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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________________
Form 10-Q
______________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
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.)

33 Hayden Avenue
Lexington, MA
02421
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 Par ValueDRNAThe 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
x
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company


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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No x
As of April 30, 2020, there were 73,916,403 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.



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DICERNA PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
Page

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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 regarding:
future conduct of the business of the Company, its clinical programs, and operations, including in relation to the COVID-19 pandemic;
the research and development plans and timelines related to the Company’s clinical programs, including the opportunity to enroll, continue, or resume clinical studies that are slowed or halted by the COVID-19 pandemic;
the initiation, timing, progress, and results of our preclinical studies and 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;
how long we expect to maintain liquidity to fund our planned level of operations and our ability to obtain additional funds for our operations;
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;
the continued manufacture and supply of raw materials and components for the Company’s clinical and development programs, the availability of any of which could be significantly impaired by the COVID-19 pandemic;
our ability to attract and retain qualified key management and technical personnel;
our dependence on our existing collaborators, Alnylam Pharmaceuticals, Inc., Novo Nordisk A/S, 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 collaborations 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.
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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 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.

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DICERNA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
MARCH 31,
2020
DECEMBER 31,
2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$245,479  $152,816  
Held-to-maturity investments461,411  196,065  
Contract receivables15,000  200,354  
Prepaid expenses and other current assets 8,606  6,934  
Total current assets730,496  556,169  
NONCURRENT ASSETS:
Property and equipment, net7,500  7,076  
Right-of-use operating assets, net29,932  30,102  
Restricted cash equivalents 5,563  3,894  
Other noncurrent assets5,298  168  
Total noncurrent assets48,293  41,240  
TOTAL ASSETS$778,789  $597,409  
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$6,497  $6,077  
Accrued expenses and other current liabilities 19,087  20,042  
Lease liability, current3,164  3,358  
Deferred revenue, current223,556  212,258  
Total current liabilities252,304  241,735  
NONCURRENT LIABILITIES:
Lease liability, noncurrent20,518  20,141  
Deferred revenue, noncurrent327,506  182,730  
Other noncurrent liabilities555  608  
Total noncurrent liabilities348,579  203,479  
TOTAL LIABILITIES600,883  445,214  
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value – 5,000,000 shares authorized; no shares issued or outstanding at March 31, 2020 or December 31, 2019
    
Common stock, $0.0001 par value – 150,000,000 shares authorized; 73,779,069 and 71,573,196 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
7  7  
Additional paid-in capital725,707  677,504  
Accumulated deficit(547,808) (525,316) 
Total stockholders’ equity177,906  152,195  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$778,789  $597,409  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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DICERNA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
THREE MONTHS ENDED
MARCH 31,
20202019
Revenue$34,028  $3,107  
Operating expenses:
Research and development43,171  21,603  
General and administrative16,023  9,676  
Total operating expenses59,194  31,279  
Loss from operations(25,166) (28,172) 
Other income (expense):
Interest income2,613  2,018  
Interest expense(4)   
Other income65    
Total other income, net2,674  2,018  
Net loss$(22,492) $(26,154) 
Net loss per share – basic and diluted$(0.31) $(0.38) 
Weighted average common shares outstanding – basic and diluted72,919,378  68,259,354  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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DICERNA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share data)
THREE MONTHS ENDED
MARCH 31, 2020
COMMON
STOCK
ADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED
DEFICIT
TOTAL
STOCKHOLDERS’
EQUITY
SHARESAMOUNT
BALANCE – January 1, 202071,573,196  $7  $677,504  $(525,316) $152,195  
Exercises of common stock options128,373  —  588  —  588  
Stock-based compensation expense—  —  8,527  —  8,527  
Proceeds from issuance of common stock, net of commissions and offering costs of $904
2,077,500  —  39,088  —  39,088  
Net loss—  —  —  (22,492) (22,492) 
BALANCE – March 31, 202073,779,069  $7  $725,707  $(547,808) $177,906  

THREE MONTHS ENDED
MARCH 31, 2019
COMMON
STOCK
ADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED
DEFICIT
TOTAL
STOCKHOLDERS’
EQUITY
SHARESAMOUNT
BALANCE – January 1, 201968,210,742  $7  $605,495  $(404,809) $200,693  
Exercises of common stock options and sales of common stock under Employee Stock Purchase Plan78,164  —  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, 201968,288,906  $7  $610,632  $(431,011) $179,628  
The accompanying notes are an integral part of these condensed consolidated financial statements. 
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DICERNA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
THREE MONTHS ENDED
MARCH 31,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(22,492) $(26,154) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation expense8,527  4,827  
Depreciation and amortization expense535  242  
Amortization of premium on investments(191) (1,225) 
Non-cash lease expense1,803  445  
Other(62)   
Changes in operating assets and liabilities:
Litigation settlement payable  (10,500) 
Deferred revenue156,074  4,893  
Prepaid expenses and other assets(6,802) 886  
Accounts payable957  1,064  
Contract receivables185,354  100,000  
Accrued expenses and other liabilities(488) (1,735) 
Lease liability(2,131) (456) 
Net cash provided by operating activities321,084  72,287  
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of held-to-maturity investments84,000  88,000  
Purchases of held-to-maturity investments(349,155) (49,451) 
Purchases of property and equipment(1,380) (2,280) 
Other15    
Net cash (used in) provided by investing activities(266,520) 36,269  
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of placement agent commissions39,192    
Payments of common stock offering costs  (50) 
Proceeds from exercises of stock options and issuances under Employee Stock Purchase Plan588  196  
Other(12)   
Net cash provided by financing activities39,768  146  
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS94,332  108,702  
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS – Beginning of period156,710  54,983  
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS – End of period$251,042  $163,685  
SUPPLEMENTAL CASH FLOW INFORMATION:
NONCASH OPERATING ACTIVITIES
Right-of-use assets acquired through operating leases$1,101  $667  
NONCASH INVESTING ACTIVITIES
Property and equipment purchases included in accounts payable and accrued expenses$259  $863  
NONCASH FINANCING ACTIVITIES
Common stock offering costs included in accounts payable or accrued expenses$104  $  
Right-of-use assets acquired through financing leases$48  $  
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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:
THREE MONTHS ENDED
MARCH 31,
20202019
Cash and cash equivalents$245,479  $160,141  
Restricted cash equivalents5,563  3,544  
Total cash, cash equivalents, and restricted cash equivalents shown in the condensed consolidated statements of cash flows$251,042  $163,685  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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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 Pharmaceuticals, Inc. (“Dicerna” or the “Company”), a Delaware corporation founded in 2006 and headquartered in Lexington, Massachusetts, is a biopharmaceutical company focused on discovering, developing, and commercializing medicines that are designed to leverage ribonucleic acid interference (“RNAi”) to selectively silence genes that cause or contribute to disease. Using the Company’s proprietary RNAi technology platform (“GalXC”™), Dicerna is committed to developing RNAi-based therapies with the potential to treat both rare and more prevalent diseases. By reducing the level of disease-causing genes of the liver, Dicerna’s GalXC platform has the potential to safely target conditions that are difficult to treat with other modalities. Continually innovating, Dicerna is also exploring new applications of RNAi technology beyond the liver, targeting additional tissues and enabling new therapeutic applications. In addition to our own pipeline of core discovery and clinical candidates, Dicerna has established collaborative relationships with some of the world’s leading pharmaceutical companies, including Alnylam Pharmaceuticals, Inc. (“Alnylam”), Novo Nordisk A/S (“Novo”), Roche, Eli Lilly and Company (“Lilly”), Alexion Pharmaceuticals, Inc. (together with its affiliates, “Alexion”), and Boehringer Ingelheim International GmbH (“BI”). Between Dicerna and its collaborative partners, the Company currently has more than 20 active discovery, preclinical, or clinical programs focused on rare, cardiometabolic, viral, chronic liver, and complement-mediated diseases, as well as neurodegeneration and pain.
COVID-19
On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic. The global spread of COVID-19 has created significant volatility, uncertainty, and economic disruption worldwide. Governments in affected regions have implemented, and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, and other public health safety measures.

Dicerna has been impacted by mandatory work from home edicts directed by the local governments in the jurisdictions in which the Company operates. However, essential work exemptions continue to permit critical research and development and laboratory activities for limited personnel. Those exemptions enable some continued discovery research and activities supporting the Company’s collaborative agreements and its own programs. Externally, the COVID-19 pandemic has resulted in slower enrollment in the Company’s clinical trials, and Dicerna has undertaken efforts to mitigate potential impacts to our business including those related to conducting clinical trials and managing our supply chain.

