Dicerna Pharmaceuticals
Annual Report 2015

Plain-text annual report

DICERNA PHARMACEUTICALS INC FORM 10-K (Annual Report) Filed 03/10/16 for the Period Ending 12/31/15 Address Telephone CIK 87 CAMBRIDGEPARK DRIVE CAMBRIDGE, MA 02140 617 621 8097 0001399529 Symbol DRNA SIC Code Fiscal Year 2834 - Pharmaceutical Preparations 12/31 http://www.edgar-online.com © Copyright 2016, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 Form 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended December 31, 2015or ¨TRANSITION REPORTS 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 ofincorporation or organization) (IRS EmployerIdentification No.)87 Cambridgepark Drive Cambridge, MA 02140(Address of principal executive offices and zip code)(617) 621-8097(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, $0.0001 par value The NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 12months (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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted 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 submitand post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer ¨Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ¨ No xBased on the closing price of the registrant’s Common Stock on the last business day of the registrant’s most recently completed second fiscal quarter, which was June 30, 2015,the aggregate market value of its shares (based on a closing price of $13.95 per share) held by non-affiliates was approximately $70.2 million. Shares of the registrant’s CommonStock held by each executive officer and director and by each entity or person that owned five percent or more of the registrant’s outstanding Common Stock were excluded inthat such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.As of March 9, 2016, there were 20,647,983 shares of common stock outstanding. Table of ContentsDICERNA PHARMACEUTICALS, INC.2015 ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS Page PART I  Item 1. Business 5 Item 1A. Risk Factors 40 Item 1B. Unresolved Staff Comments 74 Item 2. Properties 74 Item 3. Legal Proceedings 75 Item 4. Mine Safety Disclosures 75 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 76 Item 6. Selected Financial Data 79 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 80 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 96 Item 8. Financial Statements and Supplementary Data 97 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 122 Item 9A. Controls and Procedures 122 Item 9B. Other Information 123 PART III Item 10. Directors, Executive Officers and Corporate Governance 124 Item 11. Executive Compensation 124 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 124 Item 13. Certain Relationships and Related Transactions, and Director Independence 124 Item 14. Principal Accountant Fees and Services 124 PART IV Item 15. Exhibits and Financial Statement Schedules 125 Signatures 128 2Table of ContentsForward-Looking StatementsThis Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” forpurposes of this Annual Report on Form 10-K. 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”or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about: • the initiation, timing, progress and results of our research and development programs, preclinical studies, any clinical trials and Investigational NewDrug (IND) application, New Drug Application (NDA) and other regulatory submissions; • our ability to identify and develop product candidates for 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 products candidates; • the commercialization of any approved product candidates; • our ability to establish and maintain additional collaborations and retain commercial rights for our product candidates in the collaborations; • the implementation of our business model and strategic plans for our business, technologies and product candidates; • our estimates of our expenses, ongoing losses, future revenue and capital requirements; • our ability to obtain additional funds for our operations; • our ability to obtain and maintain intellectual property protection for our technologies and product candidates and our ability to operate our businesswithout infringing the intellectual property rights of others; • our reliance on third parties to conduct our preclinical studies or any future clinical trials; • our reliance on third party supply and manufacturing partners to supply the materials and components for, and manufacture, our research anddevelopment, preclinical and clinical trial drug supplies; • our ability to attract and retain qualified key management and technical personnel; • our dependence on our existing collaborator, Kyowa Hakko Kirin Co., Ltd. (KHK), for developing, obtaining regulatory approval for andcommercializing product candidates in the collaboration; • our receipt and timing of any milestone payments or royalties under our research collaboration and license agreement with KHK or arrangement withany future collaborator; • our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act; • 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 thatmay cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied bythese 3Table of Contentsforward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in PartI, Item 1A “Risk Factors” below and for the reasons described elsewhere in this Annual Report on Form 10-K. Any forward-looking statement in this AnnualReport on Form 10-K reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to ouroperations, 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 becomesavailable in the future.This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business and the markets forcertain drugs, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Informationthat is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differmaterially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and otherdata from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similarsources. 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 Annual Report on Form 10-K, “we,” “us,” “our” and the “Company” refer to Dicerna Pharmaceuticals,Inc. and, where appropriate, its consolidated subsidiary.TrademarksThis Annual Report on Form 10-K includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks andtrade names included in this Annual Report on Form 10-K are the property of their respective owners. 4Table of ContentsPART I Item 1.BusinessWe are an RNA interference-based biopharmaceutical company focused on the discovery and development of innovative treatments for rare inheriteddiseases involving the liver, for other therapeutic areas in which the liver plays a key role, and for cancers that are genetically defined. We are using our RNAinterference (RNAi) technology platform to build a broad pipeline in these therapeutic areas. In many cases we are pursuing targets that have historically beendifficult to inhibit using conventional approaches, but where we believe connections between targets and diseases are well understood and documented. We aim todiscover, develop and commercialize these novel therapeutics either on our own or in collaboration with pharmaceutical partners, while seeking to retain significantportions of the commercial rights in the rare disease and oncology fields. We have partnered two of our oncology development programs with the globalpharmaceutical company Kyowa Hakko Kirin Co., Ltd. (KHK). We are eligible to receive royalties on worldwide net sales for these product candidates. Inaddition, we have an option to co-promote, in the U.S., a therapeutic targeting the KRAS gene for an equal share of the profits from U.S. net sales.In choosing which development programs to advance, we apply scientific, clinical, and commercial criteria that we believe allow us to best leverage ourRNAi platform and maximize value for our company. Our current development programs are as follows. • Primary Hyperoxaluria Type 1 (PH1). We are developing DCR-PH1 for the treatment of PH1 by targeting the gene encoding the liver enzymeglycolate oxidase. PH1 is known to afflict an estimated one to three people per million of population, and may afflict as many as six to eight peopleper million of population, and causes severe renal disease and early mortality. In pre-clinical studies, we have shown that, by using our RNAitechnology to inactivate the gene encoding glycolate oxidase, we can significantly reduce oxalate levels, the key pathology of PH1. In December 2015,we initiated dosing in our first PH1 clinical trial in normal healthy volunteers, and we expect to begin our first Phase 1 study of DCR-PH1 in patientswith PH1 in the first half of 2016. In January 2016, we enrolled our first patient in an international, multicenter, observational study designed tomeasure biomarkers implicated in PH1. Although the observational study will not include investigational drugs or other interventions, its participantsmay be considered for enrollment in planned clinical trials of DCR-PH1. We are using our DsiRNA-EX Conjugate technology to develop asubcutaneously injected treatment for PH1 and intend to declare a clinical candidate in the first half of 2016. • Other rare inherited diseases involving the liver. We are investigating a number of other rare diseases involving genes expressed in the liver. Wehave selected these diseases and disease target genes based on criteria that include having a strong therapeutic hypothesis, a readily-identified patientpopulation, the availability of predictive biomarkers, high unmet medical need, favorable competitive positioning, and a rapid projected path toapproval. We are utilizing our DsiRNA-EX Conjugate technology in these rare disease programs. • Other diseases in which the liver plays a key role. We are using our DsiRNA-EX Conjugate technology to develop potential therapeutics for a widevariety of diseases, including chronic liver diseases, cardiovascular diseases, and viral infection diseases. We have selected these diseases and diseasetarget genes based on criteria that include having a strong therapeutic hypothesis, a readily-identified patient population, the availability of predictivebiomarkers, and favorable competitive positioning. For many of these diseases we may seek development partners. • DCR-MYC for MYC-related cancers. We are developing DCR-MYC for the treatment of MYC-related cancers, including hepatocellular carcinoma(HCC) and pancreatic neuroendocrine tumors (PNET). Multiple lines of genetic evidence implicate MYC in the initiation and progression of tumors,including natural variations in the MYC gene that predispose to certain types of cancer, and frequent genetic amplification and overexpression ofMYC within tumors. In preclinical studies, inhibition of 5Table of Contents the MYC gene with DCR-MYC has shown strong anti-tumor effects in animal models of human cancers. In the second quarter of 2014, we initiated amulti-center, dose-escalating Phase 1 clinical study of DCR-MYC to assess the safety and tolerability of DCR-MYC in patients with solid tumors,multiple myeloma, or lymphoma who are refractory or unresponsive to standard therapies. In the second quarter of 2015, we announced interim datafrom this trial, including signs of clinical and metabolic response and tumor shrinkage in two PNET patients. Based on these observations, weannounced our intention to expand this on-going phase 1 trial to include a cohort of patients with PNETs. In addition, once the optimal dose of DCR-MYC has been determined, we plan to initiate enrollment of a cohort of patients who will undergo pre- and post-treatment tumor biopsies. Molecularanalysis of the MYC gene transcript in these biopsies will allow direct observation of the RNAi-mechanism of action of DCR-MYC. We expect toannounce data from the PNET and biopsy cohorts in 2016. In the fourth quarter of 2014, we initiated a global Phase 1b/2 clinical trial of DCR-MYC inpatients with advanced hepatocellular carcinoma (HCC). Dose escalation will continue until determination of the MTD, at which point we will initiatean expansion cohort at MTD that includes pre- and post-treatment biopsies, as well as the Phase 2 portion of the study. Molecular analysis of the MYCgene transcript in tumor biopsies will allow direct observation of the RNAi-mechanism of action of DCR-MYC in HCC. We expect to report proof-of-concept data for DCR-MYC in the second half of 2016 based on anticipated results from our two ongoing trials. • Two product candidates in collaboration with KHK, including one for KRAS-related cancers. We are developing, in collaboration with KHK, atherapeutic targeting the KRAS oncogene, a gene that is frequently mutated in numerous cancers, including non-small cell lung cancer, colorectalcancer and pancreatic cancer. Such mutations are associated with aggressive disease and resistance to current therapies. We are also developing, withKHK, a therapeutic targeting a second cancer-related gene, which we are not identifying at this time. KHK is responsible for all preclinical and clinicaldevelopment activities, including the selection of patient population and disease indications for clinical trials. • DCR-BCAT for ß-catenin and Wnt pathway related tumors.  DCR-BCAT is our product candidate for tumors believed to be driven by activatingmutations in ß catenin or other tumor-driving genes in the Wnt signaling pathway. In particular, a significant fraction of patients with colorectalcarcinoma (CRC) and with HCC are believed to carry activating mutation in ß-catenin or other Wnt pathway genes. In multiple animal modelsincluding both CRC and HCC models, DCR-BCAT has shown anti-tumor efficacy in tumors driven by ß-catenin and/or Wnt pathway mutations.DCR-BCAT is based on our DsiRNA-EX technology and is delivered by an advanced version of our EnCore tumor delivery lipid nanoparticlesystem. We have chosen not to advance DCR-BCAT into IND-enabling studies until we have achieved clinical proof-of-concept with DCR-MYC.Our drug discovery and development efforts are based on the therapeutic modality of RNAi, a highly potent and specific mechanism for silencing the activityof a targeted gene. In this naturally occurring biological process, double-stranded RNA molecules induce the enzymatic destruction of the messenger RNA(mRNA) of a target gene that contains sequences that are complementary to one strand of the therapeutic double-stranded RNA molecule. Our approach is todesign proprietary double-stranded RNA molecules that have the potential to engage the enzyme Dicer and initiate an RNAi process to silence a specific targetgene. We refer to these proprietary molecules generally as Dicer substrate short interfering RNAs (DsiRNAs), or as DsiRNA or DsiRNA-EX molecules, dependingon the specific structure.RNAi therapeutics represent a novel advance in drug development. Historically, the pharmaceutical industry has developed small molecules or antibodies toinhibit the activity of disease-causing proteins. This approach is effective for many diseases; nevertheless, many proteins cannot be inhibited by either smallmolecules or antibodies. Some proteins lack the binding pockets small molecules require for interaction. Other proteins are solely intracellular and thereforeinaccessible to antibody-based therapeutics which are limited to cell surface and extracellular proteins. 6Table of ContentsThe novel advantage of RNAi is that instead of targeting proteins, RNAi goes upstream to silence the genes themselves. In 2006, the Nobel Prize wasawarded for the discovery of RNAi. That same year we incorporated with the goal of developing RNAi-based therapeutics for previously “undruggable” diseasetarget genes. Rather than seeking to inhibit a protein directly, the better approach may be to prevent its creation in the first place.We believe our approach to RNAi drug development provides the following qualities and advantages compared to other methods of inducing RNAi. • We initiate RNAi through the Dicer enzyme . DsiRNA and DsiRNA-EX molecules are structured to be processed by the enzyme Dicer, theinitiation point for RNAi in the human cell cytoplasm. Unlike earlier generation RNAi molecules, which mimic the output product of Dicerprocessing, DsiRNA and DsiRNA-EX molecules enter the RNAi pathway prior to Dicer processing. This can result in preferential use of the correctstrand of a double-stranded RNA molecule, and therefore increase the efficacy of the RNAi mechanism. We believe this benefit may increase thepotency of our DsiRNA and DsiRNA-EX molecules compared to other RNAi-inducing molecules. In addition, due to processing by the Dicer enzyme,our DsiRNA and DsiRNA-EX molecules have multiple sites for chemical modification and conjugation compared to earlier RNAi technologies. Atthese sites we can use modifications that enhance the drug-like properties on our molecules. Specifically, we can employ modifications that enhancethe pharmacokinetic profile and/or suppress immunostimulatory activity. • Our DsiRNA-EX Conjugates enable subcutaneous delivery to the liver . We have developed a proprietary subcutaneous conjugate-based deliverytechnology for our DsiRNA-EX molecules that is designed to enable convenient subcutaneous delivery for our emerging pipeline of liver-targetedRNAi investigational therapies, and can generally be applied to disease target genes and viral pathogens in the liver. These conjugates do not involvelipid nanoparticles and are built on the DsiRNA-EX platform, using an extension to one end of the double-stranded DsiRNA molecule. Theseextensions are unique to our technology, enabling a differentiated and independent approach to subcutaneous delivery of RNAi-inducing therapeutics. • In May 2015, we advanced our conjugate platform by extending its observation of potent, durable knockdown of gene expression withDsiRNA-EX Conjugates from mouse models to non-human primates. These data in non-human primates were presented at the 17 th AnnualTIDES: Oligonucleotide and Peptide Therapeutics from Research through Commercialization conference. • In September 2015, we further advanced our conjugate platform by showing that a single dose of DsiRNA-EX Conjugates significantly below1 mg/kg can reduce liver gene expression by 50% in mice, and a single dose of 5 mg/kg can yield greater than or equal to 95% reduction ingene expression. • To date, we have demonstrated in vivo gene silencing activity with DsiRNA-EX Conjugate molecules against more than ten liver disease genetargets.We are driving toward selection of our first DsiRNA-EX Conjugate clinical candidate, in order to advance a program into clinical development in2017. We intend to use DsiRNA-EX Conjugates in all future programs involving targets in the liver, and intend to declare multiple DsiRNA-EXConjugate clinical candidates in 2016. • Our EnCore lipid nanoparticle technology enables delivery to solid tumors . We have developed our proprietary EnCore lipid nanoparticle (LNP)technology for delivery of DsiRNA and DsiRNA-EX molecules to tumors. The EnCore system is engineered to accumulate in tumors and mediatedelivery of DsiRNA and DsiRNA-EX molecules into tumor cells. We have extensive pre-clinical data, in multiple animal models of human tumors, ofeffective RNAi delivery mediated by the EnCore system. We utilize this delivery system in our DCR-MYC and DCR-BCAT programs and intend toutilize it for future programs in oncology. 