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COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2018
Commitments And Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

7. COMMITMENTS AND CONTINGENCIES

300 Third Street

We lease office and laboratory space located at 300 Third Street, Cambridge, Massachusetts for our corporate headquarters under a non-cancelable real property lease agreement by and between us and ARE-MA Region No. 28, LLC, or ARE-MA, dated as of September 26, 2003, as amended by five amendments, referred to collectively as the 300 Third Street Lease. Pursuant to the 300 Third Street Lease, we lease a total of approximately 129,000 square feet of office and laboratory space. The term of the 300 Third Street Lease was set to expire on September 30, 2021.

On August 14, 2018, we and ARE-MA entered into a Sixth Amendment to Lease, pursuant to which the term of the 300 Third Street Lease was extended for an additional twelve years and four months, through January 31, 2034. Under the Sixth Amendment to Lease, we have the option to extend the 300 Third Street Lease, as amended, for two additional five-year terms.

Beginning in October 2021, annual rent under the 300 Third Street Lease, as amended by the Sixth Amendment, exclusive of operating expenses and real property taxes, will be $10.5 million for the first twelve months, with annual increases of 2.5 percent thereafter. Under the terms of the Sixth Amendment, ARE-MA will provide a tenant improvement allowance up to $8.4 million, which may be used to fund appropriate improvements to the premises.

101 Main Street

We lease office space located on the 10th floor at 101 Main Street, Cambridge, Massachusetts under a non-cancelable real property lease agreement by and between us and RREEF America REIT II CORP. PPP, or RREEF, dated as of March 9, 2015, as amended, referred to as the 101 Main Street Lease. Pursuant to the 101 Main Street Lease, we lease a total of approximately 23,350 square feet of office space on the 10th floor. The term of the 101 Main Street Lease was set to expire on March 31, 2019.

On September 27, 2018, we and RREEF entered into a Second Amendment to Lease, pursuant to which the term of the 101 Main Street Lease was extended for an additional five years, through March 31, 2024. Under the 101 Main Street Lease, as amended by the Second Amendment, we have the option to extend the term of the 101 Main Street Lease for an additional five years.

Beginning in April 2019, annual rent under the 101 Main Street Lease, as amended by the Second Amendment, will be $2.1 million for the first twelve months, with annual increases of 2.0 percent thereafter.

Manufacturing Facility

In April 2016, we purchased 12 acres of undeveloped land in Norton, Massachusetts. We are constructing a manufacturing facility at this site for drug substance, including small interfering RNAs, or siRNAs, and siRNA conjugates, for clinical and commercial use. At September 30, 2018 and December 31, 2017, property, plant and equipment, net, on our condensed consolidated balance sheets reflects $199.3 million and $140.5 million, respectively, of land and associated costs related to the construction of our drug substance manufacturing facility.

Credit Agreements

On April 29, 2016, we entered into (i) a Credit Agreement, or the BOA Credit Agreement, with Alnylam U.S., Inc., our wholly-owned subsidiary, as the borrower, us, as a guarantor, and Bank of America N.A., or BOA, as the lender and (ii) a Credit Agreement, or the Wells Credit Agreement, together with the BOA Credit Agreement, the Credit Agreements, by and among Alnylam U.S., Inc., as the borrower, us, as a guarantor, and Wells Fargo Bank, National Association, or Wells, as the lender. The Credit Agreements were entered into in connection with the planned build out of our new drug substance manufacturing facility.

The BOA Credit Agreement provided for a $120.0 million term loan facility and was scheduled to mature on April 29, 2021. In December 2017, we repaid in full the $120.0 million outstanding principal amount under the BOA Credit Agreement and the BOA Credit Agreement terminated in accordance with its terms upon repayment of the outstanding indebtedness. The Wells Credit Agreement provides for a $30.0 million term loan facility and matures on April 29, 2021. The proceeds of the borrowing under the BOA Credit Agreement were, and under the Wells Credit Agreement are, to be used for working capital and general corporate purposes. Interest on borrowings under the BOA Credit Agreement was, and under the Wells Credit Agreement is calculated based on LIBOR plus 0.45 percent, except in the event of default. The borrower may prepay loans under the Wells Credit Agreement at any time, without premium or penalty, subject to certain notice requirements and LIBOR breakage costs.

