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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 June 30, 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 ☒  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  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
Accelerated filer
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 ☒
As of July 31, 2020, there were 74,459,045 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, Novo Nordisk A/S, Roche, Eli Lilly and Company, Alexion Pharmaceuticals, Inc., Boehringer Ingelheim International GmbH, and Alnylam Pharmaceuticals, Inc. 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)
JUNE 30,
2020
DECEMBER 31,
2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$197,801  $152,816  
Held-to-maturity investments471,408  196,065  
Contract receivables12  200,354  
Prepaid expenses and other current assets 12,541  6,934  
Total current assets681,762  556,169  
NONCURRENT ASSETS:
Property and equipment, net9,135  7,076  
Right-of-use operating assets, net29,488  30,102  
Restricted cash equivalents 5,563  3,894  
Other noncurrent assets6,462  168  
Total noncurrent assets50,648  41,240  
TOTAL ASSETS$732,410  $597,409  
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$7,764  $6,077  
Accrued expenses and other current liabilities 27,009  20,042  
Lease liability, current2,810  3,358  
Deferred revenue, current221,343  212,258  
Total current liabilities258,926  241,735  
NONCURRENT LIABILITIES:
Lease liability, noncurrent19,819  20,141  
Deferred revenue, noncurrent290,889  182,730  
Other noncurrent liabilities608  608  
Total noncurrent liabilities311,316  203,479  
TOTAL LIABILITIES570,242  445,214  
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value – 5,000,000 shares authorized; no shares issued or outstanding at June 30, 2020 or December 31, 2019
    
Common stock, $0.0001 par value – 150,000,000 shares authorized; 74,321,325 and 71,573,196 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
7  7  
Additional paid-in capital741,789  677,504  
Accumulated deficit(579,628) (525,316) 
Total stockholders’ equity162,168  152,195  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$732,410  $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
JUNE 30,
SIX MONTHS ENDED
JUNE 30,
2020201920202019
Revenue$40,448  $5,682  $74,476  $8,789  
Operating expenses:
Research and development53,376  22,832  96,547  44,435  
General and administrative20,565  8,831  36,588  18,507  
Total operating expenses73,941  31,663  133,135  62,942  
Loss from operations(33,493) (25,981) (58,659) (54,153) 
Other income (expense):
Interest income1,729  2,136  4,342  4,154  
Interest expense(6)   (10)   
Other (expense) income(50)   15    
Total other income, net1,673  2,136  4,347  4,154  
Net loss$(31,820) $(23,845) $(54,312) $(49,999) 
Net loss per share – basic and diluted$(0.43) $(0.35) $(0.74) $(0.73) 
Weighted average common shares outstanding – basic and diluted74,001,126  68,323,850  73,460,252  68,292,212  
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)

SIX MONTHS ENDED
JUNE 30, 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  
Exercises of common stock options and sales of common stock under Employee Stock Purchase Plan542,256  —  5,876  —  5,876  
Stock-based compensation expense—  —  10,206  —  10,206  
Net loss—  —    (31,820) (31,820) 
BALANCE – June 30, 202074,321,325  $7  $741,789  $(579,628) $162,168  