7Table of ContentsWe believe we have a robust patent portfolio covering our proprietary RNAi platform. As of March 1, 2016, our patent estate included over 20 issued patentsand over 70 pending patent applications covering our DsiRNA and DsiRNA-EX payload technologies and our lipid nanoparticle and conjugate deliverytechnologies.Our executive management team has extensive experience in the biopharmaceutical industry. In addition, various members of our management team and ourboard of directors have contributed to the progress of the RNAi field through their substantial involvement in companies such as Cephalon Inc., Genta Inc.,GlaxoSmithKline plc, Pfizer Inc., Sanofi, Sirna Therapeutics Inc., and other companies. Our co-founder and chief executive officer, Douglas M. Fambrough III,Ph.D., was a lead venture capital investor and board member of Sirna Therapeutics, an early RNAi company acquired by Merck & Co., Inc. in 2006 for$1.1 billion.StrategyWe are committed to delivering transformative RNAi-based therapies to patients with rare inherited diseases involving the liver and for cancers that aregenetically defined. The key elements of our strategy are as follows. • Create new programs in indication areas with high unmet medical need. We intend to continue to use our proprietary RNAi technology platformto create new, high value pharmaceutical programs. Our primary focus will remain: (1) rare inherited diseases involving the liver; and (2) genetically-defined oncogene targets in oncology. We are also pursuing the use of our DsiRNA-EX Conjugate technology for programs in other therapeutic areas,including disease areas with large population sizes. • Validate our product candidates and our platform in clinical proof-of-concept studies. We expect to announce proof-of-concept clinical data forDCR-MYC in the second half of 2016, clinical data from our single ascending dose DCR-PH1 trial in patients in early 2017, and to initiate proof-of-concept clinical studies in late 2017 using our DsiRNA-EX Conjugate platform. Based on precedents in the RNAi field, we are optimistic that ourpreclinical data showing the significant knockdown of target mRNA activity may translate into clinical results. • Continue to develop product candidates for rare diseases and oncology while seeking to retain significant portions of the commercial rights. • Enter into additional partnerships with pharmaceutical companies either on our RNAi technology platform or specific indications ortherapeutic areas. We may choose to establish partnerships with pharmaceutical companies across multiple programs or indication areas dependingon the attractiveness of the opportunities. These partnerships may provide us with further validation of our technology platform, funding to advanceour proprietary product candidates, and/or access to development, manufacturing and commercial capabilities. • Continue to invest in our RNAi technology platform. We will continue to invest in expanding and improving our DsiRNA-EX RNAi payloadtechnologies and our conjugate and LNP delivery technologies. Building on what we believe are significant advantages in potency and delivery, weseek to develop product candidates that will have a profound impact on the lives of patients.Our RNAi Technology PlatformAll of our drug discovery and development efforts are based on the therapeutic modality of RNAi, a highly potent and specific mechanism for silencing theactivity of a targeted gene. The RNAi process is triggered by double-stranded RNA molecules containing sequences that are complementary to the sequence of thetargeted gene. Our novel and highly potent approach is based on double-stranded RNAs that are aimed to serve as optimal substrates for the RNAi initiatingenzyme Dicer, and thus our proprietary RNAi molecules are known as Dicer substrates, which we refer to as DsiRNAs generally or as DsiRNA or DsiRNA-EXmolecules, depending on the specific structure. The RNAi machinery, guided by a DsiRNA or DsiRNA-EX molecule (or other double-stranded RNAi-inducingmolecules) causes the targeted destruction of specific mRNAs of the complementary 8Table of Contentstarget gene. Destroying these mRNAs immediately decreases the biological activity from the target gene. A single DsiRNA or DsiRNA-EX molecule incorporatedinto the RNAi machinery can destroy hundreds or thousands of mRNAs from the targeted gene.We believe that our DsiRNA and DsiRNA-EX molecules have distinct properties in triggering the RNAi pathway to silence disease-related genes, therebyproviding advantages for triggering RNA interference compared to other types of double-stranded RNAs used to induce RNAi. Our DsiRNA and DsiRNA-EXmolecules are structured to be optimal for processing by the Dicer enzyme. We believe that other RNAi-inducing molecules currently in development mimic theoutput of a Dicer enzyme processing event, and thus act at a later point in the RNAi pathway. By contrast, DsiRNA and DsiRNA-EX molecules enter the RNAipathway through being presented to Dicer itself, the pathway’s natural initiation point. By entering the RNAi pathway at that point, we believe that DsiRNA andDsiRNA-EX molecules are able to maximize the efficacy of the RNAi mechanism, making DsiRNA and DsiRNA-EX molecules inherently more potent thantraditional RNAi-inducing molecules. This potency advantage derives from the structure of the DsiRNA and DsiRNA-EX molecules and how they interact with theDicer enzyme. Specifically, the structure of the DsiRNA and DsiRNA-EX molecule is able to indicate to the Dicer enzyme which of the two RNA strands shouldbe used to guide the selective destruction of disease gene target mRNAs by the RNAi machinery. We have found in animal tests that this benefit both increases thepotency of our DsiRNA and DsiRNA-EX molecules relative to other RNAi-inducing molecules and enables many more sequences to be used to generate our potentDsiRNAs compared to other RNAi-inducing molecules. We therefore believe that the nature of the interaction of our DsiRNA and DsiRNA-EX molecules with theRNAi pathway intervention facilitates the discovery of new DsiRNA and DsiRNA-EX therapeutic candidates and further strengthens our intellectual propertyposition.Schematic representation of our DsiRNA DsiRNAs are precisely-sized double-stranded RNA molecules that are asymmetric. In the form we use for some of our therapeutic programs, thelonger strand is 27 bases long and is complementary to the target gene we seek to silence, known as the Guide Strand. The shorter strand is 25 baseslong and known as the Passenger Strand. The two strands are complementary across their length, with the two additional bases of the 27-merforming a two-base overhang at the 3’-end of the molecule. For our product candidates we use chemical modifications (for example, 2’-OMe, 2’-Fand phosphorothioates) and we also use two bases of DNA at the 3’ end of the Passenger Strand. These DNA bases, along with the two-baseoverhang on the 27-mer, cause the Dicer enzyme preferentially to take up the Guide Strand, leading to several advantages for DsiRNAs comparedto other RNAi-inducing molecules. The DsiRNA structure is utilized in our DCR-MYC and our KHK-partnered oncology programs.Schematic representation of our DsiRNA-EX In addition to 25/27-mer duplex DsiRNAs, we have developed the DsiRNA-EX technology, where extensions to one or more of the ends of the RNAstrands can provide added functionality including 9Table of Contentssites for conjugation and other modifications. Chemical modifications (for example, 2’-OMe, 2’-F and phosphorothioates) are located on bothstrands at specific positions. Our DCR-PH1, DCR-BCAT, and all DsiRNA-EX Conjugate programs utilize these structures.In addition, due to the nature of how the Dicer enzyme processes a DsiRNA or DsiRNA-EX molecule, our DsiRNA and DsiRNA-EX molecules mayprovide advantages for targeted delivery methods that do not use lipid nanoparticles. Our DsiRNA molecules present chemical conjugation points, which can beused to attach targeting agents or other agents that facilitate delivery or enhance the “drug-like” properties of the molecules. Our DsiRNA-EX molecules includeextensions to one or more of the ends of the RNA strands, which allows even further potential for chemical modification. Notably, the extensions enable thedevelopment of subcutaneously delivered molecules that are conjugated to targeting ligands and possess enhanced biological stability, and that can be administeredsubcutaneously or intravenously without LNPs. These and other favorable features are introduced into the DsiRNA and DsiRNA-EX molecules while maintaininghigh RNAi activity. Due to how the Dicer enzyme processes a DsiRNA or DsiRNA-EX molecule, we can use stable covalent non-cleavable linkers for conjugationinstead of less stable cleavable linkers that other RNAi molecules may require.Optimization of our DsiRNA and DsiRNA-EX moleculesFor therapeutic use in humans, our DsiRNA and DsiRNA-EX molecules are optimized both with respect to base sequence and chemical modifications toincrease stability and mask them from mechanisms that recognize foreign RNAs, inducing immune system stimulation. Our optimization process begins with thescreening of 300 to 600 RNA sequences predicted to have good activity based on a proprietary DsiRNA prediction algorithm. Through optimization and chemicalmodification we identify the most active RNAi molecules while engineering in enhanced stability and engineering out immunostimulatory activity. Our DsiRNAand DsiRNA-EX molecules routinely achieve high potencies, with IC50 values (the amount of material required to silence a target gene by 50 percent) typically inthe 0.1 to 3.0 picomolar range in in vitro studies. Owing to the enzymatic nature of the RNAi pathway, this is 100 to 1,000 times as great as, or greater than, thepotency of most traditional small molecule therapeutics. Furthermore, our research and testing to date suggest that our optimized DsiRNA and DsiRNA-EXmolecules are significantly reduced in their ability to induce an immune system response in humans.Our drug delivery technologiesOur process of deliveryFrom the initial discovery of the RNAi pathway in mammals through more recent attempts at creating RNAi-based therapeutics, drug delivery has been aprofound challenge. Most nucleic acids, including our DsiRNA and DsiRNA-EX molecules, are unable to enter cells on their own, but cell entry is required toaccess the RNAi machinery in the cytoplasm and thus to silence the targeted genes. An effective drug delivery technology is required to ferry the DsiRNA andDsiRNA-EX molecules into cells, through the cell internalization pathway and ultimately release the DsiRNA and DsiRNA-EX molecules into the cell cytoplasm.We believe that our drug delivery technologies overcome these challenges. Effective RNAi drug delivery requires the following three steps: Step 1. Accumulationin the target tissue, Step 2. Binding to and internalization by the target tissue cells, Step 3. Release from the internalization compartment into the cytoplasm.Subcutaneous delivery to the liver by DsiRNA-EX ConjugatesWe believe that the structure of DsiRNA-EX molecules are well suited for direct conjugation to delivery agents. We have developed a delivery system basedon conjugation of a targeting agent to the extended region of the DsiRNA-EX molecules. We call such molecules DsiRNA-EX Conjugates. This system shouldprovide for generalized subcutaneous administration in humans of DsiRNA-EX Conjugates to the hepatocyte cells of the liver. The targeting agent used in ourDsiRNA-EX Conjugates is GalNAc (n-acetyl galactosamine), which 10Table of Contentsprovides for highly specific uptake in hepatocyptes through the hepatocyte-expressed asialoglycoprotein receptor. For example, we have administered DsiRNA-EXConjugates subcutaneously in mice and have seen IC 50 values substantially below 1.0 milligrams per kilograms of body weight for multiple gene targets,including observations of IC 50 values below 0.3 milligrams per kilogram of body weightDsiRNA-EX Conjugate StructureThe structure of DsiRNA-EX Conjugates underlying Dicerna’s most potent RNAi inducers consists of two RNA strands: a shorter Guide strand with a two-base overhang on its 3’ end, and a longer Passenger strand with a four-based “tetraloop” structure that folds back to form a short stem section. Attached to each ofthe four tetraloop bases, via a short linker, is a single GalNAc molecule. 11Table of ContentsDsiRNA-EX Conjugates yield high-potency gene silencing agents. The data shows a dose response curve for silencing of a therapeutic liver target aftersubcutaneous administration of a DsiRNA-EX Conjugate in mice. In this example the calculated IC 50 value is <0.3 milligrams per kilogram of body weight. EnCore lipid nanoparticles are composed of a lipid-DsiRNA or lipid-DsiRNA-EX core surrounded by anenvelope of different lipids which mediate the accumulation, internalization and release into the cytoplasm of theDsiRNA or DsiRNA-EX molecules in the core of the particle.EnCore lipid nanoparticles for deliveryWe are using our EnCore lipid nanoparticles (LNPs) for delivery of our DsiRNA and DsiRNA-EX molecules to solid tumors. We believe that the EnCoreLNPs effectively mediate all steps required for delivery to tumor cells: accumulation, binding and internalization, and release into the cytoplasm. The EnCore LNPsare 12Table of Contentscomprised of a “Core” of lipid and DsiRNA or DsiRNA-EX molecules, surrounded by an “Envelope” of chemically distinct lipids that are designed to interact withthe target tissue. The Core allows EnCore to carry a large payload of DsiRNA or DsiRNA-EX molecules while simultaneously protecting them from degradingenzymes. The envelope interacts with the target tissue to mediate accumulation, binding and internalization, and release into the cytoplasm. Our EnCore LNPsshow preferential delivery to tumor cells, compared to liver cells (the other tissue type commonly associated with LNP-based RNAi delivery) due to the specificlipid composition and nature of the polyethylene coating on the surface of the particles. Our EnCore LNPs also have beneficial properties such as high tolerability(low toxicity), ease of manufacturing, effective RNAi payload loading, and protection of the DsiRNA or DsiRNA-EX payload. We have successfully demonstratedeach of these properties of EnCore LNPs and have used them to achieve effective delivery of our DsiRNA and DsiRNA-EX molecules in animal models of cancer.Delivery to the liver with Arbutus’ LNPOur licensing agreement with Arbutus Biopharma Corporation (Arbutus) and one of its subsidiaries enables us to use Arbutus’ proprietary LNP for deliveryof DCR-PH1 to treat PH1. Arbutus’ lipid nanoparticle system has been shown in other human clinical studies to provide potent, safe and effective RNA delivery tohepatocytes (liver cells). We anticipate that our licensing of Arbutus’ LNP technology will help streamline the development path for DCR-PH1 and allows us tofocus our EnCore LNP efforts on our oncology pipeline.Our Product CandidatesIn choosing clinical programs to pursue using our DsiRNA and drug delivery technologies, we apply the criteria listed below. We believe that our currentdevelopment programs meet most or all of these criteria. • Strength of therapeutic hypothesis. Our current product candidate gene targets, and those we intend to pursue in the future, are a well-understoodpart of the disease process where a therapeutic intervention is likely to have substantial benefit for the patient. Because our RNAi technology platformallows us to pursue product candidate gene targets that have historically been difficult to inhibit using conventional approaches, we believe that thereare a substantial number of such targets without existing pharmaceuticals on the market. • Readily-identified patient population. We seek disease indications where patients can be readily identified by the presence of characteristic geneticmutations. In the case of genetic diseases, these are heritable genetic traits. In the case of oncology, these are genetic changes that have occurred intumor cells as part of the tumor-formation process. In both cases, available genetic tests and techniques can identify patients that carry these mutations. • Predictivity of biomarkers for early efficacy assessment. We seek indications where there is a clear relationship between the disease status and anassociated biomarker that we can readily measure. This approach will allow us to determine in early stages of clinical development whether ourDsiRNA molecules are likely to have the expected biological and clinical effects in patients. • Unmet medical need. We seek to provide patients with significant benefit and alleviation of disease. The indications we choose to approach have highunmet medical need, which is intended to enable us to better access patients and qualify for pricing and reimbursement that justify our developmentefforts. • Competitive positioning. We seek indications where we believe we have the opportunity to develop either a first-in-class product or a clearlydifferentiated therapy. 