Current supply of Dicerna’s investigational medicines is sufficient to support ongoing clinical trials. Based on current evaluations, Dicerna’s supply chains continue to appear intact at this time to meet the foreseeable 2020 clinical, nonclinical, and chemistry, manufacturing, and control (“CMC”) supply demands across all programs. The Company has undertaken efforts to mitigate potential future impacts to the supply chain by increasing its stock of critical starting materials required to meet its needs and its collaborative partners’ needs through mid-2021 and by identifying and engaging alternative suppliers. The Company continues to be alert to the potential for disruptions that could arise from COVID-19 and remains in close contact with suppliers.

The extent to which COVID-19 impacts the Company’s operations or those of its third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of COVID-19, and the actions to contain the spread of COVID-19 or treat its impact, among others.
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”), 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 were derived from audited financial statements but do 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 March 31, 2020 and its results of operations, changes in stockholders’ equity, and cash flows for the interim periods ended March 31, 2020 and 2019. These unaudited condensed consolidated
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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, 2019. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, 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 for the adoption of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as discussed below.

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Measurement of Credit Losses
For financial assets measured at amortized cost, companies must record an allowance for credit losses and changes at the end of each reporting period in the condensed consolidated statement of operations. When developing an estimate of expected credit losses on financial assets, the Company will consider available information relevant to assessing the collectability of cash flows. This information may include internal information, external information, or a combination of both, relating to past events, current conditions, and reasonable and supportable forecasts for financial asset pools.
The Company’s investment in U.S. Treasury securities, reported as held-to-maturity investments, and the associated accrued interest reported as prepaid expenses and other current assets on the condensed consolidated balance sheets, is its only pool of financial assets. The financial assets pool was determined by the type of financial asset instrument and its credit quality. Management does not expect a credit loss with U.S. Treasury securities and determined an allowance was not required based on, as of the reporting date, the U.S. Federal Reserve not having a history of defaulting on its obligations.

Recent accounting pronouncement
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The FASB subsequently issued amendments to ASU 2016-13 which have the same effective date of January 1, 2020. These standards require that credit losses be reported using an expected losses model rather than the incurred losses model that was previously used, and establish additional disclosures related to credit risks associated with financial assets. The adoption of this standard did not have a significant impact on the Company’s financial statements.
2. NET LOSS PER SHARE
The Company computes basic net loss per common 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 common 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 calculation of net loss per shares because such securities would have been anti-dilutive due to the Company’s net loss per share during the three months ended on the dates presented.

MARCH 31,
2020
MARCH 31,
2019
Options to purchase common stock14,943,084  11,191,789  
Nonvested restricted stock units703,700    
Warrants to purchase common stock2,198  2,198  
Total15,648,982  11,193,987  

3. HELD-TO-MATURITY INVESTMENTS

MARCH 31, 2020
DESCRIPTION
AMORTIZED
COST
GROSS
UNREALIZED
HOLDING
GAINS
GROSS
UNREALIZED
HOLDING
LOSSES
FAIR
VALUE
U.S. Treasury securities maturing in one year or less
$461,411  $3,094  $  $464,505  

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DECEMBER 31, 2019
DESCRIPTION
AMORTIZED
COST
GROSS
UNREALIZED
HOLDING
GAINS
GROSS
UNREALIZED
HOLDING
LOSSES
FAIR
VALUE
U.S. Treasury securities maturing in one year or less
$196,065  $160  $(6) $196,219  
The unrealized losses on the Company’s investments in U.S. Treasury securities were the result of interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. The Company does not intend to sell its investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.
4. FAIR VALUE MEASUREMENTS
A summary of the Company’s assets that are measured or disclosed at fair value on a recurring basis is presented below:
MARCH 31, 2020
DESCRIPTION
TOTAL FAIR VALUELEVEL 1LEVEL 2LEVEL 3
Cash equivalents
Money market funds$245,426  $245,426  $  $  
Held-to-maturity investments
U.S. Treasury securities464,505    464,505    
Restricted cash equivalents
Money market funds5,563  5,563      
Total
$715,494  $250,989  $464,505  $  

DECEMBER 31, 2019
DESCRIPTION
TOTAL FAIR VALUELEVEL 1LEVEL 2LEVEL 3
Cash equivalents
Money market funds$152,903  $152,903  $  $  
Held-to-maturity investments
U.S. Treasury securities196,219    196,219    
Restricted cash equivalents
Money market funds3,894  3,894      
Total
$353,016  $156,797  $196,219  $  
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 March 31, 2020 and December 31, 2019.
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 March 31, 2020 and December 31, 2019.
As of March 31, 2020 and December 31, 2019, 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.
5. COLLABORATIVE RESEARCH AND LICENSE AGREEMENTS
Novo collaboration and share purchase agreements
Background
On November 15, 2019, Dicerna and Novo entered into a Collaboration and License Agreement (the “Novo Collaboration Agreement”). Under the terms of the Novo Collaboration Agreement, the Company and Novo will seek to use GalXC to explore more than 30 gene targets associated with liver disease with the goal of delivering multiple clinical candidates for disorders including chronic liver disease, non-alcoholic steatohepatitis (“NASH”), type 2 diabetes, obesity, and rare diseases. The Company will conduct
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and fund discovery and preclinical development to clinical candidate selection for each liver cell target. Novo will be responsible for all further development and commercialization of each candidate selected for development, with the Company manufacturing clinical candidates selected for Phase 1-related clinical development, subject to reimbursement for its manufacturing costs. In addition, the Company will assist Novo with the Investigational New Drug (“IND”) filing for the first development candidate. The Company also retains the ability to opt in to co-development of a total of two programs during clinical development in Phases 1-3, subject to limitations in the event of a change in control. If the Company exercises a co-development option, it also has an option to co-promote the product in the United States, subject to limitations in the event of a change in control of the Company. Additionally, the Company may lead the development and commercialization of two programs targeting orphan liver diseases, with Novo retaining the ability to opt in to both programs in Phases 1-3. The Company and Novo will share profit and loss for the Company’s orphan liver and Novo products should both parties elect to co-develop.
The Company will work exclusively with Novo during the research collaboration period on the discovery, research, development, and commercialization of hepatocyte targets not otherwise subject to the Company’s existing partnerships and Novo will, during a specified discovery period, work exclusively with the Company in any new research and development of compounds and products directed to collaboration targets using small interfering RNA (“siRNA”) conjugated to the sugar N-acetyl-D-galactosamine (“GalNAc”) to reduce the expression of specific target genes in the liver. Under the Novo Collaboration Agreement, the Company will provide Novo with exclusive and non-exclusive licenses and manufacturing support to enable Novo to commercialize products derived from or containing compounds developed pursuant to such agreement.
Under the terms of the Novo Collaboration Agreement, Novo paid the Company an upfront payment of $175.0 million, subject to delivery of target information, in January 2020. The Company is also eligible to receive an additional $75.0 million ($25.0 million at the end of each of the first three years of the Novo Collaboration Agreement), contingent upon the Company delivering GalXC molecules for a defined number of targets, and additional payments totaling up to approximately $357.5 million per target upon achievement of specified development, regulatory, and commercial milestones. In addition, Novo will pay the Company mid-single-digits to mid-teens royalties on product sales on a country-by-country and product-by-product basis until the later of 10 years after the date of first commercial sale of each product in such country, expiration of specified patent rights in such country, or the expiration of specified regulatory exclusivity in such country for GalXC products, subject to royalty step-down provisions set forth in the agreement.
In connection with the Novo Collaboration Agreement, the Company and Novo entered into the Novo Share Issuance Agreement on November 15, 2019, pursuant to which the Company agreed to issue to Novo 2,279,982 shares (the “Novo Shares”) of the Company’s common stock, par value $0.0001 per share (“Common Stock”), at a purchase price of $21.93 per share, for an aggregate purchase price of approximately $50.0 million.
Accounting Analysis
The Novo Collaboration Agreement and the Novo Share Issuance Agreement (collectively, “the Novo Agreements”) were executed on the same date and negotiated as a package. Management therefore concluded that the Novo Agreements are to be combined for accounting purposes and concluded that Novo is a customer in this arrangement pursuant to the revenue recognition guidance.
The Company identified contract promises under the agreement for the license of intellectual property and know-how rights for selected gene targets and research and development services to develop a clinical candidate for each selected gene target, including manufacturing activities. The Company may also be required to provide research and development services for an unspecified number of targets, with the goal of the collaboration being to develop clinical candidates for each of the selected gene targets. The Company determined that the license and research and development services were not capable of being distinct or distinct within the context of the contract. The research and development services to be provided by Dicerna are specialized in nature, specifically with respect to the Company’s therapeutic expertise related to RNAi and the Company’s GalXC conjugates. In addition, there is an interdependent relationship between the contract promises. As such, the Company concluded that there is a single identified combined performance obligation consisting of a license and research and development services.
The Company may be required to perform certain additional services after Novo’s nomination of a development candidate. These services include manufacturing activities through the approval of an IND application for a development candidate, research and development activities to support the filing of an IND application for the first development candidate, and other development services to support Novo’s development activities related to any development candidates. The Company will be reimbursed by Novo for these additional services. Because the provision of these additional goods and services are conditional on Novo electing to nominate a development candidate, the Company has concluded that these goods and services represent customer options and are not considered performance obligations.
The total transaction price for the Novo Agreements is $254.2 million, consisting of the total $175.0 million upfront compensation, $75.0 million (payable in three equal annual payments of $25.0 million), and a $4.2 million premium on the sale of shares under the
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Novo Share Issuance Agreement. The Company applied equity accounting guidance to measure the $45.8 million recorded in equity upon the issuance of the shares. The upfront payment of $175.0 million was payable to the Company upon the delivery of a bioinformatics package and mapping plan for at least one of the initial targets selected by Novo and was paid in January 2020. The $75.0 million in additional payments is contingent on the Company providing a certain number of mapped targets per year. If the Novo Collaboration Agreement is terminated prior to the third anniversary of its effective date, the Company is entitled to 80% of the outstanding and unearned annual payments. The Company assumed that the mapped targets will be delivered and that the contract will not be canceled. The Company also has experience with mapping targets, and therefore, concluded that such amount does not need to be constrained. Accordingly, the Company included the $75.0 million of additional payments in the transaction price.
The Company used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential preclinical, development, and regulatory variable consideration milestone payment 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, 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 will 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, as the Company’s performance does not create an asset with alternative use, and the Company has an enforceable right to payment for performance completed to date. 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 $1.6 million of revenue under the Novo Collaboration Agreement during the three months ended March 31, 2020. The amount of the Company’s partially unsatisfied performance obligation, recorded as a contract liability presented in deferred revenue at March 31, 2020, was $177.6 million, of which $33.1 million is included in the current portion of deferred revenue, and was $4.2 million, of which $0.8 million was included in the current portion of deferred revenue, as of December 31, 2019. As of March 31, 2020, the Company expected to recognize revenue over the five-year research term, which may be extended for up to two years.

