UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

______________________________

Form 10-Q

______________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36281

______________________________

DICERNA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

______________________________

Delaware	20-5993609
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

87 Cambridgepark Drive Cambridge, MA	02140
(Address of principal executive offices)	(Zip code)

(617) 621-8097

(Registrant’s telephone number, including area code)

______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 Par Value	DRNA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days)    Yes  x   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	x
Non-accelerated filer	☐	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  x

As of November 4, 2019, there were 68,431,048 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

DICERNA PHARMACEUTICALS, INC.

INDEX TO FORM 10-Q

			Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			3
PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	5
		Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018	6
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018	7
		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018	9
		Notes to Condensed Consolidated Financial Statements	11
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 4.	Controls and Procedures	37
PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	39
	Item 1A.	Risk Factors	39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
	Item 3.	Defaults Upon Senior Securities	69
	Item 4.	Mine Safety Disclosures	69
	Item 5.	Other Information	69
	Item 6.	Exhibits	70
SIGNATURES			71

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing,” “goal,” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

• how long we expect to maintain liquidity to fund our planned level of operations and our ability to obtain additional funds for our operations;

• the initiation, timing, progress, and results of our research and development programs, preclinical studies, any clinical trials, Investigational New Drug Applications, Clinical Trial Applications, New Drug Applications, and other regulatory submissions;

• our alignment with the U.S. Food and Drug Administration on regulatory approval requirements;

• our ability to identify and develop product candidates for the treatment of additional disease indications;

• our or a collaborator’s ability to obtain and maintain regulatory approval of any of our product candidates;

• the rate and degree of market acceptance of any approved product candidates;

• the commercialization of any approved product candidates;

• our ability to establish and maintain existing and additional collaborations and retain commercial rights for our product candidates in the collaborations;

• the implementation of our business model and strategic plans for our business, technologies, and product candidates;

• our estimates of our expenses, ongoing losses, future revenue, and capital requirements;

• our ability to obtain and maintain intellectual property protection for our technologies and product candidates and our ability to operate our business without infringing the intellectual property rights of others;

• our reliance on third parties to conduct our preclinical studies or any clinical trials;

• our reliance on third-party suppliers and manufacturers to supply the materials and components for, manufacture, and to research and develop our preclinical and clinical trial drug supplies;

• our ability to attract and retain qualified key management and technical personnel;

• our dependence on our existing collaborators, F. Hoffmann-La Roche Ltd (“Roche Basel”), and Hoffmann-La Roche Inc. (“Roche US,” and together with Roche Basel, “Roche”); Eli Lilly and Company; Alexion Pharmaceuticals, Inc.; and Boehringer Ingelheim International GmbH, for developing, obtaining regulatory approval for, and commercializing product candidates in the collaborations;

• our receipt and timing of any potential milestone payments or royalties under our existing research collaboration and license agreements or any future arrangements with our existing collaboration partners or any other collaborators;

• our financial performance; and

• developments relating to our competitors or our industry.

These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in Part II, Item 1A – “Risk Factors” below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates, and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, or similar

3

methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by third parties, industry, medical and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “Dicerna,” and the “Company” refer to Dicerna Pharmaceuticals, Inc. and, where appropriate, its consolidated subsidiaries.

Trademarks

This Quarterly Report on Form 10-Q includes trademarks, service marks, and trade names owned by us or other companies. All trademarks, service marks, and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

4

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DICERNA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

	SEPTEMBER 30, 2019			DECEMBER 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	47,226		$	54,239
Held-to-maturity investments	265,484			248,387
Contract receivables	3,000			100,000
Prepaid expenses and other current assets	4,688			2,888
Total current assets	320,398			405,514
NONCURRENT ASSETS:
Property and equipment, net	5,508			2,718
Right-of-use assets	2,224			—
Restricted cash equivalents	3,544			744
Other noncurrent assets	4,576			65
Total noncurrent assets	15,852			3,527
TOTAL ASSETS	$	336,250		$	409,041
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,407		$	5,013
Accrued expenses and other current liabilities	18,585			9,649
Lease liability, current	1,710			—
Litigation settlement payable	—			10,500
Deferred revenue, current	95,659			68,893
Total current liabilities	119,361			94,055
NONCURRENT LIABILITIES:
Lease liability, noncurrent	545			—
Deferred revenue, noncurrent	81,977			114,293
Total noncurrent liabilities	82,522			114,293
TOTAL LIABILITIES	201,883			208,348
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value – 5,000,000 shares authorized; no shares issued or outstanding at September 30, 2019 or December 31, 2018	—			—
Common stock, $0.0001 par value – 150,000,000 shares authorized; 68,360,051 and 68,210,742 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	7			7
Additional paid-in capital	620,009			605,495
Accumulated other comprehensive loss	(3		)	—
Accumulated deficit	(485,646		)	(404,809		)
Total stockholders’ equity	134,367			200,693
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	336,250		$	409,041

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

5

DICERNA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(in thousands, except share and per share data)

	THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
	2019			2018			2019			2018
Revenue from collaborative arrangements	$	8,035		$	1,545		$	16,824		$	4,635
Operating expenses:
Research and development	30,086			11,695			74,521			31,927
General and administrative	10,619			5,354			29,126			14,449
Litigation expense	—			3,694			—			29,122
Total operating expenses	40,705			20,743			103,647			75,498
Loss from operations	(32,670		)	(19,198		)	(86,823		)	(70,863		)
Other income (expense):
Interest income	1,880			401			6,034			1,020
Interest expense	—			(223		)	—			(399		)
Total other income, net	1,880			178			6,034			621
Net loss	$	(30,790	)	$	(19,020	)	$	(80,789	)	$	(70,242	)
Foreign currency translation adjustment	(3		)	—			(3		)	—
Comprehensive loss	$	(30,793	)	$	(19,020	)	$	(80,792	)	$	(70,242	)
Net loss per share – basic and diluted	$	(0.45	)	$	(0.35	)	$	(1.18	)	$	(1.32	)
Weighted average common shares outstanding – basic and diluted	68,360,051			54,799,644			68,315,074			53,037,516

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

6

DICERNA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share data)

	NINE MONTHS ENDED SEPTEMBER 30, 2019
	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT			ACCUMULATED OTHER COMPREHENSIVE INCOME			TOTAL STOCKHOLDERS’ EQUITY
	SHARES	AMOUNT
BALANCE – January 1, 2019	68,210,742	$	7	$	605,495	$	(404,809	)	$	—		$	200,693
Exercises of common stock options and sales of common stock under Employee Stock Purchase Plan	78,164	—		353		—			—			353
Stock-based compensation expense (inclusive of the impact of adoption of ASU 2018-07)	—	—		4,784		43			—			4,827
Cumulative effect adjustment related to the adoption of ASC 842	—	—		—		(91		)	—			(91		)
Net loss	—	—		—		(26,154		)	—			(26,154		)
BALANCE – March 31, 2019	68,288,906	7		610,632		(431,011		)	—			179,628
Exercises of common stock options and sales of common stock under Employee Stock Purchase Plan	71,145	—		489		—			—			489
Stock-based compensation expense	—	—		3,893		—			—			3,893
Net loss	—	—		—		(23,845		)	—			(23,845		)
BALANCE – June 30, 2019	68,360,051	7		615,014		(454,856		)	—			160,165
Stock-based compensation expense	—	—		4,995		—			—			4,995
Other comprehensive loss	—	—		—		—			(3		)	(3		)
Net loss	—	—		—		(30,790		)	—			(30,790		)
BALANCE – September 30, 2019	68,360,051	$	7	$	620,009	$	(485,646	)	$	(3	)	$	134,367

7

	NINE MONTHS ENDED SEPTEMBER 30, 2018
	COMMON STOCK				ADDITIONAL PAID-IN CAPITAL			ACCUMULATED DEFICIT			TOTAL STOCKHOLDERS’ EQUITY
	SHARES		AMOUNT
BALANCE – January 1, 2018	51,644,841		$	5	$	417,037		$	(315,956	)	$	101,086
Exercises of common stock options and sales of common stock under Employee Stock Purchase Plan	130,362		—		667			—			667
Vesting of restricted common stock	10,000		—		—			—			—
Settlement of restricted stock for tax withholding	(3,774	)	—		(35		)	—			(35		)
Stock-based compensation expense	—		—		1,747			—			1,747
Net loss	—		—		—			(15,579		)	(15,579		)
BALANCE – March 31, 2018	51,781,429		5		419,416			(331,535		)	87,886
Issuance of common stock in settlement of litigation	983,208		—		10,315			—			10,315
Exercise of warrants to purchase common stock	45,710		—		49			—			49
Exercises of common stock options	57,424		—		191			—			191
Stock-based compensation expense	—		—		1,778			—			1,778
Net loss	—		—		—			(35,644		)	(35,644		)
BALANCE – June 30, 2018	52,867,771		5		431,749			(367,179		)	64,575
Proceeds from issuance of common stock from public offering, net or underwriting fees and issuance costs	8,832,565		1		107,749			—			107,750
Exercises of common stock options and sales of common stock under Employee Stock Purchase Plan	188,870		—		926			—			926
Stock-based compensation expense	—		—		2,148			—			2,148
Net loss	—		—		—			(19,020		)	(19,020		)
BALANCE – September 30, 2018	61,889,206		$	6	$	542,572		$	(386,199	)	$	156,379

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

8

DICERNA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	NINE MONTHS ENDED SEPTEMBER 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(80,789	)	$	(70,242	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Non-cash litigation expense	—			10,315
Stock-based compensation expense	13,715			5,673
Depreciation and amortization expense	876			580
Loss on disposal of property and equipment	—			9
Amortization of premium on investments	(3,179		)	(390		)
Lease expense	1,387			—
Changes in operating assets and liabilities:
Litigation settlement payable	(10,500		)	12,797
Deferred revenue	(5,550		)	(4,635		)
Prepaid expenses and other assets	(6,311		)	312
Accounts payable	191			(1,389		)
Contract receivables	97,000			—
Withholding tax receivable	—			1,583
Accrued expenses and other liabilities	8,840			2,045
Lease liability	(1,448		)	—
Net cash provided by (used in) operating activities	14,232			(43,342		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of held-to-maturity investments	306,000			50,000
Purchases of held-to-maturity investments	(319,919		)	(138,699		)
Purchases of property and equipment	(5,314		)	(245		)
Net cash used in investing activities	(19,233		)	(88,944		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of underwriters’ commissions	—			108,099
Payments of common stock offering costs	(50		)	—
Proceeds from exercises of common stock warrants, stock options, and issuances under Employee Stock Purchase Plan	842			1,832
Settlement of restricted stock for tax withholding	—			(35		)
Net cash provided by financing activities	792			109,896
Effect of exchange rate changes on cash, cash equivalents, and restricted cash equivalents	(4		)	—
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS	(4,213		)	(22,390		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS – Beginning of period	54,983			69,533
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS – End of period	$	50,770		$	47,143
SUPPLEMENTAL CASH FLOW INFORMATION:
NONCASH OPERATING ACTIVITIES
Right-of-use assets acquired through operating leases	$	667		$	—
NONCASH INVESTING ACTIVITIES
Property and equipment purchases included in accounts payable and accrued expenses	$	—		$	44
NONCASH FINANCING ACTIVITIES
Common stock offering costs included in accounts payable or accrued expenses	$	—		$	349

9

The following table provides a reconciliation of cash, cash equivalents, and restricted cash equivalents reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:

	NINE MONTHS ENDED SEPTEMBER 30,
	2019		2018
Cash and cash equivalents	$	47,226	$	46,399
Restricted cash equivalents	3,544		744
Total cash, cash equivalents, and restricted cash equivalents shown in the condensed consolidated statements of cash flows	$	50,770	$	47,143

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

10

DICERNA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(amounts in thousands, except share and per share data and where otherwise noted)

1.    DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Business

Dicerna^TM Pharmaceuticals, Inc. (“Dicerna” or the “Company”), a Delaware corporation founded in 2006 and headquartered in Cambridge, Massachusetts, is a biopharmaceutical company using ribonucleic acid (“RNA”) interference (“RNAi”) to develop medicines that silence genes that cause disease. The Company’s proprietary GalXC^TM technology is being applied to develop potent, selective, and safe RNAi therapies to treat diseases involving the liver, including rare diseases, chronic liver diseases, cardiovascular diseases, and viral infectious diseases. Dicerna aims to treat disease by addressing the underlying causes of illness with capabilities that extend beyond the liver to address a broad range of diseases, focusing on target genes where connections between gene and disease are well understood and documented. Dicerna intends to discover, develop, and commercialize novel therapeutics either on its own or in collaboration with pharmaceutical partners. Dicerna has strategic collaborations with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (together, “Roche”), Eli Lilly and Company (“Lilly”), Alexion Pharmaceuticals, Inc. (together with its affiliates, “Alexion”), and Boehringer Ingelheim International GmbH (“BI”).

Basis of presentation

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission for interim financial information, and include the accounts of Dicerna Pharmaceuticals, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP to constitute a complete set of financial statements. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position at September 30, 2019 and its results of operations, changes in stockholders’ equity, and cash flows for the interim periods ended September 30, 2019 and 2018. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, for any other interim period, or for any other future year.

Significant judgments and estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the Company’s condensed consolidated financial statements, as well as the revenues and expenses incurred during the reporting periods. On an ongoing basis, the Company evaluates judgments and estimates, including those related to revenue recognition, stock-based compensation, and accrued expenses. The Company bases its estimates on historical experience and on various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results could differ materially from those estimates.

Summary of significant accounting policies

There have been no changes to the significant accounting policies disclosed in the Company’s most recent Annual Report on Form 10‑K, except as a result of adopting the Financial Accounting Standards Board (“FASB”)’s Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as discussed below:

Leases

The Company determines if an arrangement is a lease at inception. Leases with a term greater than one year are presented on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize leases with terms of one year or less on its balance sheet. At the commencement date, operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected lease term. Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives received. Operating lease cost is recognized over the expected term on a straight-line basis.

11

The Company determines the expected term for its operating leases considering the noncancelable period of the lease, plus any additional periods covered by either (a) a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or (b) an option to extend (or not to terminate) the lease controlled by the lessor.

Recent accounting pronouncement

Adopted in 2019

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), as amended by multiple standards updates, in order to increase transparency and comparability among organizations by requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The most significant change arising from the new standard is the recognition of ROU assets and lease liabilities for leases classified as operating leases. Under the standard, disclosures are required to enable financial statement users to assess the amount, timing, and uncertainty of cash flows arising from the leases. Companies are also required to recognize and measure leases existing at, or entered into after, the adoption date using a modified retrospective approach, with certain practical expedients available. Comparative periods prior to adoption have not been retrospectively adjusted.

The Company adopted the standard effective January 1, 2019 and elected the package of three practical expedients that permitted an entity to (a) not reassess whether expired or existing contracts contain leases, (b) not reassess lease classification for existing or expired leases, and (c) not consider whether previously capitalized initial direct costs would be appropriate under the new standard. In addition, the Company has elected to combine lease and non-lease components as a single component and not to recognize leases on the balance sheet with an initial term of one year or less.

Upon adoption, the Company recorded ROU assets of $2.7 million and lease liabilities of $2.8 million. Initial implementation of the standard did not have a material impact on the statement of operations or statement of cash flows.

2.    NET LOSS PER SHARE

The Company computes basic net loss per share by dividing net loss by the weighted average number of common shares outstanding. In periods of net income, the Company’s accounting policy includes allocating a proportional share of net income to participating securities, as determined by dividing total weighted average participating securities by the sum of the total weighted average common shares and participating securities (the “two-class method”). Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods when the Company incurs a net loss, the Company does not allocate a loss to participating securities because they have no contractual obligation to share in the losses of the Company. The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options, warrants, and unvested restricted stock that are outstanding during the period, except where such non-participating securities would be anti‑dilutive. The outstanding securities presented below were excluded from the calculations of net loss per share because such securities would have been anti-dilutive due to the Company’s net loss during each of the three and nine months ended on the dates presented.

	SEPTEMBER 30, 2019	SEPTEMBER 30, 2018
Options to purchase common stock	12,801,016	7,573,698
Warrants to purchase common stock	2,198	2,198
Total	12,803,214	7,575,896

3.    HELD-TO-MATURITY INVESTMENTS

The Company invests its excess cash balances in short-term and long-term fixed-income investments. The Company determines the appropriate classification of investments at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities carried at amortized cost are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity.

The Company’s investment policy mandates that, at the time of purchase, the maturity of each investment within its portfolio shall not exceed 24 months. In addition, the weighted average maturity of the investment portfolio must not exceed 12 months.

12

The following tables provide information relating to the Company’s held-to-maturity investments:

	SEPTEMBER 30, 2019
DESCRIPTION	AMORTIZEDCOST		GROSSUNREALIZED HOLDINGGAINS		GROSS UNREALIZED HOLDINGLOSSES			FAIRVALUE
U.S. Treasury securities maturing in one year or less	$	265,484	$	202	$	(3	)	$	265,683

	DECEMBER 31, 2018
DESCRIPTION	AMORTIZEDCOST		GROSSUNREALIZED HOLDINGGAINS		GROSS UNREALIZED HOLDINGLOSSES			FAIRVALUE
U.S. Treasury securities maturing in one year or less	$	248,387	$	—	$	(43	)	$	248,344

4.    FAIR VALUE MEASUREMENTS

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs. As a basis for considering such assumptions, the accounting literature establishes a three-tier value hierarchy which prioritizes the inputs used in measuring fair value as follows:

• Level 1 – observable inputs, such as quoted prices in active markets;

• Level 2 – inputs other than the quoted prices in active markets that are observable either directly or indirectly; and

• Level 3 – unobservable inputs for which there is little or no market data, which requires the Company to develop its own assumptions.

A summary of the Company’s assets that are measured or disclosed at fair value on a recurring basis is presented below:

	SEPTEMBER 30, 2019
DESCRIPTION	TOTAL FAIR VALUE		LEVEL 1		LEVEL 2		LEVEL 3
Cash equivalents
Money market funds	$	47,934	$	47,934	$	—	$	—
Held-to-maturity investments
U.S. Treasury securities	265,683		—		265,683		—
Restricted cash equivalents
Money market funds	3,544		3,544		—		—
Total	$	317,161	$	51,478	$	265,683	$	—

	DECEMBER 31, 2018
DESCRIPTION	TOTAL FAIR VALUE		LEVEL 1		LEVEL 2		LEVEL 3
Cash equivalents
Money market funds	$	44,886	$	44,886	$	—	$	—
Held-to-maturity investments
U.S. Treasury securities	248,344		—		248,344		—
Restricted cash equivalents
Money market funds	744		744		—		—
Total	$	293,974	$	45,630	$	248,344	$	—

The Company’s cash equivalents and restricted cash equivalents, which are in money market funds, are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets as of September 30, 2019 and December 31, 2018.

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The Company’s held-to-maturity investments bore interest at the prevailing market rates for instruments with similar characteristics and therefore approximated fair value. These financial instruments were classified within Level 2 of the fair value hierarchy because the inputs to the fair value measurements were valued using observable inputs as of September 30, 2019 and December 31, 2018.

As of September 30, 2019 and December 31, 2018, the Company’s contract receivables, accounts payable, and accrued expenses approximated their estimated fair values because of the short-term nature of these financial instruments.

The litigation settlement payable at December 31, 2018 represents the remaining cash obligation payable to Alnylam Pharmaceuticals, Inc. (“Alnylam”) (see Note 10) under the terms of the Settlement & Release Agreement executed between the parties on April 28, 2018 (“Settlement Agreement”). The litigation settlement payable was recorded as the present value of the future cash payments to be made by the Company under the terms of the Settlement Agreement. As the present value of the litigation settlement payable was determined using market rates based on the nature of the obligation and the Company’s creditworthiness, the carrying value approximates the fair value.

5.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of the following:

	SEPTEMBER 30, 2019			DECEMBER 31, 2018
Laboratory equipment	$	8,111		$	4,607
Office and computer equipment	1,290			1,021
Furniture and fixtures	479			479
Leasehold improvements	257			257
Construction in process	1,554			1,661
Property and equipment, at cost	11,691			8,025
Less accumulated depreciation and amortization	(6,183		)	(5,307		)
Property and equipment, net	$	5,508		$	2,718

6.    ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	SEPTEMBER 30, 2019		DECEMBER 31, 2018
Accrued clinical, contract research, and manufacturing costs	$	8,593	$	3,960
Accrued compensation and related benefits	4,059		3,684
Accrued professional fees	5,004		1,693
Accrued other expenses	929		312
Accrued expenses and other current liabilities	$	18,585	$	9,649

7.    COLLABORATIVE LICENSE AGREEMENTS

Lilly collaboration and share purchase agreements

On October 25, 2018, the Company entered into a Collaboration and License Agreement (the “Lilly Collaboration Agreement”) with Lilly for the discovery, development, and commercialization of potential new medicines in the areas of cardiometabolic disease, neurodegeneration, and pain. Under the terms of the Lilly Collaboration Agreement, the Company and Lilly will seek to use the Company’s proprietary GalXC RNAi technology platform (the “GalXC platform”) to progress new drug targets toward clinical development and commercialization. In addition, the Company and Lilly will collaborate to extend the GalXC platform to non-liver (i.e., non-hepatocyte) tissues, including neural tissues.

The Lilly Collaboration Agreement provides that the Company will work exclusively with Lilly in the neurodegeneration and pain fields, with the exception of mutually agreed upon orphan indications. Additionally, the Company will work exclusively with Lilly on select targets in the cardiometabolic field. Under the Lilly Collaboration Agreement, the Company will provide Lilly with exclusive and non-exclusive licenses to support the companies’ activities and to enable Lilly to commercialize products derived from or containing compounds developed pursuant to such agreement. The Lilly Collaboration Agreement provides for three initially named

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hepatocyte targets, and the Company and Lilly have agreed to develop an initial research program with the goal of researching and developing multiple lead candidates directed to each of these initial targets. The Lilly Collaboration Agreement contemplates in excess of 10 targets.