13Table of Contents • Rapid development path to approval. To reach commercialization expeditiously and to help ensure our ability to finance development of ourproduct candidates, we have identified indications with the potential for rapid development through marketing approval. Specifically, we believe thatcertain of our product candidates have the potential to obtain Breakthrough Therapy Designation as well as accelerated approval from the U.S. Foodand Drug Administration (FDA). DCR-PH1 for PH1PH1 is a rare, inherited autosomal recessive disorder of metabolism in the liver that usually results in severe damage to the kidneys. PH1 is caused by thefailure of the liver to metabolize a precursor of oxalate, a highly insoluble metabolic end-product in humans, resulting in excess oxalate and high levels of oxalatein the urine. This oxalate is formed during the metabolic breakdown of hydroxyproline, a naturally occurring component of collagen. In individuals with PH1,crystals of calcium oxalate form in the renal tubules, leading to chronic and painful cases of kidney stones and subsequent fibrosis, known as nephrocalcinosis.Despite the typical interventions of a large daily intake of water to dilute the oxalate and other interventions, many patients eventually enter kidney failure (end-stage renal disease, or ESRD) and become eligible for transplant. While in ESRD, besides having to endure frequent dialysis, patients are afflicted with a build-upof oxalate in the bone, skin, heart and retina with concomitant debilitating complications, a condition known as systemic oxalosis. Some patients show partialdisease amelioration with oral pyridoxine supplementation, although disease progression usually continues. Supportive care treatments are available, generally withonly minor or no effect on disease progression. Currently, aside from dual liver and kidney organ transplantation, there are no highly efficacious therapeutic optionsfor most patients with PH1. Dual liver and kidney transplantation presents a challenge in identifying a donor and is associated with high co-morbidity rates. Even inthose U.S. patients treated with dual liver and kidney transplant, five-year post-transplant survival is 64 percent. For patients treated with kidney transplant alone,five-year survival is 45 percent.While the true prevalence of PH1 is unknown, according to estimates recently published by the New England Journal of Medicine the prevalence of PH1 isat least one to three per million of population. Based on the frequency of occurrence of disease mutations in the population derived from genome sequencedatabases, the estimated genetic incidence is six and half per million of population, which we believe suggests that PH1 is under-diagnosed. Roughly consistentwith the genetic incidence estimate, the disease is thought to have an incidence of one per 120,000 live births a year in Europe. Certain populations, for example inthe Canary Islands (Spain) or Kuwait, have higher incidences due to founder effects or consanguinity. We believe approximately 800 patients total are currently intwo distinct disease registries in North America and Europe, although these registries do not capture all afflicted 14Table of Contentspatients. Incidence is believed to be similar in Asia. Given the severity of PH1, we believe this disease represents a significant market opportunity. The patientadvocacy group, the Oxalosis and Hyperoxaluria Foundation, based in New York City, New York, seeks to represent patients with PH1.Therapeutic rationale for PH1 We believe that there is a strong rationale for focusing our RNAi technology on the development of product candidates for the treatment of PH1. Thehydroxyproline breakdown metabolic pathway that is disrupted in PH1 consists of a number of enzymes. The gene encoding the final enzyme in the pathway,alanine-glyoxylate aminotransferase 1 (AGT1), is mutated in patients with PH1. Under normal circumstances, AGT1 metabolizes oxalate precursors into theharmless amino acid glycine, which is then used by the body or excreted. But when AGT1 function is disrupted due to mutation, oxalate begins to build up,resulting in progressive loss of kidney function and, ultimately, kidney failure. Approximately 50 percent of PH1 patients have kidney failure by age 30 to 35.Animal studies have shown that intervening one step earlier in the metabolic pathway can reduce or eliminate the abnormally high oxalate production causedby the absence of AGT1 enzyme activity. These studies employ mice in which the gene encoding AGT1 has been genetically deleted to create an animal model ofPH1. Similar to human patients, these mice have elevated levels of oxalate in their urine. When the enzyme one step earlier in the metabolic pathway than AGT1 iseliminated by genetic deletion in this animal model of PH1, oxalate levels in the urine are substantially reduced. These studies demonstrate that genetic deletion ofthe enzyme prior to AGT1 in the pathway prevents the formation of the oxalate precursor and the buildup of oxalate. The enzyme upstream of AGT1 is known asglycolate oxidase (GO) and is encoded by the gene HAO1. In normal animals and humans HAO1 is expressed exclusively or nearly exclusively in the liver.Preclinical data for DCR-PH1We are using our DsiRNA-EX technology and licensed lipid nanoparticle delivery technology to develop DCR-PH1, a product candidate designed tospecifically inhibit the gene HAO1, which encodes GO. We have generated highly potent and specific DsiRNA-EX molecules targeting HAO1 and believe we haveoptimized these molecules to enhance their pharmaceutical properties. We have concluded manufacturing scale-up and Good Laboratory Practice (GLP) toxicitystudies which allowed filing an IND application with FDA in August, 2015 and CTAs with several countries in Europe; we anticipate initiating clinical trials in thefirst half of 2016. This past December, we also initiated a study in normal healthy volunteers.We have demonstrated the efficacy of DCR-PH1 in both mice and in non-human primates (monkeys). The data demonstrate that after a single intravenousdose of 0.3 milligrams per kilogram body weight of DCR-PH1 the average reduction of HAO1 gene expression was 95% in mice and 84% in monkeys soon afterdosing. At a much later time, 28 and 29 days after dosing, the target gene expression was still significantly reduced by an average of 54% in mice and 68% inmonkeys. These data are supportive of an infrequent clinical dosing regimen. 15Table of ContentsDCR-PH1 consists of a DsiRNA-EX payload formulated in a lipid nanoparticle delivery system A. Long-duration Reduction in Urinary Oxalate after HAO1 Knockdown B. Urinary Glycolate Elevation – a Biomarker of HAO1 mRNA and GO Protein Reduction In the mouse model of PH1, treatment with DCR-PH1 results in a reduction in levels of urinary oxalate and, as expected by the mechanism of action,elevation in levels of urinary glycolate. Increased urinary glycolate alone may indicate a positive treatment effect; in PH1 patients treated with DCR-PH1, elevationof urinary glycolate may precede reduction in urinary oxalate as accumulated oxalate is flushed out in urine over time.Phase 1 Clinical Development plan for DCR-PH1Our development program for DCR-PH1 has multiple on-going components, including an observational study and clinical studies in both patients andhealthy volunteers. In January of 2016 we enrolled the first patient in our PH1 observational study for patients with genetically confirmed diagnosis of PH1 andmild to moderate 16Table of Contentsrenal impairment to (1) characterize the baseline variability and factors that influence changes in urine and blood oxalate and glycolate levels and renal functionover time; and (2) better characterize the systemic complications associated with PH1. We anticipate that up to 25 patients will be enrolled. We anticipate amajority of the patients enrolled in the observational study may be considered for enrollment in the Phase 1clinical study in patients. In December 2015, weinitiated dosing in our first PH1 clinical trial, which is a Single Ascending Dose (SAD) level trial in normal healthy volunteers and is being conducted in the U.S.,and will terminate at a low dose level. Data from the healthy volunteer study will be used to facilitate initiation of clinical studies in patients in the U.S. We expectto begin our first Phase 1 study of DCR-PH1 in patients with PH1 in the first half of 2016 at EU clinical sites. This is an open label study with dose escalation in aSingle Ascending Dose (SAD) cohort. After review of the SAD data, and consideration of the competitive environment as well as progress with our DsiRNA-EXConjugate efforts in PH1, we may initiate dosing of a Multiple Ascending Dose (MAD) level cohorts. We intend for the study to be conducted in the US, EU, andother countries. The primary objective of the Phase 1 study in patients is to determine the safety profile and recommended dose of DCR-PH1. Secondary objectivesinclude the determination of pharmacokinetics (PK) and the pharmacodynamics (PD) profile of DCR-PH1, including changes in urine oxalate levels.Additional programs under investigation involving the liverWe are investigating a number of other rare diseases and other therapeutic classes involving disease target genes expressed in the liver. We have selectedthese diseases and disease target genes based on our stated criteria, including having a strong therapeutic hypothesis, a readily-identified patient population, theavailability of predictive biomarkers, high unmet medical need, favorable competitive positioning, and a rapid path to approval. We are currently optimizingDsiRNA-EX Conjugate molecules directed toward multiple disease target genes and anticipate in 2016 declaring multiple DsiRNA-EX Conjugates foradvancement into IND-enabling studies. We may not disclose the identities of these gene targets, or the diseases we intend to treat, until after an IND has beenfiled.DCR-MYC for solid tumorsFor the treatment of cancer we are developing the product candidate DCR-MYC, which utilizes our DsiRNA and EnCore LNP technologies to target theoncogene MYC. We believe that DCR-MYC has the potential to be used broadly in solid tumors from many tissues of origin, based on observed patterns of MYConcogene amplification across diverse tumor types.There is abundant evidence that the MYC oncogene is a driver of human cancer. The MYC oncogene, originally identified as a transformative agent innaturally-occurring tumor viruses, is one of the most frequently mutated oncogenes found in human cancers. A therapy that reduces or eliminates elevated MYCactivity has the potential to generate therapeutic benefits for patients with various tumor types that include MYC amplifications or other elevations of MYCactivity. Inhibition of MYC activity has generated strong anti-tumor responses in a variety of animal models of cancer, which we have also observed in our ownlabs. Genetic techniques in mice which reduce MYC expression or inhibit MYC protein activity have been shown to prevent tumor formation or cause substantialtumor shrinkage, depending on the mouse genetic model of cancer employed in the experiment. These results have been obtained from mouse tumor models whereMYC is not responsible for tumor initiation. We believe that this animal model data is supportive of the use of MYC-targeted therapy to treat cancer in humans. 17Table of ContentsAssociation of U.S. cancer patients with aberrant MYC expression CANCER TYPE APPROXIMATEPERCENTAGE OF PATIENTS Liver (hepatocellular) 50%Breast 80%Colorectal 70%Gastric 51-77%Gynecological 90%Prostate 80-90%Small cell lung 18-30%The frequently observed mutations in the MYC gene usually result in the duplication or higher-order amplification of the MYC oncogene within the tumorcell DNA, resulting in elevated levels of MYC activity. Other types of mutations have also been shown to cause elevated levels of MYC activity, such aschromosomal translocations that result in the activation of the MYC oncogene. In addition, human genetic variants known as single-nucleotide polymorphisms inthe MYC gene have been identified that are believed to predispose humans to various cancers. Based on these genetic data in humans, we believe that a therapy thatreduces or eliminates elevated MYC activity has the potential to generate therapeutic benefits for patients with various tumor types that include MYCamplifications or other elevations of MYC activity.Recent molecular work demonstrates that MYC over-expression drives the cancer process by selectively amplifying expression of genes typically expressedby a cell type. Based on this property, MYC is sometimes described as a “universal amplifier,” which can boost the activity of other cancer-related genes and pusha cell to abnormal levels of growth. This model for MYC function suggests that an intervention that could bring down the expression of MYC to normal levelscould have therapeutic benefit for cancer patients.Despite its obvious attractiveness as a therapeutic target, MYC has not been successfully targeted by conventional small molecule drugs and is not amenableto antibody therapeutics. Others have attempted to develop small molecules that inhibit MYC but to date these have not been sufficiently potent and specific to beviable product candidates. We believe that the reason for this is likely due to the absence of a good binding pocket on the MYC protein. MYC is a member of aprotein family known as transcription factors, and these proteins generally lack good binding pockets for small molecules. MYC is not amenable to treatment withantibodies; MYC is only found inside the cell and antibodies are limited to extracellular and cell surface targets.Therapeutic rationale for DCR-MYC in hepatocellular carcinoma (HCC)For several reasons, we believe that HCC presents an excellent starting point for clinical development of an MYC-targeted therapeutic. First, HCC patientsfrequently show amplifications of the MYC oncogene, suggesting an important role for MYC activity in a significant fraction of HCC patients. Second, in animalmodels of disease, we have observed strong anti-tumor responses after treatments with our product candidate DCR-MYC. Finally, there is high unmet medical needfor effective treatments for advanced HCC.Liver cancer is the second leading cause of cancer-related deaths worldwide, with 745,000 deaths per year. HCC is the most common form of liver cancer inadults, accounting for 85-90% of primary liver cancers. Many cases of HCC result from inflammation associated with infection with the hepatitis B or C virus,which can lead to cirrhosis of the liver. However, non-alcoholic fatty liver disease, associated with obesity and diabetes, is also an important risk factor for HCC.Early-stage HCC is generally treated with surgery that has the potential to be curative. However, given the non-specific symptoms characteristic of HCC, themajority of patients are diagnosed only after HCC is at an 18Table of Contentsadvanced stage. Advanced HCC has limited treatment options and is associated with poor patient outcome and high mortality. Chemotherapies have demonstratedpoor efficacy in HCC and there is no FDA-approved chemotherapeutic regime. Nexavar (marketed by Amgen Inc. and Bayer AG) is the only FDA-approved drugfor the treatment of advanced or unresectable HCC. Unmet medical needs include the identification and development of additional and more effective treatmentsfor patients not eligible for surgical resection, a reduction in relapse rates and an increase in overall survival rates.Phase 1 clinical development plan for DCR-MYCWe have initiated a clinical development program of DCR-MYC for the treatment of MYC-related cancers. The DCR-MYC development program includestwo separate Phase 1 trials: one trial in patients with solid tumors, multiple myeloma or lymphoma, and one trial in patients with advanced Hepatocellularcarcinoma (HCC). Each Phase 1 trial is an open label study with two parts. The first part is a standard dose escalation study to determine the maximum tolerateddose. The second part is an expansion cohort treated at the maximum tolerated dose determined from the dose escalation portion of the study. We submitted an INDapplication for DCR-MYC to the FDA in the second quarter of 2014 for the First in Human Study (FIH) which allows for the enrollment of patients with solidtumors, multiple myeloma, or lymphoma without other alternative therapeutic options. Our FIH Phase 1 trial has a primary objective of determining the safety andtolerability of DCR-MYC in patients and to determine the maximum tolerated dose when administered in a cycle of two weekly infusions followed by one weekwithout an infusion. Secondary objectives of the trial include: (1) evaluating the action in the body of the active ingredient in DCR-MYC (a DsiRNA known asDCR-M1711), such as absorption, distribution, metabolism and elimination over time. (2) observing decreases in the level of MYC transcript when comparing pre-and post-treatment biopsies of tumor tissues; (3) observing a decrease in tumor metabolic activity by imaging techniques, as a biomarker for inhibition of MYCfunction in tumors; (4) evaluating evidence of anti-tumor activity in patients treated with DCR-MYC; and (5) evaluating the potential use of blood biomarkers toassess activity of DCR-MYC.The FIH trial enrolled the first patient in the second quarter of 2014. In the second quarter of 2015, we announced interim data from this trial, including signsof clinical and metabolic response and tumor shrinkage in two patients with low to intermediate grade pancreatic neuroendocrine tumors (PNET). Based on theseobservations, we announced our intention to expand this on-going Phase 1 trial to include a cohort of patients with PNETs. In addition, once the optimal dose ofDCR-MYC has been determined, we plan to initiate enrollment of a cohort of patients who will undergo pre- and post-treatment tumor biopsies. Molecular analysisof the MYC gene transcript in these biopsies will allow direct observation of the RNAi-mechanism of action of DCR-MYC.We expect to report proof-of-concept data for DCR-MYC in the second half of 2016 based on anticipated results from our two ongoing trials.The second study of DCR-MYC is a Phase 1b/2 trial in patients with locally advanced or metastatic HCC. This study has a primary objective of determiningthe safety and tolerability of DCR-MYC in patients with late stage HCC and to determine a maximum tolerated dose when administered in a cycle of two weeklyinfusions followed by one week without an infusion. Secondary objectives of the trial include: (1) evaluating the action in the body of the active ingredient in DCR-MYC, DCR-M1711, such as absorption, distribution, metabolism and elimination over time; (2) observing decreases in the level of MYC transcript whencomparing pre- and post-treatment biopsies of tumor tissues; (3) evaluating evidence of anti-tumor activity in patients treated with DCR-MYC; and (4) evaluatingthe potential use of blood biomarkers to assess activity of DCR-MYC.The first patient was enrolled in this trial during the first quarter of 2015. We are conducting this trial at sites in the US, Singapore and South Korea.Additional trial sites may be added to the study during the dose escalation or expansion portions of the trial if needed to meet enrollment goals. 