Roche collaboration agreement
Background
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 RG6346, the companies’ investigational therapy in Phase 1 clinical development, toward worldwide development and commercialization, as well as provide 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 requires that Dicerna completes the ongoing Phase 1 clinical trial, along with additional Phase 1 cohorts that were requested by Roche, which will reimburse the Company for the cost of the additional cohorts, after which Roche will lead the development and commercialization of the RG6346 program. Roche also has until receipt of interim Phase 1 data from the RG6346 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 and development collaboration will be to select compounds developed by the Company or Roche for Roche’s continued development and commercialization. The Company’s and Roche’s research and early development organizations will work exclusively with each other during the research and development collaboration period on the discovery, research, and development of such targets selected by Roche, which includes the performance of certain services by Dicerna. 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.
Under the terms of the Roche Collaboration Agreement, Roche paid the Company a non-refundable upfront payment of $200.0 million in January 2020. 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. In addition, Roche will pay 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 RG6346 in a given country, the expiration of data or regulatory exclusivity, subject to certain royalty step-down provisions set forth in
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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 net sales of products in the United States. If the Company exercises the co-funding option, it also has an option to co-promote products containing RG6346 in the United States.
Accounting Analysis
The Company concluded that Roche is a customer in this arrangement pursuant to the revenue recognition guidance. The Company identified contract promises under the agreement for (i) the license of intellectual property and know-how rights related to the lead compound, (ii) research and development services to complete the Phase 1 study associated with the lead compound, (iii) lead compound transfer activities, (iv) manufacturing of clinical supply for the lead compound Phase 1 study, and (v) Roche’s option to receive additional goods and services related to the research and development collaboration. The Company determined that the Roche Collaboration Agreement contains two performance obligations consisting of: (i) a combined performance obligation that includes a license, related development and manufacturing services to complete the Phase 1 study, and manufacturing obligations through the completion of the Phase 1 study related to the lead compound, and (ii) a material right to enter into a research and development collaboration to develop additional targets. While evaluating contract promises to determine whether each was capable of being distinct and distinct within the context of the contract, management considered 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 the promises of the license and research and development services related to the lead compound were not distinct from each other. Accordingly, these promises were combined into one performance obligation. Upon Roche’s exercise of its option to enter into the research and development collaboration for which no additional consideration will be received, Roche has the right to nominate up to five additional targets. To enter the research and development collaboration, Roche is required to nominate three targets (each, a “Selected Target”) prior to December 31, 2020. For each target, Roche will receive a license to the Selected Target, for which the Company will perform research services through clinical candidate selection. The Company is not required to perform services on more than three Selected Targets at any time. Roche also has the right to replace up to three Selected Targets if a clinical candidate cannot be identified during the research term.
The total transaction price for the Roche Collaboration Agreement is $204.5 million, consisting of the upfront payment of $200.0 million and the estimated reimbursement from Roche related to the additional cohorts. The Company used the most likely amount method to estimate the amount of reimbursement, which was considered variable consideration, related to the additional cohorts. As reimbursement will be made as the Company performs the related services, the Company concluded that such amount does not need to be constrained, and therefore, included the full amount of the estimated reimbursement by Roche in the transaction price.
The Company also estimated that the most likely amount for each potential development and regulatory variable consideration milestone payment 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, 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 will 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).
The Company allocated the $204.5 million transaction price to the performance obligations on a relative standalone selling price basis. The Company estimated the standalone selling price for the lead compound performance obligation of $159.0 million using the adjusted market assessment approach, whereby the Company adjusted comparable third-party transactions to reflect the stage of development of the Company’s asset. To determine the estimated standalone selling price of the material right of $45.5 million, the Company estimated the standalone selling price of the underlying performance obligations included in the material right and estimated the probability of Roche exercising such underlying performance obligations. The Company concluded that the research and development collaboration material right contains (i) five material rights to receive a selected target license and related research and development services, and (ii) three material rights to receive a replacement selected target license and related research and development services. The variable consideration related to the reimbursement from Roche for the additional Phase 1 cohorts and any milestones and royalties that are achieved will be allocated specifically to the lead compound performance obligation, as this variable consideration relates specifically to the Company’s satisfaction of the lead compound performance obligation and such allocation has been determined to be consistent with the allocation objective of revenue recognition guidance.
Revenue associated with the lead compound 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, as the Company’s performance does not create an asset with alternative use, and the Company has an enforceable right to payment for performance completed to date. 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
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transfer of goods and services. The transaction price allocated to the research and development collaboration material right will be recognized based on the timing of recognition of the underlying performance obligations that comprise the material right, or upon expiry of the material right if such right is not exercised.
The Company recognized $19.3 million of revenue under the Roche Collaboration Agreement during the three months ended March 31, 2020. The amount of the Company’s partially unsatisfied performance obligation, recorded as a contract liability presented in deferred revenue at March 31, 2020, was $180.7 million, of which $106.6 million is included in the current portion of deferred revenue and is primarily associated with completion of our Phase 1 study of RG6346. The amount of the Company’s unsatisfied performance obligation at December 31, 2019 was $200.0 million, of which $118.1 million was included in the current portion of deferred revenue. As of March 31, 2020, the Company expected to recognize the balance of deferred revenue during the estimated three-year research term, which may be extended for up to two years.
Lilly collaboration and share purchase agreements
On October 25, 2018, the Company entered into a Collaboration and License Agreement with Lilly (the “Lilly Collaboration Agreement”) 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 GalXC to progress new drug targets toward clinical development and commercialization. In addition, the Company and Lilly will collaborate to extend the GalXC technology to non-liver (i.e., non-hepatocyte) tissues, including neural tissues.
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 hepatocyte targets, and the Company and Lilly developed research programs 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 ten targets.
Lilly agreed to pay the Company a non-refundable 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. The Lilly Share Issuance Agreement is to be combined with the Lilly Collaboration Agreement (together, the “Combined Agreements”) for accounting purposes.
Accounting Analysis
The Company concluded that Lilly is a customer in this arrangement. 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 was a single identified combined performance obligation. The total transaction price for the Combined Agreements is $148.7 million, consisting of the total $100.0 million upfront compensation and $48.7 million premium on the sale of shares under the Lilly Share Issuance Agreement. The Company applied equity accounting guidance to measure the $51.3 million recorded in equity upon the issuance of the shares.
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 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 will 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
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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 $9.6 million and $0.5 million of revenue under the Lilly Collaboration Agreement during the three months ended March 31, 2020 and 2019, respectively. The amount of the Company’s partially unsatisfied performance obligation, recorded as a contract liability presented in deferred revenue at March 31, 2020, was $125.9 million, of which $45.4 million is included in the current portion of deferred revenue, and was $135.5 million, of which $63.2 million was included in the current portion of deferred revenue, as of December 31, 2019. As of March 31, 2020, 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.
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. 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 certain 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 development and commercial rights to the GalXC RNAi molecules developed in the collaboration in exchange for development and approval-related milestones, sales milestones, and royalties on future product sales.
Alexion paid the Company a non-refundable 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 includes: (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. Alexion also agreed to pay 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 entered into a Share Purchase Agreement (the “Alexion Share Issuance Agreement”), pursuant to which Alexion purchased 835,834 shares of the Company’s common stock at $17.95 per share at issuance, for an aggregate purchase price of $15.0 million. Management concluded that the Alexion Share Issuance Agreement was 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 million was included as a component of the transaction price attributable to the revenue arrangement.
Accounting Analysis
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 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 research and development services within the context of the contract, as they are both inputs to the combined output of a target that successfully achieves IND approval. As a result, the combination of the license of
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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.
The Alexion Collaboration Agreement transaction price was determined to be $42.4 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 $14.5 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 initially 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 will 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 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 best measure of progress towards satisfying the performance obligations and reflects a faithful depiction of the transfer of goods and services.
In November 2019, the Company and Alexion amended the Alexion Collaboration Agreement (the “Amendment”) to clarify funding of certain manufacturing costs for each of the two initial targets and increased milestone payments for the additional targets if Alexion exercised its options for the two additional targets.
In December 2019, Alexion exercised its options for the exclusive rights to two additional targets within the complement pathway for the discovery and development of GalXC molecules. These exercises expand the companies’ existing research collaboration and license agreement to now encompass four targets within the complement pathway. In connection with the option exercises, Alexion paid Dicerna a total of $20.0 million, or $10.0 million in option exercise fees per additional new target that will be recognized into revenue as the related services are performed.
The Company concluded that the Amendment modified the original agreement, as the transaction price was changed as a result of Dicerna assuming responsibility for certain manufacturing costs associated with the initial targets. The exercise of the options created a single new arrangement for accounting purposes.
The Company concluded that Alexion is a customer in the Amendment. The Company identified the following promises under the Amendment: (i) the grant of licenses of intellectual property and know-how rights, and (ii) associated research and development services for the additional targets. The Company concluded that the research and development services were not capable of being distinct from the licenses and were not distinct within the context of the contract, and should therefore be combined into a single performance obligation for each program. Similar to the initial targets, 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. As a result, the combination of the license of intellectual property together with the provision of research and development services together represent the highest level of goods and services that can be deemed distinct. 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 additional targets. The transaction price of the Amendment was determined to be $35.0 million, which is comprised of the $20.0 million in option exercise fees and $15.0 million in aggregate contingent milestone payments that were probable of achievement and under the Company’s control.
During the three months ended March 31, 2020 and 2019, the Company recognized $2.1 million and $0.4 million as revenue under the Alexion Agreement, respectively, and recognized $0.6 million for the three months ended March 31, 2020 related to the Amendment. The aggregate amount of the transaction price allocated to the Company’s partially unsatisfied performance obligations and recorded as deferred revenue at March 31, 2020 was $65.2 million, of which $36.8 million is included in the current portion of deferred revenue, and was $53.0 million, of which $27.9 million was included in the current portion of deferred revenue, as of December 31,
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2019. As of March 31, 2020, the Company expects the majority of deferred revenue to be recognized through the second quarter of 2022.
BI Agreement and related amendment
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 GalXC. 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. BI paid Dicerna a non-refundable upfront payment of $10.0 million for the first target. BI also agreed to reimburse Dicerna certain third-party expenses of $0.3 million.
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 provided 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. All potential net sales milestones, totaling $95.0 million, will be accounted for in the same manner as royalties.
Accounting Analysis
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 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 were 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 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).
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 for the first target 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 $1.4 million during the three months ended March 31, 2019 as revenue associated with the first target under the BI Agreement in the accompanying condensed consolidated statement of operations.
BI contract amendment – Background
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. The terms of the Second Target option exercise and related rights and obligations associated with the Second Target were agreed to in an Additional Target Agreement (the “ATA”), which was entered into on December 31, 2018.
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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.
BI contract amendment – Accounting Analysis
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 re-evaluates 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 associated with the Second Target under the BI Agreement during both the three months ended March 31, 2020 and 2019, respectively. The aggregate amount of the transaction price allocated to the Company’s partially unsatisfied performance obligation and recorded as deferred revenue at March 31, 2020 is $1.6 million, all of which is included in the current portion of deferred revenue, and was $2.3 million, all of which was included in the current portion of deferred revenue, as of December 31, 2019.
In addition to establishing the terms of the Second Target option exercise, the ATA also amends the BI Agreement to provide the parties the opportunity to consider the development of product candidates targeting a further additional target gene (the “Third Target Option”).
Per the ATA, if BI elects to exercise the Third Target Option following Dicerna’s presentation of data for a new product candidate, the parties must also 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 upon such agreement and consummation of such exercise, 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 Targets.
The following table presents changes in the Company’s aggregate deferred revenue balances for each reporting period:

THREE MONTHS ENDED
MARCH 31, 2020
BALANCE AT BEGINNING OF PERIODADDITIONSDEDUCTIONSBALANCE AT END OF PERIOD
Deferred revenue, current and noncurrent
$394,988  $190,102  $(34,028) $551,062  

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YEAR ENDED
DECEMBER 31,
BALANCE AT BEGINNING OF PERIODADDITIONSDEDUCTIONSBALANCE AT END OF PERIOD
Deferred revenue, current and noncurrent
$183,186  $235,631  $(23,829) $394,988  

6. STOCK-BASED COMPENSATION
During the three months ended March 31, 2020 and 2019, the Company granted stock options to purchase 2,906,300 and 3,564,500 shares of common stock with aggregate grant date fair values of $44.3 million and $28.8 million, respectively. During the three months ended March 31, 2020, the Company granted 720,600 restricted stock units with a grant date fair value of $16.0 million.
The assumptions used to estimate the grant date fair value using the Black-Scholes option pricing model were as follows:
THREE MONTHS ENDED
MARCH 31,
20202019
Common stock price
$15.61 - $22.58
$10.31 - $14.13
Expected option term (in years)
5.82 - 6.08
5.94 - 6.07
Expected volatility
79.14% - 79.57%
78.79% - 79.31%
Risk-free interest rate
0.70% - 1.71%
2.24% - 2.62%
Expected dividend yield
%%
The Company has classified stock-based compensation in its condensed consolidated statements of operations as follows:
THREE MONTHS ENDED
MARCH 31,
20202019
Research and development expenses
$4,303  $1,858  
General and administrative expenses
4,224  2,969  
Total
$8,527  $4,827  