The obligations of the borrower and us under the BOA Credit Agreement were, and under the Wells Credit Agreement are secured by cash collateral in an amount equal to, at any given time, at least 100 percent of the principal amount of all term loans outstanding under such Credit Agreement at such time. At each of September 30, 2018 and December 31, 2017, we have recorded $30.0 million of cash collateral in connection with the Wells Credit Agreement as restricted investments on our condensed consolidated balance sheets. The Wells Credit Agreement contains limited representations and warranties and limited affirmative and negative covenants, including quarterly reporting obligations, as well as certain customary events of default.  

Litigation

From time to time, we are a party to legal proceedings in the course of our business, including the matters described below. The claims and legal proceedings in which we could be involved include challenges to the scope, validity or enforceability of patents relating to our product candidates, and challenges by us to the scope, validity or enforceability of the patents held by others. These include claims by third parties that we infringe their patents. The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other activities.  If we were unable to prevail in any such legal proceedings, our business, results of operations, liquidity and financial condition could be adversely affected. Our accounting policy for accrual of legal costs is to recognize such expenses as incurred.

Silence Litigation

In October 2017, Silence Therapeutics plc, or Silence, served its previously announced claim in the High Court of England and Wales, or the High Court, issued in the name of Silence Therapeutics GmbH against Alnylam UK Ltd., Alnylam Pharmaceuticals, Inc., and The Medicines Company UK Ltd, seeking a declaration that Silence was entitled to a Supplementary Protection Certificate, or SPC, for Silence’s European Patent No. 2 258 847, referred to as the ‘847 patent, when each of patisiran, fitusiran, givosiran and inclisiran obtained a marketing authorization in Europe.  In June 2018, Silence withdrew this claim against both us and The Medicines Company. Silence also withdrew its previously filed claim alleging infringement of its European Patent No. 1 857 547, referred to as the ‘547 patent, by fitusiran.

On December 10, 2018, the High Court will hear the claim brought against us by Silence alleging that ONPATTRO (patisiran) infringes the ‘547 patent, as amended in the United Kingdom, and will also hear our claim seeking a declaration of non-infringement by ONPATTRO and revocation of the ‘547 patent in its entirety. Silence is seeking monetary damages as well as a permanent injunction.  

Silence also served patent infringement proceedings against us in Portugal alleging that patisiran infringes the ‘547 patent as granted.  Silence is seeking a permanent injunction against the commercialization of patisiran in Portugal.

We believe the ‘847 and ‘547 patents as originally filed and as amended in the United Kingdom, were and are invalid and not infringed by any of our products and intend to defend against any claim of infringement brought against any of our products, including the present claim of infringement by ONPATTRO of the ‘547 patent, as amended.

On October 10, 2018, Silence filed for Preliminary Relief with the District Court of The Hague, The Netherlands, related to Silence European Patent No. 3 222 724, referred to as the ‘724 patent, alleging that ONPATTRO infringes one or more claims of the ‘724 patent, seeking a cross-border preliminary injunction in those European countries where the patent has been validated.  A hearing has been set for January 23, 2019.  We believe the ‘724 patent is invalid and not infringed by ONPATTRO and intend to vigorously defend against this claim.

We have filed an opposition with the European Patent Office, or EPO, seeking revocation of the ‘847 and ‘547 patents in their entirety and intend to file an opposition to the ‘724 patent prior to the deadline.  Although we believe these patents are invalid and not infringed by any of our products, a court or patent office could ultimately rule against us or find that Silence’s patents are valid.