Under the terms of the Lilly Collaboration Agreement, Lilly agreed to pay the Company a non-refundable, non-creditable upfront payment of $100.0 million. The Company is also eligible to receive up to $350.0 million per target in development and commercialization milestones, in addition to a $5.0 million payment, which will become due for each of the non-hepatocyte targets when a product candidate achieves proof of principle in an animal model. In addition, the Company is eligible to earn mid-single to low-double digit royalties on product sales on a country-by-country and product-by-product basis until the later of expiration of patent rights in a country, the expiration of data or regulatory exclusivity in such country, or 10 years after the first product sale in such country, subject to certain royalty step-down provisions set forth in the agreement. Simultaneously with the entry into the Lilly Collaboration Agreement, the Company and Lilly entered into a Share Purchase Agreement (the “Lilly Share Issuance Agreement”), pursuant to which Lilly purchased 5,414,185 shares of the Company’s common stock at $18.47 per share, for an aggregate purchase price of $100.0 million. Management concluded that the Lilly Share Issuance Agreement is to be combined with the Lilly Collaboration Agreement (together, the “Combined Agreements”) for accounting purposes. Of the total $200.0 million upfront compensation, the Company applied equity accounting guidance to measure the $51.3 million recorded in equity upon the issuance of the shares, and $148.7 million was identified as the transaction price allocated to the revenue arrangement.

The Company concluded that Lilly is a customer in this arrangement, and as such, the element of the arrangement unrelated to the issuance of the shares falls within the scope of the revenue recognition guidance. The Company identified contract promises under the Combined Agreements for licenses of intellectual property and know-how rights, associated research and development services for targets and for the extension of the GalXC platform, and participation on a joint steering committee. The Company determined that the contract promises were not separately identifiable and were not distinct or distinct within the context of the contract due to the specialized nature of the services to be provided by Dicerna, specifically with respect to the Company’s therapeutic expertise related to RNAi and the Company’s GalXC conjugates, and the interdependent relationship between the contract promises. As such, the Company concluded that there is a single identified combined performance obligation.

The Company used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential development milestone payment under this agreement, which is considered variable consideration, was zero, as the achievement of those milestones is uncertain and highly susceptible to factors outside of the Company’s control. Accordingly, all such milestones were excluded from the transaction price. Management will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur and adjust the transaction price as necessary. Sales-based royalties, including milestone payments based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. The Company will recognize such revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Revenue associated with the performance obligation will be recognized as services are provided using a cost-to-cost measure of progress method. The transfer of control occurs over time and, in management’s judgment, this input method is the best measure of progress towards satisfying the performance obligation and reflects a faithful depiction of the transfer of goods and services.

The Company recognized $5.2 million and $8.3 million of revenue under the Lilly Collaboration Agreement during the three and nine months ended September 30, 2019, respectively. The amount of the Company’s partially unsatisfied performance obligation, recorded as a contract liability presented in deferred revenue at September 30, 2019, is $140.2 million, of which $69.2 million is included in the current portion of deferred revenue. As of September 30, 2019, the Company expected to recognize this amount over the remaining research term of the agreement, which is expected to extend through the fourth quarter of 2022, with the majority being recognized as revenue through the fourth quarter of 2021.

Alexion collaboration and equity agreements

On October 22, 2018, the Company and Alexion entered into a Collaborative Research and License Agreement (the “Alexion Collaboration Agreement”). The Alexion Collaboration Agreement is for the joint discovery and development of RNAi therapies for complement-mediated diseases. Under the terms of the Alexion Collaboration Agreement, the Company and Alexion will collaborate on the discovery and development of subcutaneously delivered GalXC candidates, currently in preclinical development, for the treatment of complement-mediated diseases with potential global commercialization by Alexion. The Company will lead the joint discovery and research efforts through the preclinical stage, and Alexion will lead development efforts beginning with Phase 1 studies. The Company will be responsible for manufacturing of the GalXC candidates through the completion of Phase 1, and the related costs will be paid by Alexion. Alexion will be solely responsible for the manufacturing of any product candidate subsequent to the completion of Phase 1. The Alexion Collaboration Agreement provides Alexion with exclusive worldwide licenses as well as

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development and commercial rights for two of the Company’s preclinical, subcutaneously delivered GalXC RNAi candidates and an exclusive option for the discovery and development of GalXC RNAi candidates against two additional complement pathway targets.

Under the terms of the Alexion Collaboration Agreement, Alexion agreed to pay the Company a non-refundable, non-reimbursable, and non-creditable upfront payment of $22.0 million. The Alexion Collaboration Agreement also provides for potential additional payments to the Company of up to $600.0 million from proceeds from target option exercises and development and sales milestones, as defined in the agreement, which is comprised of: (i) option exercise fees of up to $20.0 million, representing $10.0 million for each of the targets selected; (ii) development milestones of up to $105.0 million for each product; and (iii) aggregate sales milestones of up to $160.0 million. Under the agreement, Alexion also agreed to pay to the Company mid-single to low-double digit royalties on potential product sales on a country-by-country, product-by-product basis until the later of the expiration of patent rights in a country, the expiration of market or regulatory exclusivity in such country, or 10 years after the first product sale in such country, subject to certain royalty step-down provisions set forth in the agreement.

Simultaneously with the entry into the Alexion Collaboration Agreement, the Company and Alexion Pharmaceuticals entered into a Share Purchase Agreement (the “Alexion Share Issuance Agreement”), pursuant to which Alexion Pharmaceuticals purchased 835,834 shares of the Company’s common stock at $17.95 per share at issuance, for an aggregate stated purchase price of $15.0 million. Management concluded that the Alexion Share Issuance Agreement is to be combined with the Alexion Collaboration Agreement (together, the “Alexion Agreements”) for accounting purposes. With respect to the $15.0 million of cash received upon issuance of the shares, the Company applied equity accounting guidance to measure the $9.1 million recorded in equity upon the issuance of the shares, and the remaining $5.9 millionwas included as a component of the transaction price attributable to the revenue arrangement.

The Company concluded that Alexion is a customer in this arrangement, and as such, the element of the arrangement unrelated to the issuance of the shares falls within the scope of the revenue recognition guidance. The Company identified the following promises under the arrangement: (i) the grant of licenses of intellectual property and know-how rights; (ii) the option to select additional targets; (iii) the option to perform validation testing on additional targets; (iv) associated research and development services for the initial and, as applicable, additional targets; and (v) participation in the joint steering committee. The Company concluded that the research and development services were not capable of being distinct from the research and development licenses, and were not distinct within the context of the contract, and should therefore be combined into a single performance obligation for each program. The Company considered the level of Alexion’s therapeutic expertise specifically related to RNAi, as well as Alexion’s know-how of the Company’s GalXC conjugates, and concluded that Alexion cannot currently benefit from the granted license on its own or together with other resources that are readily available to Alexion, including relationships with oligonucleotide vendors who synthesize GalXC conjugates under contract with the Company. The Company also concluded that, while participation on the joint steering committee was capable of being distinct, participation is not distinct from the R&D services within the context of the contract, as they are both inputs to the combined output of a target that successfully achieves IND approval. This is highlighted as an indicator in Accounting Standards Codification (“ASC”) 606, Contracts with Customers, that a significant integration service is being provided. As a result, the combination of the license of intellectual property together with the provision of research and development services and participation on the joint steering committee together represent the highest level of goods and services that can be deemed distinct.

Additionally, the Company determined that the options to select additional targets and to perform validation testing on additional targets were not priced at a discount and, as such, do not provide Alexion with material rights. Based on management’s assessments, the Company identified a single performance obligation, namely, the combined license and research and development services, for each of the two initially nominated targets.

At the outset of the Alexion Collaboration Agreement, the transaction price was determined to be $37.4 million, which is comprised of the $22.0 million upfront payment, the $5.9 million identified upon issuance of the shares, as described above, and $9.5 million in aggregate contingent milestone payments that were either received or probable of achievement and under the Company’s control.

The Company used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential development milestone payment beyond the three initial research program milestones under this agreement was zero, as the achievement of those milestones is uncertain and highly susceptible to factors outside of the Company’s control. Accordingly, such milestones were excluded from the transaction price. Management will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur and adjust the transaction price as necessary. Sales-based royalties, including milestone payments based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. The Company will recognize such revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Revenue associated with the performance obligations is being recognized as services are provided using an input method based on a cost-to-cost measure of progress. The transfer of control occurs over time and, in management’s judgment, this input method is the

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best measure of progress towards satisfying the performance obligations and reflects a faithful depiction of the transfer of goods and services.

During the three and nine months ended September 30, 2019, the Company recognized $1.5 million and $3.0 million as revenue under the Alexion Agreements, respectively. The aggregate amount of the transaction price allocated to the Company’s partially unsatisfied performance obligations and recorded as deferred revenue at September 30, 2019 is $34.4 million, of which $23.7 million is included in the current portion of deferred revenue. As of September 30, 2019, the Company expects to recognize this amount over the remaining research program term, which is estimated to extend through the fourth quarter of 2023, with the majority being recognized through the fourth quarter of 2021.

BI Agreement and related amendments

On October 27, 2017, the Company entered into a collaborative research and license agreement with BI (the “BI Agreement”), pursuant to which the Company and BI jointly research and develop product candidates for the treatment of chronic liver disease using the GalXC platform, Dicerna’s proprietary RNAi-based technology. The BI Agreement is for the development of product candidates against one target gene with an option for BI to add the development of product candidates that target a second gene (the “Second Target”). Pursuant to the BI Agreement, Dicerna granted BI a worldwide license in connection with the research and development of such product candidates and transferred certain intellectual property rights of the selected product candidates to BI for clinical development and commercialization. Dicerna also may provide assistance to BI in order to help BI further develop selected product candidates. Under the terms of the BI Agreement, BI agreed to pay Dicerna a non-refundable upfront payment of $10.0 million for the first target, less a refundable withholding tax in Germany of $1.6 million. BI also agreed to reimburse Dicerna certain third-party expenses of $0.3 million. The German withholding tax was withheld by BI and remitted to the German tax authorities in accordance with local tax law. The Company received reimbursement of this tax in July 2018.

The Company is eligible to receive up to $191.0 million in potential development and commercial milestones related to the initial target. Dicerna is also eligible to receive royalty payments on potential global net sales, subject to certain adjustments, tiered from high single digits up to low double-digits. BI’s Second Target option provides for an option fee payment of $5.0 million and success-based development and commercialization milestones and royalty payments to Dicerna.

Milestone payments that are contingent upon the Company’s performance under the BI Agreement include potential developmental milestones totaling $99.0 million. The Company has excluded these amounts from allocable consideration at the outset of the arrangement, as described below. All potential net sales milestones, totaling $95.0 million, will be accounted for in the same manner as royalties and recorded as revenue at the later of the achievement of the milestone or the satisfaction of the performance obligation.

The Company concluded that BI is a customer in this arrangement, and as such, the arrangement falls within the scope of the revenue recognition guidance. The Company identified the following promises under the contract: the license of intellectual property and conducting agreed-upon research program services. The Company concluded that the license and research and development services are not capable of being distinct and are not distinct within the context of the contract; therefore, the Company considers these to be one performance obligation. The Company concluded that the option underlying the transfer of future licenses and potential associated research for any not-yet-known target gene is not a performance obligation of the contract at inception because the option fee reflects the standalone selling price of the option, and therefore, the option is not considered to be a material right. The Company considered the level of BI’s therapeutic expertise specifically related to RNAi, as well as BI’s know-how with regard to the Company’s GalXC conjugates, and concluded that BI cannot currently benefit from the granted license on its own or together with other resources that are readily available to BI, including relationships with oligonucleotide vendors who synthesize GalXC conjugates under contract with the Company. As a result, the combination of the license of intellectual property together with the provision of research and development support services together represent the highest level of goods and services that can be deemed distinct.

Based on management’s evaluation, the $10.0 million non-refundable upfront fee and the $0.3 million agreed-upon reimbursable third-party expenses constituted the amount of the consideration to be included in the transaction price and was allocated to the performance obligation identified. None of the development milestones have been included in the transaction price during the period, since none of such milestone amounts are within the control of the Company and are not considered probable to occur until confirmed by BI, at BI’s sole discretion. Any consideration related to commercial sales-based milestones (including royalties) will be recognized when the related sales occur, since these amounts have been determined to relate predominantly to the license granted to BI and therefore are recognized at the later of when the performance obligation is satisfied or when the related sales occur. The Company re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur and adjusts the transaction price as necessary.

The $10.3 million transaction price for the first target was recognized through July 2019, which was the point where the Company’s obligation to provide research support services to BI ended. Related revenue was recognized on a straight-line basis, which was, in management’s judgment, an appropriate measure of progress toward satisfying the performance obligation. The Company recognized

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$0.5 million and $3.2 million associated with the first target under the BI Agreement during the three and nine months ended September 30, 2019, respectively. The performance obligation associated with the first target had been satisfied as of September 30, 2019.

BI contract amendment

In October 2018, BI exercised its Second Target option, which entitled the Company to a non-refundable payment of $5.0 million and reimbursement of $0.7 million for certain third party expenses upon the agreement of a research work plan and budget for the Second Target. The terms of the Second Target option exercise and related rights and obligations associated with the Second Target were agreed between the Company and BI in an Additional Target Agreement (the “ATA”), which was entered into on December 31, 2018.

Under the terms of the ATA, BI is responsible for future clinical development and commercialization of candidate products for the Second Target. Additionally, during the term of the research program, BI will reimburse the Company for certain expenses. The Company is eligible to receive up to $170.0 million in potential development and commercial milestones related to the Second Target. The Company is also eligible to receive tiered royalty payments on potential global net sales, subject to certain adjustments, in the mid-single digits. Except as otherwise set forth in the ATA, development of the Second Target is subject to the terms of the original BI Agreement.

The exercise of the Second Target option on December 31, 2018 through the ATA created a new arrangement for accounting purposes, and management determined that the $5.0 million exercise price with the $0.7 million of reimbursable expenses was representative of the standalone selling price. Consistent with the reasons described related to the initial target, management concluded that the non-refundable Second Target option exercise fee (akin to an upfront payment) constituted the amount of the consideration to be included in the transaction price and has been allocated to the single performance obligation. The basis for the conclusions regarding the treatment of development and sales-based milestones associated with the Second Target are consistent with those associated with the initial combined performance obligation under the BI Agreement. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company began recognizing the $5.7 million transaction price as revenue in January 2019 and will continue recognizing as revenue over the Company’s best estimate of the period during which it will be obligated to provide research support services to BI, currently estimated to end in October 2020.

Consistent with the first target, revenue is recognized on a straight-line basis, which is in management’s judgment an appropriate measure of progress toward satisfying the performance obligation. The Company recognized $0.8 million and $2.3 million associated with the Second Target under the BI Agreement during the three and nine months ended September 30, 2019, respectively. The aggregate amount of the transaction price allocated to the Company’s partially unsatisfied performance obligation and recorded as deferred revenue at September 30, 2019 is $3.0 million, $2.7 million of which is included in the current portion of deferred revenue.

In addition to establishing the terms of the Second Target option exercise, the ATA also amends the BI Agreement to provide BI with the option to add, over a three-year period, the development of product candidates targeting a further additional target gene (the “Third Target Option”).

Per the ATA, if BI elects, in its sole discretion, to exercise the Third Target Option, the parties would agree to a research work plan and budget for the additional gene and negotiate development and commercialization milestones and royalty payments to the Company, and BI would make an option fee payment to the Company of $5.0 million. This option exercise fee is consistent with the Second Target option exercise fee, which management concluded was representative of the standalone selling price. If BI chooses to exercise the Third Target Option, the Company will be responsible for the discovery and initial profiling of the product candidates, including primary preclinical studies, synthesis, and delivery. BI will be responsible for evaluating and selecting the product candidates for further development. If BI selects one or more product candidates, it will be responsible for further preclinical development, clinical development, manufacturing, and commercialization of those products. If the Third Target Option is exercised, such exercise would result in a new arrangement for accounting purposes, as the licensing rights and research and development services underlying the Third Target Option are distinct from those associated with the initial and Second Target.

The following table presents changes in the Company’s aggregate deferred revenue balances for each reporting period:

	NINE MONTHS ENDED SEPTEMBER 30, 2019
	BALANCE AT BEGINNING OF PERIOD		ADDITIONS		DEDUCTIONS			BALANCE AT END OF PERIOD
Deferred revenue, current and noncurrent	$	183,186	$	11,274	$	(16,824	)	$	177,636

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	YEAR ENDED DECEMBER 31, 2018
	BALANCE AT BEGINNING OF PERIOD		ADDITIONS		DEDUCTIONS			BALANCE AT END OF PERIOD
Deferred revenue, current and noncurrent	$	9,270	$	180,092	$	(6,176	)	$	183,186

8.    STOCK-BASED COMPENSATION

On May 7, 2019, the Company approved a further amendment and restatement (the “Amendment and Restatement”) to its 2014 amended and restated performance incentive plan (the “Amended and Restated 2014 Performance Incentive Plan”). The Amendment and Restatement updated the plan to reflect recent amendments to Section 162(m) of the Internal Revenue Code made by the Tax Cuts and Jobs Act.

During the three and nine months ended September 30, 2019, the Company granted stock options to purchase 861,000 and 5,317,000 shares of common stock with aggregate grant date fair values of $8.9 million and $46.2 million, respectively, compared to stock options to purchase 175,500 and 1,936,850 shares of common stock granted with aggregate grant date fair values of $1.7 million and $14.0 million for the three and nine months ended September 30, 2018, respectively.

The assumptions used to estimate the grant date fair value using the Black-Scholes option pricing model were as follows:

	THREE MONTHS ENDED SEPTEMBER 30,
	2019	2018
Common stock price	$13.46 - $15.61	$12.74 - $15.74
Expected option term (in years)	5.93 - 6.04	5.50 - 6.25
Expected volatility	79.40% - 79.56%	77.00% - 77.90%
Risk-free interest rate	1.37% - 1.84%	2.76% - 2.90%
Expected dividend yield	—%	—%

	NINE MONTHS ENDED SEPTEMBER 30,
	2019	2018
Common stock price	$10.31 - $15.61	$9.14 - $15.74
Expected option term (in years)	5.28 - 6.07	5.50 - 6.25
Expected volatility	78.33% - 80.80%	75.89% - 78.33%
Risk-free interest rate	1.37% - 2.62%	2.32% - 2.90%
Expected dividend yield	—%	—%

The Company has classified stock-based compensation in its condensed consolidated statements of operations as follows:

	THREE MONTHS ENDED SEPTEMBER 30,
	2019		2018
Research and development expenses	$	2,219	$	718
General and administrative expenses	2,776		1,430
Total	$	4,995	$	2,148

	NINE MONTHS ENDED SEPTEMBER 30,
	2019		2018
Research and development expenses	$	5,978	$	2,275
General and administrative expenses	7,737		3,398
Total	$	13,715	$	5,673

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9. LEASES

On July 11, 2014, the Company executed a noncancelable operating lease for office and laboratory space in Cambridge, Massachusetts (the “First Cambridge Lease”). The lease agreement, the term of which commenced on December 1, 2014, obligates the Company to make minimum payments totaling $9.6 million over a six-year lease term ending November 30, 2020. The Company has the option to extend the lease term for one additional five-year period. Rent expense is recorded on a straight-line basis. As part of the Company’s lease agreement, the Company established a letter of credit, secured by a restricted money market account, the balance of which is presented as restricted cash equivalents at September 30, 2019 and December 31, 2018. The Company also leases a small office in Cambridge, Massachusetts which has a 30-month term without a renewal option (the “Second Cambridge Lease” and together with the First Cambridge Lease, the “Cambridge Leases”).

Payments due under each lease agreement include fixed and variable payments. Variable payments relate to the Company’s share of the lessor’s operating costs associated with the underlying assets and are recognized when the event on which those payments are assessed occurs. None of the Company’s operating leases contain residual value guarantees. In adopting ASC 842, Leases, the Company elected not to bifurcate payments between lease and nonlease components associated with leases for office and laboratory real estate.

The interest rate implicit in lease agreements is typically not readily determinable, and as such, the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

In addition, on January 2, 2019, Dicerna executed a lease for laboratory and office space in Lexington, Massachusetts (the “Lexington Lease”) that had not commenced for accounting purposes as of September 30, 2019. As a result, the Company has not yet recognized an ROU asset or lease liability on the condensed consolidated balance sheet for the Lexington Lease. The term of the Lexington Lease is seven years with approximately $30.1 million in fixed payments. The Company has the option to extend the lease term at a prevailing market rate as of the extension date, which is seven years after the Lexington Lease commencement date. The Company currently expects the Lexington Lease to commence in the fourth quarter of 2019.

On August 26, 2019, the Company entered into a lease agreement for 15,871 square feet of office space in Boulder, Colorado (the “Boulder Lease”) that had not commenced as of September 30, 2019. Due to the fact that the Boulder Lease had not commenced as of September 30, 2019, the Company has not yet recognized an ROU asset or lease liability on the condensed consolidated balance sheet for the Boulder Lease. The term of the lease is 87 months full calendar months plus any partial month from the commencement date to the end of the month in which the commencement date falls with approximately $3.0 million in aggregate fixed payments over the term of the lease arrangement. The Boulder Lease also provides the option to extend the term for up to two additional periods of 87 months each. As part of the agreement for the Boulder Lease, the Company is required to establish a $0.4 million letter of credit, secured by a restricted money market account, which will be presented as restricted cash equivalents at December 31, 2019. The Company currently expects the lease to commence for accounting purposes in the second quarter of 2020.

Future lease payments for noncancelable operating leases as of September 30, 2019 is as follows:

	OPERATING LEASES(1)
Remaining 2019	$	335
2020	1,901
2021	193
Total undiscounted operating lease payments	2,429
Less: imputed interest expense	(174		)
Total operating lease liabilities	$	2,255

__________________________

⁽¹⁾ Excluded from the table above are the lease payments associated with the Lexington Lease and the Boulder Lease that have not commenced as of the end of the period, which is the date the asset is made available to the Company by each lessor.