7. LEASES
On January 14, 2020, the Company entered into a non-cancelable real property lease agreement for 61,282 square feet of laboratory and office space in Lexington, Massachusetts. The original term is estimated to commence during the fourth quarter of 2020 and is for 125 months with options to extend the term for two additional successive periods of 5 years thereafter. The aggregate total fixed rent is approximately $41.8 million with the annual fixed rental payments escalating from $3.6 million to $4.8 million during the original term. The Company was required to establish a $1.5 million letter of credit that has been secured by money market investments and presented as restricted cash equivalents.
Payments due under the lease agreement include fixed and variable payments. Variable payments relate to the Company’s share of the lessors’ operating costs associated with the underlying assets and are recognized when the event on which those payments are assessed occurs. This lease does not contain a residual value guarantee.
The interest rate implicit in the lease agreement is not readily determinable, and as such, the Company will utilize its incremental borrowing rate to calculate the lease liability, which is the rate incurred to borrow, on a collateralized basis for a similar term, an amount equal to the lease payments in a similar economic environment at the time the asset is made available to the Company.
8. COMMITMENTS AND CONTINGENCIES
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 March 31, 2020.
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9. SUBSEQUENT EVENT
On April 3, 2020, the Company and Alnylam entered into a collaboration and license agreement (the “Alnylam Collaboration Agreement”) and a patent cross-license agreement (the “Alnylam Cross-License Agreement”). Pursuant to the Alnylam Collaboration Agreement, the Company and Alnylam will work to develop and commercialize investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin (“A1AT”) deficiency-associated liver disease (“alpha-1 liver disease”). Pursuant to the Alnylam Cross-License Agreement, the Company and Alnylam will cross-license their respective intellectual property in the primary hyperoxaluria (“PH”) disease area related to Alnylam’s lumasiran and the Company’s nedosiran investigational program.
Under the Alnylam Collaboration Agreement, the Company’s DCR-A1AT and Alnylam’s ALN-AAT02 investigational RNAi therapeutics, each in Phase 1/2 development, will be explored for the treatment of alpha-1 liver disease. Additionally, the Company assumes responsibility for both ALN-AAT02 and DCR-A1AT (collectively, the “A1AT Product(s)”) at its cost, and may progress one or both of these investigational medicines through clinical development. The Company will select which product candidate to advance in development for the treatment of patients with alpha-1 liver disease. At the completion of Phase 3 development, Alnylam will have the no-cost opportunity to opt in to commercialize the selected candidate in countries outside the U.S. If Alnylam exercises its opt-in right, each party shall pay tiered royalties to the other party based on net product sales generated in its territory at rates dependent on each candidate commercialized, with low-single-digit to high-single-digit royalties payable to Alnylam and low-double-digit to high-teens royalties payable to the Company based on product sales on a country-by-country and product-by-product basis, subject to royalty step-down provisions set forth in the agreement. In the event Alnylam waives its commercialization option, the Company will retain worldwide rights to commercialize the selected candidate in exchange for payments upon the satisfaction of certain milestones, up to an aggregate of $180.0 million if both product candidates progress to commercialization, and royalties payable to Alnylam based on net product sales, also at a rate dependent on each candidate commercialized, ranging from low single-digits to low double-digits on product sales on a country-by-country and product-by-product basis, subject to royalty step-down provisions set forth in the agreement.
The Alnylam Collaboration Agreement includes various representations, warranties, covenants, indemnities, and other customary provisions. The Company may terminate the Alnylam Collaboration Agreement at any time without cause following the notice period described in the agreement. Either party may terminate the Alnylam Collaboration Agreement in the event of a patent challenge by either party or in the event of an uncured material breach of the other party. Further, the Alnylam Collaboration Agreement will terminate upon the expiration of all royalty terms thereunder.
Under the Alnylam Cross-License Agreement, Alnylam and the Company have granted non-exclusive cross-licenses to their respective intellectual property related to their respective PH treatment investigational programs, with the goal of providing each party with the freedom to develop and commercialize its respective investigational RNAi product candidate: Alnylam’s lumasiran targeting glycolate oxidase for the treatment of PH type 1 and the Company’s nedosiran targeting lactate dehydrogenase A for the treatment of PH types 1, 2, and 3. The Alnylam Cross-License Agreement further provides for Alnylam to pay mid- to high-single-digit royalties to the Company based on global net sales of lumasiran and for the Company to pay low-single-digit royalties to Alnylam on global net sales of nedosiran.
The Alnylam Cross-License Agreement includes various representations, warranties, covenants, indemnities, and other customary provisions. The Alnylam Cross-License Agreement cannot be terminated by either party for the other party’s breach. However, either party may terminate the Alnylam Cross-License Agreement or may reduce the royalty payable to the other party upon a patent-related challenge by the other party unless the challenge is withdrawn and no longer pending within the time periods specified in the Alnylam Cross-License Agreement. Further, the Alnylam Cross-License Agreement will terminate upon the expiration of the last-to-expire Patent Rights licensed thereunder.
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 Pharmaceuticals, Inc. (“we”, “us,” “our,” “the Company,” or “Dicerna”) is a biopharmaceutical company focused on discovering, developing, and commercializing medicines that are designed to leverage ribonucleic acid interference (“RNAi”) to selectively silence genes that cause or contribute to disease. Using our proprietary RNAi technology platform, GalXC™, Dicerna is committed to developing RNAi-based therapies with the potential to treat both rare and more prevalent diseases. By reducing the level
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of disease-causing genes of the liver, Dicerna’s GalXC platform has the potential to safely target conditions that are difficult to treat with other modalities. Continually innovating, Dicerna is also exploring new applications of RNAi technology beyond the liver, targeting additional tissues and enabling new therapeutic applications. In addition to our own pipeline of core discovery and clinical candidates, Dicerna has established collaborative relationships with some of the world’s leading pharmaceutical companies, including Alnylam Pharmaceuticals, Inc. (“Alnylam”), Novo Nordisk A/S (“Novo”), Roche, Eli Lilly and Company (“Lilly”), Alexion Pharmaceuticals, Inc. (together with its affiliates, “Alexion”), and Boehringer Ingelheim International GmbH (“BI”). Between Dicerna and our collaborative partners, we currently have more than 20 active discovery, preclinical, or clinical programs focused on rare, cardiometabolic, viral, chronic liver, and complement-mediated diseases, as well as neurodegeneration and pain.
All of our 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. For our current clinical programs, our GalXC RNAi platform has been configured for subcutaneous delivery to the liver. Due to the enzymatic nature of RNAi, a single GalXC molecule incorporated into the RNAi machinery can destroy hundreds or thousands of mRNAs from the targeted gene.
The GalXC RNAi platform supports Dicerna’s long-term strategy to retain a full or substantial ownership stake in our programs, subject to the evaluation of potential licensing opportunities as they may arise, and to invest internally in programs for diseases with focused patient populations, such as certain rare diseases. These certain rare disease programs, which include our nedosiran and A1AT product(s) programs, represent opportunities that we believe carry a relatively higher probability of success, with genetically and molecularly defined disease markers, high unmet medical need, a limited number of centers of excellence to facilitate reaching these patients, and the potential for more rapid clinical development paths to regulatory approval. For more complex diseases with multiple gene dysfunctions and/or larger patient populations, we plan to pursue collaborations that can provide the enhanced scale, resources, and commercial infrastructure required to maximize these prospects.
We currently view our operations and manage our business as one segment which encompasses the discovery, research, and development of treatments based on our RNAi technology platform.
The COVID-19 pandemic has resulted in slower enrollment in our clinical trials, and we have undertaken efforts to mitigate potential impacts to our business including those related to conducting clinical trials and managing our supply chain. We believe we have sufficient capital to fund the execution of our current clinical and operating plans into 2023.
Current supply of Dicerna’s investigational medicines is sufficient to support ongoing clinical trials. Based on current evaluations, Dicerna’s supply chains continue to appear intact at this time to meet our foreseeable 2020 clinical, nonclinical, and chemistry, manufacturing, and control (“CMC”) supply demands across all programs. We have undertaken efforts to mitigate potential future impacts to the supply chain by increasing our stock of critical starting materials required to meet our needs and our collaborative partners’ needs through mid-2021 and by identifying and engaging alternative suppliers. We continue to be alert to the potential for disruptions that could arise from COVID-19 and remain in close contact with suppliers. Please refer to the “Financial Operations Overview” section below for specific anticipated effects on our financial statement line items.
Executive Summary
Our results of operations for and liquidity and capital resources as of the three months ended March 31, 2020 include the following:
• In January 2020, we entered into a 125-month non-cancelable real property lease agreement for 61,282 square feet of office space in Lexington, Massachusetts. We currently anticipate this lease commencing during the fourth quarter of 2020.
• In January 2020, we received a $200.0 million upfront payment from Roche associated with a collaboration agreement executed in October 2019 to which we were a party. The agreement with Roche is to progress RG6346, the investigational therapy in Phase 1 clinical development, toward worldwide development and commercialization as well as an option for the companies to collaborate in the discovery, development, and commercialization of oligonucleotide therapeutics intended for the treatment of chronic hepatitis B virus (“HBV”) infection.
• In January 2020, we received a $175.0 million upfront payment from Novo associated with a collaboration agreement executed in November 2019 to which we were a party. The agreement with Novo is for the use of the Company’s
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proprietary GalXC™ platform to progress novel therapies for the treatment of liver-related cardiometabolic diseases towards clinical development and commercialization.
Revenue from collaborative arrangements during the three months ended March 31, 2020 reflects $19.3 million, $9.6 million, $2.7 million, $1.6 million, and $0.8 million from the Roche, Lilly, Alexion, Novo, and BI collaborations, respectively, compared to $2.2 million, $0.5 million, and $0.4 million related to the BI, Lilly, and Alexion collaborations, respectively, during the three months ended March 31, 2019.