In March 2018, we filed an action against Silence in the United States District Court for the District of Massachusetts seeking a declaratory judgement of non-infringement by patisiran of Silence U.S. Patent Nos: 7,893,245; 8,324,370; 8,933,215; 9,222,092; and 9,695,423. This action is pending before the court and awaiting a briefing schedule from the judge on jurisdictional matters.

Between April and July 2018, we filed petitions for Post Grant Review, or PGR, of five Silence granted U.S. Patents with the United States Patent and Trademark Office, or USPTO, seeking a cancellation of all claims as being unpatentable under 35 U.S.C. §§ 112 and 102.  On October 10, 2018, the USPTO failed to institute the PGR of U.S. Patent No. 9,695,423, ruling that it was not PGR eligible. The USPTO did not rule on the ultimate validity or scope of the claims. We disagree with the ruling and have filed a request for reconsideration.

Securities Litigation

On September 26, 2018, Caryl Hull Leavitt individually and on behalf of all others similarly situated, filed a class action complaint for violation of federal securities laws against Alnylam, our Chief Executive Officer and our Chief Financial Officer in the United States District Court for the Southern District of New York. The complaint purports to bring a federal securities class action on behalf of a class of persons who acquired our securities between February 15, 2018 and September 12, 2018 and seeks to recover damages caused by defendants’ alleged violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges, among other things, that the defendants made materially false and misleading statements related to the efficacy and safety of our product, ONPATTRO (patisiran) lipid complex injection. The plaintiff seeks, among other things, the designation of this action as a class action, an award of unspecified compensatory damages, interest, costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate.

We believe that the allegations contained in the complaint are without merit and intend to defend the case vigorously. We cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom.

Dicerna Litigation

On June 10, 2015, we filed a trade secret misappropriation lawsuit against Dicerna in the Superior Court of Middlesex County, Massachusetts seeking to stop misappropriation by Dicerna of our confidential, proprietary and trade secret information related to the RNAi assets we purchased from Merck, including certain N-acetylgalactosamine, or GalNAc, conjugate technology. In addition to permanent injunctive relief, we were also seeking monetary damages from Dicerna. In August 2017, Dicerna successfully added counterclaims against us in the trade secret lawsuit alleging that our lawsuit represented abuse of process and claiming tortious interference with its business. In September 2017, we filed a motion to dismiss Dicerna’s counterclaims, which motion was denied. In addition, in August 2017, Dicerna filed a lawsuit against us in the United States District Court of Massachusetts alleging attempted monopolization by us under the Sherman Antitrust Act.  In October 2017, we filed a motion to dismiss the antitrust lawsuit.  

On April 18, 2018, we and Dicerna entered into a Settlement Agreement resolving all ongoing litigation between the companies. The terms of the Settlement Agreement include mutual releases and dismissal with prejudice of all claims and counterclaims in the following litigation between the parties: (i) Alnylam Pharmaceuticals, Inc. v. Dicerna Pharmaceuticals, Inc., No. 15-4126, pending in the Massachusetts Superior Court for Middlesex County; and (ii) Dicerna Pharmaceuticals, Inc. v. Alnylam Pharmaceuticals, Inc., No. 1:17-cv-11466, pending in the United States District Court for the District of Massachusetts.

Under the terms of the Settlement Agreement, Dicerna will pay us an aggregate of $25.0 million, including an upfront cash payment of $2.0 million and 983,208 shares of Dicerna common stock, valued at $10.0 million, that were received in the second quarter of 2018, and an additional $13.0 million over the next four years, the timing of which will be dependent upon revenue Dicerna receives pursuant to future partnerships and collaborations related to Ga1NAc-conjugated RNAi research and development, provided that such additional amount must be paid by no later than April 18, 2022. In addition, Dicerna will be restricted in its development and other activities relating to oligonucleotide-based therapeutics directed toward a defined set of targets, for periods ranging from 18 months up to four years. The Settlement Agreement does not include any license to our GalNAc conjugate intellectual property or any licenses to any other intellectual property from either party. Nor does the Settlement Agreement include any admission of liability or wrongdoing by either company.