The components of lease cost for the three and nine months ended September 30, 2019 are as follows:

	THREE MONTHS ENDED SEPTEMBER 30, 2019		NINE MONTHS ENDED SEPTEMBER 30, 2019
Operating lease cost	$	471	$	1,387
Variable lease cost	509		1,095
Total lease cost	$	980	$	2,482

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Amounts reported in the condensed consolidated balance sheet for leases where the Company is the lessee as of September 30, 2019 were as follows:

	SEPTEMBER 30, 2019
Operating leases
Operating lease ROU assets	$	2,224
Operating lease liabilities	$	2,255
Weighted average remaining lease term
Operating leases	1.32 years
Weighted average discount rate
Operating leases	10.00		%

Other information related to leases for the nine months ended September 30, 2019 is as follows:

	NINE MONTHS ENDED SEPTEMBER 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,448
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	3,414

10.    COMMITMENTS AND CONTINGENCIES

Alnylam Settlement

On June 10, 2015, Alnylam filed a complaint against the Company in the Superior Court of Middlesex County, Massachusetts alleging misappropriation of confidential, proprietary, and trade secret information, as well as other related claims, in connection with the Company’s hiring of a number of former employees of Merck & Co., Inc. (“Merck”) and its discussions with Merck regarding the acquisition of its subsidiary, Sirna Therapeutics, Inc., which was subsequently acquired by Alnylam.

On April 18, 2018, the Company and Alnylam entered into the Settlement Agreement, resolving all ongoing litigation between the Company and Alnylam. Pursuant to the terms of the Settlement Agreement, the Company agreed to make the following payments to Alnylam: (i) a $2.0 million upfront payment in cash, which the Company made in May 2018; (ii) an additional $13.0 million in cash to be paid as 10.0% of any upfront or first year cash consideration that the Company receives pursuant to future collaborations related to Ga1NAc-conjugated RNAi research and development (excluding any amounts received or to be received by the Company from its existing collaboration with BI), provided that the $13.0 million must be paid by no later than April 28, 2022; and (iii) issuance of shares of the Company’s common stock pursuant to the Alnylam Share Issuance Agreement.

At December 31, 2018, the outstanding balance of the litigation settlement payable was $10.5 million. The Company paid the remaining outstanding balance of the litigation settlement payable in full on January 22, 2019.

Legal proceedings

From time to time, the Company may be subject to various claims and legal proceedings in the ordinary course of business. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount is reasonably estimable, the Company will accrue a liability for the estimated loss. There were no contingent liabilities recorded as of September 30, 2019.

11.    SUBSEQUENT EVENTS

Roche Collaboration and License Agreement

On October 30, 2019, the Company and Roche entered into a Collaboration and License Agreement (the “Roche Collaboration Agreement”). Under the terms of the Roche Collaboration Agreement, the Company and Roche will seek to progress DCR-HBVS, the Company’s investigational therapy in Phase 1 clinical development, toward worldwide development and commercialization as well as

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an option for the companies to collaborate in the discovery, development, and commercialization of oligonucleotide therapeutics intended for the treatment of hepatitis B virus (“HBV”).

The Roche Collaboration Agreement provides that Roche will lead the development and commercialization of the DCR-HBVS program after completion of the Phase 1 clinical trial by the Company. Roche also has until receipt of interim Phase 1 data from the DCR-HBVS Phase 1 study (but no later than December 31, 2020) to initiate a research and development collaboration with the Company to pursue up to five targets selected by Roche which are intended primarily to treat HBV. Under the terms of the Roche Collaboration Agreement, the goal of such research collaboration will be to select compounds developed by the Company or Roche for Roche’s continued development and commercialization. The Roche Collaboration Agreement provides that the Company and Roche’s research and early development organization will work exclusively with each other during the research collaboration period on the discovery, research, and development of such targets selected by Roche. Under the Roche Collaboration Agreement, the Company will provide Roche with exclusive and non-exclusive licenses to support Roche’s activities and to enable Roche to commercialize products derived from or containing compounds developed pursuant to such agreement.

Roche will pay the Company a non-refundable upfront payment of $200.0 million. The Company is also eligible to receive additional payments totaling up to approximately $1.47 billion, which includes payments upon achievement of specified development, regulatory, and commercial milestones for DCR-HBVS. In addition, the Roche Collaboration Agreement provides that Roche will pay to the Company up to mid- teens percent royalties on product sales. Royalties are payable until the later of 10 years after first commercial sale of each product in a country, expiration of patent rights in a country, or for products containing DCR-HBVS in a given country, the expiration of data or regulatory exclusivity, subject to certain royalty step-down provisions set forth in the agreement. In addition, the Company has an option to co-fund the development of products under the agreement and, if exercised, receive high twenties to mid thirties royalty rates on the net sales of products in the United States. If the Company exercises the co-funding option, it shall also have an option to co-promote products containing DCR-HBVS in the United States.

The Roche Collaboration Agreement includes various representations, warranties, covenants, indemnities, and other customary provisions. Roche may terminate the Roche Collaboration Agreement at any time without cause following the notice periods described in the agreement. Either party may terminate the Roche Collaboration Agreement in the event of an uncured material breach of the other party. The Roche Collaboration Agreement is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

Overview

Dicerna^TM Pharmaceuticals, Inc. (“we”, “us,” “our,” “the Company,” or “Dicerna”) is a biopharmaceutical company using ribonucleic acid (“RNA”) interference (“RNAi”) to develop medicines that silence genes that cause disease. The Company’s proprietary GalXC^TM technology is being applied to develop potent, selective, and safe RNAi therapies to treat diseases involving the liver, including rare diseases, chronic liver diseases, cardiovascular diseases, and viral infectious diseases. Dicerna aims to treat disease by addressing the underlying causes of illness with capabilities that extend beyond the liver to address a broad range of diseases, focusing on target genes where connections between gene and disease are well understood and documented. Dicerna intends to discover, develop, and commercialize novel therapeutics either on its own or in collaboration with pharmaceutical partners. Dicerna has strategic collaborations with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (together, “Roche”), Eli Lilly and Company (“Lilly”), Alexion Pharmaceuticals, Inc. (together with its affiliates, “Alexion”), and Boehringer Ingelheim International GmbH (“BI”).

All of our GalXC 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 structure of double-stranded RNA molecules 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.

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The GalXC RNAi platform supports Dicerna’s long-term strategy to retain a full or substantial ownership stake, subject to the evaluation of potential licensing opportunities as they may arise, and to invest internally in diseases with focused patient populations, such as certain rare diseases. We see such diseases as representing opportunities that 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 programs. For more complex diseases with multiple gene dysfunctions and larger patient populations, we are pursuing 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.

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. We are focusing our efforts on three priority therapeutic programs for which we currently have a Clinical Trial Application (“CTA”) filed or an Investigational New Drug (“IND”) application filed. We are also evaluating a series of potential programs in the clinical candidate selection stage, or for which a provisional clinical candidate has been selected that may be elevated into IND/CTA-enabling studies in the future, either on our own or in collaboration with larger pharmaceutical companies.

Our three priority programs are: DCR-PHXC for the treatment of primary hyperoxaluria (“PH”), DCR-HBVS for the treatment of chronic hepatitis B virus (“HBV”) infection, and DCR-A1AT for the treatment of alpha-1 antitrypsin (“A1AT”) deficiency-associated liver disease. Our potential programs include additional rare disease programs, a program for the treatment of hypercholesterolemia, and multiple programs in various therapeutic areas involving liver function.

The table below sets forth the state of development of our various GalXC RNAi platform product candidates as of November 7, 2019.

Status of Dicerna Programs

Our current GalXC RNAi platform development programs are as follows:

• Primary Hyperoxaluria. We are developing DCR-PHXC for the treatment of all types of PH. PH is a family of severe, rare, genetic liver disorders characterized by overproduction of oxalate, a natural chemical in the body that is normally eliminated as waste through the kidneys. In patients with PH, the kidneys are unable to eliminate the large

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amount of oxalate that is produced. The accumulation of oxalate can result in severe damage to the kidneys and other organs.

In May 2018, we received notice from the United States (“U.S.”) Food and Drug Administration (“FDA”) granting Orphan Drug Designation to DCR-PHXC for the treatment of PH. In August 2018, the European Medicines Agency’s Committee for Orphan Medicinal Products designated DCR-PHXC as an orphan medicinal product for the treatment of PH in the European Union (“EU”). We received approval to proceed with the Phase 2 (“PHYOX2”) and Phase 3 (“PHYOX3”) studies in 2019 in a subset of the countries in which we intend to open trial sites. We initiated dosing of participants rolling over from the PHYOX1 trial into the recently approved PHYOX3 study, a long-term, multi-dose, open-label, roll-over extension study. Additionally, we’re enrolling patients in our registration trial, PHYOX2. In discussions with the FDA, we received feedback indicating alignment on a path to the full approval of DCR-PHXC for the treatment of PH type 2 (“PH2”) based on achievement of substantial reduction of high baseline urinary oxalate in patients with PH2 in the PHYOX2 pivotal trial. With this feedback, we believe we have a path to full approval in both PH type 1 (“PH1”) and PH2 based on PHYOX2 results. In July 2019, we received Breakthrough Therapy Designation from the FDA for the development of DCR-PHXC for the treatment of PH1. We plan to continue our dialogue with the FDA regarding endpoints for studies involving patients with PH type 3 (“PH3”) as part of the PHYOX clinical development program for DCR-PHXC and potentially an expansion of the Breakthrough Therapy Designation for PH2. In the first half of 2020, further clinical studies will be initiated in PH1 and PH2 patients aged 2-5 years, with relatively intact renal function, in PH1 and PH2 patients with severe renal impairment, including those in dialysis, and in patients with PH3, pending regulatory approvals.

Our Phase 1 clinical trial of DCR-PHXC called PHYOX1 has completed dosing. PHYOX1 is a Phase 1 single ascending-dose study of DCR-PHXC in healthy volunteers (“HVs”) and study participants with PH1 and PH2. The primary objective of the study is to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of single-ascending doses of DCR-PHXC. Secondary endpoints include the change in 24-hour urinary oxalate excretion from baseline, defined as the mean of two 24-hour collections during screening. The trial is divided into two groups:

• Group A is a placebo-controlled, single-blind study and includes 25 HVs at a single site in the United Kingdom with five cohorts dosed at 0.3, 1.5, 3.0, 6.0, or 12.0-mg/kg of DCR-PHXC or placebo (3:2 randomization).

• Group B is an open-label study and includes 18 participants, 15 with PH1 and three with PH2, and includes three cohorts of participants dosed at 1.5, 3.0, and 6.0-mg/kg of DCR-PHXC and a fourth cohort with flexible dosing. Group B participants are enrolled among five sites in the European Union and one site in the United States.

Group A dosing was completed in March 2018 and Group B dosing was completed in January 2019. We first reported interim results from the PHYOX1 trial on September 5, 2018 and subsequently presented updated results at the American Society of Nephrology’s (“ASN”) Kidney Week in San Diego on October 25, 2018, at the German Society of Pediatric Nephrology 50^th Annual Meeting in Cologne, Germany on March 28, 2019, at the Oxalosis and Hyperoxaluria Foundation International Hyperoxaluria Workshop in Boston, Massachusetts on June 20, 2019, and at the ASN’s Kidney Week Annual Meeting in Washington, D.C. on November 7, 2019.

As of September 2019, investigators reported that DCR-PHXC was generally well-tolerated based on data from 18 participants (15 adults and three adolescents [participants 12-17 years old]) with PH1 (n=15) and PH2 (n=3) and 25 adult HVs. To date, five serious adverse events (“SAEs”) have occurred in four participants in Group B, none was deemed related to the study drug, and all five SAEs have resolved. A total of seven participants dosed with DCR-PHXC experienced mild or moderate injection site reactions, all of which resolved without intervention in a mean of 25 hours. No clinically meaningful safety signals were observed, including from liver function tests.

With respect to efficacy data in PHYOX1, as of September 2019, among the four participants with PH1 dosed at 6.0-mg/kg, the mean maximal reduction in urinary oxalate was 72% (range: 35% to 100%); three participants in this cohort reached normalization (defined as 24-hour urinary oxalate excretion <0.46 mmol) at one or more post-dose time points; one other achieved near-normalization (defined as 24-hour urinary oxalate excretion ≥ 0.46 and < 0.6 mmol). A single 3.0-mg/kg dose of DCR-PHXC was associated with a mean maximal reduction of 24-hour urinary oxalate of 72% (range: 62% to 80%) in participants with PH1. The 3.0-mg/kg dose brought urinary oxalate levels into the normal range at one or more post-dose time points in five of six participants with PH1. Additionally, the investigators reported a mean maximal reduction in urinary oxalate of 51% (range: 28% to 72%) among participants

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with PH1 receiving a single 1.5-mg/kg dose, which was associated with normalization or near-normalization in three of five participants.

The PHYOX1 investigators also reported that the three participants with PH2 (one of whom received a single 1.5-mg/kg dose of DCR-PHXC; 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.

• Chronic Hepatitis B Virus infection.We have declared a GalXC RNAi platform-based product candidate for the treatment of chronic HBV infection, DCR-HBVS, and have initiated a Phase 1 clinical trial, which is known as DCR-HBVS-101. HBV is the world’s most common serious liver infection, with more than 292 million patients chronically infected, according to an estimate by the Hepatitis B Foundation. Chronic HBV infection, a condition characterized by the presence of the HBV surface antigen (“HBsAg”) for six months or more, claims approximately 780,000 lives annually; an estimated 650,000 of these deaths are caused by cirrhosis and liver cancer as a result of chronic hepatitis B, and 130,000 of these deaths result from complications associated with acute disease.

Current therapies for HBV rarely lead to a long-term immunological cure as measured by the clearance of HBsAg and sustained HBV deoxyribonucleic acid (“DNA”) suppression in patient plasma or blood. DCR-HBVS is comprised of a single GalXC molecule that targets HBV mRNAs within the HBsAg gene sequence region. Preclinical studies with a standard mouse model of HBV infection showed DCR-HBVS was associated with greater than 99% reduction in circulating HBsAg, suggesting a level of HBsAg suppression, both in magnitude and duration of suppression, that may be greater than that achieved from targeting within the X gene sequence region.

We received CTA and ethics committee approvals for a Phase 1 clinical trial in HVs and patients with chronic HBV infection in New Zealand in December 2018 and in Australia, Hong Kong, South Korea, and Thailand in 2019. The Phase 1 study was initiated in December 2018 and the first participants were dosed in January 2019. We anticipate human proof-of-concept data from all planned cohorts of our DCR-HBVS Phase 1 clinical trial to be available mid-year 2020.

The DCR-HBVS-101 clinical trial is a Phase 1, randomized, placebo-controlled study designed to evaluate the safety and tolerability of DCR-HBVS in HVs and in patients with non-cirrhotic chronic HBV infection. Secondary objectives are to characterize the pharmacokinetic profile of DCR-HBVS and to evaluate preliminary pharmacodynamics and antiviral efficacy on plasma levels of HBsAg and HBV DNA in blood. The DCR-HBVS-101 clinical trial is divided into three phases or groups:

In Group A, 30 HVs received a single ascending-dose of DCR-HBVS (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 in August 2019. Group B is a single-dose arm in which eight participants with chronic HBV who are naïve to nucleoside analog therapy will receive a 3.0-mg/kg dose of DCR-HBVS or placebo; these participants will be followed for 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 C is a multiple ascending dose arm in which DCR-HBVS (1.5, 3.0, or 6.0-mg/kg) or placebo will be administered to 18 participants with chronic HBV who are already being treated with nucleoside analogs, with a treatment and follow-up period of 16 weeks or more. The first patient dosed was from this group, at a dose of 1.5-mg/kg, in May 2019. The final patient’s last dose was administered in October 2019.

Participants with chronic HBV in Groups B and C, in whom HBsAg will have dropped by more than 1 log10 IU/mL below baseline at their last scheduled study visit, will continue to be followed until their HBsAg level is less than 1 log10 IU/mL below the baseline value.

• Alpha-1 antitrypsin deficiency-associated liver disease.We have declared a GalXC RNAi platform-based product candidate for the treatment of alpha-1 antitrypsin (“A1AT”) deficiency-associated liver disease and submitted a CTA to the Swedish Medical Products Agency in June 2019 to conduct a first-in-human Phase 1/2 study of DCR-A1AT, an investigational therapy from our GalXC™ technology platform.

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 (shortage) of A1AT or an abnormal form of the protein that cannot control neutrophil elastase. Accumulation of abnormal A1AT in the liver

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can lead to liver disease. Uncontrolled neutrophil elastase can also destroy alveoli (small air sacs in the lungs) and cause lung disease.

Approximately 7% of children with A1AT deficiency develop cirrhosis, and more than 15% of those require liver transplantation. About 10% of adults with A1AT deficiency develop cirrhosis due to formation of scar tissue in the liver, and over 15% of those require liver transplant. Individuals affected by A1AT deficiency are also at risk of developing hepatocellular carcinoma, a type of liver cancer. Liver transplant is currently the only effective treatment for A1AT deficiency-associated liver 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. Many individuals with A1AT deficiency are thought to be undiagnosed, particularly those who also have chronic obstructive pulmonary disease. Some people with A1AT deficiency are misdiagnosed as having asthma.    

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 HVs and in patients with Alpha-1 antitrypsin 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 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. The DCR-A1AT-101 clinical trial is divided into two phases or groups:

In Group A, up to 36 HVs are to receive a single ascending-dose of DCR-A1AT (0.1, 1.0, 3.0, 6.0, or 12.0-mg/kg) or placebo, with a minimum 8-week follow-up. Group B is a multiple ascending dose arm in which DCR-A1AT (doses yet to be determined) or placebo will be administered to up to 24 participants with A1AT with a treatment and follow-up period of 12 weeks or more. Group A is expected to begin enrollment in the fourth quarter of 2019.

• Additional pipeline programs. We have developed a robust portfolio of additional targets and diseases that we plan to pursue either on our own or through collaborations. We have applied our GalXC technology to multiple gene targets across our disease focus areas of rare diseases, chronic liver diseases, and cardiovascular diseases.

Pursuant to our strategy, we are seeking collaborations with larger and/or more experienced pharmaceutical companies to advance our programs in the areas of chronic liver diseases and cardiovascular diseases, as well as select rare diseases that do not fit our criteria for a priority development program. The chronic liver and cardiovascular disease areas represent large and diverse patient populations, requiring complex clinical development and commercialization paths that we believe can be more effectively pursued in collaboration with larger pharmaceutical companies. Certain rare diseases require complex clinical development and commercialization paths aligned with existing treatment paradigms that we believe can be more effectively pursued in collaboration with companies possessing certain rare disease expertise.

For our additional rare disease opportunities, we are continuing to assess their potential for clinical success and market opportunity while optimizing our GalXC molecules. For our additional pipeline programs, we may utilize more advanced versions of our GalXC technology that further improve pharmaceutical properties of the GalXC molecules, including enhancing the duration of action and potency. We have further optimized our GalXC technology platform, enabling the development of next generation GalXC molecules. Improvements to our GalXC compound include modification of the tetraloop end of the molecule, which can be applied to any target gene, resulting in a substantially longer duration of action and higher potency of target gene silencing in animal models across multiple targets. Modification of the tetraloop only impacts the sense strand and does not impact the antisense strand. These modifications are unique to our GalXC molecules and, we believe, provide a competitive advantage for the Company.

Partner Development Programs

Roche Collaboration

On October 30, 2019, we entered into a Collaboration and License Agreement with Roche (the “Roche Collaboration Agreement”). Under the terms of the Roche Collaboration Agreement, we and Roche will seek to progress DCR-HBVS, our investigational therapy in Phase 1 clinical development, toward worldwide development and commercialization as well as an option for the companies to collaborate in the discovery, development, and commercialization of oligonucleotide therapeutics intended for the treatment of HBV.

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The Roche Collaboration Agreement provides that Roche will lead the development and commercialization of the DCR-HBVS program after we complete the Phase 1 clinical trial. Roche also has until receipt of interim Phase 1 data from the DCR-HBVS Phase 1 study (but no later than December 31, 2020) to initiate a research and development collaboration with us to pursue up to five targets selected by Roche which are intended primarily to treat HBV. Under the terms of the Roche Collaboration Agreement, the goal of such research collaboration will be to select compounds developed by us or Roche for Roche’s continued development and commercialization. The Roche Collaboration Agreement provides that we and Roche’s research and early development organization will work exclusively with each other during the research collaboration period on the discovery, research, and development of such targets selected by Roche. Under the Roche Collaboration Agreement, we will provide Roche with exclusive and non-exclusive licenses to support Roche’s activities and to enable Roche to commercialize products derived from or containing compounds developed pursuant to such agreement.

Roche will pay us a non-refundable upfront payment of $200.0 million. We are also eligible to receive additional payments totaling up to approximately $1.47 billion, which includes payments upon achievement of specified development, regulatory, and commercial milestones for DCR-HBVS. In addition, the Roche Collaboration Agreement provides that Roche will pay us up to mid- teens percent royalties on product sales. Royalties are payable until the later of 10 years after first commercial sale of each product in a country, expiration of patent rights in a country, or for products containing DCR-HBVS in a given country, the expiration of data or regulatory exclusivity, subject to certain royalty step-down provisions set forth in the agreement. In addition, we have an option to co-fund the development of products under the agreement and, if exercised, receive high twenties to mid thirties royalty rates on the net sales of products in the U.S. If we exercise the co-funding option, we shall also have an option to co-promote products containing DCR-HBVS in the U.S.

The Roche Collaboration Agreement includes various representations, warranties, covenants, indemnities, and other customary provisions. Roche may terminate the Roche Collaboration Agreement at any time without cause following the notice periods described in the agreement. Either party may terminate the Roche Collaboration Agreement in the event of an uncured material breach of the other party. The Roche Collaboration Agreement is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions.

Lilly Collaboration

On October 25, 2018, we entered into a Collaboration and License Agreement with Lilly (the “Lilly Collaboration Agreement”). The Lilly Collaboration Agreement is for the discovery, development, and commercialization of potential new medicines in the areas of cardiometabolic disease, neurodegeneration, and pain. Under the terms of the Lilly Collaboration Agreement, we and Lilly will seek to use our proprietary GalXC RNAi technology platform to progress new drug targets toward clinical development and commercialization. In addition, we will collaborate with Lilly to extend the GalXC RNAi platform technology to non-liver (i.e., non-hepatocyte) tissues, including neural tissues.

