The accumulation of oxalate compromises the renal system, which may result in severe damage to the kidneys and other organs. 31 -------------------------------------------------------------------------------- Table of Contents PH encompasses three genetically distinct, autosomal-recessive, inborn errors of glyoxalate metabolism characterized by the overproduction of oxalate. PH1, PH2, and PH3 are each characterized by a specific enzyme deficiency. PH1 is caused by a deficiency of glyoxalate aminotransferase, PH2 is caused by a deficiency of glyoxalate reductase/hydroxypyruvate reductase, and PH3 is caused by a deficiency of 4-hydroxy-2-oxoglutarate aldolase. Patients with PH are predisposed to the development of recurrent urinary tract (urolithiasis) and kidney (nephrolithiasis) stones, composed of calcium oxalate crystals. Stone formation is accompanied by nephrocalcinosis in some patients with PH1 or PH2. This deposition of calcium crystals in the renal parenchyma produces tubular toxicity and renal damage that is compounded by the effects of renal calculi-related obstruction and frequent superimposed infections. Based on the evaluation of genome sequence databases, there may be as many as 16,000 people with PH in theU.S. and major European countries. The ultimate goal of any PH therapy is for patients to live normal lives without the need to comply with hyperhydration and urine alkalization supporting therapies in order to prevent the formation of new calcium oxalate crystals. To best achieve this ultimate goal, Dicerna has developed a once-monthly fixed-dose injection regimen of nedosiran. This once-monthly formulation of nedosiran is designed to avoid the sudden oxalate spikes that could occur with less frequent administration or missed dosages, which could result in the formation of kidney stones and renal failure. To maximize patient convenience, we are developing pre-filled syringes to enable self-administration by most PH patients without the need for involvement of a healthcare provider for dosing. In 2018, nedosiran received Orphan Drug Designation from the FDA, and theEuropean Medicines Agency's ("EMA") Committee for Orphan Medicinal Products ("COMP") designated nedosiran as an orphan medicinal product for the treatment of PH. InJune 2020 , the FDA granted rare pediatric disease designation for nedosiran. Under theFDA's rare pediatric disease designation program, the FDA may grant a priority review voucher to a Sponsorwho receives a product approval for a rare pediatric disease. Subject to FDA approval of nedosiran for the treatment of PH, we would be eligible to receive a voucher that may be redeemed to receive priority review for a subsequent marketing application for a different product candidate or which could be sold or transferred. As ofNovember 2019 , we had completed all study participant dosing and follow-up in PHYOX™1, a Phase 1 single-ascending-dose study of nedosiran in healthy volunteers and study participants with PH1 or PH2. The primary objective of the study was to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of single-ascending doses of nedosiran. Secondary endpoints included the change in 24-hour urinary oxalate excretion from baseline, defined as the mean of two 24-hour collections during screening. The trial was divided into two groups: •Group A was a placebo-controlled, single-blind study and included 25 healthy volunteers at a single site in theUnited Kingdom with five cohorts dosed at 0.3, 1.5, 3.0, 6.0, or 12.0 mg/kg of nedosiran or placebo (3:2 randomization). •Group B was an open-label study and included 18 participants, 15 with PH1 and three with PH2, and included three cohorts of participants dosed at 1.5, 3.0, and 6.0 mg/kg of nedosiran and a fourth cohort with mixed dosing. Group B participants were enrolled among three sites in theEuropean Union , one in theUnited Kingdom , and one inthe United States . Group A dosing was completed inMarch 2018 , and Group B dosing was completed inJanuary 2019 . We first reported interim results from the PHYOX1 trial onSeptember 5, 2018 and subsequently presented updated results at theAmerican Society of Nephrology's ("ASN") Kidney Week inSan Diego onOctober 25, 2018 , at theGerman Society of Pediatric Nephrology 50th Annual Meeting inCologne, Germany onMarch 28, 2019 , at theOxalosis and Hyperoxaluria Foundation International Hyperoxaluria Workshop inBoston, Massachusetts onJune 20, 2019 , and at the ASN's Kidney Week Annual Meeting inWashington, D.C. onNovember 7, 2019 . With respect to efficacy data in PHYOX1, as ofSeptember 2019 , nedosiran was associated with normalization or near-normalization of urinary oxalate levels in 14 of 18 adult patients with PH1 or PH2 following single-dose administration. The PHYOX1 investigators also reported that the three participants with PH2 (one of whom received a single 1.5 mg/kg dose of nedosiran; the other two received a 3.0 mg/kg dose) achieved a mean maximal reduction of 24-hour urinary oxalate of 49% (range: 39% to 66%) with one participant reaching normalization and another participant reaching near-normalization at one or more post-dose time points. The PH2 patientwho did not achieve normalization or near-normalization was dosed at the 1.5 mg/kg level. Data from the PHYOX1 trial showed that nedosiran was associated with normalization or near-normalization of urinary oxalate levels in 14 of 18 adult participants with PH1 or PH2 following single-dose administration. Nedosiran was generally well tolerated based on data from 18 participants (15 adults and three adolescents [participants 13-16 years old]) with PH1 (n=15) or PH2 (n=3) and 25 adult healthy volunteers. As of the last data cut inMarch 2020 , seven serious adverse events ("SAEs") had occurred in six participants in Group B; none was deemed related to the study drug, and all seven SAEs had resolved. A total of seven participants dosed with nedosiran experienced mild or moderate injection-site reactions (defined as occurring four hours or more after injection), all of which resolved without intervention in a mean of 25 hours. No clinically meaningful safety signals were observed, including no clinically significant liver function test abnormalities. 