In addition, in April 2020, we and Alnylam entered into a collaboration and license agreement (the “Alnylam Collaboration Agreement”) and a patent cross-license agreement (the “Alnylam Cross-License Agreement”). Under the Alnylam Collaboration Agreement, we and Alnylam will work to develop and commercialize investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin (“A1AT”) deficiency-associated liver disease (“alpha-1 liver disease”). Under the Alnylam Cross-License Agreement, we and Alnylam will cross-license our respective intellectual property related to Alnylam’s lumasiran and our nedosiran investigational programs for the treatment of primary hyperoxaluria (“PH”). The non-exclusive license agreement provides for Alnylam to pay mid- to high-single-digit royalties to Dicerna based on global net sales of lumasiran and for Dicerna to pay low-single-digit royalties to Alnylam on global net sales of nedosiran. The non-exclusive cross-license agreement ensures that each party has the freedom to develop and commercialize its respective product candidate.
Development Programs
In choosing which development programs to internally advance, we apply the scientific, clinical, and commercial criteria that we believe allow us to best leverage our GalXC RNAi platform and maximize value. Using our GalXC RNAi technology, and applying the criteria of our development focus, we have created a pipeline of core therapeutic programs for development by Dicerna. For opportunities that were not selected as a core program opportunity, we have sought partners to fund the discovery, and subsequently drive the development of, these non-core opportunities in exchange for upfront payments, milestone payments, royalties on product sales, and potentially other economic and operational arrangements. Our current collaborations with Novo, Lilly, Alexion, and BI resulted from this effort. For core programs targeting rare diseases, we intend to develop these programs internally through approval, subject to partnership opportunities that arise, such as our collaboration with Alnylam. For core programs targeting larger populations, we may seek development partners, such as our collaboration with Roche on RG6346, under various economic and operational arrangements. Together, our core program pipeline and our pipeline of non-core collaborative programs constitute a broad and growing therapeutic pipeline that we believe may result in multiple valuable approved products based on our GalXC technology.
In addition to the programs listed in our pipeline, we are exploring a variety of potential programs involving gene targets in the liver, CNS, and other tissues, which we may elevate in the future to be either a core program or a non-core collaborative program. Under our collaborations with Novo, Roche, and Lilly, our collaborators have rights to nominate additional programs for discovery by Dicerna and subsequent development by the nominating collaborator, and which will become part of our non-core pipeline.
Our four core programs are: nedosiran for the treatment of PH, RG6346 for the treatment of HBV infection, DCR-A1AT and ALN-AAT02 for the treatment of alpha-1 liver disease, and a program for the treatment of a common disease involving the liver.
We conduct clinical trials in various countries around the world, including the U.S. and other areas heavily impacted by the COVID-19 pandemic. As a result, and based on the most recent updates from clinical sites impacted by these measures, the Company has reevaluated its previous expectations related to clinical development milestones.
The tables below set forth the state of development of our various GalXC RNAi platform product candidates as of May 7, 2020.
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Status of Dicerna Programs
Our current GalXC RNAi platform development programs are as follows:
Nedosiran for Primary Hyperoxaluria
We are developing our lead GalXC product candidate, nedosiran, for the treatment of PH type 1 (“PH1”), PH type 2 (“PH2”), and PH type 3 (“PH3”), which is in the pivotal phase of clinical development. PH is a family of severe, ultra-rare, genetic liver disorders characterized by the overproduction of oxalate, a highly insoluble metabolic end-product that is eliminated from the body mainly by the kidneys. In patients with PH, the kidneys are unable to eliminate fully the large amount of oxalate that is produced. The accumulation of oxalate compromises the renal system, which may result in severe damage to the kidneys and other organs.
PH encompasses three genetically distinct, autosomal-recessive, inborn errors of glyoxylate metabolism characterized by the overproduction of oxalate. PH1, PH2, and PH3 are each characterized by a specific enzyme deficiency. PH1 is caused by a deficiency of glyoxylate-aminotransferase, PH2 is caused by a deficiency of glyoxylate reductase/hydroxypyruvate reductase, and PH3 is caused by a deficiency of 4-hydroxy-2-oxoglutarate aldolase. Patients with PH are predisposed to the development of recurrent urinary tract (urolithiasis) and kidney (nephrolithiasis) stones, composed of calcium oxalate crystals. Stone formation is accompanied by nephrocalcinosis in some patients with PH1 and PH2. This deposition of calcium oxalate crystals in the renal parenchyma produces tubular toxicity and renal damage that is compounded by the effects of renal calculi-related obstruction and frequent superimposed infections. Based on evaluation of genome sequence databases, there may be as many as 16,000 people with PH in the U.S. and major European countries.
In May 2018, we received notice from the U.S. Food and Drug Administration (“FDA”) granting Orphan Drug Designation to nedosiran for the treatment of PH. In August 2018, the European Medicines Agency’s (“EMA”) Committee for Orphan Medicinal Products (“COMP”) designated nedosiran as an orphan medicinal product for the treatment of PH in the European Union (“EU”).
As of November 2019, we completed all study participant dosing and follow-up in PHYOX™1, a Phase 1 single-ascending-dose study of nedosiran in healthy volunteers and study participants with PH1 and PH2. The primary objective of the study was to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of single-ascending doses of nedosiran. Secondary endpoints included the change in 24-hour urinary oxalate excretion from baseline, defined as the mean of two 24-hour collections during screening. The trial was divided into two groups:
Group A was a placebo-controlled, single-blind study and included 25 healthy volunteers at a single site in the United Kingdom with five cohorts dosed at 0.3, 1.5, 3.0, 6.0, or 12.0 mg/kg of nedosiran or placebo (3:2 randomization).
Group B was an open-label study and included 18 participants, 15 with PH1 and three with PH2, and included three cohorts of participants dosed at 1.5, 3.0, and 6.0 mg/kg of nedosiran and a fourth cohort with mixed dosing. Group B
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participants were enrolled among three sites in the European Union, one in the United Kingdom, 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 50th 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.
With respect to efficacy data in PHYOX1, as of September 2019, nedosiran was associated with normalization or near-normalization of urinary oxalate levels in 14 of 18 adult patients with PH1 and PH2 following single-dose administration.
The PHYOX1 investigators also reported that the three participants with PH2 (one of whom received a single 1.5 mg/kg dose of nedosiran; the other two received a 3.0 mg/kg dose) achieved a mean maximal reduction of 24-hour urinary oxalate of 49% (range: 39% to 66%) with one participant reaching normalization and another participant reaching near-normalization at one or more post-dose time points. The PH2 patient that did not achieve normalization or near-normalization was dosed at the 1.5 mg/kg level.
Preliminary data from the PHYOX1 trial presented in November 2019 showed that nedosiran was generally well tolerated based on data from 18 participants (15 adults and three adolescents [participants 13-16 years old]) with PH1 (n=15) and PH2 (n=3) and 25 adult healthy volunteers. As of the last data cut in March 2020, seven serious adverse events (“SAEs”) have occurred in six participants in Group B; none was deemed related to the study drug, and all seven SAEs have resolved. A total of seven participants dosed with nedosiran experienced mild or moderate injection-site reactions (defined as occurring four hours or more after injection), all of which resolved without intervention in a mean of 25 hours. No clinically meaningful safety signals were observed, including from liver function tests.
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. In March 2020, we conducted a preliminary analysis of multidose data from the PHYOX3 trial. As of this preliminary data analysis, 14 participants from the completed single-dose PHYOX1 Phase 1 clinical trial had enrolled in the PHYOX3 trial, and four had received at least three monthly doses of nedosiran delivered subcutaneously. In this preliminary analysis, nedosiran appeared well tolerated, with no injection-site reactions and no drug-related severe adverse events. The overall adverse event profile was comparable to that observed in the PHYOX1 Phase 1 clinical trial. There were two patients who each experienced an SAE, but these were determined by the investigator to be unrelated to the study drug. Data from the PHYOX3 trial shows, on at least two visits, normalization or near-normalization of urinary oxalate levels for four patients who have received at least three monthly doses of nedosiran. Based on the cumulative number of days patients have participated in the PHYOX3 trial, total patient exposure to monthly dosing of nedosiran delivered subcutaneously reached nearly two years, and the longest-treated patient in the PHYOX3 trial received seven monthly doses of nedosiran as of the March 2020 interim analysis. We expect to present interim multidose data from PHYOX3 at our R&D Day in August 2020.
In March 2020, we provided an overview of our response to the COVID-19 pandemic that included an update on business continuity and clinical development milestones, including milestones related to the PHYOX clinical development program for nedosiran. The update outlined Dicerna’s intention to work closely with local Institutional Review Boards (“IRBs”) to implement a protocol amendment in accordance with recently adopted regulatory guidance that would allow for the transition of remaining site visits to at-home nurse visits for drug administration and safety follow-up. As a result of enrollment progress and temporary suspension of further clinical trial activities at multiple sites as of the March update, the Company updated its previous expectations for completion of enrollment in PHYOX2 in the second quarter of 2020. As of April 2020, Dicerna was implementing the necessary protocol amendments and working closely with local IRBs to facilitate the transition of certain site visits to a combination of at-home nurse visits with investigator telehealth assessments for drug administration and safety follow-up in the PHYOX2 trial, and patients continued to be screened for potential enrollment in the PHYOX2 trial, as feasible. Given the fluid nature of the COVID-19 pandemic and the evolving and extraordinary actions undertaken by clinical trial sites globally, we continue to evaluate our clinical plan related to nedosiran, and at a later date, will provide a revised timing estimate for PHYOX2 enrollment completion, as well as evaluate its potential effect on timing of subsequent activities, such as the nedosiran New Drug Application submission.
Unlike the PHYOX2 trial, which requires screening and enrollment of new patients, patients with PH are permitted to roll over into the PHYOX3 trial from any previous nedosiran trial in which they have participated. As of April 2020, we had implemented a protocol amendment with local IRBs and had transitioned certain site visits to a combination of at-home nurse visits with investigator telehealth assessments for dose administration and safety follow-up, and patients were continuing to enroll in the PHYOX3 trial. As of May 4, 2020, 17 patients had enrolled in the study.