The Lilly Collaboration Agreement provides that we will work exclusively with Lilly in the neurodegeneration and pain fields with the exception of mutually agreed upon orphan indications. Additionally, we will work exclusively with Lilly on select targets in the cardiometabolic field. Under the Lilly Collaboration Agreement, we will provide Lilly with exclusive and non-exclusive licenses to support the companies’ activities and to enable Lilly to commercialize products derived from or containing compounds developed pursuant to such agreement. The Lilly Collaboration Agreement contemplates in excess of 10 targets.

Under the terms of the Lilly Collaboration Agreement, Lilly paid us a non-refundable, non-creditable upfront payment of $100.0 million and made a concurrent stated $100.0 million equity investment in us at a premium pursuant to a share issuance agreement between the parties (the “Lilly Share Issuance Agreement”). Under the Lilly Collaboration Agreement, we are also eligible to potentially receive up to approximately $350.0 million per target in development and commercialization milestones, in addition to a $5.0 million payment due for each of the non-hepatocyte targets when a product achieves proof of principle in an animal model. In addition, the Lilly Collaboration Agreement also provides that Lilly will pay us mid-single to low-double digit royalties on product sales on a country-by-country and product-by-product basis until the later of expiration of patent rights in a country, the expiration of data or regulatory exclusivity in such country, or 10 years after the first product sale in such country, subject to certain royalty step-down provisions set forth in the agreement. During the three and nine months ended September 30, 2019, $5.2 million and $8.3 million of revenue was recognized associated with the Lilly Collaboration Agreement, respectively.

Alexion Collaboration

On October 22, 2018, we entered into a Collaborative Research and License Agreement (the “Alexion Collaboration Agreement”) with Alexion for the joint discovery and development of RNAi therapies for complement-mediated diseases. Under the terms of the Alexion Collaboration Agreement, we will collaborate with Alexion on the discovery and development of subcutaneously delivered GalXC candidates, currently in preclinical development, for the treatment of complement-mediated diseases with potential global commercialization by Alexion. We will lead the joint discovery and research efforts through the preclinical stage, and Alexion

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will lead development efforts beginning with Phase 1 studies. We will be responsible for manufacturing of the GalXC candidates for use through the completion of Phase 1, the costs of which will be paid by Alexion. Alexion will be solely responsible for the manufacturing of any product candidate subsequent to the completion of Phase 1.

The Alexion Collaboration Agreement also provides Alexion with exclusive worldwide licenses as well as development and commercial rights for two of our preclinical, subcutaneously-delivered GalXC RNAi candidates and an exclusive option for the discovery and development of GalXC RNAi candidates against two additional complement pathway targets.

Under the terms of the Alexion Collaboration Agreement, Alexion paid us a non-refundable, non-reimbursable, and non-creditable upfront payment of $22.0 million, with Alexion Pharmaceuticals making a concurrent stated $15.0 million equity investment at a premium in Dicerna pursuant to a share issuance agreement between us and Alexion Pharmaceuticals (the “Alexion Share Issuance Agreement”). The Alexion Collaboration Agreement also provides for potential additional payments to Dicerna of up to $600.0 million from proceeds from target option exercises and development and sales milestones, as defined in the agreement, which are comprised of option exercise fees of up to $20.0 million, representing $10.0 million for each of the candidates selected; development milestones of up to $105.0 million for each product; and aggregate sales milestones of up to $160.0 million. Under the agreement, Alexion will also pay us mid-single to low-double digit royalties on potential product sales on a country-by-country, product-by-product basis until the later of the expiration of patent rights in a country, the expiration of market or regulatory exclusivity in such country, or 10 years after the first product sale in such country, subject to certain royalty step-down provisions set forth in the agreement. During the three and nine months ended September 30, 2019, we recognized $1.5 million and $3.0 million in revenue associated with the Alexion Collaboration Agreement, respectively.

BI Collaboration

On October 27, 2017, we entered into a Collaborative Research and License Agreement with BI (the “BI Agreement”), pursuant to which we and BI agreed to jointly research and develop product candidates for the treatment of chronic liver diseases, with an initial focus on nonalcoholic steatohepatitis (“NASH”) using our GalXC platform. NASH is caused by the buildup of fat in the liver, potentially leading to liver fibrosis and cirrhosis. NASH has an especially high prevalence among obese and diabetic patients and is an area of high unmet medical need.

The BI Agreement is for the development of product candidates against one target gene with an option for BI to add the development of product candidates that target a second gene (the “Second Target”). We are working exclusively with BI to develop the product candidates against the undisclosed target gene. We are responsible for the discovery and initial profiling of the product candidates, including primary preclinical studies, synthesis, and delivery. BI is responsible for evaluating and selecting the product candidates for further development. If BI selects one or more product candidates, it will be responsible for further preclinical development, clinical development, manufacturing, and commercialization of those products. Also pursuant to the BI Agreement, we granted BI a worldwide license in connection with the research and development of the product candidates and have transferred to BI certain intellectual property rights of the product candidates selected by BI for clinical development and commercialization. We also may provide assistance to BI in order to help BI further develop selected product candidates.

Under the terms of the BI Agreement, BI agreed to pay us a non-refundable upfront payment of $10.0 million for the first target. During the term of the research program, BI will reimburse Dicerna the cost of materials and third-party expenses that have been included in the preclinical studies up to an agreed-upon limit. We are eligible to receive up to $191.0 million in potential development and commercial milestones related to the initial target. We are also eligible to receive royalty payments on potential global net sales, subject to certain adjustments, tiered from high single digits up to low double-digits. BI’s Second Target option provided for an option fee payment of $5.0 million and success-based development and commercialization milestones and royalty payments to Dicerna.

In October 2018, BI exercised its Second Target option, which entitled the Company to a non-refundable payment of $5.0 million upon the agreement of a research work plan and budget for the Second Target. The terms of the Second Target option exercise and related rights and obligations associated with the Second Target were agreed between the Company and BI in an Additional Target Agreement (the “ATA”), which was entered into on December 31, 2018. In addition to establishing the terms of the Second Target option exercise, the ATA also amends the BI Agreement to provide BI with the option to add, over a three-year period, the development of product candidates targeting a further additional target gene (the “Third Target” option).

Under the terms of the ATA, in accordance with the terms of the BI Agreement, BI agreed to pay us a non-refundable upfront payment of $5.0 million to exercise its initial option for development related to the Second Target. Under the terms of the ATA, during the term of the research program, BI will reimburse us for certain expenses. We are eligible to receive up to $170.0 million in potential development and commercial milestones related to the Second Target. We are also eligible to receive tiered royalty payments on potential global net sales, subject to certain adjustments, in the mid-single digits. Other than as set forth in the ATA, development of the Second Target will be subject to the terms of the BI Agreement. Per the ATA, if BI elects, in its sole discretion, to exercise the

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Third Target option, the parties would agree to a research work plan and budget for the additional gene and negotiate development and commercialization milestones and royalty payments to Dicerna, and BI would make an option fee payment to us of $5.0 million. During the three and nine months ended September 30, 2019, $1.3 million and $5.5 million of revenue was recognized associated with the BI Agreement, respectively.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of 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 the U.S. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the revenue and expenses incurred during the reported periods. On an ongoing basis, we evaluate these estimates and judgments. 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 the SEC on March 13, 2019. 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 ended September 30, 2019.

Recent Accounting Pronouncement

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). Additional information regarding relevant accounting pronouncements is provided below.

Adopted in 2019

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), as amended by multiple standards updates, in order to increase transparency and comparability among organizations by requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The most significant change arising from the new standard is the recognition of right-of-use (“ROU”) assets and lease liabilities for leases classified as operating leases. Under the standard, disclosures are required to enable financial statement users to assess the amount, timing, and uncertainty of cash flows arising from the leases. Companies are also required to recognize and measure leases existing at, or entered into after, the adoption date using a modified retrospective approach, with certain practical expedients available. Comparative periods prior to adoption have not been retrospectively adjusted.

We adopted the standard effective January 1, 2019 and elected the package of three practical expedients that permitted an entity not to (a) reassess whether expired or existing contracts contain leases, (b) reassess lease classification for existing or expired leases, and (c) consider whether previously capitalized initial direct costs would be appropriate under the new standard.

Upon adoption, we recorded ROU assets of $2.7 million and lease liabilities of $2.8 million. Initial implementation of the standard did not have a material impact on the statement of operations or statement of cash flows.

Recent Developments

Colorado lease

On August 26, 2019, we entered into a non-cancelable real property lease agreement for 15,871 square feet of office space in Boulder, Colorado (the “Boulder Lease”). We intend to relocate our currently remote Colorado employees to this facility upon lease commencement, which we currently anticipate will occur in the second quarter of 2020.

The term of the Boulder Lease is 87 full calendar months plus any partial month from the commencement date to the end of the month in which the commencement date falls. The Boulder Lease commences on the earlier of the date on which (a) we occupy any portion of the facility and begin conducting business therein, (b) the landlord delivers the facility to us with the work in the facility

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substantially completed, or (c) the work in the facility would have been substantially completed but for the occurrence of any delays caused by us. The Boulder Lease provides for an aggregate fixed rent of approximately $3.0 million during the 87-month term. In addition to the annual fixed rent, we will be responsible for certain customary operating expenses and real estate taxes specified in the agreement.

Lexington lease

On January 2, 2019, we entered into a non-cancelable real property lease agreement for 80,872 square feet of laboratory and office space in Lexington, Massachusetts (the “Lexington Lease”). We intend to move our corporate headquarters and research facility to this location upon occupancy and expect the move to occur in the fourth quarter of 2019.

The original term (the “Original Term”) of the Lexington Lease is seven years, commencing on the earlier of (a) the date on which the premises are ready for occupancy under the terms of the lease, or (b) the date on which we commence occupancy of any portion of the premises for the permitted uses under the lease. We have options to extend the term of the lease for two additional successive periods of five years each (the “Extension Periods”).

Annual fixed rent is approximately $3.9 million for the first 12-month period during the Original Term, increasing on an annual basis until reaching approximately $4.7 million for the seventh 12-month period during the Original Term. The Lexington Lease provides for an aggregate fixed rent of approximately $30.1 million during the seven-year Original Term. We will agree upon annual fixed rent during the Extension Periods with the landlord following our provision of notice of intention to exercise an extension option. If we cannot reach an agreement on annual fixed rent during an Extension Period with the landlord, we will have the right to seek, subject to the terms of the Lexington Lease, a broker determination of the prevailing market rent, and the annual fixed rent during such Extension Period will be the prevailing market rent determined by the broker.

In addition to the annual fixed rent, we will be responsible for certain customary operating expenses and real estate taxes specified in the agreement. The Lexington Lease also contains customary default provisions allowing the landlord to terminate the lease or seek damages if we fail to cure certain breaches of our obligations under the lease within specified periods of time. In addition, we will be obligated to indemnify the landlord for certain losses incurred in connection with our use or occupancy of the premises.

Cambridge sublease

On January 4, 2019, we entered into a non-cancelable real property sublease agreement for approximately 9,653 square feet of office space in Cambridge, Massachusetts (“Cambridge Sublease”). The term of the sublease commenced on January 11, 2019, the date that the Landlord provided written consent to the Cambridge Sublease, and extends through the sublease expiration date of July 30, 2021. The Cambridge Sublease provides for an aggregate fixed rent of approximately $0.8 million during the term of the sublease.

Roche collaboration

On October 30, 2019, we entered into a Collaboration and License Agreement with Roche (the “Roche Collaboration Agreement”). Under the terms of the Roche Collaboration Agreement, we and Roche will seek to progress DCR-HBVS, our investigational therapy in Phase 1 clinical development, toward worldwide development and commercialization as well as an option for the companies to collaborate in the discovery, development, and commercialization of oligonucleotide therapeutics intended for the treatment of HBV.

Roche will pay us a non-refundable upfront payment of $200.0 million. We are also eligible to receive additional payments totaling up to approximately $1.47 billion, which includes payments upon achievement of specified development, regulatory, and commercial milestones for DCR-HBVS. In addition, the Roche Collaboration Agreement provides that Roche will pay us up to mid- teens percent royalties on product sales. Royalties are payable until the later of 10 years after first commercial sale of each product in a country, expiration of patent rights in a country, or for products containing DCR-HBVS in a given country, the expiration of data or regulatory exclusivity, subject to certain royalty step-down provisions set forth in the agreement. In addition, we have an option to co-fund the development of products under the agreement and, if exercised, receive high twenties to mid thirties royalty rates on the net sales of products in the U.S. If we exercise the co-funding option, we shall also have an option to co-promote products containing DCR-HBVS in the U.S. Refer to “Part I, Item II — Management’s Discussion and Analysis of Financial Condition and Results of Operations – Development Programs” for further information.

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Executive Summary

Our results of operations and liquidity and capital resources for and as of the three and nine months ended September 30, 2019 reflect the following:

• On January 1, 2019, we implemented the new lease accounting standard issued by the Financial Accounting Standards Board, Leases (Topic 842). Upon adoption, we recorded a right-of-use asset of $2.7 million which is recorded in noncurrent assets in the condensed consolidated balance sheet, a short-term lease liability of $1.4 million, and a long-term lease liability of $1.4 million. As of September 30, 2019 the right-of-use asset was $2.2 million, and the short-term and long-term lease liabilities were $1.7 million and $0.5 million, respectively.

• On January 2, 2019, we entered into a seven-year non-cancelable real property lease agreement for 80,872 square feet of laboratory and office space in Lexington, Massachusetts. We intend to move our corporate headquarters and research facility to this location in the fourth quarter of 2019.

• On January 4, 2019, we entered into a non-cancelable real property sublease agreement for 9,653 square feet of office space in Cambridge, Massachusetts. The term of the sublease commenced on January 11, 2019 and extends through the sublease expiration date of July 30, 2021.

• In January 2019, we received a $100.0 million upfront payment from Lilly associated with a collaboration agreement executed in October 2018 to which we were a party. The collaboration agreement with Lilly is for the discovery, development, and commercialization of potential new medicines in the areas of cardiometabolic disease, neurodegeneration, and pain.

• In February 2019, we received a non-refundable payment of $5.0 million upon the agreement of a research work plan and budget pursuant to BI’s exercise of its Second Target option in October 2018.

• On August 26, 2019, we entered into an 87-month non-cancelable real property lease agreement for 15,781 square feet of office space in Boulder, Colorado. We intend to relocate our currently remote Colorado employees to this facility in the second quarter of 2020.

• On October 30, 2019, we entered into a Collaboration and License Agreement with Roche (the “Roche Collaboration Agreement”). Under the terms of the Roche Collaboration Agreement, we and Roche will seek to progress DCR-HBVS, our investigational therapy in Phase 1 clinical development, toward worldwide development and commercialization as well as an option for the companies to collaborate in the discovery, development, and commercialization of oligonucleotide therapeutics intended for the treatment of HBV. Roche will pay us a non-refundable upfront payment of $200.0 million. We are also eligible to receive additional payments totaling up to approximately $1.47 billion, which includes payments upon achievement of specified development, regulatory, and commercial milestones for DCR-HBVS. In addition, the Roche Collaboration Agreement provides that Roche will pay us up to mid- teens percent royalties on product sales. We also have an option to co-fund the development of products under the agreement and, if exercised, receive high twenties to mid thirties royalty rates on the net sales of products in the U.S. If we exercise the co-funding option, we shall also have an option to co-promote products containing DCR-HBVS in the U.S. The Roche Collaboration Agreement is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions.

• Revenue from collaborative arrangements during the three months ended September 30, 2019 reflects $5.2 million, $1.5 million, and $1.3 million from the Lilly, Alexion, and BI collaborations, respectively, compared to $1.6 million solely related to the BI collaboration during the three months ended September 30, 2018.

• Revenue from collaborative arrangements during the nine months ended September 30, 2019 reflects $8.3 million, $3.0 million, and $5.5 million from the Lilly, Alexion, and BI collaborations, respectively, compared to $4.6 million solely related to the BI collaboration during the nine months ended September 30, 2018.

Financial Operations Overview

Revenue from collaborative arrangements

Our revenue from collaboration arrangements to date has been generated primarily through research funding, license fees, option exercise fees, and preclinical development payments under our research collaboration arrangements with Roche, Lilly, Alexion, and BI. We have not generated any commercial product revenue, nor do we expect to generate any product revenue for the foreseeable future.

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. We expect that any revenue we generate will fluctuate in future periods as a result of the timing of our or our collaborators’

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achievement of preclinical, clinical, regulatory, and commercialization milestones, to the extent achieved, the timing and amount of any payments to us relating to such milestones, and the extent to which any of our product candidates are approved and successfully commercialized by us or a collaborator. If we, our current collaboration partners, or any future collaborator fails to develop product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue from collaboration arrangements, and our results of operations and financial position, would be materially and adversely affected.

Research and development expenses

Research and development expenses consist of costs associated with our research activities, including discovery and development of our GalXC 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 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.

The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. We or any of our current or future collaborators may never succeed in obtaining marketing approval for any of our product candidates. The probability of success for each product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability, and commercial viability. All of our research and development programs are at an early stage, and successful development of future product candidates from these programs is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict. We anticipate we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to our ability to maintain or enter into collaborations with respect to each product candidate, the scientific and clinical success of each product candidate, as well as ongoing assessments as to the commercial potential of product candidates. We will need to raise additional capital and may seek additional collaborations in the future in order to advance our various product candidates. Additional private or public financings may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy.

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 (excluding litigation expenses), audit, tax, and other professional services, and allocated facility-related costs not otherwise included in research and development expenses.

Litigation expense

Litigation expense consists of legal fees and expenses solely related to the litigation with Alnylam Pharmaceuticals, Inc. (“Alnylam”).

Interest income

Interest income consists of interest income earned on our cash and cash equivalents, held-to-maturity investments, and restricted cash equivalents.

Interest expense

Interest expense represents interest expense incurred on a long-term payable with Alnylam, which was paid in the first quarter of 2019.

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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2019 and 2018

The following table summarizes the results of our operations for the periods indicated (amounts in thousands, except percentages):

	THREE MONTHS ENDED SEPTEMBER 30,
	2019			2018			$ CHANGE			% CHANGE
Revenue from collaborative arrangements	$	8,035		$	1,545		$	6,490		420.1	%
Operating expenses:
Research and development	30,086			11,695			18,391			157.3	%
General and administrative	10,619			5,354			5,265			98.3	%
Litigation expense	—			3,694			(3,694		)	(100.0	)%
Total operating expenses	40,705			20,743			19,962			96.2	%
Loss from operations	(32,670		)	(19,198		)	(13,472		)	70.2	%
Other income (expense):
Interest income	1,880			401			1,479			368.8	%
Interest expense	—			(223		)	223			(100.0	)%
Total other income, net	1,880			178			1,702			*
Net loss	$	(30,790	)	$	(19,020	)	$	(11,770	)	61.9	%

	NINE MONTHS ENDED SEPTEMBER 30,
	2019			2018			$ CHANGE			% CHANGE
Revenue from collaborative arrangements	$	16,824		$	4,635		$	12,189		263.0	%
Operating expenses:
Research and development	74,521			31,927			42,594			133.4	%
General and administrative	29,126			14,449			14,677			101.6	%
Litigation expense	—			29,122			(29,122		)	(100.0	)%
Total operating expenses	103,647			75,498			28,149			37.3	%
Loss from operations	(86,823		)	(70,863		)	(15,960		)	22.5	%
Other income (expense):
Interest income	6,034			1,020			5,014			491.6	%
Interest expense	—			(399		)	399			(100.0	)%
Total other income, net	6,034			621			5,413			*
Net loss	$	(80,789	)	$	(70,242	)	$	(10,547	)	15.0	%

* Percentage change not meaningful

Revenue from collaborative arrangements

Revenue from collaborative arrangements during the three months ended September 30, 2019 reflects $5.2 million, $1.5 million, and $1.3 million from the Lilly, Alexion, and BI collaborations, respectively, compared to $1.6 million solely related to the BI collaboration during the three months ended September 30, 2018.

Revenue from collaborative arrangements during the nine months ended September 30, 2019 reflects $8.3 million,$3.0 million, and $5.5 million from the Lilly, Alexion, and BI collaborations, respectively, compared to $4.6 million solely related to the BI collaboration during the nine months ended September 30, 2018.

We do not expect to generate any product revenue for the foreseeable future.

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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,
	2019		2018		$ CHANGE		% CHANGE
Direct research and development expenses	$	17,116	$	6,207	$	10,909	175.8	%
Platform-related expenses	4,319		1,636		2,683		164.0	%
Employee-related expenses	7,797		3,018		4,779		158.3	%
Facilities, depreciation, and other expenses	854		834		20		2.4	%
Total	$	30,086	$	11,695	$	18,391	157.3	%

	NINE MONTHS ENDED SEPTEMBER 30,
	2019		2018		$ CHANGE		% CHANGE
Direct research and development expenses	$	40,628	$	16,037	$	24,591	153.3	%
Platform-related expenses	9,782		4,174		5,608		134.4	%
Employee-related expenses	21,399		9,274		12,125		130.7	%
Facilities, depreciation, and other expenses	2,712		2,442		270		11.1	%
Total	$	74,521	$	31,927	$	42,594	133.4	%

Research and development expenses increased for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 primarily due to direct research and development expenses and employee-related expenses. The $10.9 million increase in direct research and development expenses in the three months ended September 30, 2019 included a $6.2 million increase in manufacturing costs to support our clinical studies and a $3.6 million increase in clinical study costs, reflecting increased activities associated with our DCR-PHXC and DCR-HBVS programs.Research and development expenses were also impacted by a$4.8 millionincrease in employee-related expenses, such as compensation and benefits.