32 -------------------------------------------------------------------------------- Table of Contents PHYOX3 Long-Term, Multidose, Open-Label Extension Study Following positive Phase 1 data from PHYOX1 in 2019, a single-ascending-dose study of nedosiran in healthy volunteers and study participants with PH1 or PH2, we received approval to proceed with the Phase 2 ("PHYOX2," our multidose, double-blind, randomized, placebo-controlled pivotal trial of nedosiran) and Phase 3 ("PHYOX3") studies of nedosiran in PH. We initiated dosing of participants transitioning from the PHYOX1 trial into the PHYOX3 study, a long-term, multi-dose, open-label extension study. Unlike the PHYOX2 trial, which requires screening and enrollment of new participants, patients are permitted to transition into the PHYOX3 trial from any previous nedosiran trial in which they have participated. As ofApril 2020 , we had implemented a protocol amendment with local institutional review boards ("IRBs") and had transitioned certain site visits to a combination of at-home nurse visits with investigator telehealth assessments for dose administration and safety follow-up, as a result of impacts from COVID-19. The primary endpoint of PHYOX3 is to evaluate the impact of monthly nedosiran administration on the annual rate of decline in estimated glomerular filtration rate ("eGFR"), a measure of kidney function. The PHYOX3 trial will also evaluate the long-term effect of nedosiran on urinary oxalate ("Uox") excretion, new stone formation, progression of nephrocalcinosis, and the potential to enable the gradual decrease or elimination of patients' supportive hyperhydration therapies. InAugust 2020 , we presented interim data from the PHYOX3 trial up toJuly 10, 2020 . Included in the analysis were 11 patientswho had received at least five monthly doses of nedosiran delivered subcutaneously. There was an extended washout period between participants' completion of PHYOX1 during which participants were anticipating a return to 80% of Uox PHYOX1 baseline prior to starting in PHYOX3. Some patients did not return to this range and were permitted to enroll in PHYOX3 with lower baseline levels. The mean body surface area ("BSA") adjusted baseline Uox of these 11 participants in PHYOX1 was 1.323 mmol/1.73m2 BSA/24 hr, and the mean BSA-adjusted observable baseline Uox level for these same participants initiating PHYOX3 and included in this analysis was 0.926 mmol/1.73m2 BSA/24 hr. One hundred percent of PH1 participants (eight of eight) that had rolled over from PHYOX1 and received five doses of nedosiran in the PHYOX3 study had normalization or near normalization at Day 120: of these, near-normalization was reached in 63% of the PH1 participants (five of eight). For PH1 participants, the mean Uox level achieved was within the normal range (mean Uox - 0.404 mmol/1.73m2 BSA/24 hr). Thirty-three percent of PH2 participants (one of three) achieved normalization at Day 120. We define normal and near-normal Uox as below 0.46 mmol/1.73m2 BSA/24 hr and from 0.46 to 0.6 mmol/1.73m2 BSA/24 hr, respectively. As ofJuly 10, 2020 , five of the 17 participants enrolled in PHYOX3 had achieved and maintained normal Uox concentrations on at least three consecutive visits, making them eligible for gradual reduction in fluid intake. InOctober 2020 , we presented new interim data from the PHYOX3 trial. A total of 16 trial participants from the completed PHYOX1 trial had entered the PHYOX3 trial. Of these, 13who had reached 180 Days and had received six monthly doses in the PHYOX3 trial were included in this analysis. Three participants were not included in the efficacy analysis, as they had not yet reached Day 180 at the time of the analysis. All 13 participants (10 with PH1 and three with PH2) receiving nedosiran achieved normal (12 of 13) or near-normal (one of 13) Uox excretions at one or more timepoints. Of these, all 10 (100%) of the participants with PH1, and two of the three (67%) participants with PH2, achieved normal Uox excretions at one or more visits. In this interim analysis, nedosiran was generally well tolerated, and no serious safety concerns were identified in this study. There were no treatment discontinuations or study withdrawals during the observation period. Two participants had serious treatment-emergent adverse events ("TEAEs") (pyelonephritis and nephrolithiasis) that were determined by the investigator to be unrelated to nedosiran treatment. The most common TEAEs were mild to moderate administration-site reactions. PHYOX2 Multidose, Double-Blind, Randomized, Placebo-Controlled Pivotal Trial InMarch 2020 , we provided an overview of our response to the COVID-19 pandemic that included an update on business continuity and clinical development milestones, including milestones related to the PHYOX clinical development program for nedosiran. The update outlined Dicerna's intention to work closely with local IRBs to implement a protocol amendment in accordance with recently adopted regulatory guidance that would allow for the transition of remaining site visits to at-home nurse visits for drug administration and safety follow-up. As a result of enrollment progress and temporary suspension of further clinical trial activities at multiple sites as of the March update, the Company withdrew its previous guidance for completion of enrollment in PHYOX2 in the second quarter of 2020. During April andMay 2020 , Dicerna transitioned certain site visits in the PHYOX2 trial to a combination of at-home nurse visits and investigator telehealth assessments for drug administration and safety follow-up following trial sites' operational changes resulting from the COVID-19 pandemic. Enrollment in the PHYOX2 trial continues at a number of sites