SIX MONTHS ENDED
JUNE 30, 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  
Exercises of common stock options and sales of common stock under Employee Stock Purchase Plan71,145  —  489  —  489  
Stock-based compensation expense—  —  3,893  —  3,893  
Net loss—  —  —  (23,845) (23,845) 
BALANCE – June 30, 201968,360,051  $7  $615,014  $(454,856) $160,165  
The accompanying notes are an integral part of these condensed consolidated financial statements. 
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DICERNA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
SIX MONTHS ENDED
JUNE 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(54,312) $(49,999) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation expense18,733  8,720  
Depreciation and amortization expense1,066  539  
Amortization of premium on investments(302) (2,297) 
Non-cash lease expense3,640  916  
Other(5)   
Changes in operating assets and liabilities:
Litigation settlement payable  (10,500) 
Deferred revenue117,243  (789) 
Prepaid expenses and other assets(11,988) (2,067) 
Accounts payable2,035  1,795  
Contract receivables200,342  100,000  
Accrued expenses and other liabilities7,536  866  
Lease liability(4,564) (952) 
Net cash provided by operating activities279,424  46,232  
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of held-to-maturity investments254,000  228,000  
Purchases of held-to-maturity investments(529,041) (222,286) 
Purchases of property and equipment(3,358) (3,856) 
Other15    
Net cash (used in) provided by investing activities(278,384) 1,858  
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of placement agent commissions39,192    
Payments of common stock offering costs(104) (50) 
Proceeds from exercises of stock options and issuances under Employee Stock Purchase Plan6,550  842  
Other(24)   
Net cash provided by financing activities45,614  792  
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS46,654  48,882  
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS – Beginning of period156,710  54,983  
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS – End of period$203,364  $103,865  
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SIX MONTHS ENDED
JUNE 30,
20202019
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$446  $527  
NONCASH FINANCING ACTIVITIES
Right-of-use assets acquired through financing leases$48  $  
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:
SIX MONTHS ENDED
JUNE 30,
20202019
Cash and cash equivalents$197,801  $100,321  
Restricted cash equivalents5,563  3,544  
Total cash, cash equivalents, and restricted cash equivalents shown in the condensed consolidated statements of cash flows$203,364  $103,865  
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 silencing disease-causing genes, Dicerna’s GalXC platform has the potential to address conditions that are difficult to treat with other modalities. Initially focused on hepatocytes, Dicerna has continued to innovate and is exploring new applications of its RNAi technology beyond the liver, targeting additional tissues and enabling new therapeutic applications. In addition to our own pipeline of core discovery and clinical candidates, Dicerna has established collaborative relationships with some of the world’s leading pharmaceutical companies, including Novo Nordisk A/S (“Novo”), Roche, Eli Lilly and Company (“Lilly”), Alexion Pharmaceuticals, Inc. (together with its affiliates, “Alexion”), Boehringer Ingelheim International GmbH (“BI”), and Alnylam Pharmaceuticals, Inc. (“Alnylam”). Between Dicerna and 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. The Company continues to be alert to the potential for disruptions that could arise from COVID-19 and monitors the Food and Drug Administration’s and other health authorities’ guidance for the conduct of clinical trials during this time.

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.
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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 June 30, 2020 and its results of operations, changes in stockholders’ equity, and cash flows for the interim periods ended June 30, 2020 and 2019. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The results of operations for the three and six months ended June 30, 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.

Recent accounting pronouncement
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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.
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 FASB ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
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 because the U.S. Federal Reserve did not have a history of defaulting on its obligations as of the reporting date.
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
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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 proportional share of net loss to participating securities because they have no contractual obligation to share in the net 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 units 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 share because such securities would have been anti-dilutive due to the Company’s net loss per share during the three and six months ended on the dates presented.
JUNE 30,
2020
JUNE 30,
2019
Options to purchase common stock15,109,939  11,973,016  
Unvested restricted stock units887,355    
Warrants to purchase common stock  2,198  
Total15,997,294  11,975,214  

3. HELD-TO-MATURITY INVESTMENTS
A summary of the Company’s held-to-maturity investments is presented below:
JUNE 30, 2020
DESCRIPTION
AMORTIZED
COST
GROSS
UNREALIZED
HOLDING
GAINS
GROSS
UNREALIZED
HOLDING
LOSSES
FAIR
VALUE
U.S. Treasury securities maturing in one year or less
$471,408  $1,453  $(1) $472,860  

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 Company presents accrued interest receivable in prepaid expenses and other current assets, separate from held-to-maturity investments in its condensed consolidated balance sheets.
The Company’s policy is not to measure an allowance for credit losses for accrued interest receivables and to write off any uncollectible accrued interest receivable as a reversal of interest income in the period in which it determines the accrued interest will not be collected. The Company did not write off any accrued interest receivables during the three and six months ended June 30, 2020 and 2019.
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 likely that the Company will be required to sell the investments before recovery of their amortized cost bases.
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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:
JUNE 30, 2020
DESCRIPTION
TOTAL FAIR VALUELEVEL 1LEVEL 2LEVEL 3
Cash equivalents
Money market funds$197,772  $197,772  $  $  
Held-to-maturity investments
U.S. Treasury securities472,860    472,860    
Restricted cash equivalents
Money market funds5,563  5,563      
Total
$676,195  $203,335  $472,860  $  

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 held 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 June 30, 2020 and December 31, 2019. Restricted cash equivalents represent money market investments which secure letters of credit established in connection with the Company’s facility leases.
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 June 30, 2020 and December 31, 2019.
As of June 30, 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. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
JUNE 30,
2020
DECEMBER 31,
2019
Prepaid clinical, contract research, and manufacturing costs$6,406  $4,288  
Interest receivable1,327  918  
Prepaid insurance1,351  583  
Other prepaid expenses and other current assets3,457  1,145  
Total$12,541  $6,934  