Research and development expenses increased for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 primarily due to direct research and development expenses and employee-related expenses. The $24.6 million increase in direct research and development expenses in the nine months ended September 30, 2019 included a $14.2 million increase in manufacturing costs to support our clinical studies and a $9.5 million increase in clinical study costs, reflecting increased activities associated with our DCR-PHXC and DCR-HBVS programs.These costs were partially offset by a$2.3 milliondecrease in preclinical study costs. Research and development expenses were also impacted by a$12.1 millionincrease in employee-related expenses, such as compensation and benefits. The increase in employee-related expenses in both the three andninemonths endedSeptember 30, 2019, is a result of a 145% increase in research and development headcount necessary to support our growth.

We expect our overall research and development expenses to continue to increase throughout 2019 for the foreseeable future, as we ramp our clinical manufacturing activities, continue clinical activities associated with our three proprietary product candidates, and increase activities under the Lilly, Alexion, and BI agreements and potentially under the Roche agreement, if they choose to select additional targets.

General and administrative expenses

General and administrative expenses increased for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. The increase in the three months ended September 30, 2019 is primarily related to a $3.2 million increase in employee-related expenses, due to increased stock-based compensation and headcount growth, and a $0.9 million increase in general and business development consulting costs.

General and administrative expenses increased for the nine months ended September 30, 2019 compared to the three months ended September 30, 2018. The increase in the nine months ended September 30, 2019 is primarily related to a $8.7 million increase in employee-related expenses, due to increased stock-based compensation and headcount growth, and a $2.6 million increase in general and business development consulting costs.

We expect general and administrative expenses to continue to increase in 2019, as compared to 2018, largely due to investments in staffing and market readiness activities.

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Litigation expenses

Litigation expenses of $3.7 million and $29.1 million, for the three and nine months ended September 30, 2018, respectively, were comprised solely of litigation and settlement expenses associated with the litigation with Alnylam that was settled in the second quarter of 2018.

Interest income

Interest income represents interest earned from our cash and cash equivalents, held-to-maturity investments, and restricted cash equivalents. The increases for the three and nine months ended September 30, 2019 were largely due to higher balances in money market funds and U.S. Treasury securities as a result of cash received from the collaboration agreements executed with Lilly and Alexion in October 2018.

Interest expense

Interest expense of $0.2 million and $0.4 million during the three and nine months ended September 30, 2018, respectively, represents interest expense incurred on the balance of the litigation settlement payable.

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 with Lilly, Alexion, and BI. As of September 30, 2019, we had cash and cash equivalents and held-to-maturity investments of $312.7 million compared to $302.6 million as of December 31, 2018. The balance of cash, cash equivalents, and held-to-maturity investments as of September 30, 2019 includes the receipt of an additional $105.0 million in proceeds from the Lilly and BI collaborations, which were partially offset by the $10.5 million final settlement payment to Alnylam.

On May 31, 2018, a universal shelf registration statement on Form S-3 permitting the sale of up to $250.0 million of our common stock and other securities was declared effective by the SEC. In September 2018, we sold an aggregate of 8,832,565 shares of our common stock for gross proceeds of $115.0 million pursuant to this registration statement. We currently intend to use the net proceeds from the offering for preclinical studies and clinical trials, and to use the remainder of any net proceeds for continued technology platform development, working capital, and general corporate purposes.

We believe that our cash, cash equivalents, and held-to-maturity investments, together with the $200.0 million upfront payment expected upon closing of our recently announced agreement with Roche, provides us with sufficient resources to continue our planned operations and clinical activities beyond the year ended December 31, 2021.

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,
	2019			2018
Net cash provided by (used in) operating activities	$	14,232		$	(43,342	)
Net cash used in investing activities	$	(19,233	)	$	(88,944	)
Net cash provided by financing activities	$	792		$	109,896

Operating activities

Net cash provided by (used in) operating activities increased $57.6 million in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 primarily due to a $97.0 million decrease in contract receivables largely due to the upfront cash payment received from Lilly in January 2019 in connection with our collaboration agreement. This increase in cash was offset by a $23.3 million decrease in the litigation settlement payable as a result of the final settlement payment in the first quarter of 2019 and a $10.3 million decrease in non-cash litigation expense in the nine months ended September 30, 2018, as there were no such expenses in the nine months ended September 30, 2019.

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Investing activities

Net cash used in investing activities decreased $69.7 million in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The decrease in net cash used in investing activities primarily relates to a $256.0 million increase in proceeds from the maturities of held-to-maturity investments that were partially offset by a $181.2 million increase in purchases of held-to-maturity investments for the nine months ended September 30, 2019. Net cash used in investing activities was additionally impacted by a $5.1 million increase in purchases of property and equipment in the nine months ended September 30, 2019.

Financing activities

Net cash provided by financing activities for the nine months ended September 30, 2019 decreased $109.1 million compared to the nine months ended September 30, 2018. The decrease was primarily due to the receipt of $107.7 million in net proceeds in September 2018 from a follow-on public offering of our common stock.

Funding requirements

We expect that our primary uses of capital will continue to be 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, and held-to-maturity investments will be sufficient to fund the execution of our current clinical and operating plans for at least the 12-month period following November 7, 2019. 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 Roche Collaboration Agreement, Lilly Collaboration Agreement, the Alexion Collaboration Agreement, or the BI 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 potential product candidates;

• our alignment with the U.S. Food and Drug Administration on regulatory approval requirements;

• 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. We may be unable to raise capital or enter into such other arrangements when needed or on favorable terms, or at all. Our failure to raise capital or enter into such other arrangements in a reasonable timeframe would have a negative impact on our financial condition, and we may have to delay,

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reduce, or terminate our research and development programs, preclinical or clinical trials, limit strategic opportunities, or undergo reductions in our workforce or other corporate restructuring activities.

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

The following is a summary of our significant contractual obligations as of September 30, 2019 (amounts in thousands):

	Payments Due By Period
	Total		Less Than 1 Year		More Than 1 Year and Less Than 3 Years		More Than 3 Years and Less Than 5 Years		More Than 5 Years
Operating lease obligations*	$	2,429	$	1,868	$	561	$	—	$	—

______________________________________

* Represents future minimum lease payments under our existing non-cancelable operating leases for our offices and laboratory space in Cambridge, Massachusetts, for which the end of the lease terms are November 30, 2020 and July 30, 2021. Excluded from the table above are fixed lease payments of $30.1 million associated with our lease of office and laboratory space in Lexington, Massachusetts for our future headquarters. Such lease payments were excluded as the commencement date has not yet occurred and a lease liability has not yet been recognized on our condensed consolidated balance sheet.

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 or in the table above since the achievement and timing of these milestones were not probable or estimable as of September 30, 2019.

Off-Balance Sheet Arrangements

As of September 30, 2019, 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objectives of our investment activities are to ensure liquidity and to preserve principal, while at the same time maximizing the income we receive from our marketable securities without significantly increasing risk. Some of the securities that we invest in may have market risk related to changes in interest rates. As of September 30, 2019, we had cash, cash equivalents, and held-to-maturity investments of $312.7 million. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash and cash equivalents and held-to-maturity investments and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash, cash equivalents, or held-to-maturity investments. To minimize the risk in the future, we intend to maintain our portfolio of cash, cash equivalents, and held-to-maturity investments in a variety of securities, including commercial paper, money market funds, and government securities.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file under the Exchange Act with the SEC is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon, and as of the date of, this evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations, and cash flows for the periods presented.

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Changes in Internal Control Over Financial Reporting

We continuously seek to improve the efficiency and effectiveness of our internal controls. This results in refinements to processes throughout the Company. There was no change in our internal control over financial reporting during the quarter ended September 30, 2019, which was identified in connection with management’s evaluation required by Exchange Act Rules 13a-15(f) and 15d-15(f), that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management, including the chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of one person, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we may be subject to legal proceedings, claims, and litigation arising in the ordinary course of business. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition, or results of operations. Any future litigation could result in substantial costs and divert our management’s attention and resources, which could cause serious harm to our business, operating results, and financial condition. We maintain liability insurance; however, if any costs or expenses associated with this or any other litigation exceed our insurance coverage, we may be forced to bear some or all of these costs or expenses directly, which could be substantial.

ITEM 1A. RISK FACTORS

We are providing the following cautionary discussion of risk factors, uncertainties, and assumptions that we believe are relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and our forward-looking statements. We note these factors for investors as permitted by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider this section to be a complete discussion of all potential risks or uncertainties that may substantially impact our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time, and it is not possible to predict the impact of all of these factors on our business, financial condition, or results of operations.

Risks Related to Our Business

We will need to raise substantial additional funds to advance development of our product candidates and we cannot guarantee that we will have sufficient funds available in the future to develop and commercialize our current or future product candidates. Raising additional funds may cause dilution to our stockholders, restrict our operations, or require us to relinquish control over our technologies or product candidates.

We will need to raise substantial additional funds to expand our development, regulatory, manufacturing, marketing, sales, and general and administrative operations capabilities, whether internally or through other organizations. We have used substantial funds to develop our product candidates and delivery technologies and will require significant funds to conduct further research and development and preclinical testing and clinical trials of our product candidates, to seek regulatory approvals for our product candidates, and to manufacture and market products, if any are approved for commercial sale. As of September 30, 2019, we had $312.7 million in cash, cash equivalents, and held-to-maturity investments. Based on our current operating plan and liquidity, we believe that our available cash, cash equivalents, and held-to-maturity investments, together with the $200.0 million upfront payment expected upon closing of our recently announced agreement with Roche, will be sufficient to fund the execution of our current clinical and operating plan beyond 2021. However, to the extent our clinical and operating plan changes, we will need to raise substantial additional funds. Further, our future capital requirements and the period for which our existing resources are able to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with successful development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. To execute our business plan, we will need, among other things:

• to obtain the human and financial resources necessary to develop, test, obtain regulatory approval for, manufacture, and market our product candidates;

• to build and maintain a strong intellectual property portfolio and avoid infringing intellectual property of third parties;

• to establish and maintain successful licenses, collaborations, and alliances;

• to satisfy the requirements of clinical trial protocols, including patient enrollment;

• to establish and demonstrate the clinical efficacy and safety of our product candidates;

• to manage our spending as costs and expenses increase due to preclinical studies and clinical trials, regulatory approvals, manufacturing scale-up, and commercialization;

• to obtain additional capital to support and expand our operations;

• to satisfy the requirements for quality and safety in developing and commercializing our products; and

• to market our products to achieve acceptance and use by the medical community.

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If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to delay, reduce, or terminate our research and development programs and preclinical studies or clinical trials, if any, delay or cease our efforts to build our commercial capabilities, limit strategic opportunities, or undergo reductions in our workforce or other corporate restructuring activities. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish development or commercialization rights to some of our technologies or product candidates that we would otherwise pursue on our own. We do not expect to realize revenue from product sales or royalties in the foreseeable future, if at all, and milestone payments, if any, are based on third-party determinations and/or events outside our control. Our revenue sources currently are, and will remain, limited unless and until our product candidates are clinically tested, approved for commercialization, and successfully marketed. To date, we have financed our operations primarily through the sale of securities, research collaborations and license agreements, debt financings, and credit and loan facilities. We will be required to seek additional funding in the future and intend to do so through a combination of public or private equity offerings, debt financings, and research collaborations and license agreements. Our ability to raise additional funds will depend on financial, economic, and other factors, many of which are beyond our control. For example, a number of factors, including the timing and outcomes of our clinical activities, our status as a smaller reporting company under SEC regulations, as well as conditions in the global financial markets, may present significant challenges to accessing the capital markets at a time when we would like or require, and at an increased cost of capital. Additional funds may not be available to us on acceptable terms or at all. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution, and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of equity securities receive any distribution of corporate assets.

We have a history of operating losses; we expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability, which could result in a decline in the market value of our common stock.

We are a biopharmaceutical company with a limited operating history focused on the discovery and development of treatments based on the emerging therapeutic modality RNAi, a biological process in which RNA molecules inhibit gene expression. Since our inception in October 2006, we have devoted our resources to the development of RNAi molecules and delivery technologies. We have had significant operating losses since our inception. As of September 30, 2019, we had an accumulated deficit of $485.6 million. For the nine months ended September 30, 2019 and for the years ended December 31, 2018, 2017, and 2016, our net loss attributable to common stockholders was $80.8 million, $88.9 million, $80.3 million, and $59.5 million, respectively. Substantially all of our operating losses have resulted from expenses incurred in connection with our research and development programs, from general and administrative costs associated with our operations, and, prior to 2019, litigation expenses associated with the Alnylam Pharmaceuticals, Inc. (“Alnylam”) litigation settled in April 2018. Our technologies and product candidates are in early stages of development, and we are subject to the risks of failure inherent in the development of product candidates based on novel technologies.

We have not generated, and do not expect to generate, any revenue from product sales for the foreseeable future, and unless we enter into new significant collaboration agreements with significant upfront payments, we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies and clinical trials, and the regulatory approval process for product candidates. The amount of future losses is uncertain. Our ability to achieve profitability, if ever, will depend on, among other things, us or our existing collaborators, or any future collaborators, successfully developing product candidates, obtaining regulatory approvals to market and commercialize product candidates, manufacturing any approved products on commercially reasonable terms, establishing a sales and marketing organization or suitable third-party alternatives for any approved product, and raising sufficient funds to finance business activities. If we or our existing collaborators, or any future collaborators, are unable to develop and commercialize one or more of our product candidates or if sales revenue from any product candidate that receives approval is insufficient, we will not achieve profitability, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.

We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

• variations in the level of expense related to our product candidates or future development programs;

• delays in enrolling subjects in, initiating, conducting, or releasing results of clinical trials, or the addition or termination of clinical trials or funding support by us, our existing collaborators, or any future collaborator or licensor;

• the timing of the release of results from any clinical trials conducted by us or our collaborators or licensors;

• our execution of any collaboration, licensing, or similar arrangement, and the timing of payments we may make or receive under such existing or future arrangements or the termination or modification of any such existing or future arrangements;

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• any intellectual property infringement or misappropriation lawsuit or opposition, interference, re-examination, post-grant review, inter partes review, nullification, derivation action, or cancellation proceeding in which we may become involved;

• additions and departures of key personnel;

• strategic decisions by us and our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments, or changes in business strategy;

• if any of our product candidates receive regulatory approval, market acceptance and demand for such product candidates;

• delays in engagement of our third-party manufacturers for our product candidates or their failure to execute on our manufacturing requirements or perform in accordance with current good manufacturing practices (“cGMP”);

• timing of regulatory decisions and regulatory developments affecting our product candidates or those of our competitors;

• disputes concerning patents, proprietary rights, or license and collaboration agreements that negatively impact our receipt of milestone payments or royalties or require us to make significant payments arising from licenses, settlements, adverse judgments, or ongoing royalties;

• changes in general market and economic conditions; and

• changes in tax laws.

If our quarterly operating results fluctuate or fall below the expectations of investors or securities analysts, the price of our common stock could fluctuate or decline substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Our approach to the discovery and development of innovative therapeutic treatments based on novel technologies is unproven and may not result in marketable products.

We plan to develop subcutaneously delivered RNAi-based pharmaceuticals using our GalXC RNAi platform for the treatment of rare diseases involving the liver and for other therapeutic areas involving the liver such as chronic liver diseases, as well as cardiovascular diseases and viral infectious diseases. We believe that product candidates identified with our drug discovery and delivery platform may offer an improved therapeutic approach to small molecules and monoclonal antibodies, as well as several advantages over earlier generation RNAi molecules. However, the scientific research that forms the basis of our efforts to develop product candidates is relatively new. The scientific evidence to support the feasibility of developing therapeutic treatments based on RNAi and GalXC is both preliminary and limited.

Relatively few product candidates based on RNAi have been tested in animals or humans, and a number of clinical trials conducted by other companies using RNAi technologies have not been successful. We may discover that GalXC does not possess certain properties required for a drug to be safe and effective, such as the ability to remain stable in the human body for the period of time required for the drug to reach the target tissue or the ability to cross the cell wall and enter into cells within the target tissue for effective delivery. We currently have only limited data, and no conclusive evidence, to suggest that we can introduce these necessary drug-like properties into GalXC. We may spend substantial funds attempting to introduce these properties and may never succeed in doing so. In addition, product candidates based on GalXC may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies. Even if product candidates, such as DCR‑PHXC, DCR-HBVS, and DCR-A1AT, have successful results in animal studies, they may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective, or harmful ways. As a result, we may never succeed in developing a marketable product, we may not become profitable, and the value of our common stock will decline.

Further, the United States (“U.S.”) Food and Drug Administration (“FDA”) has relatively limited experience with RNAi or GalXC-based therapeutics. We and our current collaborators, or any future collaborators, may never receive approval to market and commercialize any product candidate. Even if we or a collaborator obtain regulatory approval, the approval may be for disease indications or patient populations that are not as broad as we intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We or a collaborator may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to post-marketing testing requirements to maintain regulatory approval. If our technologies based on GalXC prove to be ineffective, unsafe, or commercially unviable, our entire platform and pipeline would have little, if any, value, which would have a material adverse effect on our business, financial condition, results of operations, and prospects.

The market may not be receptive to our product candidates based on a novel therapeutic modality, and we may not generate any future commercial revenue from the sale or licensing of product candidates.

Even if approval is obtained for a product candidate, we may not generate or sustain revenue from sales of the product due to numerous factors, including whether the product can be sold at a competitive price and otherwise is accepted in the market. The

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product candidates that we are developing are based on new technologies and therapeutic approaches. Market participants with significant influence over acceptance of new treatments, such as physicians and third-party payors, may not adopt a treatment based on GalXC technology, and we may not be able to convince the medical community and third-party payors, including health insurers, to accept and use, or to provide favorable coverage of or reimbursement for, any product candidates developed by us or our existing collaborator or any future collaborators. Market acceptance of our product candidates will depend on, among other factors:

• the timing of our receipt of any marketing and commercialization approvals and those of our competitors;

• the terms of any approvals and the countries in which approvals are obtained;

• the safety and efficacy of our product candidates;

• the prevalence and severity of any adverse side effects associated with our product candidates;

• limitations or warnings contained in any labeling approved by the FDA or other regulatory authority;

• relative convenience and ease of administration of our product candidates;

• the willingness of physicians and patients to accept any new methods of administration;

• the success of our physician education programs;

• the availability of adequate government and third-party payor coverage and reimbursement;

• the pricing of our products, particularly as compared to alternative treatments and the recommendations of public or private pricing review agencies or organizations regarding our products;

• our ability to market and sell our products in compliance with applicable law; and

• availability of alternative effective treatments for the disease indications our product candidates are intended to treat and the relative risks, benefits, and costs of those treatments.

With our focus on the emerging therapeutic modality RNAi, these risks may increase to the extent the market becomes more competitive or less favorable to this approach. Additional risks apply to any disease indications we pursue which are for rare diseases. Because of the small patient population for a rare disease, if pricing is not approved or accepted in the market at an appropriate level for an approved rare disease product, such drug may not generate enough revenue to offset costs of development, manufacturing, marketing, and commercialization, despite any benefits received from our efforts to obtain orphan drug designation by regulatory agencies in major commercial markets, such as the U.S., the European Union (“EU”), and Japan. These benefits may include market exclusivity, assistance in clinical trial design, or a reduction in user fees or tax credits related to development expense. Market size is also a variable in disease indications that are not classified as rare. Our estimates regarding potential market size for any indication may be materially different from what we discover to exist if we ever get to the point of product commercialization, which could result in significant changes in our business plan and have a material adverse effect on our business, financial condition, results of operations, and prospects.

If a product candidate that has orphan drug designation subsequently receives the first FDA approval for the indication for that designation, the product candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, could also block the approval of one of our product candidates for seven years if a competitor obtains approval of the same drug for the same indication as defined by the FDA.

Even if we, or any future collaborators, obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective, or makes a major contribution to patient care.

On August 3, 2017, the Congress passed the FDA Reauthorization Act of 2017 (“FDARA”). FDARA, among other things, codified the FDA’s preexisting regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. The law reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

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As in the U.S., we may apply for designation of a product candidate as an orphan drug for the treatment of a specific indication in the EU before the application for marketing authorization is made. For example, in August 2018, the European Medicines Agency’s Committee for Orphan Medicinal Products designated DCR‑PHXC as an orphan medicinal product for the treatment of PH in the EU. Sponsors of orphan drugs in the EU can enjoy economic and marketing benefits, including up to 10 years of market exclusivity for the approved indication. During such period, marketing authorization applications for a “similar medicinal product” will not be accepted, unless another applicant can show that its product is safer, more effective, or otherwise clinically superior to the orphan-designated product. In the EU, a “similar medicinal product” is a medicinal product containing a similar active substance or substances as contained in a currently authorized orphan medicinal product, and which is intended for the same therapeutic indication. The respective orphan designation and exclusivity frameworks in the U.S. and in the EU are subject to change, and any such changes may affect our ability to obtain U.S. or EU orphan designations in the future.

Our product candidates are in early stages of development and may fail or suffer delays that materially and adversely affect their commercial viability.

We currently have no products on the market and our product candidates are in varied stages of development. Our ability to achieve and sustain profitability depends on obtaining regulatory approvals, including ethics committee approval, to conduct clinical trials at particular sites, successfully completing our clinical trials, and successfully commercializing our product candidates, either alone or with third parties, such as our collaborators. Before obtaining regulatory approval for the commercial distribution of our product candidates, we or a collaborator must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical testing and clinical trials are expensive, difficult to design and implement, can take many years to complete, and are uncertain as to outcome. The start or end of a clinical study is often delayed or halted due to changing regulatory requirements, manufacturing challenges, required clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative drug or required prior therapy, clinical outcomes, and financial constraints. For instance, delays or difficulties in patient enrollment or difficulties in retaining trial participants can result in increased costs, longer development times, or termination of a clinical trial. Clinical trials of a new product candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease the product candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, the age and condition of the patients, the stage and severity of disease, the nature of the protocol, the proximity of patients to clinical sites, and the availability of effective treatments for the relevant disease. Thus, enrollment of sufficient patients can be challenging for rare disease drug development programs where patient populations are inherently small in size, particularly when there are competitive clinical trials.