globally. Given the fluid nature of the COVID-19 pandemic and the evolving and extraordinary actions undertaken by clinical trial sites globally, we continue to evaluate our clinical plan related to nedosiran, and, at this time, expect to complete PHYOX2 enrollment in the fourth quarter of 2020. We also anticipate the last patient to complete this study in the first half of 2021 and to submit a New Drug Application ("NDA") in the third quarter of 2021. In addition to the PHYOX2 clinical trial, we have multiple additional trials planned. Patient enrollment in a study of patients with PH3 (PHYOX4) is expected in the fourth quarter of 2020. Enrollment in a study of PH1 and PH2 patients with severe renal impairment, including those on dialysis (PHYOX7), and in a study of PH1 and PH2 patients aged 0-5 years with relatively intact renal 33 -------------------------------------------------------------------------------- Table of Contents function (PHYOX8) is expected to begin in the first quarter of 2021. In addition, we initiated an observational study in the third quarter of 2020 in patients with PH3 (PHYOX-OBX) to evaluate the association between urinary oxalate and the rate of kidney stone formation. In discussions with the FDA, we received feedback indicating alignment on a path to the full approval of nedosiran for the treatment of PH1 and PH2 based on achievement of substantial reduction of urinary oxalate excretion in patients with PH1 and PH2 after nedosiran administration versus those to whom the placebo was administered in the PHYOX2 pivotal trial. With this feedback, we believe we have a path to seek full approval in both PH1 and PH2 based on PHYOX2 results. InJuly 2019 , we received Breakthrough Therapy Designation from the FDA for the development of nedosiran for the treatment of PH1. InJune 2020 , we announced that the FDA granted rare pediatric disease designation for nedosiran for the treatment of PH. We plan to continue our dialogue with the FDA regarding endpoints for studies involving patients with PH3 as part of the PHYOX clinical development program for nedosiran, and potentially an expansion of the Breakthrough Therapy Designation to include PH2. In order to enhance our ability to bring nedosiran to market, inApril 2020 , we entered into the Alnylam Cross-License Agreement for the intellectual property for ours and Alnylam's respective investigational programs for the treatment of PH. The non-exclusive cross-license agreement ensures that each party has the freedom to develop and commercialize its respective product candidates. The cross-license agreement provides for Alnylam to pay mid- to high-single-digit royalties to Dicerna based on global net sales of lumasiran and for Dicerna to pay low-single-digit royalties to Alnylam on global net sales of nedosiran. Commercial readiness activities continue across the organization to ensure the timing of appropriate infrastructure, processes, and capabilities to support Dicerna's evolution to a fully integrated biopharmaceutical company. The primary focus is onU.S. commercialization infrastructure for nedosiran and the Medical Affairs and Commercial teams that have been established. Additional infrastructure and commercialization activities are paced to the PHYOX programs and NDA preparations. Outside theU.S. , active discussions for regional and/or multinational commercial collaboration partners are underway. RG6346 for Chronic Hepatitis B Virus Infection Our GalXC RNAi platform-based product candidate for the treatment of chronic HBV infection, RG6346, is currently being tested in a Phase 1 clinical trial. Roche will be responsible for initiating Phase 2 development of RG6346. HBV is the world's most common serious liver infection and affects an estimated 292 million people worldwide. Chronic HBV infection is characterized by the presence of the HBV surface antigen ("HBsAg") for six months or more. In order to be optimally positioned to develop and commercialize our product candidate, RG6346, in combination with other novel drugs, we entered into a research collaboration and licensing agreement with Roche inOctober 2019 . Under the terms of the agreement, we are leading the development of RG6346 through the current Phase 1 trial, and pending favorable results, Roche intends to further develop RG6346 with the overall goal of developing a combination regimen to achieve a long-term functional cure of chronic HBV in combination with additional Roche product candidates. The agreement also provides an option for the companies to collaborate in the discovery, development, and commercialization of oligonucleotide therapeutics intended for the treatment of chronic HBV. The DCR-HBVS-101 clinical trial is a Phase 1, randomized, placebo-controlled, double-blind study designed to evaluate the safety and tolerability of RG6346 in healthy volunteers and in patients with chronic HBV. Secondary objectives are to characterize the pharmacokinetic profile of RG6346 and to evaluate preliminary pharmacodynamic effects on markers of HBV antiviral efficacy, including reductions of HBsAg and HBV deoxyribonucleic acid ("DNA") levels in blood. The Phase 1 clinical trial is divided into three groups: •Group A is a single-ascending-dose arm in which 30 healthy volunteers received a dose of RG6346 (0.1, 1.5, 3.0, 6.0, or 12.0 mg/kg) or placebo, with a four-week follow-up period. Group A dosing was completed inAugust 2019 . •Group B is a single-dose arm in which eight participants with chronic HBVwho are naïve to nucleoside analog therapy received a 3.0 mg/kg dose of RG6346 or placebo, with a follow-up period of at least 12 weeks. We initiated Group B dosing in the third quarter of 2019, in parallel with Group C at the 3.0 mg/kg dose level. Group B dosing was completed inMay 2020 . •Group C is a multiple-ascending-dose arm in which RG6346 (1.5, 3.0, or 6.0 mg/kg) or placebo was administered to 18 participants with chronic HBVwho are already being treated with nucleoside