19Table of ContentsAs with most Phase 1 trials, ours are not designed to yield statistically significant efficacy or molecular marker results. Accordingly, any observed resultsmay be due to chance and not efficacy of DCR-MYC. The principal purpose of our Phase 1 trials will be to provide the basis for design of larger, definitive trials.Those trials will enroll more patients and they will be designed to evaluate potential safety and efficacy of the product candidate with statistical significance.We have developed an additional product candidate using our DsiRNA-EX technology and the next generation EnCore tumor delivery technology.Product candidate for ß-catenin and Wnt pathway-related solid tumorsThe ß-catenin/Wnt pathway is consistently activated in human tumors, including ~50% of hepatocellular carcinomas (HCC) and ~90% of colorectal cancers(CRC). This is often caused directly by tumorigenic mutations in the APC or ß-catenin /CTNNB1 gene. Robust preclinical and genetic evidence strongly suggeststhat inhibiting ß-catenin function would yield broad therapeutic benefit in oncology, but efforts to target it using conventional drug modalities have beenunsuccessful to-date. DCR-BCAT, our product that contains DsiRNA-EX targeting human ß-catenin formulated in EnCore lipid nanoparticles (LNP) of novelcomposition, effectively delivered the payload to multiple tumor types including the more clinically relevant CRC liver metastases and caused up to 80% tumorgrowth inhibition in multiple Wnt/ß-catenin activated colorectal tumor models, and near-complete regression in a model of spontaneous hepatocellular carcinoma(HCC). Importantly, there was no growth inhibition observed when ß-catenin was downregulated in APC/ß-catenin wild type CRC tumors suggests that the ß-catenin DsiRNA efficiently and specifically inhibits the Wnt/ß-catenin pathway. In addition, we also found that the dual targeting of Wnt pathway and MEK usingDCR-BCAT and an FDA approved Trametinib resulted in robust anti-tumor activity compared to either of the single agent treatment in preclinical models of CRCwith RAS mutations.Therapeutic rationale for wnt-related solid tumorsGlobally, HCC is responsible for over 250,000 deaths annually, and is thus the third most common cause of cancer death with over 500,000 new casesdiagnosed per year. Although surgery is the most effective treatment for HCC, tumor recurrence is very high, and the 5-year survival rate remains at only 10%.Because majority of the patients are diagnosed at advanced stage, chemotherapies are frequently ineffective. Targeted therapy, Sorafenib prolonged the overallsurvival of the HCC patients only by 2-3 months. Thus there is an urgent need for a tolerable, life extending strategies in the management of HCC patients. Apromising approach will be to define novel targets for therapeutic strategies based on the identification of molecular pathways responsible for initiating andsustaining HCC. The canonical Wnt signaling pathway is one such signaling mechanism that is frequently activated in this disease and is clearly implicated intumorigenesisWith 940,000 recorded cases worldwide per year, CRC is the third most common malignancy in the world. Despite efforts to improve early detection andimproved therapy, nearly 500,000 patients die from CRC each year worldwide. It has become evident that the main problem in the treatment of CRC is not so mucheradication of the primary tumor, but rather the formation of incurable metastases. Its high mortality rates are particularly associated with the occurrence ofmetastases in the liver. Even when metastatic disease remains limited to the liver, the majority of these are unresectable and the reported rates of successfulresection have been found to be less than 20%, and conventional chemotherapy is only marginally effective.Targeted therapies (current standard of care) such as anti-EGFR treatment and anti-VEGF treatments made some improvement on mCRC treatmentstrategies compared to chemotherapies. Epidermal growth factor receptor (EGFR) is expressed in approximately 80% of CRCs. But approximately 40% to 50% ofcolorectal tumors are known to have a mutated KRAS gene, and 10-20% of CRCs have mutated BRAF gene indicating that these patients are unlikely to benefitfrom anti-EGFR treatment and therefore these CRC patients are excluded in those treatments, leaving only a small subset of CRC patients eligible for anti-EGFRtreatment. Clinical studies 20Table of Contentsconfirmed the lack of benefit of epidermal growth factor receptor (EGFR)-directed therapy in patients with KRAS/BRAF mutations, limiting treatment options tostandard chemotherapeutics with or without VEGF pathway targeted agents. The anti-VEGF therapy is efficacious in mCRCs when combined with chemotherapy,but the overall survival benefit is still very modest. Clinical data also suggest that the VEGF blockade upregulates inflammatory pathways and promote metastasisin the face of VEGF blockade. Improving the outcome in CRC will require overcoming the resistance mechanisms that thwart the anti-VEGF therapy. The CRCpatients with KRAS/BRAF wild-type may be able to derive some benefit from anti-EGFR therapy, but it still remains unclear if these patients will definitelyrespond. MEK inhibitors are being tested in CRC patients too, as MEK is central to the pathogenesis of CRC as a downstream effector of mutant KRAS and BRAF,however the single agent efficacy has been very limited to date. All these suggest that targeting resistance pathways through rational combination strategies maylead to greater efficacy. Several studies have identified the aberrant activation of Wnt signaling as the primary cause of CRCs and as a resistance mechanism inRAS mutant CRCs. Despite this knowledge, none of the therapeutic agents specifically targeting the Wnt pathway has yet been approved to date. Since Wntpathway is activated in majority of the CRCs (~90%) and HCCs (~50%), we believe that our potent and specific Wnt inhibitor (DCR-BCAT) would reach and treatthe liver metastases of CRCs and HCCs effectively. More importantly, we also strongly believe that the rational combination of our DCR-BCAT together withMEK inhibitor would be an effective therapeutic strategy for RAS mutant CRC patients with liver metastases.Association of U.S. cancer patients with aberrant Wnt activation CANCER TYPEWITH GENETICALTERATUINS APPROXIMATEPERCENTAGE OF PATIENTS Colorectal- APC 80%Colorectal- ß-catenin 10%Colorectal- KRAS 40-50%Colorectal- BRAF 10-15%Colorectal-EGFR 80%HCC- ß-catenin 40-50%Product candidate for KRAS-related solid tumorsWe believe that the KRAS oncogene represents an excellent target for our RNAi-based therapy because it is a frequently-mutated oncogene found in severalcommon cancers, but it has historically been difficult to inhibit by the pharmaceutical industry. We are pursuing a DsiRNA-based product candidate targetingKRAS in conjunction with our collaborator KHK. Under the terms of our collaboration, KHK is responsible for selection of the clinical product candidate(including delivery system), all preclinical and clinical development activities and the choice of patient population and disease indications for clinical trials. Basedon preclinical safety and efficacy data observed to data, KHK has advanced a product candidate resulting from this program into development. KHK has assumedresponsibility for preclinical and clinical development of the program and bears the expense of that effort. We have an option to co-promote any KRAS product inthe U.S. for an equal share of the profits from U.S. net sales.Therapeutic rationale for KRAS-related solid tumorsActivating mutations in the KRAS gene are commonly found in a wide variety of tumor types. Among cancer indications with large patient populations,KRAS is found to be mutated in approximately 90 percent of pancreatic cancers, approximately 40 percent of colorectal cancers and approximately 25 percent ofnon-small cell lung cancers. KRAS mutations are also found in cancers with smaller patient numbers, such as bile duct cancers. In general, the presence of a KRASmutation correlates with poorer disease prognosis. In the case of 21Table of Contentsnon-small cell lung cancer, certain therapeutics approved by the FDA and other global regulatory agencies which have demonstrated clinical efficacy in non-smallcell lung cancer are known to be ineffective in patients with KRAS mutations. While our collaborator KHK will decide which disease indications to pursue, webelieve the potential market for a KRAS therapeutic is highly significant. In the U.S. alone, there are estimated to be over 43,000 cases of pancreatic cancer,125,000 cases of colorectal cancer and over 202,000 cases of non-small cell lung cancer diagnosed each year.Association of U.S. cancer patients with activating KRAS mutations CANCER TYPE APPROXIMATE PERCENTAGEWITH ACTIVATING KRAS MUTATIONS IMPLIED PATIENT NUMBERSBASED ON INCIDENCE AND MUTATION FREQUENCY Pancreatic adenocarcinoma 90% 38,700 Colorectal 40% 50,000 Non-small cell lung 25% 50,500 We believe that our DsiRNA for KRAS-related solid tumors will be developed and used with a companion diagnostic that allows for the selection of patientscarrying tumors with KRAS mutations. Clinical diagnostic tests for the presence of KRAS mutations have already been approved by the FDA and other globalregulatory agencies and are commercially available.As with MYC, Numerous studies have indicated that KRAS is a transformative agent in tumor viruses, which led to the identification of the human KRASoncogene in the 1980s. Yet despite being known as an important drug target since that time, traditional small molecule approaches have not yielded effectiveKRAS inhibitors. Also, similar to MYC, KRAS is an intracellular protein and thus is not amenable to antibody therapeutics, which are limited to extracellular andcell surface drug targetsIn its normal non-mutant form, the KRAS protein plays a key role in the promotion and regulation of cell growth and division. The KRAS protein acts in akeystone position in an intracellular signaling pathway often called the Ras-MAP Kinase pathway. This pathway is responsible for receiving growth-promotingsignals from outside the cell and communicating those signals within the cell so that the cell can respond appropriately to the cell growth signals.Additional product candidates for cancer gene targetsWe are developing a second product candidate targeting a cancer-related gene in collaboration with KHK. We have not disclosed the identity of this target.In January 2013 we announced that KHK elected to advance this second therapeutic oncology product candidate from the research to the development stage. Theachievement of this milestone triggered a $5.0 million payment from KHK to Dicerna. KHK is responsible for all development costs associated with this productcandidate and has worldwide commercialization rights. We are eligible to receive royalties on worldwide net sales of the product candidate and payments of up to$110.0 million based on achievement of certain clinical, regulatory and commercialization milestones.Strategic Partnerships and CollaborationsKHK research collaboration and license agreementIn December 2009, we entered into a research collaboration and license agreement (the collaboration agreement) with KHK for the research, developmentand commercialization of drug delivery platforms and DsiRNA molecules for therapeutic targets, primarily in oncology. Under the collaboration agreement, weengaged in the discovery of DsiRNA molecules against KRAS and other gene targets nominated by KHK. In 2011, KHK exercised its option for one additionaltarget, the identity of which has not been publicly disclosed. 22Table of ContentsAs part of the research we are conducting in the collaboration, we are using our specific RNAi-inducing double-stranded DsiRNA molecules with a lipidnanoparticle drug delivery platform proprietary to KHK. KHK is responsible for all costs it incurs to develop any compound that is directed against a targetincluded in the collaboration that KHK designates for development, subject to our exercise of our co-promotion option with respect to that compound if thatcompound is directed against KRAS.We have granted KHK an exclusive license to certain of our technology and patents relating to compounds resulting from the collaboration. KHK hasgranted us certain non-exclusive licenses in its technology as necessary for us to perform research and development activities as part of the research collaboration.Under the terms of the collaboration agreement, we have received total payments of $17.5 million. We are entitled to receive up to an additional$110.0 million for each product candidate resulting from the collaboration of certain clinical, regulatory and commercialization milestones. KHK is also obligatedto pay us royalties on net sales of products resulting from the research collaboration. These royalties vary depending on the total net sales and range frompercentages of net sales in the high single digits to the teens. None of the previously paid milestones are subject to reimbursement.We have the option to elect to co-promote the KRAS product in the U.S. for an equal share of the profits resulting from U.S. net sales of the product.If we exercise our option to co-promote a KRAS product in the U.S., the collaboration agreement will remain in effect pursuant to its terms in the U.S. for aslong as any product is being sold by either KHK or us in the U.S. For each country outside of the U.S., the agreement will remain in effect pursuant to its terms on aproduct-by-product and country-by-country basis until the later of the last to expire of any patent rights licensed under the agreement applicable to the manufacture,use or sale of the product or twelve years after the date of the first commercial sale of such product in the applicable country. In the event we do not exercise ouroption to co-promote an oncogene KRAS product in the U.S., the collaboration agreement will remain in effect pursuant to its terms on a product-by-product andcountry-by-country basis until the later of the last to expire of any patent rights licensed under the agreement applicable to the manufacture, use or sale of theproduct or twelve years after the date of the first commercial sale of such product in the applicable country.KHK may terminate the agreement at any time upon prior written notice to us. We may terminate the agreement if KHK challenges the validity orenforceability of any patents licensed by us to KHK. Either we or KHK may terminate the agreement in the event of the bankruptcy or uncured material breach bythe other party.City of Hope license agreementIn September 2007, we entered into a license agreement with City of Hope (COH), an academic research and medical center, pursuant to which COH hasgranted to us an exclusive (subject to the exception described below), royalty-bearing, worldwide license under certain patent rights in relation to DsiRNA,including the core DsiRNA patent (U.S. 8,084,599), to manufacture, use, offer for sale, sell and import products covered by the licensed patent rights for theprevention and treatment of any disease in humans. COH is restricted from granting any additional rights to develop, manufacture, use, offer to sell, sell or importproducts covered by the licensed patent rights for the prevention and treatment of any disease in humans. Prior to entering into the license with us, COH hadentered into a non-exclusive license with respect to such patent rights to manufacture, use, import, offer for sale and sell products covered by the licensed patentrights for the treatment or prevention of disease in humans (excluding viruses and delivery of products into the eye or ear). While that non-exclusive license hasbeen terminated, a sublicensee to that non-exclusive license was permitted to enter into an equivalent non-exclusive license which, to our knowledge, is subsistingwith Arrowhead Research Corporation, (Arrowhead) as successor to the non-exclusive license holder. In addition, COH has granted to us an exclusive, royalty-bearing, worldwide license under the licensed patent rights providing certain rights for up to 20 licensed products selected by us for human diagnostic uses,provided that COH has not granted or is not negotiating a license of rights to 23Table of Contentsdiagnostic uses for such licensed products to a third party. The exclusive licenses granted by COH to us under the agreement are subject to any retained rights ofthe U.S. government in the licensed patent rights and a royalty-free right of COH to practice the licensed patent rights for educational, research and clinical uses.We have the right to sublicense the licensed patent rights to third parties with COH’s written consent. The core DsiRNA patent (U.S. 8,084,599), titled “methodsand compositions for the specific inhibition of gene expression by double-stranded RNA,” describes RNA structures having a 25 to 30 nucleotides sense strand, ablunt end at the 3’ end of the sense strand and a one to four nucleotides overhang at the 3’ end of the antisense strand. The expiration date of this patent is July 17,2027. The COH license is applicable to our DCR-MYC and KHK programs.Pursuant to the terms of the agreement, we paid COH a one-time, non-refundable license fee and issued shares of our common stock to COH and a co-inventor of the core DsiRNA patent. COH is entitled to receive milestone payments in an aggregate amount of up to $5.25 million for each licensed product uponachievement of certain clinical and regulatory milestones. COH is further entitled to receive royalties at a low single-digit percentage of any net sale revenue of thelicensed products sold by us and our sublicensees. If we sublicense the licensed patent rights to a third party, COH has the right to receive a double digit percentageof sublicense income, the percentage of which decreases after we have expended $12.5 million in development and commercialization costs. We are also obligatedto pay COH an annual license maintenance fee, which may be credited against any royalties due to COH in the same year, and reimburse COH for expensesassociated with the prosecution and maintenance of the license patent rights. Royalties shall be paid on a product-by-product and country-by-country basis until theexpiration in each country of the last to expire of the licensed patent rights.Under the agreement, we are obligated to use commercially reasonable efforts to develop and commercialize the licensed products in certain major markets.COH has the right to terminate the agreement in its entirety if we fail to enroll patients for clinical trials of one or more licensed products at various phases beforecertain specified deadlines unless we exercise the right to extend the deadlines in one-year increments by making a payment of $0.5 million to COH for each one-year extension. We have extended one milestone deadline for three one-year extensions, paying an aggregate of $1.5 million to COH for such extensions.The agreement will remain in effect pursuant to its terms until all of the obligations under the agreement with respect to the payment of milestones orroyalties related to licensed products have terminated or expired. Either party may terminate the license agreement for any uncured material breach by the otherparty. COH may terminate the agreement upon our bankruptcy or insolvency. We may terminate the agreement without cause upon written notice to COH.Arbutus Biopharma Corporation license agreementIn November 2014, we entered into a licensing and collaboration agreement with Arbutus to license Arbutus’ LNP delivery technology for exclusive use inour PH1 development program. We will use Arbutus’ LNP technology to deliver DCR-PH1, for the treatment of PH1. As of December 31, 2015, we had paid$3.0 million in cumulative license fees. Arbutus is entitled to receive additional payments of $22.0 million in aggregate development milestones, plus a mid-single-digit royalty on future PH1 sales. This partnership also includes a supply agreement with Arbutus providing clinical drug supply and regulatory support.Under the agreement, we are obligated to use commercially reasonable efforts to develop and commercialize the product.The agreement will remain in effect pursuant to its terms until all of the obligations under the agreement with respect to the payment of milestones orroyalties related to licensed products have terminated or expired. Either party may terminate the license agreement for any uncured material breach by the otherparty. Arbutus may terminate the agreement upon our bankruptcy or insolvency. We may terminate the agreement without cause upon written notice to Arbutus. 