A product candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for product candidates is high due to many factors, including scientific feasibility, safety, efficacy, and changing standards of medical care. The results from preclinical testing or early clinical trials of a product candidate may not predict the results that will be obtained in later phase clinical trials of the product candidate. We, the FDA or other applicable regulatory authorities, an individual Institutional Review Board (“IRB”) with respect to its institution, or an independent ethics committee may suspend clinical trials of a product candidate at any time for various reasons, including a belief that individuals participating in such trials are being exposed to unacceptable health risks or adverse side effects. We may not have the financial resources to continue development of, or to enter into collaborations for, a product candidate if we experience any problems or other unforeseen events that delay or prevent regulatory approval of, or our ability to commercialize, product candidates, including:

• negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;

• serious and unexpected drug-related side effects experienced by participants using our products in our clinical trials or by individuals using drugs similar to our product candidates;

• delays in submitting INDs or comparable foreign applications or delays or failures in obtaining the necessary approvals from regulators or IRBs to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;

• conditions imposed by the FDA or comparable foreign authorities, such as the European Medicines Agency (“EMA”), regarding the scope or design of our clinical trials;

• competition for subjects in competitive clinical trials and delays in enrolling individuals in clinical trials;

• high drop-out rates of study participants;

• inadequate supply or quality of drug product or product candidate components or materials or other supplies necessary for the conduct of our clinical trials;

• greater than anticipated clinical trial costs;

• poor effectiveness of our product candidates during clinical trials;

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• unfavorable FDA or other regulatory agency inspection and review of a clinical trial site;

• failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;

• delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our technology in particular; and

• varying interpretations of data by the FDA and foreign regulatory agencies.

Breakthrough Therapy Designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

The FDA has granted Breakthrough Therapy Designation to DCR-PHXC for the treatment of patients with primary hyperoxaluria type 1 (“PH1”). A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA will work closely with us to provide guidance on subsequent development of DCR-PHXC for treatment of PH1 to help us design and conduct a development program as efficiently as possible. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval and priority review.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe a product candidate we develop meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of Breakthrough Therapy Designation may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if a product candidate qualifies as a breakthrough therapy, the FDA may later decide that the drug no longer meets the conditions for qualification and rescind the Breakthrough Therapy Designation. If the Breakthrough Therapy Designation for DCR-PHXC for treatment of PH1 is rescinded, submission of portions of the NDA will not be permitted under this program.

We are dependent on our collaboration partners for the successful development of product candidates and, therefore, are subject to the efforts of these partners and our ability to successfully collaborate with these partners.

We have entered into collaboration agreements with Lilly, Alexion, and BI (our “Collaboration Partners”) providing joint development of certain RNAi therapies. The success of our collaborations with our Collaboration Partners and the realization of the milestone and royalty payments under the collaboration agreements depends upon the efforts of our Collaboration Partners, any of which may not be successful in obtaining approvals for the product candidates developed under the collaboration or in marketing, or arranging for necessary supply, manufacturing, or distribution relationships for, any approved products. Our Collaboration Partners may change their strategic focus or pursue alternative technologies in a manner that results in reduced, delayed, or no additional payments to us under the collaboration agreements. Our Collaboration Partners have a variety of marketed products and product candidates under collaboration with other companies, possibly including some of our competitors, and our Collaboration Partners’ own corporate objectives may not be consistent with our interests. If our Collaboration Partners fail to develop, obtain regulatory approval for, or ultimately commercialize any product candidate under our collaborations, or if any of our Collaboration Partners terminates their applicable collaboration, our business, financial condition, results of operations, and prospects could be materially and adversely affected. Each of our collaboration agreements is terminable by the applicable collaboration partner any time at will, subject to compliance with applicable notice periods. In addition, if we have a dispute or enter into litigation with any of our Collaboration Partners in the future, it could delay development programs, create uncertainty as to ownership of intellectual property rights, distract management from other business activities, and generate substantial expense.

If third parties on which we depend to conduct our preclinical studies, or any future clinical trials, do not perform as contractually required, fail to satisfy regulatory or legal requirements, or miss expected deadlines, our development program could be delayed with materially adverse effects on our business, financial condition, results of operations, and prospects.

We rely on third-party clinical investigators, contract research organizations (“CROs”), clinical data management organizations, and consultants to design, conduct, supervise, and monitor preclinical studies of our product candidates and will do the same for any clinical trials. Because we rely on third parties and do not have the ability to conduct preclinical studies or clinical trials independently, we have less control over the timing, quality, compliance, and other aspects of preclinical studies and clinical trials than we would if we conducted them on our own. These investigators, CROs, and consultants are not our employees and we have limited

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control over the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs. The third parties with which we contract might not be diligent, careful, compliant, or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.

If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials, or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial as well as applicable laws and regulations. The FDA and certain foreign regulatory authorities, such as the EMA, require preclinical studies to be conducted in accordance with applicable good laboratory practices and clinical trials to be conducted in accordance with applicable FDA regulations and applicable good clinical practices, including requirements for conducting, recording, and reporting the results of preclinical studies and clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of clinical trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Any such event could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Because we rely on third-party manufacturing and supply partners, our supply of research and development, preclinical studies, and clinical trial materials may become limited or interrupted or may not be of satisfactory quantity or quality.

We rely on third-party supply and manufacturing companies and organizations to supply the materials, components, and manufacturing services for our research and development, preclinical study, and clinical trial drug supplies. We do not own or lease manufacturing facilities or supply sources for such components and materials. Our manufacturing requirements include oligonucleotides and custom amidites, some of which we procure from a single source supplier on a purchase order basis. In addition, for each product candidate, we typically contract with only one manufacturer for the formulation and filling of drug product. There can be no assurance that our supply of research and development, preclinical study, and clinical trial drugs and other materials will not be limited, interrupted, restricted in certain geographic regions, or of satisfactory quality, or continue to be available at acceptable prices. In particular, any replacement of our drug substance manufacturer could require significant effort and expertise because there may be a limited number of qualified replacements.

If we are at any time unable to provide an uninterrupted supply of our product candidates or, following regulatory approval, any products to patients, we may lose patients, physicians may elect to utilize competing therapeutics instead of our products, and our clinical trials may be adversely affected, which could materially and adversely affect our clinical trial outcomes.

The manufacturing process for a product candidate is subject to FDA and foreign regulatory authority review. Suppliers and manufacturers must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory standards such as cGMP. In the event that any of our suppliers or manufacturers fails to comply with such requirements or to perform its obligations regarding quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may experience shortages resulting in delayed shipments, supply constraints and/or stock-outs of our products, be forced to manufacture the materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills or technology to another third party and a feasible alternative may not exist. These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our product candidates. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.

We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidates successfully. Our or a third party’s failure to execute on our manufacturing requirements could adversely affect our business in a number of ways, including:

• an inability to initiate or continue preclinical studies or clinical trials of product candidates under development;

• delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates;

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• lack of or loss of the cooperation of a collaborator;

• subjecting manufacturing facilities of our product candidates to additional inspections by regulatory authorities;

• requirements to cease distribution or to recall batches of our product candidates; and

• in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.

We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to develop and commercialize product candidates, impact our cash position, increase our expense, and present significant distractions to our management.

From time to time, we may consider strategic transactions, such as collaborations, acquisitions of companies, asset purchases, and out- or in-licensing of product candidates or technologies. In addition to our current collaborations with BI, Alexion, and Lilly, we will evaluate and, if strategically attractive, seek to enter into additional collaborations, including with major biopharmaceutical, biotechnology, or pharmaceutical companies. The competition for collaborators is intense, and the negotiation process is time-consuming and complex. Any new collaboration may be on terms that are not optimal for us, and we may be unable to maintain any existing or future collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product do not meet expectations, or the collaborator terminates the collaboration. Any such collaboration, or other strategic transaction, may require us to incur non-recurring or other charges, increase our near- and long-term expenditures, and pose significant integration or implementation challenges or disrupt our management or business. These transactions entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business, and diversion of our management’s time and attention in order to obtain and manage a collaboration or develop acquired products, product candidates, or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition, or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business, deterioration of relationships with key suppliers, manufacturers, or customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business. Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and have a material adverse effect on our business, results of operations, financial condition, and prospects. Conversely, failure to enter any collaboration or other strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidates and have a negative impact on the competitiveness of any product candidate that reaches market.

We face competition from entities that have developed or may develop product candidates for our target disease indications, including companies developing novel treatments and technology platforms based on modalities and technology similar to ours. If these companies develop technologies or product candidates more rapidly than we do or their technologies, including delivery technologies, are more effective, our ability to develop and successfully commercialize product candidates may be adversely affected.

The development and commercialization of drugs is highly competitive. We compete with a variety of multinational pharmaceutical companies and specialized biotechnology companies, as well as technology being developed at universities and other research institutions. Our competitors have developed, are developing, or may develop product candidates and processes competitive with our product candidates, some of which may become commercially available before any of our product candidates. We believe that a significant number of products are currently under development and may become commercially available in the future for the treatment of conditions for which we may try to develop product candidates.

Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments that enter the market. We are aware of many companies that are working in the field of RNAi therapeutics, including major pharmaceutical companies and a number of biopharmaceutical companies including Alnylam, Arrowhead Pharmaceuticals, Inc. (“Arrowhead”), and Arbutus Biopharma Corporation (“Arbutus”).

We also compete with companies working to develop antisense and other RNA-based drugs including Ionis Pharmaceuticals, Akcea Therapeutics, Inc., Moderna, Inc., and Wave Life Sciences Ltd. Like RNAi therapeutics, antisense drugs target mRNA with the objective of suppressing the activity of specific genes. The development of antisense drugs is more advanced than that of RNAi therapeutics with several antisense therapies currently approved, and antisense technology may become the preferred technology for products that target mRNAs.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we have. Some of our competitors may be in the lead in the development of competitive products. If we successfully obtain approval for any product candidate, we will face competition based on many different factors, including safety and

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effectiveness, ease with which our products can be administered, the timing of product entry into the market, the extent to which patients and physicians accept relatively new routes of administration, timing and scope of regulatory approvals, availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage, and patent position of our products. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our product candidates. Competitive products that enter the market before our products could capture significant market share and create barriers to entry to our products. Competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan.

Beyond RNA-based platform competition, there are a number of potential competitors working to develop therapeutics in our areas of research, including Oxthera AB, Allena Pharmaceuticals, Inc., Arbutus, F. Hoffman-LaRoche, Ltd, Vertex Pharmaceuticals Incorporated, Assembly Biosciences, Inc., Spring Bank Pharmaceuticals, Inc., Gilead Sciences, Inc., and GlaxoSmithKline plc.

Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.

Our success largely depends on the continued service of key management and other specialized personnel, including: Douglas M. Fambrough, III, Ph.D., our chief executive officer; Bob D. Brown, Ph.D., our chief scientific officer; Ralf Rosskamp, M.D., our chief medical officer; John B. Green, our chief financial officer; James B. Weissman, our chief operating officer; and Rob Ciappenelli, our chief commercial officer. The loss of one or more members of our management team or other key employees or advisors could delay our research and development programs and materially harm our business, financial condition, results of operations, and prospects. The relationships that our key managers have cultivated within our industry make us particularly dependent upon their continued employment with us. We are dependent on the continued service of our technical personnel because of the highly complex nature of our product candidates and technologies and the specialized nature of the regulatory approval process. Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us at any time without penalty. We do not maintain key person life insurance policies on any of our management team members or key employees. Our future success will depend in large part on our continued ability to attract and retain other highly qualified scientific, technical, and management personnel, as well as personnel with expertise in clinical testing, manufacturing, governmental regulation, and commercialization. We face competition for personnel from other companies, universities, public and private research institutions, government entities, and other organizations.

Interim and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available or as additional analyses are conducted and as the data are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Material adverse changes between preliminary or interim data and final data could significantly harm our business prospects.

If our product candidates advance into clinical trials, we may experience difficulties in managing our growth and expanding our operations.

We have limited experience in drug development and with clinical trials of product candidates. As our product candidates enter and advance through preclinical studies and any clinical trials, we will need to expand our development, regulatory, and manufacturing capabilities or contract with other organizations to provide these capabilities for us. In the future, we expect to have to manage additional relationships with collaborators, contract research organizations, clinical trial sites, investigators, suppliers, and other firms. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial, and management controls, reporting systems, and procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.

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We or our collaborative partners may conduct clinical trials for product candidates outside of the U.S., and the FDA and comparable foreign regulatory authorities may not accept data from such trials.

We or our collaborative partners may in the future choose to conduct one or more clinical trials outside the U.S., including in Europe. For instance, our clinical trials of DCR-PHXC and DCR-HBVS each include subjects outside of the U.S. and our clinical trials of DCR-A1AT plan to include subjects outside of the U.S. The acceptance of study data from clinical trials conducted outside of the U.S. or another jurisdiction by the FDA or comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the U.S., the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; and (ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory authorities have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from trials conducted outside of the U.S. or the applicable international jurisdiction for which we plan to enroll subjects outside of the U.S. If the FDA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in product candidates that we may develop not receiving approval or clearance for commercialization in the applicable jurisdiction.

If any of our product candidates are approved for marketing and commercialization and we are unable to develop sales, marketing, and distribution capabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we will be unable to successfully commercialize any such future products.

We currently have limited sales, marketing, or distribution capabilities or experience. If any of our product candidates are approved, we will need to significantly expand and implement sales, marketing, and distribution capabilities to commercialize such products, which would be expensive and time-consuming, or enter into collaborations with third parties to perform these services. If we decide to market our products directly, we will need to commit significant financial, legal, and managerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration, and compliance capabilities. If we rely on third parties with such capabilities to market our approved products or decide to co-promote products with collaborators, we will need to establish and maintain marketing and distribution arrangements with third parties, and there can be no assurance that we will be able to enter into such arrangements on acceptable, compliant terms, or at all. In entering into third-party marketing or distribution arrangements, any commercial revenue we receive will depend upon the efforts of the third parties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining market acceptance of any approved product. If we are not successful in commercializing any product approved in the future, either on our own or through third parties, our business, financial condition, results of operations, and prospects could be materially and adversely affected.

If we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercialization approvals we may receive and subject us to other penalties that could materially harm our business.

The Company, our product candidates, our suppliers, and our contract manufacturers, distributors, and contract testing laboratories are subject to extensive regulation by governmental authorities in the EU, the U.S., and other countries, with the regulations differing from country to country.

Even if we receive marketing and commercialization approval of a product candidate, we and our third-party services providers will be subject to continuing regulatory requirements, including a broad array of regulations related to establishment registration and product listing, manufacturing processes, risk management measures, quality and pharmacovigilance systems, post-approval clinical studies, labeling, advertising and promotional activities, record keeping, distribution, adverse event reporting, import and export of pharmaceutical products, pricing, sales and marketing, and fraud and abuse requirements. We are required to submit safety and other post-market information and reports and are subject to continuing regulatory review, including in relation to adverse patient experiences with the product and clinical results that are reported after a product is made commercially available, both in the U.S. and any foreign jurisdiction in which we seek regulatory approval. The FDA and certain foreign regulatory authorities, such as the EMA, have significant post-market authority, including the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials to evaluate safety risks related to the use of a product or to require withdrawal of the product from the market. The FDA also has the authority to require a risk evaluation and mitigation strategy (“REMS”) plan after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug. The EMA now routinely requires risk management plans (“RMPs”) as part of the marketing authorization application process, and such plans must be continually modified and updated throughout the lifetime of the product as new information becomes available. In addition, for nationally authorized medicinal products, the relevant governmental authority of any EU member state can request an RMP whenever there is a concern about a risk affecting the benefit risk balance of the product. The manufacturer and manufacturing facilities we use to make a future product, if any, will also be subject to periodic review and inspection by the FDA and other regulatory agencies,

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including for continued compliance with cGMP requirements. The discovery of any new or previously unknown problems with our third-party manufacturers, manufacturing processes, or facilities may result in restrictions on the product, manufacturer, or facility, including withdrawal of the product from the market. If we rely on third-party manufacturers, we will not have control over compliance with applicable rules and regulations by such manufacturers. Any product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review. If we or our collaborators, manufacturers, or service providers fail to comply with applicable continuing regulatory requirements in the U.S. or foreign jurisdictions in which we seek to market our products, we or they may be subject to, among other things, fines, warning and untitled letters, clinical holds, delay or refusal by the FDA or foreign regulatory authorities to approve pending applications or supplements to approved applications, suspension, refusal to renew or withdrawal of regulatory approval, product recalls, seizures or administrative detention of products, refusal to permit the import or export of products, operating restrictions, inability to participate in government programs including Medicare and Medicaid, and total or partial suspension of production or distribution, injunction, restitution, disgorgement, debarment, civil penalties, and criminal prosecution.

We face risks arising from the results of the public referendum held in the United Kingdom and its membership in the European Union.

We have a subsidiary located in the United Kingdom (the “UK”), which we established in order to allow us to conduct clinical trials in EU member states. On June 23, 2016, the UK held a referendum in which voters approved an exit from the EU, commonly referred to as “Brexit.” The withdrawal of the UK from the EU will take effect either on the effective date of the withdrawal agreement or, in the absence of agreement, two years after the UK provides a notice of withdrawal pursuant to the EU Treaty. On March 29, 2017, the Prime Minister of the UK delivered a formal notice of withdrawal to the EU. On May 22, 2017, the Council of the EU (the “Council”) adopted a decision authorizing the opening of Brexit negotiations with the UK and formally nominated the European Commission as EU negotiator. The Council also adopted negotiating directives for the talks, which began on April 18, 2018. Because of the regulatory uncertainty surrounding Brexit, we have established a subsidiary in Ireland for ongoing regulatory initiatives in the EU.

The ongoing developments following the UK’s public referendum vote to exit from the EU could cause disruptions to and create uncertainty surrounding our business, including affecting our relationships with existing and potential suppliers, manufacturers, and other third parties. Negotiations have commenced to determine the terms of the UK’s future relationship with the EU, including the terms of trade between the UK and the EU, and the UK’s current deadline to complete its exit from the EU is uncertain. The effects of Brexit will depend upon any agreements the UK makes to retain access to EU markets either during a transitional period or more permanently. The measures could potentially have corporate structural consequences, adversely change tax benefits or liabilities in these or other jurisdictions, and could disrupt some of the markets and jurisdictions in which we operate. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. In addition, the announcement of Brexit has caused significant volatility in global stock markets and currency exchange rate fluctuations, including the strengthening of the USD against some foreign currencies, and the Brexit negotiations may continue to cause significant volatility. The progress and outcomes of Brexit negotiations also may create global economic uncertainty. Any of these effects of Brexit, among others, could materially adversely affect the business, business opportunities, and financial condition of our company.

Price controls imposed in foreign markets and downward pricing pressure in the U.S. may adversely affect our future profitability.

In some countries, particularly member states of the EU, the pricing of prescription drugs may be subject to governmental control, at national as well as at regional levels. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, in the U.S. and elsewhere, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic, and regulatory developments may further complicate pricing and reimbursement negotiations, and pricing negotiations may continue after coverage or reimbursement has been obtained. Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our RNAi therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, financial condition, results of operations, or prospects could be adversely affected.

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Our business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could harm our business, financial condition, results of operations, or prospects.

Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing, and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in an investigation by certain regulatory authorities, such as the FDA or foreign regulatory authorities, of the safety and effectiveness of our products, our manufacturing processes and facilities, or our marketing programs and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend related litigation, a diversion of management’s time and our resources, substantial monetary awards to clinical trial participants or patients, and a decline in our stock price. We currently have product liability insurance that we believe is appropriate for our stage of development and may need to obtain higher levels prior to marketing any of our product candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have a material adverse effect on our business.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include, but is not limited to, intentional failures to comply with FDA or U.S. healthcare laws and regulations or applicable laws, regulations, guidance, or codes of conduct set by foreign governmental authorities or self-regulatory industry organizations, provide accurate information to any governmental authorities such as the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws, regulations, guidance, and codes of conduct intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws, regulations, guidance, and codes of conduct may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, business or conduct involving healthcare professionals, and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions, including debarment or disqualification of those employees from participation in FDA-regulated activities, and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and any precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, regulations, guidance, or codes of conduct. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines, exclusion from government programs, or other sanctions.

Our internal computer systems, or those of third parties with which we do business, including our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs or the theft of Company or patient confidential information.

Despite the implementation of security measures, our internal computer systems and those of third parties with which we do business, including our CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. Such events, as well as power outages, natural disasters (including extreme weather), terrorist attacks, phishing or ransomware attacks, or other similar events, could cause interruptions of our operations. For instance, the loss of preclinical data or data from any future clinical trial involving our product candidates could result in delays in our development and regulatory filing efforts and significantly increase our costs. Certain data breaches must also be reported to affected individuals and the government, and in some cases to the media, under provisions of the U.S. federal Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the European Union Data Protection Directive, and financial penalties may also apply. To the extent that any disruption or security breach were to result in a loss of, or damage to, internal computer systems, or those used by our CROs or other independent organizations, advisors, contractors or consultants, our data, or inappropriate disclosure of confidential or proprietary information of the Company or patients, we could incur liability, reputational harm, and the development of our product candidates could be delayed.

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If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research, development, and manufacturing involve the use of hazardous materials and various chemicals. We maintain quantities of various flammable and toxic chemicals in our facilities in Cambridge, Massachusetts, that are required for our research, development, and manufacturing activities. We are subject to federal, state, and local laws and regulations governing the use, manufacture, storage, handling, and disposal of these hazardous materials. We believe our procedures for storing, handling, and disposing these materials in our Cambridge facilities comply with the relevant guidelines of Cambridge, the Commonwealth of Massachusetts, and the Occupational Safety and Health Administration of the U.S. Department of Labor. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health, and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens, and the handling of animals and biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials. Additional federal, state, and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.

Our information technology systems could face serious disruptions that could adversely affect our business.

Despite the use of off-site (cloud-based) information storage systems for certain key corporate information, our internal information technology and other infrastructure systems, including corporate firewalls, servers, leased lines, and connection to the Internet, face the risk of systemic failure that could disrupt our operations. A significant disruption in the availability of our information technology and other internal infrastructure systems could cause interruptions in our collaborations and delays in our research and development work. While we qualify and seek to ensure our cloud-based information systems have appropriate cybersecurity and operations controls, we are dependent on third parties to assure their operations meet our information technology requirements.