analogs, with a treatment and follow-up period of 16 weeks or more. InAugust 2020 , we announced interim top-line data from all originally planned cohorts from the ongoing DCR-HBVS-101 study. Patients within Groups B and C were randomized 5:3 and 2:1, to RG6346 treatment versus placebo, respectively. Participants in Groups B and C were eligible to enter into an extended follow-up observation period if reductions of ?1.0 log10 IU/mL of HBsAg from baseline were maintained at the end of the double-blind treatment period (12 weeks/85 days for Group B and 16 weeks/112 days for Group C). Enrollment for the originally planned cohorts was completed inJune 2020 , and results from an interim analysis of data 34 -------------------------------------------------------------------------------- Table of Contents available as ofJune 25, 2020 were presented publicly during our R&D Day event inAugust 2020 and are summarized below. As of the interim analysis, two participants in the Group C 6.0 mg/kg group had not yet reached Day 112. The last participant dose in the 6.0 mg/kg dose group was administered inSeptember 2020 , and the follow-up phase of the study is ongoing as ofNovember 5, 2020 . •Data from theJune 25, 2020 interim analysis showed that nine of 10 patientswho received RG6346 and completed the treatment period in Group C achieved ?1.0 Log10 IU/mL reduction in HBsAg at Day 112 and continued in the extended follow-up period. •At Day 112, the mean reduction in HBsAg from baseline for each Group C cohort was: •1.39 log10 IU/mL (n=4) for the 1.5 mg/kg cohort •1.80 log10 IU/mL (n=4) for the 3.0 mg/kg cohort •1.84 log10 IU/mL (n=2) for the 6.0 mg/kg cohort; two participants had not yet reached Day 112. •Six of the 10 participantswho completed Day 112 had HBsAg <100 IU/mL. •Of the data presented, durability of response was demonstrated up to Day 392, and the first patient dosed in the study had reached Day 392 during the conditional follow-up period with a 2.21 log10 IU/mL reduction in HBsAg (<100 IU/mL). In addition, after a single 3.0 mg/kg dose of RG6346, two participants in Group B (naïve to nucleoside analog therapy) experienced protocol-defined transient alanine aminotransferase ("ALT") flares, and one patient experienced a near-flare. In each case, synthetic and excretory liver function was preserved and there was a coinciding drop in blood HBsAg, suggesting a potential beneficial flare and immune response in relation to the observed ALT elevations. A similar self-resolving flare and response was demonstrated in one Group C participant receiving 6.0 mg/kg of RG6346. No SAEs were observed with RG6346 treatment in any group. The most commonly reported adverse events were mild or moderate injection-site events. No dose-limiting toxicities were observed, and there were no safety-related discontinuations. No dose-/exposure-dependent increases in frequency or severity of safety parameters were noted, and participants with ALT/aspartate aminotransferase ("AST") or gamma-glutamyl transferase ("GGT") elevations were all self-resolving and associated with preserved liver synthetic and excretory function. All observed ALT elevations above the upper limit of normal were self-resolving and associated with preserved liver synthetic and excretory function. Dose-/exposure-dependent increases in frequency or severity of any other safety parameters were not noted. In agreement with Roche, we are enrolling two additional optional open-label, fixed dose Group C cohorts, Cohort 4C and Cohort 5C. Cohorts 4C and 5C will evaluate fixed dosing regimens over an extended conditional follow-up period to capture the rebound kinetics of HBsAG from baseline levels. Cohort 4C is a single-ascending-dose arm with a total follow-up duration of up to 48 weeks. Cohort 5C is a multiple dose cohort with a total follow-up duration of up to 72 weeks. InApril 2020 , Roche nominated the first of up to five targets under the research and development portion of our collaboration agreement. DCR-A1AT and ALN-AAT02 for Alpha-1 Antitrypsin Deficiency-Associated Liver Disease Our GalXC RNAi platform-based product candidate for the treatment of A1AT deficiency-associated liver disease, DCR-A1AT, is currently being tested in a Phase 1/2 clinical study, which we believe could enable a pivotal trial without additional studies. A1AT deficiency is an inherited disorder that can lead to liver disease in children and adults and lung disease in adults. The disorder is caused by mutations in a gene called SERPINA1. This gene, when functioning normally, provides instructions for making the A1AT protein, which protects the body from an enzyme called neutrophil elastase. This enzyme is released from white blood cells to fight infection, but it can attack normal tissues if not tightly controlled by A1AT. Mutations in the SERPINA1 gene can result in a deficiency of A1AT or, most commonly, an abnormal form of the protein that cannot control neutrophil elastase. Accumulation of abnormal A1AT protein in the liver can lead to liver disease. Uncontrolled neutrophil elastase can also destroy alveoli (small air sacs in the lungs) and cause lung disease. A1AT deficiency occurs all over the world, though its prevalence varies by population. The disorder affects roughly one in 1,500 to 3,500 individuals with European ancestry but is uncommon in people of Asian descent. Congenital A1AT deficiency is estimated to affect 2.4 people out of every 10,000 in the EU. InMarch 2020 , the FDA granted orphan drug designation to DCR-A1AT for the treatment of A1AT deficiency. InDecember 2019 , theEuropean Commission granted orphan drug designation to DCR-A1AT for the treatment of congenital A1AT deficiency based on a positive opinion from the COMP of the EMA. We submitted a CTA to theSwedish Medical Products Agency inJune 2019 to conduct a first-in-human Phase 1/2 study of DCR-A1AT. 35 -------------------------------------------------------------------------------- Table of Contents InApril 