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In addition to the PHYOX2 clinical trial, we have multiple additional trials planned. Further clinical studies are expected to be initiated in patients with PH3 (PHYOX4) and in PH1 and PH2 patients with severe renal impairment, including those in dialysis (PHYOX7), pending regulatory approvals and evaluation of the feasibility of trial initiations in relation to the COVID-19 pandemic. A study in PH1 and PH2 patients aged 2-5 years, with relatively intact renal function (PHYOX8), is also planned, pending regulatory approvals and evaluation of the feasibility of trial initiations in relation to the COVID-19 pandemic.
In discussions with the FDA, we received feedback indicating alignment on a path to the full approval of nedosiran for the treatment of PH1 and PH2 based on achievement of substantial reduction of high baseline urinary oxalate in patients with PH1 and PH2 in the PHYOX2 pivotal trial. With this feedback, we believe we have a path to seek full approval in both PH1 and PH2 based on PHYOX2 results. In July 2019, we received Breakthrough Therapy Designation from the FDA for the development of nedosiran for the treatment of PH1. We plan to continue our dialogue with the FDA regarding endpoints for studies involving patients with PH3 as part of the PHYOX clinical development program for nedosiran and potentially an expansion of the Breakthrough Therapy Designation to include PH2.
The ultimate goal of any PH therapy is for patients to live a normal life without the need to comply with hyperhydration and urine alkalization supporting therapies in order to prevent the formation of new calcium oxalate crystals. The PHYOX3 study will evaluate nedosiran’s long-term effect in reducing urinary oxalate levels to the normal range, enabling patients’ supportive therapies to be gradually decreased or eliminated. To best achieve this ultimate goal, Dicerna has developed a once-monthly fixed-dose injection regimen of nedosiran. This once-monthly formulation of nedosiran is designed to avoid the sudden oxalate spikes that could occur with less frequent administration or missed dosages and which could result in the formation of kidney stones and renal failure. To maximize patient convenience, we are developing pre-filled syringes to enable self-administration by most PH patients without the need for involvement of a healthcare provider.
In order to enhance our ability to bring nedosiran to market, in April 2020, we entered into the Alnylam Cross-License Agreement for the intellectual property for ours and Alnylam’s respective investigational programs for the treatment of PH. The non-exclusive cross-license agreement ensures that each party has the freedom to develop and commercialize its respective product candidates. The cross-license agreement provides for Alnylam to pay mid- to high-single-digit royalties to Dicerna based on global net sales of lumasiran and for Dicerna to pay low-single-digit royalties to Alnylam on global net sales of nedosiran.
RG6346 for Chronic Hepatitis B Virus Infection
Our GalXC RNAi platform-based product candidate for the treatment of chronic HBV infection, RG6346, is currently being tested in a Phase 1 clinical trial. HBV is reported to be the most common serious liver infection affecting an estimated 292 million people globally. Chronic HBV infection is characterized by the presence of the HBV surface antigen (“HBsAg”) for six months or more.
The DCR-HBVS-101 clinical trial is a Phase 1, randomized, placebo-controlled, double-blind study designed to evaluate the safety and tolerability of RG6346 in healthy volunteers and in patients with HBV. Secondary objectives are to characterize the pharmacokinetic profile of RG6346 and to evaluate preliminary antiviral efficacy, as well as characterize the pharmacodynamics of HBsAg and HBV DNA levels in blood. The DCR-HBVS-101 clinical trial is divided into three phases or groups:
Group A is a single-ascending-dose arm in which 30 healthy volunteers received a dose of RG6346 (0.1, 1.5, 3.0, 6.0, or 12.0 mg/kg) or placebo, with a four-week follow-up period. Group A dosing was completed 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 RG6346 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 RG6346 (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.
We dosed the first patient, from Group C, at a dose of 1.5 mg/kg, in May 2019. The final patient’s last dose in the 1.5 mg/kg dose cohort was administered in October 2019.
We dosed the first patient in the 3.0 mg/kg cohort in August 2019. The final patient’s last dose in the 3.0 mg/kg dose group was administered in January 2020.
We dosed the first patient in the 6.0 mg/kg cohort in December 2019 and are enrolling the remainder of the cohort.
Participants with chronic HBV in Groups B and C, in whom HBsAg will have dropped equal to or more than 1 log10 IU/mL below their baseline at the time of their last scheduled study visit, will continue to be followed until their HBsAg level is less than 1 log10 IU/mL below their baseline value. Multiple patients had achieved this level of HBsAg reduction at their last scheduled visit.
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In order to be optimally positioned to develop and commercialize our product candidate, RG6346, in combination with other novel drugs, we entered into a research collaboration and licensing agreement with Roche in October 2019. Under the terms of the agreement, we will be leading the development of RG6346 through the current Phase 1 trial, and pending favorable results, Roche intends to further develop RG6346 with the overall goal of developing a combination regime to achieve a long-term immunological cure of chronic HBV in combination with additional Roche product candidates in Phase 2 and Phase 3 clinical trials.
The Phase 1 clinical trial of RG6346 for the treatment of chronic HBV infection continues to progress and is nearing the end of enrollment. Dicerna continues to expect to present Phase 1 proof-of-concept data from all existing cohorts at our R&D Day in August 2020.
DCR-A1AT and ALN-AAT02 for Alpha-1 Antitrypsin Deficiency-Associated Liver Disease
Our GalXC RNAi platform-based product candidate for the treatment of alpha-1 antitrypsin (“A1AT”) deficiency-associated liver disease, DCR-A1AT, is currently being tested in a Phase 1/2 clinical study, which we believe could enable a pivotal trial without additional studies. A1AT deficiency is an inherited disorder that can lead to liver disease in children and adults and lung disease in adults. The disorder is caused by mutations in a gene called SERPINA1. This gene, when functioning normally, provides instructions for making the A1AT protein, which protects the body from an enzyme called neutrophil elastase. This enzyme is released from white blood cells to fight infection, but it can attack normal tissues if not tightly controlled by A1AT. Mutations in the SERPINA1 gene can result in a deficiency of A1AT or, most commonly, an abnormal form of the protein that cannot control neutrophil elastase. Accumulation of abnormal A1AT protein in the liver can lead to liver disease. Uncontrolled neutrophil elastase can also destroy alveoli (small air sacs in the lungs) and cause lung disease.
A1AT deficiency occurs all over the world, though its prevalence varies by population. The disorder affects roughly one in 1,500 to 3,500 individuals with European ancestry but is uncommon in people of Asian descent. Congenital A1AT deficiency is estimated to affect 2.4 people out of every 10,000 in the EU.
In March 2020, the FDA granted orphan drug designation to DCR-A1AT for the treatment of A1AT deficiency. In December 2019, the European Commission granted orphan drug designation to DCR-A1AT for the treatment of congenital A1AT deficiency based on a positive opinion from the COMP of the EMA. We submitted a CTA to the Swedish Medical Products Agency in June 2019 to conduct a first-in-human Phase 1/2 study of DCR-A1AT.
The initial DCR-A1AT-101 clinical trial is a Phase 1/2 randomized, placebo-controlled study designed to evaluate the safety and tolerability of DCR-A1AT in healthy volunteers and in patients with A1AT deficiency-associated liver disease. Secondary objectives are to characterize the pharmacokinetic profile of DCR-A1AT, to evaluate preliminary pharmacodynamics on serum A1AT protein concentrations, and to characterize the effect of DCR-A1AT on A1AT deficiency-associated liver disease evaluated by liver biopsy. Exploratory objectives include characterization of the effect of DCR-A1AT on A1AT deficiency-associated liver disease evaluated by biochemical markers as well as the effect on liver stiffness. The DCR-A1AT-101 clinical trial is divided into two phases or groups:
Group A is a single-ascending-dose arm in which a single dose of DCR-A1AT (0.1, 1.0, 3.0, 6.0, or 12.0 mg/kg) or placebo will be administered to up to 36 healthy volunteers, with a minimum 8-week follow-up. The first participant in Group A was dosed in November 2019.
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.
Following our business update in March 2020, further enrollment of healthy volunteers in the Phase 1/2 trial of DCR-A1AT was effectively paused due to site restrictions related to the COVID-19 pandemic. All subjects in the current dosing cohort are expected to complete their remaining visits, as feasible. As of late April 2020, the Scientific Review Committee for the DCR-A1AT Phase 1/2 trial confirmed that the study could continue and begin enrolling healthy volunteers in the next dosing cohort. Additional safety precautions will be implemented, including testing of any participants who present with symptoms consistent with COVID-19. We expect that participants will begin enrolling in the next dosing cohort in the next few weeks. Completion of dosing in healthy volunteers in the single-ascending-dose cohort and initiation of dosing in patients in the Phase 1/2 trial of DCR-A1AT will be determined based on the timing of enrollment at identified trial sites, further developments in the COVID-19 pandemic, as well as the Company’s evaluation of next steps for the ALN-AAT02 and DCR-A1AT programs under the agreement with Alnylam (discussed below).
In April 2020, we entered into the Alnylam Collaboration Agreement. Under the Alnylam Collaboration Agreement, Alnylam’s ALN-AAT02 and Dicerna’s DCR-A1AT, each in Phase 1/2 development, will be explored for the treatment of alpha-1 liver disease. Under the agreement, we assume responsibility for both ALN-AAT02 and DCR-A1AT at our cost and may progress one or both of
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these investigational medicines through clinical development. We will select which product candidate to advance in development for the treatment of patients with alpha-1 liver disease. At the completion of Phase 3, Alnylam has the no-cost opportunity to opt in to commercialize the selected candidate in countries outside the U.S. If Alnylam exercises its opt-in right, each party will pay tiered royalties to the other party based on net product sales generated in its territory at rates dependent on which candidate is commercialized. In the event Alnylam waives its commercialization option, we will retain worldwide rights to commercialize the selected candidate in exchange for milestones and royalties payable to Alnylam, also at a rate dependent on which candidate is ultimately commercialized.
Completion of dosing in healthy volunteers and initiation of dosing in patients in the Phase 1/2 trial of DCR-A1AT will be determined based on the timing and pace of enrollment, further developments in the COVID-19 pandemic, and the Company’s evaluation of the ALN-AAT02 and DCR-A1AT programs.
DCR-Proprietary
We are currently pursuing development of a proprietary candidate for the treatment of a common disease involving the liver. Our goal is to begin a Phase 1 study for this program in 2021.