Our current operations are largely concentrated in one location and any events affecting this location may have material adverse consequences.

Our current operations are carried out primarily in our facilities located in Cambridge, Massachusetts. Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure, or other natural or manmade accidents, or incidents that prevent us from fully utilizing the facilities, may have a material adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to these facilities may result in increased costs, delays in the development of our product candidates, or interruption of our business operations. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure you that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed. Any business interruption may have a material adverse effect on our business, financial position, results of operations, and prospects.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred substantial losses during our history, do not expect to become profitable for the foreseeable future, and may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change by value in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be further limited. We are in the process of performing an analysis on whether we have experienced any ownership changes in the past. Our preliminary analysis indicates that we may have experienced ownership changes in November 2007, October 2010, February 2014, and March 2018. While this analysis is still preliminary, it is likely that our net operating losses are subject to such limitation. As of September 30, 2019, we had significant U.S. federal and Massachusetts net operating loss carryforwards that could be reduced or lost if we have or do experience an ownership change, which could have an adverse effect on our business, financial position, results of operations, and prospects.

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The investment of our cash, cash equivalents, and held-to-maturity investments is subject to risks which may cause losses and affect the liquidity of these investments.

As of September 30, 2019, we had $312.7 million in cash, cash equivalents, and held-to-maturity investments. We historically have invested substantially all of our available cash and cash equivalents in corporate bonds, commercial paper, securities issued by the U.S. government, certificates of deposit, and money market funds meeting the criteria of our investment policy, which is focused on the preservation of our capital. These investments are subject to general credit, liquidity, market, and interest rate risks. For example, the impact of U.S. sub-prime mortgage defaults in recent years affected various sectors of the financial markets and caused credit and liquidity issues. We may realize losses in the fair value of these investments or a complete loss of these investments, which would have a negative effect on our consolidated financial statements.

In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associated with our investment portfolio may have an adverse effect on our results of operations, liquidity, and financial condition.

Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our compensation policies.

Accounting methods and policies for public companies and biopharmaceutical companies, including policies governing revenue recognition, research and development and related expenses, and accounting for stock-based compensation, are subject to review, interpretation, and guidance from our auditors and relevant accounting authorities, including the SEC. Changes to accounting methods or policies, or interpretations thereof, may require us to reclassify, restate, or otherwise change or revise our consolidated financial statements, including those contained in our Annual Reports on Form 10-K.

Risks Related to Intellectual Property

If we are not able to obtain and enforce patent protection for our technologies or product candidates, development and commercialization of our product candidates may be adversely affected.

Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, for our product candidates, methods used to manufacture our product candidates and methods for treating patients using our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights, and to operate without infringing upon the proprietary rights of others. There can be no assurance that an issued patent will remain valid and enforceable in a court of law through the entire patent term. Should the validity of a patent be challenged, the legal process associated with defending the patent may be costly and time consuming. Issued patents can be subject to oppositions, interferences, post-grant proceedings, and other third-party challenges that can result in the revocation of the patent or limit patent claims such that patent coverage lacks sufficient breadth to protect subject matter that is commercially relevant. Competitors may be able to circumvent our patents. Development and commercialization of pharmaceutical products can be subject to substantial delays and it is possible that at the time of commercialization any patent covering the product will have expired or will be in force for only a short period of time thereafter.

As of September 30, 2019, our worldwide patent estate, not including the patents and patent applications that we have licensed from third parties, included 83 issued patents or allowed patent applications and 136 pending patent applications supporting commercial development of our RNAi molecules and delivery technologies. We may not be able to apply for patents on certain aspects of our product candidates or delivery technologies in a timely fashion or at all. Our existing issued and granted patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing products and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, that any of our issued or granted patents will not later be found to be invalid or unenforceable, or that any issued or granted patents will include claims that are sufficiently broad to cover our product candidates or delivery technologies or to provide meaningful protection from our competitors. Moreover, the patent position of biotechnology and pharmaceutical companies can be highly uncertain because it involves complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology and product candidates are covered by valid and enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially and adversely impact our position in the market.

The U.S. Patent and Trademark Office (“USPTO”) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in

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biotechnology and pharmaceutical patents. As such, we do not know the degree of future protection that we will have on our proprietary products and technology. While we will endeavor to protect our product candidates with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive, and sometimes unpredictable.

In addition, there are numerous recent changes to the patent laws and proposed changes to the rules of the USPTO which may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. The U.S. Supreme Court has ruled on several patent cases in recent years, some of which cases either narrow the scope of patent protection available in certain circumstances or weaken the rights of patent owners in certain situations. The 2013 decision by the U.S. Supreme Court in Association for Molecular Pathology v. Myriad Genetics, Inc. precludes a claim to a nucleic acid having a stated nucleotide sequence which is identical to a sequence found in nature and unmodified. We currently are not aware of an immediate impact of this decision on our patents or patent applications because we are developing nucleic acid products that are not found in nature. However, this decision has yet to be clearly interpreted by courts and by the USPTO. We cannot assure you that the interpretations of this decision or subsequent rulings will not adversely impact our patents or patent applications. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing U.S. patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period before or after allowance or grant, during which time third parties can raise objections against such initial grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked or may lose the allowed or granted claims altogether. Our patent risks include that:

• others may, or may be able to, make, use, or sell compounds that are the same as or similar to our product candidates but that are not covered by the claims of the patents that we own or license;

• we or our licensors, collaborators, or any future collaborators may not be the first to file patent applications covering certain aspects of our inventions;

• others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

• a third party may challenge our patents, and, if challenged, a court may not hold that our patents are valid, enforceable, and infringed;

• a third party may challenge our patents in various patent offices, and, if challenged, we may be compelled to limit the scope of our allowed or granted claims or lose the allowed or granted claims altogether;

• any issued patents that we own or have licensed from others may not provide us with any competitive advantages, or may be challenged by third parties;

• we may not develop additional proprietary technologies that are patentable;

• the patents of others could harm our business; and

• our competitors could conduct research and development activities in countries where we will not have enforceable patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.

Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation could be costly and licenses may be unavailable on commercially reasonable terms.

Research and development of RNAi-based therapeutics and other oligonucleotide-based therapeutics has resulted in many patents and patent applications from organizations and individuals seeking to obtain patent protection in the field. Our efforts are based on RNAi technology that we have licensed and that we have developed internally and own or co-own. We have chosen this approach to increase our likelihood of technical success and our freedom to operate. We have obtained grants and issuances of RNAi-based patents and have licensed other patents from third parties on exclusive and non-exclusive bases. The issued patents and pending patent applications in the U.S. and in key markets around the world that we own, co-own, or license claim many different methods, compositions, and processes relating to the discovery, development, manufacture, and commercialization of RNAi therapeutics. Specifically, we own, co-own, or have licensed a portfolio of patents, patent applications, and other intellectual property covering: (1) certain aspects of the structure and uses of RNAi molecules, including their manufacture and use as therapeutics, and RNAi-related mechanisms, (2) chemical modifications to RNAi molecules that improve their properties and suitability for therapeutic uses,

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(3) RNAi molecules directed to specific gene sequences and drug targets as treatments for particular diseases, and (4) delivery technologies, such as in the field of lipid nanoparticles and lipid nanoparticle formulation, and chemical modifications such as conjugation to targeting moieties.

The RNAi-related intellectual property landscape, including patent applications in prosecution where no definitive claims have yet issued, is still evolving, and it is difficult to conclusively assess our freedom to operate. Other companies are pursuing patent applications and possess issued patents broadly directed to RNAi compositions, methods of making and using RNAi, and to RNAi-related delivery and modification technologies. Our competitive position may suffer if patents issued to third parties cover our products, or our manufacture or uses relevant to our commercialization plans. In such cases, we may not be in a position to commercialize products unless we enter into a license agreement with the intellectual property right holder, if available, on commercially reasonable terms or successfully pursue litigation, opposition, interference, re-examination, post-grant review, inter partes review, nullification, derivation action, or cancellation proceeding to limit, nullify, or invalidate the third-party intellectual property right concerned. Even if we are successful in limiting, nullifying, or invalidating third-party intellectual property rights through such proceedings, we may incur substantial costs and could require significant time and attention of our personnel.

While we believe our intellectual property allows us to pursue our current development programs, the biological process of RNAi is a natural process and cannot be patented. Several companies in the space are pursuing alternate methods to exploit this phenomenon and have built their intellectual property around these methods. For example, Alnylam controls three patent families containing both pending patent applications and issued patents (e.g., U.S. Patent Numbers 8,853,384 and 9,074,213, and European Patent EP 1 352 061 B1) that pertain to RNAi. These are referred to in their corporate literature as the “Tuschl family” (e.g. patents and applications claiming priority to WO2002/044321, filed November 29, 2001, and their priority filings) and the “Kreutzer-Limmer family” (e.g., patents and applications claiming priority to WO 2002/044895, filed January 29, 2000, WO 2002/055693, filed January 9, 2002, and their priority filings). Both families contain patent applications still in prosecution, with the applicants actively seeking to extend the reach of this intellectual property in ways that might strategically impact our business. Additional areas of intellectual property pursued by Alnylam and others include oligonucleotide delivery-related technologies (such as conjugation to targeting moieties) and oligonucleotides directed to specific gene targets. In addition, Silence Therapeutics owns patents directed to certain chemical modifications of RNAi molecules, including U.S. Patent Number 9,222,092, with a priority date of August 5, 2002.

Patent applications in the U.S. and elsewhere are generally published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates or platform technology could have been filed by others without our knowledge. Additionally, pending claims in patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our product candidates, or the use of our product candidates. Third-party intellectual property right holders may also bring patent infringement claims against us. No such patent infringement actions have been brought against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve any future infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable, and time-consuming litigation, and may be prevented from or experience substantial delays in marketing our products. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We might also be forced to redesign product candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

As the field of RNAi therapeutics matures, patent applications are being processed by national patent offices around the world. There is uncertainty about which patents they will issue, and, if they do, as to when, to whom, and with what claims. It is likely that there will be significant litigation in the courts and other proceedings, such as interferences, re-examinations, oppositions, post-grant reviews, inter partes reviews, nullifications, derivation actions, or cancellation proceedings, in various patent offices relating to patent rights in the RNAi therapeutics field. In many cases, the possibility of appeal or opposition exists for either us or our opponents, and it may be years before final, unappealable rulings are made with respect to these patents in certain jurisdictions. The timing and outcome of these and other proceedings is uncertain and may adversely affect our business if we are not successful in defending the patentability and scope of our pending and issued patent claims or if third parties are successful in obtaining claims that cover our RNAi technology or any of our product candidates. In addition, third parties may attempt to invalidate our intellectual property rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our intellectual property rights. Our defense against any attempt by third parties to circumvent or invalidate our intellectual property rights could be costly to us, could require significant time and attention of our management, and could have a material adverse effect on our business and our ability to successfully compete in the field of RNAi therapeutics.

There are many issued and pending patents that claim aspects of oligonucleotide chemistry and modifications that we may need to apply to our therapeutic candidates. There are also many issued patents that claim targeting genes or portions of genes that may be relevant for drugs we wish to develop. Thus, it is possible that one or more organizations will hold patent rights to which we will need

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a license. If those organizations refuse to grant us a license to such patent rights on reasonable terms, we may be unable to market products or perform research and development or other activities covered by these patents.

We may license patent rights from third-party owners or licensees. If such owners or licensees do not properly or successfully obtain, maintain, or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be adversely affected.

We may, in the future, rely on intellectual property rights licensed from third parties to protect our technology, including licenses that give us rights to third-party intellectual property that is necessary or useful for our business. We also may license additional third-party intellectual property in the future. Our success may depend in part on the ability of our licensors to obtain, maintain, and enforce patent protection for our licensed intellectual property, in particular, those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications licensed to us. Even if patents issue or are granted, our licensors may fail to maintain these patents, such patents may have claim breadth coverage insufficient to protect our interests, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue litigation less aggressively than we would. Further, we may not obtain exclusive rights, which would allow for third parties to develop competing products. Without protection for, or exclusive right to, the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects. In addition, we sublicense certain of our rights under our third-party licenses to BI and may sublicense such rights to current or future collaborators. Any impairment of these sublicensed rights could result in reduced revenue under our collaboration agreement with BI or result in termination of an agreement by one or more of our existing or any other future collaborators.

We may be unable to protect our intellectual property rights throughout the world.

Obtaining a valid and enforceable issued or granted patent covering our technology in the U.S. and worldwide can be extremely costly. In jurisdictions where we have not obtained patent protection, competitors may use our technology to develop their own products, and further, may export otherwise infringing products to territories where we have patent protection, but where it is more difficult to enforce a patent compared to the U.S. We also may face competition in jurisdictions where we do not have issued or granted patents or where our issued or granted patent claims or other intellectual property rights are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain developing countries, make it difficult to enforce patents and such countries may not recognize other types of intellectual property protection, particularly that relating to biopharmaceuticals. This could make it difficult for us to prevent the infringement of our patents or marketing of competing products in violation of our proprietary rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

We generally file a provisional patent application first (a priority filing) at the USPTO. A U.S. utility application and/or international application under the Patent Cooperation Treaty (“PCT”) are usually filed within 12 months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed in the EU, Japan, Australia, and Canada and, depending on the individual case, also in any or all of, inter alia, China, India, South Korea, Singapore, Taiwan, and South Africa. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patent applications before grant. Finally, the grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might be refused in some jurisdictions, while granted by others. Depending on the country, various scopes of patent protection may be granted on the same product candidate or technology.

The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the U.S., and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. These difficulties could impact the future commercialization of our Hepatitis B Virus infection product candidate because a substantial share of the global market is in non-Western countries. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business and results of operations may be adversely affected.

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We, our licensors, or existing or future collaborators may become subject to third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay, or prevent the development and commercialization of our product candidates, or put our patents and other proprietary rights at risk.

We, our licensors, or existing or future collaborators may be subject to third-party claims for infringement or misappropriation of patent or other proprietary rights. We are generally obligated under our license or collaboration agreements to indemnify and hold harmless our licensors or collaborators for damages arising from intellectual property infringement by us. If we, our licensors, or existing or future collaborators are found to infringe a third-party patent or other intellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have willfully infringed. In addition, we, our licensors, or existing or future collaborators may choose to seek, or be required to seek, a license from a third party, which may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we, our licensors, or existing or future collaborators may be unable to effectively market product candidates based on our technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.

If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or our technology, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during patent prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during patent prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our platform technology. Such a loss of patent protection could have a material adverse impact on our business. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without legally infringing our patents or other intellectual property rights.

If we fail to comply with our obligations under any license, collaboration, or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our product candidates and delivery technologies, or we could lose certain rights to grant sublicenses.

Any future licenses we enter are likely to impose various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach any of these obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages, and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture, and sell products that are covered by the licensed technology, or enable a competitor to gain access to the licensed technology. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on sales of future products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize products, we may be unable to achieve or maintain profitability.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patent protection for certain aspects of our product candidates and delivery technologies, we also consider trade secrets, including confidential and unpatented know-how, important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary

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information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts in the U.S. and certain foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

We are also subject both in the U.S. and outside the U.S. to various regulatory schemes regarding requests for the information we provide to regulatory authorities, which may include, in whole or in part, trade secrets or confidential commercial information. While we are likely to be notified in advance of any disclosure of such information and would likely object to such disclosure, there can be no assurance that our challenge to the request would be successful.

We may be, in the future, subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages, may be prohibited from using some of our research and development work, and may lose valuable intellectual property rights or personnel.

Many of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our competitors or potential competitors. From time to time, we have received correspondence from other companies alleging the improper use or disclosure, or inquiring regarding the use or disclosure, by certain of our employees who have previously been employed elsewhere in our industry, including with our competitors, of their former employer’s trade secrets or other proprietary information. Responding to these allegations can be costly and disruptive to our business, even when the allegations are without merit, and can be a distraction to management.

We may be subject to additional claims in the future that these or other employees of the Company have, or we have, inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending current or future claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, personnel, or the ability to use some of our research and development work. A loss of intellectual property, key research personnel, or their work product could hamper our ability to commercialize, or prevent us from commercializing, our product candidates, which could severely harm our business.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our trademarks or trade names may be challenged, infringed, circumvented or declared generic, or determined to be infringing on other marks. Any trademark litigation could be expensive. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential collaborators or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, and our business may be adversely affected.

Risks Related to Government Regulation

We may be unable to obtain U.S. or foreign regulatory approval and, as a result, may be unable to commercialize our product candidates.

Our product candidates are subject to extensive governmental regulations relating to, among other things, research, development, testing, manufacture, quality control, approval, labeling, packaging, promotion, storage, record keeping, advertising, distribution, sampling, pricing, sales and marketing, safety, post-approval monitoring and reporting, and export and import of drugs. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required to be successfully completed in the U.S. and in many foreign jurisdictions before a new drug can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain, and subject to unanticipated delays. It is possible that none of the product candidates we may develop will obtain the regulatory approvals necessary for us or our collaborators to begin selling them.

We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA as well as foreign regulatory authorities, such as the EMA. The time required to obtain FDA and foreign regulatory approvals is unpredictable but typically takes many years following the commencement of clinical trials, depending upon the type, complexity, and novelty of the product candidate. The standards that the FDA and its foreign counterparts use when regulating us are not always applied predictably or uniformly and can change. Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit, or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, for example, from future

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legislation or administrative action, or from changes in the policy of the FDA or foreign regulatory authorities during the period of product development, clinical trials, and regulatory review by the FDA or foreign regulatory authorities. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign laws, regulations, guidance, or interpretations will be changed, or what the impact of such changes, if any, may be.

Because the drugs we are developing may represent a new class of drug, the FDA and its foreign counterparts have not yet established any definitive policies, practices, or guidelines in relation to these drugs. While we believe the product candidates that we are currently developing are regulated as new drugs under the Federal Food, Drug, and Cosmetic Act, the FDA could decide to reclassify them, namely to regulate them or other products we may develop as biologics under the Public Health Service Act. The lack of policies, practices, or guidelines may hinder or slow review by the FDA or foreign regulatory authorities of any regulatory filings that we may submit. Moreover, the FDA or foreign regulatory authorities may respond to these submissions by defining requirements we may not have anticipated. Such responses could lead to significant delays in the clinical development of our product candidates. In addition, because there may be approved treatments for some of the diseases for which we may seek approval, in order to receive regulatory approval, we may need to demonstrate through clinical trials that the product candidates we develop to treat these diseases, if any, are not only safe and effective, but safer or more effective than existing products.

Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular product candidate for which we are seeking approval. Furthermore, any regulatory approval to market a product may be subject to limitations on the approved uses for which we may market the product or the labeling or other restrictions. Regulatory authorities also may impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. In addition, the FDA has the authority to require a REMS plan as part of an NDA or biologics license application or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug or biologic, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria, and requiring treated patients to enroll in a registry. These limitations and restrictions may limit the size of the market for the product and affect coverage and reimbursement by third-party payors.

We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing, and third-party reimbursement. The foreign regulatory approval process varies among countries and may include all of the risks associated with FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities outside the U.S. and vice versa.

If we or current or future collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions and substantial penalties, which could affect our ability to develop, market, and sell our products, and may harm our reputation.

Although we do not currently have any products on the market, if our therapeutic candidates or clinical trials are covered by federal healthcare programs or other third-party payors, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal, state, and foreign governments of the jurisdictions in which we conduct our business. Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of any therapeutic candidates for which we may obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse, transparency, and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our therapeutic candidates for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include, but are not limited to, the following:

• the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare or Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• the federal civil and criminal false claims laws and civil monetary penalty laws, such as the U.S. federal False Claims Act (“FCA”), which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including manufacturers) for, among other things, knowingly presenting or causing to be presented, to the federal government, claims for payment that are false or fraudulent, making, using, or causing to be made or used, a false statement or record material to payment of a false or fraudulent claim or obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. The government may deem manufacturers to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information

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to customer or promoting a product off-label. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA;

• HIPAA includes a fraud and abuse provision which imposes criminal and civil liability for executing, or attempting to execute, a scheme to defraud any healthcare benefit program (including private payors), or knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services, regardless of the payor (e.g., public or private). Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• HIPAA, as amended by HITECH, and its implementing regulations, which impose obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;

• federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

• the federal false statements statute which prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• the federal Physician Payment Sunshine Act created under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, collectively referred to as the “ACA,” and its implementing regulations which require that manufacturers of drugs, biologicals, devices, and medical supplies for which payment is available under Medicare, Medicaid, and Children’s Health Insurance Program (with certain exceptions) report annually to the Department of Health and Human Services information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;

• federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs;

• analogous state laws and regulations, such as state anti-kickback and false claims laws potentially applicable to sales or marketing arrangements and claims involving healthcare items or services reimbursed by nongovernmental third-party payors, including private insurers; and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;

• The Foreign Corrupt Practices Act (“FCPA”) prohibits companies and their intermediaries from making, or offering or promising to make, improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment;

• the EU General Data Protection Regulation (EU) 2016/679 (“GDPR”), which introduced new data protection requirements in the EU, as well as substantial fines for breaches of the data protection rules as of May 25, 2018. The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements, and onerous new obligations on services providers. Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal data, such as healthcare data or other sensitive information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate; and

• federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.

Additionally, we may be subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor. The approval and commercialization of any of

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our drug candidates outside the U.S. will also likely subject us to non-U.S. equivalents of the healthcare laws mentioned above, among other non-U.S. laws.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions, and settlements in the healthcare industry. Responding to investigations can be time and resource-consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs. If our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetary damages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement, or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time, and resources.