2020 , we entered into the Alnylam Collaboration Agreement. Under the Alnylam Collaboration Agreement, Alnylam's ALN-AAT02 and Dicerna's DCR-A1AT, each in Phase 1/2 development, will be explored for the treatment of alpha-1 liver disease. Under the agreement, we assume responsibility for both ALN-AAT02 and DCR-A1AT at our cost and may progress one or both of these investigational medicines through clinical development. We will select which product candidate to advance in development for the treatment of patients with alpha-1 liver disease. At the completion of Phase 3, Alnylam has the no-cost opportunity to opt in to commercialize the selected candidate in countries outside theU.S. where it already has a commercialization infrastructure in place. If Alnylam exercises its opt-in right, each party will pay tiered royalties to the other party based on net product sales generated in its territory at rates dependent on which candidate is commercialized. In the event Alnylam waives its commercialization option, we will retain worldwide rights to commercialize the selected candidate in exchange for milestones and royalties payable to Alnylam, also at a rate dependent on which candidate is ultimately commercialized. The initial DCR-A1AT-101 clinical trial is a Phase 1/2 randomized, placebo-controlled study designed to evaluate the safety and tolerability of DCR-A1AT in healthy volunteers and in patients with A1AT deficiency-associated liver disease. Secondary objectives are to characterize the pharmacokinetic profile of DCR-A1AT, to evaluate preliminary pharmacodynamics on serum A1AT protein concentrations, and to characterize the effect of DCR-A1AT on A1AT deficiency-associated liver disease evaluated by liver biopsy. Exploratory objectives include characterization of the effect of DCR-A1AT on A1AT deficiency-associated liver disease evaluated by biochemical markers as well as the effect on liver stiffness. Following our business update inMarch 2020 , further enrollment of healthy volunteers in the Phase 1/2 trial of DCR-A1AT was effectively paused due to site restrictions related to the COVID-19 pandemic; however, all subjects in the current dosing cohort have since completed their remaining visits. Additional safety precautions have been implemented, including testing of any participantswho present with symptoms consistent with COVID-19. As of lateApril 2020 , theScientific Review Committee for the DCR-A1AT Phase 1/2 trial confirmed that the study could continue, and we began enrolling the next dosing cohort inMay 2020 , which has since been completed. We are currently targeting program selection for advancement into Phase 2 in the first quarter of 2021. DCR-Proprietary We are currently pursuing development of a proprietary candidate for the treatment of a more prevalent condition involving the liver. Our goal is to submit an Investigational New Drug ("IND") or Clinical Trial Application ("CTA") filing in mid-2021. Collaborative Program Update Eli Lilly and Company During the first quarter of 2020, Lilly selected LY3819469, a GalXC molecule for the second collaboration target in cardiometabolic disease, for advancement into preclinical development. Lilly currently has a goal of filing an IND or CTA for LY3561774 in late 2020. Critical Accounting Policies and Significant Judgments and Estimates Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in theU.S. The preparation of our condensed consolidated financial statements requires us to make estimates and apply judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the revenue and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates and could have a material impact on our condensed consolidated financial statements. The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our financial statements presented in this report are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates" in our Annual Report on Form 10-K filed with theSEC onFebruary 28, 2020 . There have been no significant changes to our critical accounting policies as disclosed in our most recently filed Annual Report on Form 10-K during the nine months endedSeptember 30, 2020 . 36 -------------------------------------------------------------------------------- Table of Contents Recent Accounting Pronouncements A summary of significant recent accounting pronouncements that we have adopted or expect to adopt is included in Note 1 - Description of Business and Basis of Presentation to our condensed consolidated financial statements (see Part I, Item 1 - "Financial Statements" of this Quarterly Report on Form 10-Q). Financial Operations Overview Revenue Our revenue to date has been generated primarily through research funding, license fees and other upfront payments, option exercise fees, milestone payments, and preclinical development payments under our research collaboration arrangements with Novo, Roche, Lilly, Alexion, and BI. We have not generated any commercial product revenue, nor do we expect to generate any product revenue in the near-term. In the future, we may generate revenue from a combination of research and development payments, license fees and other upfront payments, milestone payments, product sales, and royalties in connection with our current or future collaborations with partners, and product sales from our internally developed products. We expect that any revenue we generate will fluctuate in future periods as a result of the timing of our or our collaborators' achievement of preclinical, clinical, regulatory, and commercialization milestones, to the extent achieved, the timing and amount of any payments to us related to such milestones, and the extent to which any of our product candidates are approved and successfully commercialized by us or a collaborator. Delays in or changes to the research and development plans and timelines related to our collaboration agreements are likely due to the COVID-19 pandemic. Because we recognize the majority of our collaboration revenue