Collaborative Program Update
Eli Lilly and Company
During the first quarter of 2020, Lilly selected LY3819469, a GalXC molecule for the second collaboration target in cardiometabolic disease, for advancement into preclinical development.
We currently have a goal for an Investigational New Drug or Clinical Trial Authorization filing for LY3561774 by Lilly late in 2020.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our condensed consolidated financial statements requires us to make estimates and apply judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the revenue and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates and could have a material impact on our condensed consolidated financial statements.
The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our financial statements presented in this report are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2020. There have been no significant changes to our critical accounting policies as disclosed in our most recently filed Annual Report on Form 10-K during the three months ended March 31, 2020.
Recent Accounting Pronouncements
A summary of significant recent accounting pronouncements that we have adopted or expect to adopt is included in Note 1 – Description of Business and Basis of Presentation to our condensed consolidated financial statements (see Part I, Item 1 – “Financial Statements” of this Quarterly Report on Form 10-Q).
Recent Developments
Additional Lexington Facility
In January 2020, we entered into a non-cancelable real property lease agreement for 61,282 square feet of laboratory and office space in Lexington, Massachusetts.
The original term is estimated to commence during the fourth quarter of 2020 and is for 125 months with options to extend the term for two additional successive periods of five years thereafter. The aggregate total fixed rent is approximately $41.8 million with
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the annual fixed rental payments escalating from $3.6 million to $4.8 million during the original term. We were also obligated to deliver an irrevocable letter of credit or security deposit in the amount of $1.5 million.
In addition to the fixed rent during the lease term, we will be responsible for certain customary operating expenses and real estate taxes specified in the agreement.
Institutional Investment
On February 6, 2020, we issued and sold an aggregate of approximately $40.0 million of shares of our common stock to a single institutional investor pursuant to our common stock Sales Agreement with Cowen and Company, LLC as the sales agent. In this transaction, we sold an aggregate of 2,077,500 shares of common stock at a price of $19.25 per share, resulting in net proceeds of approximately $39.2 million after a deduction of approximately $0.8 million in sales commissions. The shares in the offering were sold pursuant to a shelf registration statement declared effective by the SEC on May 31, 2018 and a prospectus supplement filed with the SEC on June 1, 2018.
Alnylam Agreements
In April 2020, we and Alnylam entered into the Alnylam Collaboration Agreement and the Alnylam Cross-License Agreement. Under the Alnylam Collaboration Agreement, we and Alnylam will work to develop and commercialize investigational RNAi therapeutics for the treatment of alpha-1 liver disease. Under the Alnylam Cross-License Agreement, we and Alnylam will cross-license our respective intellectual property in the PH disease area related to Alnylam’s lumasiran and our nedosiran investigational program.
Financial Operations Overview
Revenue from collaborative arrangements
Our revenue from collaboration arrangements to date has been generated primarily through research funding, license fees and other upfront payments, option exercise fees, milestone payments, and preclinical development payments under our research collaboration arrangements with Novo, Roche, Lilly, Alexion, and BI. We have not generated any commercial product revenue, nor do we expect to generate any product revenue in the near-term 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, and product sales from our internally developed products. We expect that any revenue we generate will fluctuate in future periods as a result of the timing of our or our collaborators’ achievement of preclinical, clinical, regulatory, and commercialization milestones, to the extent achieved, the timing and amount of any payments to us relating to such milestones, and the extent to which any of our product candidates are approved and successfully commercialized by us or a collaborator. Delays in or changes to the research and development plans and timelines related to our collaboration agreements are likely due to the COVID-19 pandemic. Because we recognize the majority of our collaboration revenue on a cost-to-cost measure of progress, revenues recognized in the near-term future may be lower than originally anticipated and could be recognized over an extended period of time as a result.
Research and development expenses
Research and development expenses consist of costs associated with our research activities, including discovery and development of our molecules and drug delivery technologies, clinical and preclinical development activities, and research activities under our research collaboration and license agreements. Our research and development expenses include:
direct research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, and consultants;
platform-related lab expenses, including 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.
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Delays in or changes to our research and development plans and timelines, which impact both our internal and external resources, have occurred and may continue to occur due to the COVID-19 pandemic. Internally, we are impacted by mandatory work from home edicts directed by the local governments in the jurisdictions in which we operate. However, essential work exemptions continue to permit critical research and development and laboratory activities for limited personnel. Those exemptions enable some continued discovery research and activities supporting our collaborative agreements and our own programs. We also anticipate that the timing of hiring additional personnel may shift into later periods than initially anticipated. Externally, a number of our clinical trial sites are temporarily postponing or suspending trial-related activities as a result of COVID-19. Any of these factors could cause the timing of the research and development expenses we expect to incur to shift into later periods and have the potential to cause us to expend more funds than originally contemplated as a result of needing to restart or resume development activities.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development, commercial, and support functions. Other general and administrative expenses include travel expenses, professional legal fees (excluding litigation expenses), audit, tax, and other professional services, and allocated facility-related costs not otherwise included in research and development expenses.
Delays in or changes to our research and development plans and timelines due to the COVID-19 pandemic may also impact our support functions and the timing of hiring additional personnel, which could cause the timing of certain general and administrative expenses we expect to incur to shift into later periods.
Interest income
Interest income consists of income earned on our cash and cash equivalents, held-to-maturity investments, and restricted cash equivalents.

Results of Operations
Comparison of the Three Months Ended March 31, 2020 and 2019
The following table summarizes the results of our operations for the periods indicated (amounts in thousands, except percentages):
THREE MONTHS ENDED
MARCH 31,
20202019$ CHANGE% CHANGE
Revenue$34,028  $3,107  $30,921   
Operating expenses:
Research and development43,171  21,603  21,568  99.8 %
General and administrative16,023  9,676  6,347  65.6 %
Total operating expenses59,194  31,279  27,915  89.2 %
Loss from operations(25,166) (28,172) 3,006  (10.7)%
Other income (expense):
Interest income2,613  2,018  595  29.5 %
Interest expense(4) —  (4) (100.0)%
Other income65  —  65  100.0 %
Total other income, net2,674