24Table of ContentsIn addition to the license agreement, we entered into a development and supply agreement with Arbutus. Arbutus will perform certain development andmanufacture processes in accordance with the specifications in development and supply agreement. There is no minimum purchase requirement for the servicesprovided by Arbutus.Intellectual PropertyWe invest significant amounts in research and development. Our research and development expenses were approximately $44.0 million, $29.5 million and$11.6 million in 2015, 2014 and 2013, respectively.We are seeking multifaceted protection for our intellectual property that includes licenses, confidentiality and non-disclosure agreements, copyrights, patents,trademarks and common law rights, such as trade secrets. We enter into confidentiality and proprietary rights agreements with our employees, consultants,collaborators, subcontractors and other third parties and generally control access to our documentation and proprietary information.Patents and proprietary rightsWe own U.S. patents and a number of pending patent applications with claims to methods and compositions of matters that cover various aspects of ourRNAi technology and our discovery technologies, including our proprietary DsiRNA and DsiRNA-EX molecules and lipid and DsiRNA-EX conjugate deliverytechnologies. These U.S. patents include U.S. 8,349,809 (issued in January 2013 with a projected expiration date of January 2030), U.S. 8,513,207 (issued inAugust 2013 with a projected expiration date of May 2030) and U.S. 8,927,705 (issued in January 2015 with a projected expiration date of July 2030). We also ownnumerous patents and patent applications covering specific DsiRNA sequences that drive activity against high value disease targets, including MYC, KRAS (U.S.8,372,816; issued in February 2013, with projected expiration in April 2030), HAO1, CTNNB1 (ß-catenin; U.S. 8,815,825; issued in August 2014, with projectedexpiration in July 2031), Androgen Receptor (US 8,927,515; issued in January 2015, with projected expiration in September 2031). Further, we own seven U.S.patents expiring by 2017 and numerous patent applications with claims to methods and compositions of matters related to our lipid delivery technology, such aslipid compositions and particle formulations and the EnCore formulation process. We have issued or pending claims to DsiRNA molecules, pharmaceuticalcompositions/formulations, methods of use, including in vitro and in vivo methods of reducing target gene expression, methods of treatment, methods of inhibitingcell growth and methods of synthesis.We jointly own with KHK U.S. and foreign patent applications pursuant to our research collaboration and license agreement claiming developments made inthe course of the collaboration focused on delivery of KRAS specific DsiRNA molecules. Depending on the subject matter of future issued claims, we may alsojointly own patents issuing from patent applications filed under the research collaboration and license agreement with KHK.Our strategy around protection of our proprietary technology, including any innovations and improvements, is to obtain worldwide patent coverage with afocus on jurisdictions that represent significant global pharmaceutical markets. Generally, patents have a term of twenty years from the earliest non-provisionalpriority date, assuming that all maintenance fees are paid, no portion of the patent has been terminally disclaimed and the patent has not been invalidated. In certainjurisdictions, and in certain circumstances, patent terms can be extended or shortened. We are obtaining worldwide patent protection for at least novel molecules,composition of matter, pharmaceutical formulations, methods of use, including treatment of disease, methods of manufacture and other novel uses for the inventivemolecules originating from our research and development efforts. We continuously assess whether it is strategically more favorable to maintain confidentiality forthe “know-how” regarding a novel invention rather than pursue patent protection. For each patent application that is filed we strategically tailor our claims inaccordance with the existing patent landscape around a particular technology. There can be no assurance that an issued patent will remain valid and enforceable in acourt of law through the entire patent term. Should the validity of a patent be challenged, the legal process associated with defending the 25Table of Contentspatent can be costly and time consuming. Issued patents can be subject to oppositions, interferences, post-grant proceedings, and other third party challenges thatcan result in the revocation of the patent limit patent claims such that patent coverage lacks sufficient breadth to protect subject matter that is commerciallyrelevant. Competitors may be able to circumvent our patents. Development and commercialization of pharmaceutical products can be subject to substantial delaysand it is possible that at the time of commercialization any patent covering the product has expired or will be in force for only a short period of time followingcommercialization.We cannot predict with any certainty if any third party U.S. or foreign patent rights, other proprietary rights, will be deemed infringed by the use of ourtechnology. Nor can we predict with certainty which, if any, of these rights will or may be asserted against us by third parties. Should we need to defend ourselvesand our partners against any such claims, substantial costs may be incurred. Furthermore, parties making such claims may be able to obtain injunctive or otherequitable relief, which could effectively block our ability to develop or commercialize some or all of our products in the U.S. and abroad, and could result in theaward of substantial damages. In the event of a claim of infringement, we or our partners may be required to obtain one or more licenses from a third party. Therecan be no assurance that we can obtain a license on a reasonable basis should we deem it necessary to obtain rights to an alternative technology that meets ourneeds. The failure to obtain a license may have a material adverse effect on our business, results of operations and financial condition.We also rely on trade secret protection for our confidential and proprietary information. No assurance can be given that we can meaningfully protect ourtrade secrets on a continuing basis. Others may independently develop substantially equivalent confidential and proprietary information or otherwise gain access toour trade secrets.See “— Risk Factors — Risks Related to Intellectual Property” for a more detailed discussion of the risks to our intellectual property.It is our policy to require our employees and consultants, outside scientific collaborators, sponsored researchers and other advisors who receive confidentialinformation from us to execute confidentiality agreements upon the commencement of employment or consulting relationships. These agreements provide that allconfidential information developed or made known to these individuals during the course of the individual’s relationship with the company is to be keptconfidential and is not to be disclosed to third parties except in specific circumstances. The agreements provide that all inventions conceived by an employee shallbe the property of the company. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our tradesecrets in the event of unauthorized use or disclosure of such information.Our success will depend in part on our ability to obtain and maintain patent protection, preserve trade secrets, prevent third parties from infringing upon ourproprietary rights and operate without infringing upon the proprietary rights of others, both in the U.S. and other territories worldwide.Additional licensesIn addition to the license agreement with COH described above, we have entered into license agreements for RNA technology that may benefit us as weadvance our programs.Plant Bioscience Limited license agreementIn September 2013, we entered into a commercial license agreement with Plant Bioscience Limited (PBL), pursuant to which PBL has granted to us anominated-target-limited, worldwide, non-exclusive, fee-bearing license to certain of its U.S. patents (the Baulcombe patent estate) and patent applications toresearch, discover, develop, manufacture, sell, import and export, for human diagnostic and therapeutic uses, products incorporating one or more short RNAmolecules (SRMs) designed to target and modify the expression of a human gene or 26Table of Contentsgenes nominated by us from time to time. We are entitled to nominate multiple SRMs and have so far nominated one gene as the first SRM under the agreement.We are not obligated to nominate any additional genes.We have paid PBL a one-time, non-refundable signature fee and will pay PBL a nomination fee for any additional SRMs nominated by us under theagreement. We are further obligated to pay PBL milestone payments in an aggregate amount of up to $3.85 million for each licensed product upon achievement ofcertain clinical and regulatory milestones. In addition, PBL is entitled to receive royalties at a low single-digit percentage of any net sale revenue of any licensedproducts sold by us. The agreement will expire on a country-by-country basis in each country where any licensed products are used, provided, manufactured or soldupon the date of the last to expire of applicable valid claim. Each party may terminate the agreement for any uncured material breach by the other party. We mayterminate the agreement at any time for convenience upon prior written notice to PBL. The PBL license is applicable to our DCR-MYC and KHK programs.Carnegie Institution of Washington license agreementIn January 2009, we entered into a license agreement with the Carnegie Institution of Washington (Carnegie), pursuant to which Carnegie has granted to us aworldwide, non-exclusive license under certain of its patents and patent applications (the Fire and Mello patent estate) relating to genetic inhibition by double-stranded RNA molecules for internal research, screening and development of product candidates for human and non-human diagnostic and therapeutic uses. Wehave paid Carnegie a one-time upfront fee and will in addition pay an annual license fee during the term of the agreement. We are further obligated to make twoone-time additional payments in the aggregate amount of $100,000 upon achievement of the filing with the FDA of an NDA for a licensed product candidate andthe first commercial sale of a licensed product candidate or licensed method. Carnegie is entitled to receive royalties on any net sale revenue from licensed productcandidates sold by us, with the royalty rate to be further negotiated between Carnegie and us in good faith reflecting customary rates in the industry.The agreement will terminate with respect to each licensed product candidate upon the last to expire of any valid claim within the licensed patent rights.Each party may terminate the agreement upon any uncured material breach by the other party. We may terminate the agreement at any time for any reason uponwritten notice to Carnegie. Any patents associated with this license will expire in 2018, removing any obligations.Manufacturing and SupplyWe do not currently own or operate manufacturing facilities for the production of preclinical, clinical or commercial quantities of any of our productcandidates. For each product candidate, we currently contract with only one drug product formulation manufacturer for the encapsulation of the oligonucleotide in alipid nanoparticle and we expect to continue to do so to meet the preclinical and any clinical requirements of our product candidates. We do not have a long termagreement with this third party.Currently, each of our drug starting materials for our manufacturing activities are supplied by a single source supplier. We have agreements for the supply ofsuch drug materials with manufacturers or suppliers that we believe have sufficient capacity to meet our demands. In addition, we believe that adequate alternativesources for such supplies exist. However, there is a risk that, if supplies are interrupted, it would materially harm our business. We typically order raw materials andservices on a purchase order basis and do not enter into long-term dedicated capacity or minimum supply arrangements.In November 2014, we entered into a development and supply agreement with Arbutus. Arbutus will perform, or subcontract, certain development andmanufacture processes in accordance with the specifications in development and supply agreement. There is no minimum purchase requirement for the servicesprovided by Arbutus.KHK is responsible for all manufacturing under our collaboration agreement with KHK both for the KRAS DsiRNA and the oncology program selected byKHK for development under the agreement. 27Table of ContentsManufacturing is subject to extensive regulations that impose various procedural and documentation requirements, which govern record keeping,manufacturing processes and controls, personnel, quality control and quality assurance, among others. Our contract manufacturing organizations manufacture ourproduct candidates under current Good Manufacturing Practice (cGMP) conditions. cGMP is a regulatory standard for the production of pharmaceuticals that willbe used in humans.CompetitionWe believe that our scientific knowledge and expertise in RNAi-based therapies provide us with competitive advantages over the various companies andother entities that are attempting to develop similar treatments. However, we face competition at the technology platform and therapeutic indication levels fromboth large and small biopharmaceutical companies, academic institutions, governmental agencies and public and private research institutions. Many of ourcompetitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials,obtaining regulatory approvals and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientificand management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, ornecessary for, our programs.Our success will be based in part upon our ability to identify, develop and manage a portfolio of drugs that are safer and more effective than competingproducts in the treatment of our targeted patients. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercializeproducts that are safer, more effective, have fewer side effects, are more convenient or are less expensive than any products we may develop.RNA-based therapeuticsTo our knowledge, there are no other companies developing DsiRNA and DsiRNA-EX molecules for therapeutic use. However, there are several companiesthat are currently developing RNAi-based therapies for various indications. We believe that Arrowhead, Arbutus and Alnylam through their company specificdevelopment or through various partnerships with the aforementioned companies are developing RNAi-based therapies that are competing against our currentprograms or potential future programs.Among these, Alnylam, in partnership with Genzyme (a Sanofi company), is developing its ALN-TTR program, which is an RNAi-based therapy for thetreatment of transthyretin-mediated amyloidosis (ATTR) and is currently in Phase 3 trials. Alnylam has announced it expects to complete enrollment in itsAPOLLO Phase 3 study of patisiran in ATTR patients with Familial Amyloidotic Polyneuropathy (FAP) in January 2016, Enrollment in its ENDEAVOUR Phase 3study to evaluate the efficacy and safety of revusiran in ATTR patients with Familial Amyloidotic Cardiomyopathy (FAC) continues and data are expected to bereported from this study in 2018. Alnylam is also developing ALN-TTRsc02 for all forms of ATTR amyloidosis and expects to initiate a Phase 1 study in mid-2016. Alnylam is also developing RNAi-based therapies for other indications, including PH1, paroxysmal nocturnal hemoglobinuria (PNH), acute intermittentporphyria (AIP) hemophilia, porphyria, hypercholesterolemia, hemoglobinopathies, and alpha-1-antitrypsin (AAT) deficiency hepatocyte inclusions, among others.In addition, Alnylam expects to initiate a Phase 1 study for ALN-HBV in mid-2016 and announced its intention to seek strategic partnerships for its HepaticInfectious Disease therapeutic area. ALN-PCSsc for the treatment of hypercholesterolemia is partnered with The Medicines Company who expect to present initialdata from the ORION-1 Phase 2 study in late 2016.Arbutus also is clinically investigating its RNAi molecules for use in treating serious human diseases, such as cancer and viral infections, including hepatitisB virus (HBV) and Ebola. ARB-1467 for the treatment of HBV is in a Phase II study that was initiated in December 2015 and Arbutus expects to announcepreliminary data in late 2016 Arbutus has rights under Alnylam’s intellectual property to develop thirteen RNAi therapeutic products. 