on a cost-to-cost measure of progress, revenues recognized in the near-term future may be lower than originally anticipated and could be recognized over an extended period of time as a result. Research and development expenses Research and development expenses consist of costs associated with our research activities, including discovery and development of our molecules and drug delivery technologies, clinical and preclinical development activities, and research activities under our research collaboration and license agreements. Our research and development expenses include: •direct research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, and consultants; •platform-related lab expenses, including discovery research, lab supplies, license fees, and consultants; •employee-related expenses, including salaries, benefits, and stock-based compensation expense; and •facilities, depreciation, and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment, and laboratory and other supplies. We expense research and development costs as they are incurred. We account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received. A significant portion of our research and development costs are not tracked by project, as they benefit multiple projects or our technology platform. Delays in or changes to our research and development plans and timelines, which impact both our internal and external resources, have occurred and may continue to occur due to the COVID-19 pandemic. Internally, we have been impacted by mandatory work from home edicts directed by the local governments in the jurisdictions in which we operate. However, essential work exemptions continue to permit critical research and development and laboratory activities for limited personnel. Those exemptions enable some continued discovery research and activities supporting our collaborative agreements and our own programs. We also anticipate that the timing of hiring additional personnel may shift into later periods than initially anticipated. Externally, a number of our clinical trial sites have delayed and may continue to delay trial-related activities as a result of COVID-19. Any of these factors could cause the timing of the research and development expenses we expect to incur to shift into later periods and have the potential to cause us to expend more funds than originally contemplated as a result of needing to extend clinical development activities. General and administrative expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development, commercial, and support functions. Other general and administrative expenses include travel expenses, professional legal fees, audit, tax, and other professional services, and allocated facility-related costs not otherwise included in research and development expenses. 37 -------------------------------------------------------------------------------- Table of Contents Delays in or changes to our research and development plans and timelines due to the COVID-19 pandemic may also impact our support functions and the timing of hiring additional personnel, which could cause the timing of certain general and administrative expenses we expect to incur to shift into later periods. Other income (expense) Other income (expense) consists primarily of interest income. Interest income consists of income earned on our cash and cash equivalents, held-to-maturity investments, and restricted cash equivalents. We expect that interest income will continue to decrease due to recent decreases in interest rates. Results of Operations Comparison of the Three and Nine Months EndedSeptember 30, 2020 and 2019 The following table summarizes the results of our operations for the periods indicated (amounts in thousands, except percentages): THREE MONTHS ENDED SEPTEMBER 30, 2020 2019 $ CHANGE % CHANGE Revenue$ 48,875 $ 8,035 $ 40,840 * Operating expenses: Research and development 54,814 30,086 24,728 82.2 % General and administrative 16,961 10,619 6,342 59.7 % Total operating expenses 71,775 40,705 31,070 76.3 % Loss from operations (22,900) (32,670) 9,770 (29.9) % Other income (expense): Interest income (expense), net 1,050 1,880 (830) (44.1) % Other income 1 - 1 100.0 % Total other income, net 1,051 1,880 (829) (44.1) % Net loss$ (21,849) $ (30,790) $ 8,941 (29.0) %
* Percentage change not meaningful
NINE MONTHS ENDED
SEPTEMBER 30,
2020 2019 $ CHANGE % CHANGE
Revenue $ 123,351 $ 16,824 $ 106,527 *
Operating expenses:
Research and development 151,361 74,521 76,840 103.1 %
General and administrative 53,549 29,126 24,423 83.9 %
Total operating expenses 204,910 103,647 101,263 97.7 %
Loss from operations (81,559) (86,823) 5,264 (6.1) %
Other income (expense):
Interest income (expense), net 5,382 6,034 (652) (10.8) %
Other income 16 - 16 100.0 %
Total other income, net 5,398 6,034 (636) (10.5) %
Net loss $ (76,161) $ (80,789) $ 4,628 (5.7) %
* Percentage change not meaningful
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Revenue
The following tables provide a summary of revenue recognized (amounts in
thousands):
THREE MONTHS ENDED
SEPTEMBER 30,
2020 2019 $ CHANGE % CHANGE
Novo $ 3,552 $ - $ 3,552 100.0 %
Roche 18,686 - 18,686 100.0 %
Lilly 12,073 5,274 6,799 128.9 %
Alexion 13,639 1,451 12,188 *
BI 925 1,310 (385) (29.4) %
Total $ 48,875 $ 8,035 $ 40,840 *
* Percentage change not meaningful
NINE MONTHS ENDED
SEPTEMBER 30,
2020 2019 $ CHANGE % CHANGE
Novo $ 7,604 $ - $ 7,604 100.0 %
Roche 58,670 - 58,670 100.0 %
Lilly 31,142 8,346 22,796 273.1 %
Alexion 23,464 2,954 20,510 *
BI 2,471 5,524 (3,053) (55.3) %
Total $ 123,351 $ 16,824 $ 106,527 *
* Percentage change not meaningful
The increase in revenue for the three and nine months ended September 30, 2020
is primarily attributable to increased activities and associated costs under the
recent collaboration agreement with Roche, as well as under the Alexion and
Lilly collaboration agreements, as all three agreements are recognized as
revenue on a cost-to-cost measure of progress method.