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6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
JUNE 30,
2020
DECEMBER 31,
2019
Accrued clinical, contract research, and manufacturing costs$14,641  $10,347  
Accrued compensation and other employee-related benefits8,029  7,298  
Accrued professional fees1,071  1,519  
Other accrued expenses and current liabilities3,268  878  
Total$27,009  $20,042  

7. COLLABORATIVE RESEARCH AND LICENSE AGREEMENTS
Alnylam
Background
On April 3, 2020, the Company and Alnylam (collectively, the “parties”) entered into a Collaboration and License Agreement (the “A1AT Agreement”) and a Patent Cross License Agreement (the “PH Agreement”). Pursuant to the A1AT Agreement, Dicerna will lead efforts on investigational RNAi therapeutics for the treatment of alpha-1 antitrypsin (“A1AT”) deficiency-associated liver disease (“alpha-1 liver disease”). Pursuant to the PH Agreement, the parties completed a cross-license of their respective intellectual property for Alnylam’s lumasiran and Dicerna’s nedosiran investigational programs for the treatment of primary hyperoxaluria (“PH”). No upfront cash consideration was exchanged in either transaction.
Pursuant to the A1AT Agreement, Alnylam’s A1AT product (ALN-AAT02, or the “Alnylam Product”) and Dicerna’s A1AT product (DCR-A1AT, or the “Dicerna Product”) will be explored for the treatment of alpha-1 liver disease. Under the A1AT Agreement, the Company obtained an exclusive worldwide license to Alnylam’s intellectual property to exploit the Alnylam Product. Dicerna assumes responsibility for the development of both the Alnylam Product and the Dicerna Product, at its cost. Dicerna will select which product candidate(s) 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. where it already has a commercialization infrastructure in place (the “Commercialization Option”). If Alnylam exercises its Commercialization Option, the parties will share future development costs. Further, each party will pay tiered royalties to the other party based on a percentage of net product sales generated in its territory ranging from low-single-digits to high teens dependent upon which candidate is commercialized. 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 which candidate is ultimately commercialized, ranging from low-single-digits to low-double-digits. The A1AT Agreement is subject to customary termination provisions, and the Company may terminate the A1AT Agreement at any time without cause following the notice period described in the A1AT Agreement.
Pursuant to the PH Agreement, the parties granted to each other a perpetual non-exclusive cross-license to their respective intellectual property related to their respective PH treatment investigational programs to ensure that each party has the freedom to develop and commercialize its respective product candidate with Alnylam’s lumasiran targeting glycolate oxidase (“GO”) for the treatment of PH type 1 and Dicerna’s nedosiran targeting lactate dehydrogenase A (“LDHA”) for the treatment of PH types 1, 2, and 3. Each party will have sole discretion concerning the research and development of its products in the field. In exchange for the license, Alnylam is required to pay mid- to high-single-digit royalties to Dicerna based on global net sales of lumasiran and Dicerna is required to pay low-single-digit royalties to Alnylam on global net sales of nedosiran. The PH Agreement cannot be terminated by either party for the other party’s breach. However, either party may terminate the PH 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 PH Agreement. Further, the PH Agreement will terminate upon the expiration of the last-to-expire patent rights licensed thereunder.
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Accounting Analysis
The Company determined that the A1AT Agreement and the PH Agreement represent separate agreements for accounting purposes, as the transactions have different commercial objectives, the consideration under each contract is not dependent upon the price or performance of the other contract, and the goods or services under each contract are separate performance obligations.
A1AT Agreement
The Company concluded that the A1AT Agreement was within the scope of Accounting Standards Codification (“ASC”) 606, Contracts with Customers, as the provision of research and development services is considered an output of the entity’s ordinary activities in exchange for consideration.
The Company identified a single performance obligation under the A1AT Agreement which consists of the provision of certain nonclinical and clinical services through the completion of the Phase 1 clinical trial for any product.
The Company determined that the transaction price at inception of the A1AT Agreement consists of non-cash consideration in the form of the license received from Alnylam. The Company determined that the fair value of the non-cash consideration (the license received from Alnylam) is insignificant given the early-stage development status of the Alnylam Product and the related risks associated with developing a commercial product. The sales-based royalties that Dicerna may be entitled to receive in the event that Alnylam exercises its Commercialization Option have been excluded from the transaction price and will be recognized only if Alnylam exercises its Commercialization Option and the related sales occur.
In the event that Alnylam waives the Commercialization Option, Dicerna may be required to pay contingent milestones and royalties in amounts that vary depending on whether a Dicerna or Alnylam Product is commercialized to compensate Alnylam for the license provided under the agreement. Given the uncertainty associated with these contingent payments, the Company has not recognized any amounts associated with these payments.
The Company has recorded development costs incurred under the A1AT Agreement as research and development expenses in the Company’s condensed consolidated statement of operations.
PH Agreement
The Company concluded the PH Agreement is within the scope of ASC 610, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets, as the exchange of non-exclusive licenses is considered an exchange of non-financial assets outside the ordinary scope of business. Pursuant to ASC 610-20, the Company applied the guidance in ASC 606 to determine if a contract exists, identify the distinct non-financial assets, and determine when control transfers and, therefore, when to derecognize the asset. Additionally, the Company applied the measurement principles of ASC 606 to determine the amount of consideration, if any, to include in the calculation of the gain or loss for the non-financial asset.
The Company determined that it transferred control of a non-financial asset (the non-exclusive license granted to Alnylam) at contract inception. Applying the non-cash consideration guidance in ASC 606, the Company further determined that the fair value of the non-financial asset received (the non-exclusive license from Alnylam) was insignificant. Therefore, the Company has concluded that no gain or loss will be recorded related to the PH Agreement at contract inception.
The Company will record costs related to its PH program as research and development expenses in the Company’s condensed consolidated statement of operations.