If we or current or future collaborators, manufacturers, or service providers fail to comply with applicable federal, state, or foreign laws or regulations, we could be subject to enforcement actions, which could affect our ability to develop, market, and sell our products successfully and could harm our reputation and lead to reduced acceptance of our products by the market. These enforcement actions include, among others:

• adverse regulatory inspection findings;

• warning or untitled letters;

• voluntary or mandatory product recalls or public notification or medical product safety alerts to healthcare professionals;

• restrictions on, or prohibitions against, marketing our products;

• restrictions on, or prohibitions against, importation or exportation of our products;

• suspension of review or refusal to approve pending applications or supplements to approved applications, including due to pending enforcement actions or a finding of an enforcement action;

• exclusion from participation in government-funded healthcare programs;

• exclusion from eligibility for the award of government contracts for our products;

• a corporate integrity agreement;

• FDA debarment of individuals at our Company;

• suspension or withdrawal of product approvals;

• seizure or administrative detention of products;

• injunctions; and

• civil and criminal penalties and fines.

Any drugs we develop may become subject to unfavorable pricing regulations, third-party coverage, and reimbursement practices or healthcare reform initiatives, thereby harming our business.

The regulations that govern marketing approvals, pricing, coverage, and reimbursement for new drugs vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. Although we intend to monitor these regulations, our programs are currently in the early stages of development and we will not be able to assess the impact of price regulations for a number of years. As a result, we might obtain regulatory approval for a product in a particular country but then be subject to price regulations that delay our commercial launch of the product and negatively impact the revenues we are able to generate from the sale of the product in that country.

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Our ability to commercialize any products successfully will also depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations. However, there may be significant delays in obtaining coverage for newly-approved drugs. Moreover, eligibility for coverage does not necessarily signify that a drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale, and distribution costs. Also, interim payments for new drugs, if applicable, may be insufficient to cover our costs and may not be made permanent. Thus, even if we succeed in bringing one or more products to the market, these products may not be considered medically necessary or cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. Because our programs are in the early stages of development, we are unable at this time to determine their cost effectiveness, or the likely level or method of reimbursement. In addition, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical, and cost-effectiveness data for the use of our product on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop.

Increasingly, the third-party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are seeking greater upfront discounts, additional rebates, and other concessions to reduce the prices for pharmaceutical products. If the price we are able to charge for any products we develop, our product candidates are not considered medically necessary or cost effective, or the reimbursement provided for such products is inadequate in light of our development and other costs, our return on investment could be adversely affected.

We currently expect that certain drugs we develop may need to be administered under the supervision of a physician on an outpatient basis. Under currently applicable U.S. law, certain drugs that are not usually self-administered (including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Specifically, Medicare Part B coverage may be available for eligible beneficiaries when the following, among other requirements have been satisfied:

• the product is reasonable and necessary for the diagnosis or treatment of the illness or injury for which the product is administered according to accepted standards of medical practice;

• the product is typically furnished incident to a physician’s services;

• the indication for which the product will be used is included or approved for inclusion in certain Medicare-designated pharmaceutical compendia (when used for an off-label use); and

• the product has been approved by the FDA.

Average prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S. Reimbursement rates under Medicare Part B would depend in part on whether the newly approved product would be eligible for a unique billing code. Self-administered, outpatient drugs are typically reimbursed under Medicare Part D, and drugs that are administered in an inpatient hospital setting are typically reimbursed under Medicare Part A under a bundled payment. It is difficult for us to predict how Medicare coverage and reimbursement policies will be applied to our products in the future and coverage and reimbursement under different federal healthcare programs are not always consistent. Medicare reimbursement rates may also reflect budgetary constraints placed on the Medicare program.

Third-party payors often rely upon Medicare coverage policies and payment limitations in setting their own reimbursement rates. These coverage policies and limitations may rely, in part, on compendia listings for approved therapeutics. Our inability to promptly obtain relevant compendia listings, coverage, and adequate reimbursement from both government-funded and private payors for new drugs that we develop and for which we obtain regulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our financial condition.

We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and lower reimbursement and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs once marketing approval is obtained. One example is the establishment in 2006 of the Institute for Clinical and Economic Review, or ICER. ICER evaluates the clinical and economic value of prescription drugs and issues reports for payers to rely on in making decisions on patient access to new medicines.

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In addition, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient assistance programs, and reform government program reimbursement methodologies for drugs. At the federal level, the U.S. President’s administration’s budget for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 legislative session or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the current U.S. President’s administration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human Services, or HHS, has already started the process of soliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. For example, in September 2018, CMS announced that it will allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January 1, 2019. Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the current U.S. President’s administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. While some proposed measures will require authorization through additional legislation to become effective, Congress and the current U.S. President’s administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare and legislative and regulatory proposals to broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number of legislative and regulatory changes in the healthcare system in the U.S. and other major healthcare markets have been proposed, and such efforts have expanded substantially in recent years. These developments could, directly or indirectly, affect our ability to sell our products, if approved, at a favorable price.

In 2010, the U.S. Congress passed the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional policy reforms. Both the U.S. Congress and President Trump have expressed an intention to repeal or replace the ACA, and as a result, certain sections of the ACA have not been fully implemented or have been effectively repealed. The uncertainty around the future of the ACA and, in particular, the impact to reimbursement levels, may lead to uncertainty or delay in the purchasing decisions of our customers, which may in turn negatively impact our product sales. If there are not adequate reimbursement levels, our business and results of operations could be adversely affected.

Among the provisions of the ACA addressing coverage and reimbursement of pharmaceutical products of importance to our potential therapeutic candidates are the following:

• increases to pharmaceutical manufacturer rebate liability under the Medicaid Drug Rebate Program due to an increase in the minimum basic Medicaid rebate on most branded prescription drugs and the application of Medicaid rebate liability to drugs used in risk-based Medicaid managed care plans;

• the expansion of the 340B Drug Pricing Program to require discounts for “covered outpatient drugs” sold to certain children’s hospitals, critical access hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospitals;

• requirements imposed on pharmaceutical companies to offer discounts on brand-name drugs to patients who fall within the Medicare Part D coverage gap, commonly referred to as the “Donut Hole”;

• requirements imposed on pharmaceutical companies to pay an annual non-tax-deductible fee to the federal government based on each company’s market share of prior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs, and Department of Defense. Since we currently expect our branded pharmaceutical sales to constitute a small portion of the total federal healthcare program pharmaceutical market, we do not currently expect this annual assessment to have a material impact on our financial condition; and

• for products classified as biologics, marketing approval for a follow-on biologic product may not become effective until 12 years after the date on which the reference innovator biologic product was first licensed by the FDA, with a possible six-month extension for pediatric products. After this exclusivity ends, it may be possible for biosimilar manufacturers to enter the market, which is likely to reduce the pricing for the innovator product and could affect our profitability if our products are classified as biologics.

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Despite initiatives to invalidate the Affordable Care Act, the U.S. Supreme Court has upheld certain key aspects of the legislation, including a tax-based shared responsibility payment imposed on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individual mandate.” However, as a result of tax reform legislation passed in December 2017, the individual mandate has been eliminated effective January 1, 2019. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The Trump administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018, the same judge issued an order staying the judgment pending appeal. A Fifth Circuit U.S. Court of Appeals has been asked to determine whether certain states and the House of Representatives have standing to appeal the lower court decisions, but it is unclear when a Court will render its decision and what effect it will have on the status of the ACA. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results. We will continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.

In addition, since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Further, the Trump administration has concluded that Cost-Sharing Reduction (“CSR”) payments to insurance companies required under the ACA have not received necessary appropriations from Congress and announced that it will discontinue these payments immediately until such appropriations are made. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017 and again on July 18, 2018. Furthermore, on June 14, 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12.0 billion in ACA risk corridor payments to third-party payors who argued were owed to them. On June 24, 2019, the U.S. Supreme Court agreed to hear an appeal of the appellate decision during its next term, which began in October of 2019. The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are complex and not fully understood.

Also, CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the health benefits required under the ACA for plans sold through these marketplaces. For example, on November 30, 2018, CMS announced a proposed rule that would amend the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out-of-pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. Among other things, the proposed rule would allow Medicare Advantage plans to use pre-authorization (“PA”) and step therapy (“ST”) for six protected classes of drugs, with certain exceptions; permit plans to implement PA and ST in Medicare Part B drugs; change the definition of “negotiated prices;” and add a new definition of “price concession.” It is unclear whether these proposed changes will be accepted, and if so, what effect such changes will have on our business. Congress will likely continue to consider subsequent legislation and further action to repeal, replace, or modify the ACA.

Also, in 2018, the Trickett Wendler, Frank Mogiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 provided a federal framework for certain patients with life-threatening diseases to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to that policy.

From time to time, legislation is drafted, introduced, and passed in the U.S. Congress that could significantly change the statutory provisions governing coverage, reimbursement, and marketing of products regulated by CMS or other government agencies. In addition to new legislation, CMS coverage and reimbursement policies are often revised or interpreted in ways that may significantly affect our business and our products.

Our ability to obtain reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.

U.S. federal government agencies currently face potentially significant spending reductions. The Budget Control Act of 2011 (the “BCA”) established a Joint Select Committee on Deficit Reduction, which was tasked with achieving a reduction in the federal debt level of at least $1.2 trillion. That committee did not draft a proposal by the BCA’s deadline. As a result, automatic cuts, referred to as sequestration, in various federal programs were scheduled to take place, beginning in January 2013, although the American Taxpayer Relief Act of 2012 delayed the BCA’s automatic cuts until March 1, 2013. While the Medicare program’s eligibility and scope of benefits are generally exempt from these cuts, Medicare payments to providers and Part D health plans are not exempt. The BCA did, however, provide that the Medicare cuts to providers and Part D health plans would not exceed two percent unless additional Congressional action is taken. President Obama issued the sequestration order on March 1, 2013, and cuts went into effect on April 1, 2013. Additionally, the Bipartisan Budget Act of 2015 extended sequestration for Medicare through fiscal year 2027.

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More recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. Individual states in the U.S. have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

The U.S. federal deficit reached an all-time high in 2019, and efforts to bring spending under control could, among other things, lead to cuts in Medicare payments to providers, as the Medicare program is frequently mentioned as a target for spending cuts. The full impact on our business of any future cuts in Medicare or other programs is uncertain. In addition, we cannot predict any impact President Trump’s administration and the U.S. Congress may have on the federal budget. If federal spending is reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health, to continue to function at current levels. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve drug research and development, manufacturing, and marketing activities, which may delay our ability to develop, market, and sell any products we may develop.

 If any of our product candidates receive marketing approval and we or others later identify undesirable side effects caused by the product candidate, our ability to market and derive revenue from the product candidates could be compromised.

In the event that any of our product candidates receive regulatory approval and we or others identify undesirable side effects, adverse events, or other problems caused by one of our products, any of the following adverse events could occur, which could result in the loss of significant revenue to us and materially and adversely affect our results of operations and business:

• regulatory authorities may withdraw their approval of the product or seize the product;

• we may need to recall the product or change the way the product is administered to patients;

• additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;

• we may not be able to secure or maintain adequate coverage and reimbursement for our proprietary product candidates from government (including U.S. federal healthcare programs) and private payors;

• we may be subject to fines, restitution or disgorgement of profits or revenues, injunctions, or the imposition of civil penalties or criminal prosecution;

• regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;

• regulatory authorities may require us to implement a REMS, or to conduct post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product; we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients;

• we could be sued and held liable for harm caused to patients;

• the product may become less competitive; and

• our reputation may suffer.

Risks Related to Our Common Stock

We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) Section 404(b) (“Section 404”), (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700.0 million as of the prior June 30 or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before

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that time, in which cases we would no longer be an emerging growth company as of the following December 31, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may, under certain circumstances, still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile. Based on the market value of our common stock held by non-affiliates as of June 30, 2019, we expect to lose our emerging growth company status as of the year following December 31, 2019. As a result, we may incur additional and increasing costs to comply with our reporting and other obligations that we had not historically incurred due to our status as an emerging growth company or as a smaller reporting company. These costs include the need to comply with the rules of the SEC that implement Section 404, which will require us to dedicate internal resources, engage outside consultants, and adopt a detailed work plan to assess and document the adequacy of internal controls over financial reporting, continue steps to improve control processes, as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal controls over financial reporting.

Our stock price is volatile and purchasers of our common stock could incur substantial losses.

Our stock price has historically fluctuated widely and is likely to continue to be volatile. From January 30, 2014, the first day of trading of our common stock, through September 30, 2019, the closing sale price of our common stock has ranged between a high of $46.00 per share and a low of $2.45 per share. The market price for our common stock may be influenced by many factors, including the other risks described in this “Risk Factors” section, and the following:

• the success or failure of competitive products or technologies;

• delays in initiating or completing and the results of preclinical studies and clinical trials of our product candidates or those of our competitors, our existing collaborators, or any future collaborators;

• regulatory or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our product candidates;

• introductions and announcements of new products by us, our commercialization collaborators, or our competitors, and the timing of these introductions or announcements;

• actions taken by regulatory agencies with respect to our or our competitors’ product candidates, products, clinical studies, manufacturing processes, or sales and marketing terms;

• actual or anticipated variations in our financial results or those of companies that are perceived to be similar to us;

• the success of our or our competitors’ efforts to acquire or in-license additional technologies, products, or product candidates;

• developments concerning our or our competitors’ products or collaborations, including but not limited to, those with sources of manufacturing supply and commercialization partners;

• announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, or capital commitments;

• our ability or inability to raise additional capital and the terms on which we raise it;

• the recruitment or departure of key personnel;

• changes in the structure of healthcare payment systems;

• market conditions in the pharmaceutical and biotechnology sectors;

• actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies, or our industry generally;

• our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;

• fluctuations in the valuation of companies perceived by investors to be comparable to us;

• announcement and expectation of additional financing efforts;

• speculation in the press or investment community;

• trading volume of our common stock;

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• sales of our common stock by us or our stockholders;

• the absence of lock-up agreements with the holders of substantially all of our outstanding shares in connection with follow-on public offerings of our common stock;

• the concentrated ownership of our common stock;

• changes in accounting principles;

• terrorist acts, acts of war, or periods of widespread civil unrest;

• natural disasters and other calamities;

• general economic, industry, and market conditions; and

• developments concerning complaints or litigation against us.

In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical, and biotechnology stocks in particular have experienced extreme volatility that has often been unrelated to the operating performance of the issuer. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.

The future issuance of equity or of debt securities that are convertible into equity will dilute our share capital.

We may choose to raise additional capital in the future depending on market conditions, strategic considerations, and operational requirements. To the extent that additional capital is raised through the issuance of shares or other securities convertible into shares, our stockholders will be diluted. Future issuances of our common stock or other equity securities, or the perception that such sales may occur, could adversely affect the trading price of our common stock and impair our ability to raise capital through future offerings of shares or equity securities. We cannot predict the effect, if any, that future sales of common stock or the availability of common stock for future sales will have on the trading price of our common stock.

The employment agreements with our executive officers may require us to pay severance benefits to officers who are terminated in connection with a change of control of the Company, which could harm our financial condition.

Our executive officers are parties to employment agreements providing, in the event of a termination of employment in connection with a change of control of the Company, for significant cash payments for severance and other benefits and acceleration of vesting of up to all outstanding stock options. The accelerated vesting of options could result in dilution to our existing stockholders and reduce the market price of our common stock. The payment of these severance benefits could harm our financial condition. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property, or our stock performance, or if our target studies and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

As of September 30, 2019, our executive officers and directors, together with holders of five percent or more of our outstanding common stock and their respective affiliates, beneficially owned, in the aggregate, approximately 54.2% of our outstanding common stock, including shares subject to outstanding options and warrants that are exercisable within 60 days after such date, based on the Forms 3 and 4 and Schedules 13D and 13G filed by them with the SEC. As a result, these stockholders, if acting together, will continue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation, or sale of all or substantially all of our assets, and any other significant corporate transaction. The interests of these stockholders may not be the same as, or may even conflict with, the interests of our other stockholders. For example, these stockholders could delay or prevent a change of control of our Company, even if such a change of control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our Company or our assets and might affect the prevailing market price of our common stock. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include:

• a prohibition on actions by our stockholders by written consent;

• a requirement that special meetings of stockholders, which the Company is not obligated to call more than once per calendar year, be called only by the chairman of our board of directors, our chief executive officer, our board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors, or, subject to certain conditions, by our secretary at the request of the stockholders holding of record, in the aggregate, shares entitled to cast not less than ten percent of the votes at a meeting of the stockholders (assuming all shares entitled to vote at such meeting were present and voted);

• advance notice requirements for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings; and

• the authority of the board of directors to issue preferred stock, such as the Redeemable Convertible Preferred, with such terms as the board of directors may determine.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, as amended, which prohibits a person who owns in excess of 15 percent of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15 percent of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions would apply even if the proposed merger or acquisition could be considered beneficial by some stockholders.

We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, we incur, and particularly after we are no longer an emerging growth company and when we cease to be a smaller reporting company, we will continue to incur significant legal, accounting, and other expenses that we did not incur as an emerging growth company or smaller reporting company.

The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Global Select Market, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, we expect that these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Due to our status as an emerging growth company, we have not been required to comply with the rules of the SEC that implement Section 404(b). Pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company and a smaller reporting company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. We expect to lose our status as an emerging growth company as early as following the year ending December 31, 2019. To achieve compliance with Section 404(b) within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we are dedicating internal resources, engaging outside consultants, and have adopted a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal controls over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse

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reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on The Nasdaq Global Select Market.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain of our common stockholders for the foreseeable future.

We may incur significant costs from class action litigation due to our historical or expected stock volatility.

Our stock price has fluctuated and may fluctuate for many reasons, including as a result of public announcements regarding the progress of our development efforts or the development efforts of our collaborators or competitors, the addition or departure of our key personnel, variations in our quarterly operating results, and changes in market valuations of pharmaceutical and biotechnology companies. This risk is especially relevant to us because pharmaceutical and biotechnology companies have experienced significant stock price volatility in recent years. When the market price of a stock has been volatile as our stock price has been and may be, holders of that stock have occasionally brought securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management.

Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated bylaws provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, as amended, our amended and restated certificate of incorporation or our amended and restated bylaws, any action to interpret, apply, enforce, or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws, any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws, or any other action asserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Our stockholders may experience significant dilution as a result of future equity offerings and exercise of outstanding options.

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock, as we did with the Redeemable Convertible Preferred, which was converted into common stock in December 2017 and with the follow-on offerings of our common stock in December 2017 and September 2018. We cannot assure you that we will be able to sell shares or other securities in any offering at a price per share that is equal to or greater than the price paid by our existing shareholders, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may be higher or lower than the price per share paid by our existing stockholders.

In addition, we have a significant number of securities allowing for the purchase of our common stock. As of November 4, 2019, we also had 4,084,099 shares of common stock reserved for future issuance under our stock incentive plans. As of that date, there were also stock options and awards to purchase 13,168,519 shares of our common stock outstanding and warrants to purchase 2,198 shares of our common stock outstanding. The exercise of outstanding options and warrants having an exercise price per share that is less than the offering price per share paid by our existing stockholders will increase dilution to such stockholders.

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Future sales of our common stock in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of November 4, 2019, we had 68,431,048 shares of common stock outstanding, all of which, other than shares held by our directors and certain officers, were eligible for sale in the public market, subject in some cases to compliance with the requirements of Rule 144, including the volume limitations and manner of sale requirements. In addition, shares of common stock issuable upon exercise of outstanding options and shares reserved for future issuances under our stock incentive plans will become eligible for sale in the public market to the extent permitted by applicable vesting requirements and subject in some cases to compliance with the requirements of Rule 144.

Sales of shares issued in private placements may cause the market price of our shares to decline.

In April 2017, we issued 700,000 shares of the Redeemable Convertible Preferred in a private placement, which were convertible into shares of our common stock at an agreed conversion rate. In December 2017, all shares of Redeemable Convertible Preferred were converted into shares of our common stock. We granted the holders of Redeemable Convertible Preferred certain demand, shelf, and “piggyback” registration rights with respect to the shares of common stock issued upon conversion of the Redeemable Convertible Preferred. Such registration rights continue subsequent to the conversion and repurchase of the Redeemable Convertible Preferred with respect to the shares of common stock issued in such conversion. In accordance with such registration rights, we filed a shelf registration statement on Form S-3 covering the resale of 24,491,663 shares of our common stock by the former holders of Redeemable Convertible Preferred. The registration statement was declared effective on May 9, 2018, and all shares of common stock issued upon conversion of the Redeemable Convertible Preferred may now be freely sold in the open market. Additionally, we issued 983,208 shares of our common stock to Alnylam in April 2018, 835,834 shares of our common stock to Alexion in October 2018, and 5,414,185 shares of our common stock to Lilly in December 2018. The shares issued to Alnylam are freely tradeable in the open market, subject to certain volume limitations and compliance with applicable securities laws. The shares issued to Alexion and Lilly were subject to a lock-up period but, following the expiration of such lock-up periods, such shares of our common stock may be freely sold in the open market subject to compliance with the requirements of Rule 144, subject to compliance with applicable securities laws. The sale of a significant amount of these shares in the open market or the perception that these sales may occur could cause the market price of our common stock to decline or become highly volatile.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Unregistered Sales of Equity Securities

Not applicable.

(b) Use of Proceeds

Not applicable.

(c) Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the period covered by this report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

		Incorporated by Reference
Exhibit Number	Description of Documents	Form	File Number	Exhibit	Filing Date
3.1	Amended and Restated Certificate of Incorporation of the Company.	8-K	001-36281	3.1	February 5, 2014
3.2	Amended and Restated Bylaws of the Company.	8-K	001-36281	3.2	February 5, 2014
10.1*	Lease Agreement between the Company and Western Office Portfolio Property Owner LLC, dated as of August 26, 2019.
31.1*	Certification of the Company’s principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*	Certification of the Company’s principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1**	Section 1350 Certifications.
101.INS*	XBRL Report Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Label Linkbase Document
101.PRE*	XBRL Taxonomy Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

______________________

*    Filed herewith.

** Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act, or the Exchange Act, except as otherwise stated in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DICERNA PHARMACEUTICALS, INC.
Date: November 7, 2019	By:	/s/ John B. Green
		John B. Green
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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