Research and development expenses
The following table summarizes our research and development expenses incurred
during the periods indicated (amounts in thousands):
THREE MONTHS ENDED
SEPTEMBER 30,
2020 2019 $ CHANGE % CHANGE
Direct research and development expenses
72.7 %
Platform-related and discovery research expenses 3,843 4,319 (476) (11.0) %
Employee-related expenses 18,483 7,797 10,686 137.1 %
Facilities, depreciation, and other expenses 2,921 854 2,067 242.0 %
Total $ 54,814 $ 30,086 $ 24,728 82.2 %
NINE MONTHS ENDED
SEPTEMBER 30,
2020 2019 $ CHANGE % CHANGE
Direct research and development expenses
108.6 %
Platform-related and discovery research expenses 10,488 9,782 706 7.2 %
Employee-related expenses 47,359 21,399 25,960 121.3 %
Facilities, depreciation, and other expenses 8,757 2,712 6,045 222.9 %
Total $ 151,361 $ 74,521 $ 76,840 103.1 %
Research and development expenses increased for the three months ended
September 30, 2020 compared to the three months ended September 30, 2019
primarily due to direct research and development expenses and employee-related
expenses. The $12.5 million increase in direct research and development expenses
in the three months ended September 30, 2020 included a
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$3.8 million increase in clinical study costs, reflecting increased activities
primarily associated with our nedosiran and DCR-A1AT programs, as well as
increased costs associated with our collaboration with Lilly. In addition,
manufacturing costs increased $3.7 million . Research and development expenses
were also impacted by a $10.7 million increase in employee-related expenses,
which include salaries, benefits, and stock-based compensation. The increase in
employee-related expenses is a result of an increase in research and development
headcount necessary to support our collaboration agreements and expanding
pipeline.
Research and development expenses increased for the nine months ended
September 30, 2020 compared to the nine months ended September 30, 2019
primarily due to direct research and development expenses and employee-related
expenses. The $44.1 million increase in direct research and development expenses
in the nine months ended September 30, 2020 included a $19.3 million increase in
manufacturing costs primarily for drug substance to support our clinical studies
and a $10.4 million increase in clinical study costs, reflecting increased
activities primarily associated with our DCR-A1AT and nedosiran programs, as
well as increased costs associated with our collaboration with Lilly. In
addition, research-related expenses, such as lab supplies and materials,
increased $5.3 million . Research and development expenses were also impacted by
a $26.0 million increase in employee-related expenses, which include salaries,
benefits, and stock-based compensation. The increase in employee-related
expenses is a result of an increase in research and development headcount
necessary to support our collaboration agreements and expanding pipeline.
We expect our overall research and development expenses to continue to increase
for the foreseeable future as we ramp our clinical manufacturing activities,
continue clinical activities associated with our core product candidates, and
continue activities under our existing collaboration agreements.
General and administrative expenses
General and administrative expenses increased for the three months ended
September 30, 2020 compared to the three months ended September 30, 2019 . The
$6.3 million increase for the three months ended September 30, 2020 is primarily
due to a $4.6 million increase in employee-related compensation, including
salaries, benefits, and stock-based compensation, due to an increase in
headcount necessary to support our growing operations. In addition, professional
consulting services increased $1.0 million in the three months ended
September 30, 2020 .
General and administrative expenses increased for the nine months ended
September 30, 2020 compared to the nine months ended September 30, 2019 . The
$24.4 million increase for the nine months ended September 30, 2020 is primarily
due to a $16.3 million increase in employee-related compensation, including
salaries, benefits, and stock-based compensation, due to an increase in
headcount necessary to support our growing operations. In addition, professional
consulting services increased $5.9 million in the nine months ended
September 30, 2020 .
We expect general and administrative expenses to continue to increase in the
foreseeable future, largely due to investments in staffing and market readiness
activities.
Liquidity and Capital Resources
We have historically funded our operations primarily through the public offering
and private placement of our securities and consideration received from our
collaborative agreements. As of September 30, 2020 , we had cash and cash
equivalents and held-to-maturity investments of $609.9 million compared to
$348.9 million as of December 31, 2019 .