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 and fund discovery and preclinical development to clinical candidate selection for each liver cell target. Novo will be responsible for all further development and the 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
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opt in to both programs in Phases 1-3. The Company and Novo will share in profits and losses for the Company’s orphan liver and Novo products should both parties elect to co-develop.
The Company is working 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 is, during a specified discovery period, working 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 is providing 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 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.
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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 is being 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 aggregate amount of the transaction price allocated to the Company’s unsatisfied or partially unsatisfied performance obligations under the Novo Collaboration Agreement at June 30, 2020 was $250.1 million. As of June 30, 2020, the Company expected to recognize the balance of deferred revenue over the remaining portion of 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 had 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 an amendment to the Roche Collaboration Agreement in June 2020, Roche and Dicerna agreed to extend the date for nomination of targets and initiation of the research and develop collaboration from December 31, 2020 to January 15, 2021, subject to further potential extension by the parties due to the COVID-19 global pandemic shutdowns. 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 is providing 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. In April 2020, Roche selected its first target under the research and development portion of the Roche Collaboration 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 worldwide 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 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.
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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. 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. In April 2020, Roche nominated the first of up to five targets under the research and development portion of our collaboration agreement.
The total transaction price for the Roche Collaboration Agreement is $206.5 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 $206.5 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 $161.0 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 is 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 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.
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The aggregate amount of the transaction price allocated to the Company’s unsatisfied or partially unsatisfied performance obligations under the Roche Collaboration Agreement at June 30, 2020 was $167.7 million. Additionally, at June 30, 2020, the Company had a contract asset of $1.3 million. As of June 30, 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
Background
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 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).
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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 aggregate amount of the transaction price allocated to the Company’s unsatisfied or partially unsatisfied performance obligations under the Lilly Collaboration Agreement at June 30, 2020 was $116.6 million. As of June 30, 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
Background
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 two 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 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.
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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.
The aggregate amount of the transaction price allocated to the Company’s unsatisfied or partially unsatisfied performance obligations under the Alexion Agreements at June 30, 2020 was $63.2 million. As of June 30, 2020, the Company expects the majority of deferred revenue to be recognized through the second quarter of 2022.
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BI Agreement and related amendment
Background
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.
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 (together, with the BI Agreement, the “BI Collaboration Agreements”).
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
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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.
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 aggregate amount of the transaction price allocated to the Company’s partially unsatisfied performance obligations under the BI ATA at June 30, 2020 was $1.0 million. The Company expects to recognize this amount through October 2020.
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.
Revenue summary
The following table provides a summary of revenue recognized:

THREE MONTHS ENDED
JUNE 30,
SIX MONTHS ENDED
JUNE 30,
2020201920202019
Novo$2,447  $  $4,052  $  
Roche20,677    39,984    
Lilly9,487  2,539  19,069  3,072  
Alexion7,063  1,082  9,825  1,503  
BI774  2,061  1,546  4,214  
Total$40,448  $5,682  $74,476  $8,789  
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The following table provides a summary of deferred revenue balances:
JUNE 30, 2020
CURRENTNONCURRENTTOTAL
Novo$39,929  $135,192  $175,121  
Roche79,468  81,810  161,278  
Lilly59,892  56,739  116,631  
Alexion41,023  17,148  58,171  
BI1,031    1,031  
Total$221,343  $290,889  $512,232  

DECEMBER 31, 2019
CURRENTNONCURRENTTOTAL
Novo$813