During the nine months ended September 30, 2020 , we realized $375.0 million in
proceeds from the Novo and Roche collaborations and net proceeds of $39.2
million from the issuance of common stock to a single institutional investor
pursuant to our common stock Sales Agreement with Cowen and Company, LLC as the
sales agent. The shares in the offering were sold pursuant to a
shelf registration statement declared effective by the SEC on May 31, 2018 and
a prospectus supplement filed with the SEC on June 1, 2018 .
We believe that our cash, cash equivalents, and held-to-maturity investments,
together with anticipated milestone and other payments from existing
collaborations, provide us with sufficient resources to continue our planned
operations and clinical activities into 2023.
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Cash flows
The following table shows a summary of our condensed consolidated cash flows for
the periods indicated (amounts in thousands):
NINE MONTHS ENDED
SEPTEMBER 30,
2020 2019
Net cash provided by operating activities
Operating activities Net cash provided by operating activities increased$208.2 million in the nine months endedSeptember 30, 2020 compared to the nine months endedSeptember 30, 2019 , primarily due to a$98.3 million decrease in contract receivables largely due to the upfront cash payment received from Roche inJanuary 2020 in connection with our collaboration agreement and a$79.1 million increase in deferred revenue from the Novo and Roche collaborations. Investing activities Net cash used in investing activities increased$197.6 million in the nine months endedSeptember 30, 2020 compared to the nine months endedSeptember 30, 2019 . The increase in net cash used in investing activities primarily relates to a$309.5 million increase in purchases of held-to-maturity investments for the nine months endedSeptember 30, 2020 as a result of an increased cash balance from the Novo and Roche upfront payments, which were partially offset by a$114.0 million increase in maturities of investments. Financing activities Net cash provided by financing activities for the nine months endedSeptember 30, 2020 increased$47.6 million compared to the nine months endedSeptember 30, 2019 . The increase was primarily due to the receipt of$39.2 million in net proceeds inFebruary 2020 from the private placement of our common stock. Funding requirements We expect that our primary uses of capital will continue to be commercialization readiness and launch activities, subject to approval of our development candidates; third-party clinical research and development services and manufacturing costs; compensation and related expenses; laboratory and related supplies; legal and other regulatory expenses; and general overhead costs. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of capital outlays and operating expenditures associated with our anticipated development activities. However, based on our current operating plan, we believe that our available cash, cash equivalents, held-to-maturity investments, and anticipated milestone and other payments from existing collaborations will be sufficient to fund the execution of our current clinical and operating plans into 2023. Over the balance of 2020 and the year endingDecember 31, 2021 , we forecast receiving over$100.0 million in cash from our collaborations, including anticipated milestone achievement. We based this estimate on assumptions that may prove to be incorrect, and we could utilize our available capital resources sooner than we currently expect. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially as a result of a number of factors. Our future capital requirements are difficult to forecast and will depend on many factors, including: •the potential receipt of any milestone payments under the Novo Collaboration Agreement, Roche Collaboration Agreement, Lilly Collaboration Agreement, Alexion Collaboration Agreement, BI Agreements, and Alnylam Collaboration Agreement and the potential payment of any royalties under the Alnylam Collaboration Agreement; •the potential payment or receipt of royalty payments under the Alnylam Cross-License Agreement; •the terms and timing of any other collaboration, licensing, and other arrangements that we may establish; •the initiation, progress, timing, and completion of preclinical studies and clinical trials for our current and future potential product candidates, including the impact of COVID-19 on our ongoing and planned research and development efforts and the timing of a potential commercial launch date for nedosiran; 41 -------------------------------------------------------------------------------- Table of Contents •our alignment with the FDA on regulatory approval requirements; •the impact of COVID-19 on the operations of key governmental agencies, such as the FDA, which may delay the development of our current product candidates or any future product candidates; •the number and characteristics of product candidates that we pursue; •the outcome, timing, and cost of regulatory approvals; •delays that may be caused by changing regulatory requirements; •the cost and timing of hiring new employees to support our continued growth; •the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims; •the costs of filing and prosecuting intellectual property rights and enforcing and defending any intellectual property-related claims; •the costs of responding to and defending ourselves against complaints and potential litigation; •the costs and timing of procuring clinical and commercial supplies for our product candidates; •the extent to which we acquire or in-license other product candidates and technologies; and •the extent to which we acquire or invest in other businesses, product candidates, or technologies. Until such time, if ever, that we generate product revenue, we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, and research collaboration and license agreements. Please see the risk factors set forth in Part II, Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q for additional risks associated with our substantial capital requirements. Contractual Obligations and Commitments We have excluded from our condensed consolidated balance sheets$69.2 million of fixed payments for leases that have not yet commenced for accounting purposes. We also have obligations to make future payments to licensors that become due and payable on the achievement of certain development, regulatory, and commercial milestones. We have not included any such potential obligations on our condensed consolidated balance sheet since the achievement and timing of these milestones were not probable or estimable as ofSeptember 30, 2020 . Off-Balance Sheet Arrangements As ofSeptember 30, 2020 , we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as "special purpose" entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. 42
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