28Table of ContentsAdditionally, Arrowhead is developing ARC-520 for chronic hepatitis B (HBV) and in January 2016, announced the dosing of the first patient in the Phase2b MONARCH combination study of ARC-520, the treatment of chronic hepatitis B virus (HBV). ARC-AAT for the treatment of liver disease associated withalpha-1 antitrypsin deficiency completed dosing in healthy volunteers and transitioned into patients with PiZZ genotype alpha-1 antitrypsin deficiency. In March2015 Arrowhead announced the acquisition of Novartis’ RNAi research and development portfolio and associated assets. The acquisition includes assignment ofcertain intellectual property owned or controlled by Novartis, including access to non-delivery Alnylam RNAi IP for 30 targets, and three pre-clinical RNAicandidates for which Novartis has developed varying amounts of preclinical data.In addition to RNAi therapies, there are other intracellular technologies focused on silencing the activity of specific genes by targeting mRNAs copied fromthem. Companies such as miRagen Therapeutics, Inc., Mirna Therapeutics, Inc., Regulus Therapeutics Inc. and Santaris Pharma A/S, which was acquired by Rochein 2014 and is now known as Roche Innovation Center Copenhagen –(RICC), target or inhibit or replace microRNAs, which are approximately 22 nucleotides inlength, short, non-coding RNAs, to alter mRNA expression levels. The product candidates being developed by these companies are currently in preclinical andclinical trials for various indications. If our lead product candidates are approved for the indications for which we undertake clinical trials, they will compete withtherapies that are either in development or currently marketed, such as the following.Hepatocellular CarcinomaThere are limited treatments for HCC in the U.S. and abroad. If diagnosed as early-stage HCC, the disease is generally treated with surgical resection of theliver and has the potential to be curative. The majority of patients diagnosed with HCC, however, are in the advanced stages, for which chemotherapies havedemonstrated poor efficacy. There is no FDA-approved chemotherapeutic regimen. Nexavar is the only FDA-approved drug for the treatment of advanced orunresectable HCC in our belief. Given the high unmet medical need and the commercial success of Nexavar, numerous targeted therapies for the treatment ofhepatocellular carcinoma (HCC) are under development. Targeted therapies represent the largest proportion of the HCC pipeline.Primary Hyperoxaluria Type 1The current standard of care for treating PH1 is dual-organ transplant, namely a kidney and liver transplant in patients with PH1, which is often difficult toperform due to lack of donors and the threat of organ rejection. Other treatments include pyridoxine regimens and intensive dialysis, as well as treatments generallyused in kidney stone disorders such as high-volume fluid intake and oral citrate. These other treatments do not halt disease progression. OxThera has a competingapproach to PH1 treatment, currently in Phase 2 clinical trials, that is not RNAi-based. In January 2016, Alnylam announced their plans to start a Phase 1 clinicaltrial for ALN-GO1, an investigational RNAi therapeutic for the treatment of PH1. Alnylam also plans to present initial Phase 1 clinical data in late 2016.Solid tumorsThere are a number of pharmaceuticals and biologics that are marketed or in clinical development for the treatment of solid tumors. The most commontreatments for solid tumors are various chemotherapeutic agents, radiation therapy and certain targeted therapies. Target therapies include monoclonal antibodiessuch as Avastin, Erbitux, Herceptin and Vectibix, and small molecules, such as Nexavar, Sutent and Tarceva. Immunotherapy regimens are also on the market andin development for the treatment of solid tumors. In contrast, our proprietary DsiRNA molecules target tumors in which there is dependence on the MYC andKRAS oncogenes. To our knowledge, only one small molecule (salirasib (KD032)) is being evaluated by Kadmon Corporation, LLC in clinical trials for thetreatment of KRAS-specific non-small cell lung cancer, pancreatic cancer and other solid tumors. We are not aware of any clinical trial that is currently evaluatinga therapy for the treatment of solid tumors in which the MYC oncogene is specifically targeted. 29Table of ContentsGovernment Regulation and Product ApprovalGovernmental authorities in the U.S., at the federal, state and local level, and other countries extensively regulate, among other things, the research,development, testing, manufacture, quality control, approval, labeling, packaging, promotion, storage, record-keeping, advertising, distribution, sampling,marketing, safety, post-approval monitoring and reporting, and export and import of products such as those we are developing. Our product candidates must beapproved by the FDA through the NDA process before they may be legally marketed in the U.S. and will be subject to similar requirements in other countries priorto marketing in those countries. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreignstatutes and regulations require the expenditure of substantial time and financial resources.U.S. government regulationNDA approval processesIn the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (the FDCA) and implementing regulations. Failure to comply with theapplicable U.S. requirements at any time during the product development or approval process, or after approval, may result in a delay of approval or subject anapplicant to administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include: • refusal to approve pending applications; • withdrawal of an approval; • imposition of a clinical hold; • issuance of warning or untitled letters; • product recalls; • product seizures; • refusals of government contracts; • total or partial suspension of production or distribution; or • injunctions, fines, restitution, disgorgement, civil penalties or criminal prosecution.The process required by the FDA before a drug may be marketed in the U.S. generally includes the following: • completion of nonclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices (GLPs) or otherapplicable laws and regulations; • submission to the FDA of an investigational new drug application (IND), which must become effective before human clinical trials may begin; • approval by an institutional review board (IRB) at each clinical site before each trial may be initiated • performance and inspection of adequate and well-controlled human clinical trials and clinical data according to FDA regulations and Good ClinicalPractices (GCP) to establish the safety and efficacy of the product candidate for its intended use; • submission of an NDA to FDA and FDA’s acceptance of the NDA for filing; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product candidate is produced to assesscompliance with current Good Manufacturing Practices (cGMPs) to assure that the facilities, methods and controls are adequate to preserve theproduct candidate’s identity, strength, quality and purity; 30Table of Contents • satisfactory completion of an FDA inspection of the major investigational sites to ensure data integrity and assess compliance with good clinicalpractice (GCP) requirements; and • FDA review and approval of the NDA.Once a pharmaceutical candidate is identified for development, it enters the preclinical or nonclinical testing stage. Nonclinical tests include laboratoryevaluations of product chemistry, stability, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the nonclinical tests,together with manufacturing information and analytical data, to the FDA as part of the IND. Some nonclinical testing may continue even after the IND issubmitted. In addition to including the results of the nonclinical studies, the IND will also include a protocol detailing, among other things, the objectives of theclinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination.The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In sucha case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical hold may occur at any time during the life ofan IND and may affect one or more specific studies or all studies conducted under the IND.All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with FDA regulations and GCPs. They mustbe conducted under protocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion criteria and the safety andeffectiveness criteria to be evaluated. Each protocol and protocol amendments must be submitted to the FDA as part of the IND, and progress reports detailing thestatus of the clinical trials must be submitted to the FDA annually. Sponsors also must timely report to FDA serious and unexpected adverse reactions, anyclinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigation brochure or any findings from otherstudies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug. All research subjects or their legally authorized representativesmust provide their informed consent in writing prior to their participation in a clinical trial. An institutional review board (IRB) at each institution participating inthe clinical trial must review and approve the protocol and the informed consent form before a clinical trial commences at that institution, monitor the study untilcompleted and otherwise comply with IRB regulations. Information about most clinical trials must be submitted within specific timeframes to the NationalInstitutes of Health (NIH) to be publicly posted on the ClinicalTrials.gov website.Human clinical trials are typically conducted in three sequential phases that may overlap or be combined. • Phase 1—The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism,distribution and elimination. In the case of some product candidates for severe or life-threatening diseases, such as cancer, especially when the productcandidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients. • Phase 2—Clinical trials are performed on a limited patient population intended to identify possible adverse effects and safety risks, to preliminarilyevaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. • Phase 3—Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographicallydispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis forproduct labeling.Human clinical trials are inherently uncertain and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed. The FDA, the sponsor, or a datasafety monitoring board, may suspend a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposedto an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted inaccordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients. 31Table of ContentsDuring the development of a new product candidate, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior tothe submission of an IND, at the end of Phase 2 and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide anopportunity for the sponsor to share information about the data gathered to date and for the FDA to provide advice on the next phase of development. Sponsorstypically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believewill support the approval of an NDA. If a Phase 2 clinical trial is the subject of discussion at the end of Phase 2 meeting with the FDA, a sponsor may be able torequest a Special Protocol Assessment (SPA), the purpose of which is to reach agreement with the FDA on the Phase 3 clinical trial protocol design and analysisthat will form the primary basis of an efficacy claim.Concurrent with clinical trials, sponsors usually complete additional animal safety studies and also develop additional information about the chemistry andphysical characteristics of the product candidate and finalize a process for manufacturing commercial quantities of the product candidate in accordance with cGMPrequirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and the manufacturer must developmethods for testing the safety, identity, strength, purity, and quality of the product candidate. Additionally, appropriate packaging must be selected and tested andstability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its proposed shelf-life. Beforeapproving an NDA, the FDA will inspect the facility or facilities where the product is manufactured and tested and will not approve the product unless cGMPcompliance is satisfactory. The FDA will also typically inspect one or more clinical sites to assure compliance with FDA regulations and GCPs.The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and othercontrol mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. Thesubmission of an NDA is subject to the payment of user fees, but a waiver of such fees may be obtained under specified circumstances. The FDA reviews all NDAssubmitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It may request additional information rather thanaccept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review beforethe FDA accepts it for filing.Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA reviews an NDA to determine, among other things, whether aproduct is safe and effective for its intended use and whether its manufacturing is cGMP-compliant. The FDA typically requires that an NDA include data from twoadequate and well-controlled clinical trials, but approval may be based upon a single adequate and well-controlled clinical trial in certain circumstances. The FDAmay refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data. Even if such data are submitted,the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA may refer the NDA to an advisory committee for review andrecommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisorycommittee, but it generally follows such recommendations.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwisebe limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions beincluded in the product labeling. In addition, the FDA may condition approval on the completion of post approval studies. Such studies may involve clinical trialsdesigned to further assess a product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products thathave been commercialized. If FDA determines that it is necessary to ensure the safe use of the drug, FDA may also condition approval on the implementation of arisk evaluation and mitigation strategy, or REMS. The REMS could include medication guides, physician communication plans or elements to assure safe use, suchas restricted distribution methods, patient registries, or other risk minimization tools. 32Table of ContentsExpedited review and approvalThe FDA has various programs, including Fast Track, priority review, breakthrough, and accelerated approval, which are intended to expedite or simplify theprocess for reviewing product candidates. Generally, product candidates that are eligible for these programs are those for serious or life-threatening conditions,those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. A sponsor can request application ofthese programs either alone or in combination with each other, depending on the circumstances. Even if a product candidate qualifies for one or more of theseprograms, the FDA may later decide that the product candidate no longer meets the conditions for qualification or that the time period for FDA review or approvalwill be shortened. None of the expedited approval programs change the NDA approval standard applied to a product.New drugs are eligible for Fast Track status if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential toaddress unmet medical needs for the disease or condition. Fast Track status entitles such a drug to expedited review and frequent contact with the FDA reviewdivision. Unlike other expedited review programs, Fast Track designation allows FDA to accept for review individual sections of the NDA on a rolling basis. TheFDA may also grant a priority review designation to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. Apriority review means that the goal for the FDA to review an application is six months from filing of an NDA, rather than the standard review of ten months fromfiling under current PDUFA guidelines. Most products that are eligible for fast track designation are also likely to be considered appropriate to receive a priorityreview.Drug products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon adetermination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can bemeasured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit,taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDAtypically requires that a sponsor of a product candidate receiving accelerated approval conduct post-approval clinical trials. As an additional condition of approval,the FDA currently requires pre-approval of all promotional materials, which could adversely impact the timing of the commercial launch of the product.The FDA may expedite the approval of a designated breakthrough therapy, which is a drug that is intended, to treat a serious or life-threatening disease orcondition for which preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or moreclinically significant endpoints, such as substantial treatment effects observed early in clinical development. A sponsor may request that a drug be designated as abreakthrough therapy at any time during the clinical development of the product. If FDA designates a drug as a breakthrough therapy, FDA must take actionsappropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout thedevelopment of the drug; providing timely advice to the sponsor regarding the development of the drug to ensure that the development program is as efficient aspracticable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; and taking steps to ensure that thedesign of the clinical trials is as efficient as practicable.Patent term restoration and marketing exclusivityDepending upon the timing, duration and specifics of FDA approval of the use of our product candidates, some of our U.S. patents may be eligible forlimited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory reviewprocess. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product candidate’s approval date. Thepatent term restoration period 33Table of Contentsis generally one half of the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDAand the approval of that application. Only one patent applicable to an approved product candidate is eligible for the extension and the application for extensionmust be made prior to expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for anypatent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to addpatent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevantNDA.Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year periodof non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A product candidate is a newchemical entity if the FDA has not previously approved any other new product candidate containing the same active moiety, which is the molecule or ionresponsible for the action of the product candidate substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drugapplication (ANDA) or a 505(b)(2) NDA submitted by another company for another version of such product candidate where the applicant does not own or have alegal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patentinvalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA ifnew clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to theapproval of the application, for example, for new indications, dosages or strengths of an existing product candidate. This three-year exclusivity covers only theconditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for product candidates containing the originalactive agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would berequired to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety andeffectiveness.Orphan drug designationUnder the Orphan Drug Act, the FDA may grant orphan drug designation to product candidates intended to treat a rare disease or condition, which isgenerally a disease or condition that affects fewer than 200,000 individuals in the U.S. or more than 200,000 individuals in the U.S. and for which there is noreasonable expectation that the cost of developing and making available in the U.S. a product candidate for this type of disease or condition will be recovered fromsales in the U.S. for that product candidate. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation,the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in orshorten the duration of the regulatory review and approval process.If a product candidate that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, theproduct candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications including a full NDA to market thesame product candidate for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, could also block theapproval of one of our product candidates for seven years if a competitor obtains approval of the same product candidate as defined by the FDA prior to us, or ifour product candidate is determined to be contained within the competitor’s approved orphan product candidate for the same indication or disease.Pediatric exclusivity, pediatric use and rare pediatric disease priority review vouchersUnder the Best Pharmaceuticals for Children Act (BPCA), certain product candidates may obtain an additional six months of exclusivity if the sponsorsubmits information requested in writing by the FDA (a 34Table of ContentsWritten Request) relating to the use of the active moiety of the product candidate in children. The FDA may not issue a Written Request for studies on unapprovedor approved indications or where it determines that information relating to the use of a product candidate in a pediatric population, or part of the pediatricpopulation, may not produce health benefits in that population.In addition, the Pediatric Research Equity Act (PREA) requires a sponsor to conduct pediatric studies for most product candidates and biologics, for a newactive ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, biologics license applicationand supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safetyand effectiveness of the product candidate for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for eachpediatric subpopulation for which the product candidate is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all of thepediatric subpopulations. A deferral may be granted for several reasons, including a finding that the product candidate or biologic is ready for approval for use inadults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. After April 2013,the FDA must send a noncompliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request forapproval of a pediatric formulation. PREA does not apply to any drug for an indication for which orphan designation has been granted. However, if only oneindication for a product has orphan designation, a pediatric assessment may still be required for any applications to market that same product for the non-orphanindication(s).Under section 529 of the FDCA, FDA will award priority review vouchers to sponsors of certain rare pediatric disease product applications. Section 529 ofthe FDCA is intended to encourage development of new drug and biological products for prevention and treatment of certain rare pediatric diseases. Although thereare existing incentive programs to encourage the development and study of drugs for rare diseases, pediatric populations, and unmet medical needs, section 529provides an additional incentive for rare pediatric diseases, which may be used alone or in combination with other incentive programs. “Rare pediatric disease” isdefined as a disease that: • “primarily affects individuals aged from birth to 18 years, including age groups often called neonates, infants, children, and adolescents,” which isinterpreted as meaning that greater than 50% of the affected population in the U.S. is aged 0 through 18 years; and • is “a rare disease or condition” as defined in FDCA, which includes diseases and conditions that affect fewer than 200,000 persons in the United States(U.S.) and diseases and conditions that affect a larger number of persons and for which there is no reasonable expectation that the costs of developingand making available the drug in the U.S. can be recovered from sales of the drug in the U.S.Under section 529, the sponsor of a human drug application for a rare pediatric disease drug product may be eligible for a voucher that can be used (or sold)to obtain a priority review for a subsequent human drug application submitted under section 505(b)(1) of the FDCA or section 351 of the Public Health Service(PHS) Act after the date of approval of the rare pediatric disease drug product. FDA has issued draft Guidance for Industry for Rare Pediatric Disease PriorityReview Vouchers.Post-approval requirementsOnce an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if problems occur after theproduct candidate reaches the market. Requirements for additional Phase 4 (post-approval marketing studies) to confirm safety and efficacy may be imposed as acondition of approval. Later discovery of previously unknown problems with a product candidate may result in restrictions on the product candidate, or REMS, oreven complete withdrawal of the product candidate from the market. After approval, some types of changes to the approved product candidate, such as adding newindications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. In addition, the FDA may require testing andsurveillance programs to monitor the effect of approved 35Table of Contentsproduct candidates that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product candidate based on the results ofthese post-marketing programs.Any product candidates manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, amongother things: • record-keeping requirements; • reporting of adverse experiences with the product candidate; • submission of periodic reports; • providing the FDA with updated safety and efficacy information; • drug sampling, stability and distribution requirements; • notifying the FDA and gaining its approval of specified manufacturing or labeling changes; and • complying with statutory and regulatory requirements for promotion and advertising.Drug manufacturers and other entities involved in the manufacture and distribution of approved product candidates are required to register theirestablishments and provide product listing information to the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA andsome state agencies for compliance with cGMPs and other laws.Regulation outside of the U.S.In addition to regulations in the U.S., we will be subject to regulations of other jurisdictions governing any clinical trials and commercial sales anddistribution of our product candidates. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities ofcountries outside of the U.S. before we can commence clinical trials in such countries, and approval of the regulators of such countries or supranational areas, suchas the European Union, before we may market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials,product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.Under European Union regulatory systems, a company may submit marketing authorization applications either under a centralized or decentralizedprocedure. The centralized procedure, which is compulsory for certain medicines, including those produced by biotechnology or those intended to treat HIV, AIDS,cancer, neurodegenerative disorders, autoimmune and other immune dysfunctions, viral diseases or diabetes and is optional for those medicines which are asignificant therapeutic, scientific or technical innovation or whose authorization would be in the interest of public health, provides for the grant of a singlemarketing authorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national approvaldecisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days ofreceiving the applications and assessment reports, each member state must decide whether to recognize the approval. If a member state does not recognize themarketing authorization, the disputed points are eventually referred to the European Commission, whose decision is binding on all member states.As in the U.S., we may apply for designation of a product candidate as an orphan drug for the treatment of a specific indication in the European Union beforethe application for marketing authorization is made. Sponsors of orphan drugs in the European Union can enjoy economic and marketing benefits, including up toten years of market exclusivity for the approved indication unless another applicant can show that its product is safer, more effective or otherwise clinicallysuperior to the orphan-designated product. 36Table of ContentsReimbursementSales of our products will depend, in part, on the extent to which the costs of our products will be covered by third-party payors, such as government healthprograms, commercial insurance and managed healthcare organizations. These third-party payors are increasingly challenging the prices charged for medicalproducts and services. Additionally, the containment of healthcare costs has become a priority of federal and state governments and the prices of drugs have been afocus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs,including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containmentmeasures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. If thesethird-party payors do not consider our products to be cost-effective compared to other therapies, they may not cover our products after approved as a benefit undertheir plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) imposed new requirements for the distribution and pricing ofprescription drugs for Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities which willprovide coverage of outpatient prescription drugs. Part D plans include both stand-alone prescription drug benefit plans and prescription drug coverage as asupplement to Medicare Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are notrequired to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier orlevel. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarilyall the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeuticcommittee. Government payment for some of the costs of prescription drugs may increase demand for our products for which we receive marketing approval.However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain.Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitationsin setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmentalpayors.The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments forthe same illness. A plan for the research will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and Quality andthe National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to the U.S. Congress. Although the resultsof the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the researchwill have on the sales of any product, if any such product or the condition that it is intended to treat is the subject of a study. It is also possible that comparativeeffectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of our product candidates. If third-party payors do notconsider our products to be cost-effective compared to other available therapies, they may not cover our products as a benefit under their plans or, if they do, thelevel of payment may not be sufficient to allow us to sell our products on a profitable basis.The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, collectivelyreferred to as the ACA, enacted in March 2010, is expected to have a significant impact on the health care industry. ACA is expected to expand coverage for theuninsured while at the same time containing overall healthcare costs. With regard to pharmaceutical products, among other things, ACA is expected to expand andincrease industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements under the Medicare Part D program. Wecannot predict the impact of ACA on pharmaceutical companies, as many of the ACA reforms require the promulgation of 37Table of Contentsdetailed regulations implementing the statutory provisions which has not yet occurred. In addition, although the U.S. Supreme Court upheld the constitutionality ofmost of the ACA, some states have indicated that they intend to not implement certain sections of the ACA, and some members of the U.S. Congress are stillworking to repeal parts of the ACA. These challenges add to the uncertainty of the legislative changes enacted as part of ACA.In addition, in some non-U.S. jurisdictions, the proposed pricing for a product candidate must be approved before it may be lawfully marketed. Therequirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict therange of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for humanuse. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of thecompany placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations forpharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our product candidates. Historically, product candidates launchedin the European Union do not follow price structures of the U.S. and generally tend to be significantly lower.EnvironmentOur third party manufacturers are subject to inspections by the FDA for compliance with cGMP and other U.S. regulatory requirements, including U.S.federal, state and local regulations regarding environmental protection and hazardous and controlled substance controls, among others. Environmental laws andregulations are complex, change frequently and have tended to become more stringent over time. We have incurred, and may continue to incur, significantexpenditures to ensure we are in compliance with these laws and regulations. We would be subject to significant penalties for failure to comply with these laws andregulations.Sales and MarketingOur current focus is on the development of our existing portfolio, the completion of clinical trials and, if and where appropriate, the registration of ourproduct candidates. We currently do not have marketing, sales and distribution capabilities. If we receive marketing and commercialization approval for any of ourproduct candidates, we intend to market the product either directly or through strategic alliances and distribution agreements with third parties. The ultimateimplementation of our strategy for realizing the financial value of our product candidates is dependent on the results of clinical trials for our product candidates, theavailability of funds and the ability to negotiate acceptable commercial terms with third parties.Scientific AdvisorsWe seek advice from our scientific advisory board, which consists of a number of leading scientists and physicians, on scientific and medical matters. Wealso seek advice on an as-needed basis from other leading scientists and physicians, who are not on our scientific advisory board, based on their particularknowledge and expertise. Our scientific advisory board meets periodically to assess: • our research and development programs; • the design and implementation of our clinical programs; • our patent and publication strategies; • new technologies relevant to our research and development programs; and • specific scientific and technical issues relevant to our business. 38Table of ContentsThe current members of our scientific advisory board are as follows. NAME POSITION AND INSTITUTIONAL AFFILIATIONMark Behlke, M.D., Ph.D. Chief Scientific Officer, Integrated DNA TechnologiesFrank McCormick, Ph.D., F.R.S., D.Sc. (Hon) Director, University of California, San Francisco Helen Diller FamilyComprehensive Cancer CenterJohn Rossi, Ph.D. Co-Founder of Dicerna and Professor and Dean of Irell and ManellaGraduate School of Biological Sciences at City of Hope’s BeckmanResearch InstituteEmployeesAs of December 31, 2015, we had 48 full-time employees, of whom 41 are engaged in research and development and seven in administration. None of ouremployees is represented by a labor union or covered by a collective bargaining agreement. Geographically, all employees are located in Massachusetts. Weconsider our relationship with our employees to be good.Corporate InformationWe were incorporated in Delaware in 2006. We maintain our executive offices at 87 Cambridgepark Drive, Cambridge, MA 02140, and our main telephonenumber is (617) 621-8097. Our website is located at www.dicerna.com, which contains information about us. The information contained in, or that can be accessedthrough, our website is not part of, and is not incorporated in, this Annual Report on Form 10-K.We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company untilthe earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering on February 4, 2014, (b) in whichwe have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of ourcommon stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion innon-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,” and referencesherein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.Our website address is http://www.dicerna.com . The information in, or that can be accessed through, our website is not part of this Annual Report onForm 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports are available, freeof charge, on or through our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities ExchangeCommission (SEC). The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C.20549. Information on the operation of the Public Reference Room can be obtained by calling 1-800-SEC-0330. The SEC maintains an Internet site that containsreports, proxy and information statements and other information regarding our filings at www.sec.gov . 39Table of ContentsItem 1A.Risk FactorsWe are providing the following cautionary discussion of risk factors, uncertainties and assumptions that we believe are relevant to our business. These arefactors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and our forward-looking statements. We note these factors for investors as permitted by Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), andSection 27A of the Securities Act of 1933, as amended (Securities Act). You should understand that it is not possible to predict or identify all such factors.Consequently, you should not consider this section to be a complete discussion of all potential risks or uncertainties that may substantially impact our business.Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time and it is not possible to predict the impact of all ofthese factors on our business, financial condition or results of operations.Risks Related to Our BusinessWe are a clinical stage biopharmaceutical company with a history of losses, expect to continue to incur significant losses for the foreseeable future and maynever achieve or maintain profitability, which could result in a decline in the market value of our common stock.We are a clinical stage biopharmaceutical company with a limited operating history, focused on the discovery and development of treatments based on theemerging therapeutic modality RNA interference (RNAi), a biological process in which ribonucleic acid (RNA) molecules inhibit gene expression. Since ourinception in October 2006, we have devoted our resources to the development of Dicer substrate RNA (DsiRNA) molecules and delivery technologies. We havehad significant operating losses since our inception. As of December 31, 2015, we had an accumulated deficit of $196.2 million. For the years ended December 31,2015, 2014 and 2013, our net loss was $62.8 million, $47.9 million and $18.5 million, respectively. Substantially all of our losses have resulted from expensesincurred in connection with our research programs and from general and administrative costs associated with our operations. Our technologies and productcandidates are in early stages of development, and we are subject to the risks of failure inherent in the development of product candidates based on noveltechnologies.To date, we have generated revenue primarily from the receipt of upfront research funding, license and option exercise fees and preclinical payments underour research collaboration and license agreement with Kyowa Hakko Kirin Co., Ltd. (KHK). We have not generated, and do not expect to generate, any revenuefrom product sales for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of researchand development, preclinical studies and clinical trials and the regulatory approval process for product candidates. The amount of future losses is uncertain. Ourability to achieve profitability, if ever, will depend on, among other things, us or our existing collaborators, or any future collaborators, successfully developingproduct candidates, obtaining regulatory approvals to market and commercialize product candidates, manufacturing any approved products on commerciallyreasonable terms, establishing a sales and marketing organization or suitable third party alternatives for any approved product and raising sufficient funds to financebusiness activities. If we or our existing collaborators, or any future collaborators, are unable to develop and commercialize one or more of our product candidatesor if sales revenue from any product candidate that receives approval is insufficient, we will not achieve profitability, which could have a material adverse effect onour business, financial condition, results of operations and prospects.We will need substantial additional funds to advance development of our product candidates, and we cannot guarantee that we will have sufficient fundsavailable in the future to develop and commercialize our current or future product candidates.We will need substantial additional funds to expand our development, regulatory, manufacturing, marketing and sales capabilities with other organizations toprovide these capabilities for us. We have used substantial funds to develop our product candidates and delivery technologies and will require significant funds toconduct 40Table of Contentsfurther research and development and preclinical testing and clinical trials of our product candidates, to seek regulatory approvals for our product candidates and tomanufacture and market products, if any, that are approved for commercial sale. As of December 31, 2015, we had $94.6 million in cash and cash equivalents andheld-to-maturity investments. Based on our current operating plan, we believe that our available cash, cash equivalents and held-to-maturity investments will besufficient to fund our anticipated level of operations for at least the next 12 months. Our future capital requirements and the period for which we expect our existingresources to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing development andcorporate activities. Because the length of time and activities associated with successful development of our product candidates is highly uncertain, we are unableto estimate the actual funds we will require for development and any approved marketing and commercialization activities. To execute our business plan, we willneed, among other things: • to obtain the human and financial resources necessary to develop, test, obtain regulatory approval for, manufacture and market our product candidates; • to build and maintain a strong intellectual property portfolio and avoid infringing intellectual property of third parties; • to establish and maintain successful licenses, collaborations and alliances; • to satisfy the requirements of clinical trial protocols, including patient enrollment; • to establish and demonstrate the clinical efficacy and safety of our product candidates; • to obtain regulatory approvals; • to manage our spending as costs and expenses increase due to preclinical studies and clinical trials, regulatory approvals, manufacturing scale-up andcommercialization; • to obtain additional capital to support and expand our operations; and • to market our products to achieve acceptance and use by the medical community in general.If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to delay, reduce or terminate our research and developmentprograms and preclinical studies or clinical trials, if any, limit strategic opportunities or undergo reductions in our workforce or other corporate restructuringactivities. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of ourtechnologies or product candidates that we would otherwise pursue on our own. We do not expect to realize revenue from product sales, milestone payments orroyalties in the foreseeable future, if at all. Our revenue sources are, and will remain, extremely limited unless and until our product candidates are clinically tested,approved for commercialization and successfully marketed. To date, we have primarily financed our operations through the sale of securities, debt financings,credit and loan facilities and payments received under our collaboration and license agreement with KHK. We will be required to seek additional funding in thefuture and intend to do so through either collaborations, equity offerings or debt financings, credit or loan facilities or a combination of one or more of thesefunding sources. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. Additional fundsmay not be available to us on acceptable terms or at all. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the termsof any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand,and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility inconducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of equity securities receive any distribution ofcorporate assets. 41Table of ContentsOur quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause ourstock price to fluctuate or decline.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including: • variations in the level of expense related to our product candidates or future development programs; • results of clinical trials, or the addition or termination of clinical trials or funding support by us, our existing collaborators or any future collaborator orlicensing partner; • the timing of the release of results from any clinical trials conducted by us or our collaborator KHK; • our execution of any collaboration, licensing or similar arrangement, and the timing of payments we may make or receive under such existing or futurearrangements or the termination or modification of any such existing or future arrangements; • any intellectual property infringement lawsuit or opposition, interference, re-examination, post-grant review, inter partes review, nullification,derivation action, or cancellation proceeding in which we may become involved; • additions and departures of key personnel; • strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in businessstrategy; • if any of our product candidates receive regulatory approval, market acceptance and demand for such product candidates; • if any of our third-party manufacturers fail to execute on our manufacturing requirements; • regulatory developments affecting our product candidates or those of our competitors; • disputes concerning patents, proprietary rights, or license and collaboration agreements that negatively impact our receipt of milestone payments orroyalties or require us to make significant payments arising from licenses, settlements, adverse judgments or ongoing royalties; • expenditures as we respond to and defend against complaints and potential litigation, including Alnylam’s lawsuit alleging misappropriation ofconfidential information; and • changes in general market and economic conditions.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterlycomparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.Our approach to the discovery and development of innovative therapeutic treatments based on novel technologies is unproven and may not result in marketableproducts.We plan to develop a pipeline of product candidates using our DsiRNA molecules and delivery technologies for rare inherited diseases involving the liverand cancers that are genetically defined. We believe that product candidates identified with our drug discovery and delivery platform may offer an improvedtherapeutic approach to small molecules and monoclonal antibodies, as well as several advantages over earlier generation RNAi molecules. However, the scientificresearch that forms the basis of our efforts to develop product candidates based on the therapeutic modality RNAi and the identification and optimization ofDsiRNA is relatively new. Further, the scientific evidence to support the feasibility of developing therapeutic treatments based on RNAi and DsiRNA is bothpreliminary and limited. 42Table of ContentsRelatively few product candidates based on RNAi have been tested in animals or humans, and a number of clinical trials conducted by other companies usingRNAi technologies have not been successful. We may discover that DsiRNA does not possess certain properties required for a drug to be effective, such as theability to remain stable in the human body for the period of time required for the drug to reach the target tissue or the ability to cross the cell wall and enter intocells within the target tissue for effective delivery. We currently have only limited data, and no conclusive evidence, to suggest that we can introduce thesenecessary drug-like properties into DsiRNA. We may spend substantial funds attempting to introduce these properties and may never succeed in doing so. Inaddition, product candidates based on DsiRNA may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies.Even if product candidates, such as DCR-PH1 and DCR-MYC, have successful results in animal studies, they may not demonstrate the same chemical andpharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective or harmful ways. As a result, we may neversucceed in developing a marketable product, we may not become profitable and the value of our common stock will decline.Further, the U.S. Food and Drug Administration (FDA) has relatively limited experience with RNAi and DsiRNA based therapeutics. No regulatoryauthority has granted approval to any person or entity, including us, to market and commercialize therapeutics using RNAi or DsiRNA, which may increase thecomplexity, uncertainty and length of the regulatory approval process for our product candidates. We and our current collaborators, or any future collaborators,may never receive approval to market and commercialize any product candidate. Even if we or a collaborator obtain regulatory approval, the approval may be fordisease indications or patient populations that are not as broad as we intended or desired or may require labeling that includes significant use or distributionrestrictions or safety warnings. We or a collaborator may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to post-marketing testing requirements to maintain regulatory approval. If our technologies based on DsiRNA prove to be ineffective, unsafe or commercially unviable, ourentire platform and pipeline would have little, if any, value, which could have a material adverse effect on our business, financial condition, results of operationsand prospects.The market may not be receptive to our product candidates based on a novel therapeutic modality, and we may not generate any future revenue from the sale orlicensing of product candidates.Even if approval is obtained for a product candidate, we may not generate or sustain revenue from sales of the product due to factors such as whether theproduct can be sold at a competitive cost and otherwise accepted in the market. The product candidates that we are developing are based on new technologies andtherapeutic approaches. Market participants with significant influence over acceptance of new treatments, such as physicians and third-party payors, may not adopta treatment based on DsiRNA technology, and we may not be able to convince the medical community and third-party payors to accept and use, or to providefavorable reimbursement for, any product candidates developed by us or our existing collaborator or any future collaborators. Market acceptance of our productcandidates will depend on, among other factors: • the timing of our receipt of any marketing and commercialization approvals; • the terms of any approvals and the countries in which approvals are obtained; • the safety and efficacy of our product candidates; • the prevalence and severity of any adverse side effects associated with our product candidates; • limitations or warnings contained in any labeling approved by the FDA or other regulatory authority; • relative convenience and ease of administration of our product candidates; • the willingness of patients to accept any new methods of administration; • the success of our physician education programs; • the availability of adequate government and third-party payor reimbursement; 43Table of Contents • the pricing of our products, particularly as compared to alternative treatments; and • availability of alternative effective treatments for the disease indications our product candidates are intended to treat and the relative risks, benefits andcosts of those treatments.With our focus on the emerging therapeutic modality RNAi, these risks may increase to the extent the space becomes more competitive or less favored in thecommercial marketplace. Additional risks apply in relation to any disease indications we pursue which are classified as rare diseases and allow for orphan drugdesignation by regulatory agencies in major commercial markets, such as the U.S., the European Union and Japan. For instance, we are in the preliminary stages ofdeveloping a treatment for the rare genetic disorder Primary Hyperoxaluria Type 1 (PH1) with the gene encoding the liver metabolic enzyme glycolate oxidase asour target. Because of the small patient population for a rare disease, if pricing is not approved or accepted in the market at an appropriate level for an approvedproduct with orphan drug designation, such drug may not generate enough revenue to offset costs of development, manufacturing, marketing andcommercialization despite any benefits received from the orphan drug designation, such as market exclusivity, assistance in clinical trial design or a reduction inuser fees or tax credits related to development expense. Market size is also a variable in disease indications not classified as rare. Our estimates regarding potentialmarket size for any indication may be materially different from what we discover to exist at the time we commence commercialization, if any, for a product, whichcould result in significant changes in our business plan and have a material adverse effect on our business, financial condition, results of operations and prospects.If a product candidate that has orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, theproduct candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same productcandidate for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, could also block the approval of one ofour product candidates for seven years if a competitor obtains approval of the same product candidate as defined by the FDA or if our product candidate isdetermined to be contained within the competitor’s product candidate for the same indication or disease.As in the U.S., we may apply for designation of a product candidate as an orphan drug for the treatment of a specific indication in the European Union beforethe application for marketing authorization is made. Sponsors of orphan drugs in the European Union can enjoy economic and marketing benefits, including up toten years of market exclusivity for the approved indication unless another applicant can show that its product is safer, more effective or otherwise clinicallysuperior to the orphan-designated product.Our product candidates are in early stages of development and may fail in development or suffer delays that materially adversely affect their commercialviability.We have no products on the market and all of our product candidates are in early stages of development. Our ability to achieve and sustain profitabilitydepends on obtaining regulatory approvals, including institutional review board (IRB) approval to conduct clinical trials at particular sites, and successfullycommercializing our product candidates, either alone or with third parties, such as our collaborators KHK and Arbutus Biopharma Corporation. Before obtainingregulatory approval for the commercial distribution of our product candidates, we or a collaborator must conduct extensive preclinical tests and clinical trials todemonstrate the safety and efficacy in humans of our product candidates. Preclinical testing and clinical trials are expensive, difficult to design and implement, cantake many years to complete and are uncertain as to outcome. The start or end of a clinical study is often delayed or halted due to changing regulatory requirements,manufacturing challenges, required clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability orprevalence of use of a comparative drug or required prior therapy, clinical outcomes or financial constraints. For instance, delays or difficulties in patientenrollment or difficulties in retaining trial participants can result in increased costs, longer development times or termination of a clinical trial. Clinical trials of anew product candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the 44Table of Contentsdisease the product candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, including the sizeof the patient population, the eligibility criteria for the clinical trial, the age and condition of the patients, the stage and severity of disease, the nature of theprotocol, the proximity of patients to clinical sites and the availability of effective treatments for the relevant disease.A product candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for product candidates is high dueto scientific feasibility, safety, efficacy, changing standards of medical care and other variables. The results from preclinical testing or early clinical trials of aproduct candidate may not predict the results that will be obtained in later phase clinical trials of the product candidate. We, the FDA, IRB, an independent ethicscommittee, or other applicable regulatory authorities may suspend clinical trials of a product candidate at any time for various reasons, including a belief thatsubjects participating in such trials are being exposed to unacceptable health risks or adverse side effects. Similarly, an IRB or ethics committee may suspend aclinical trial at a particular trial site. We may not have the financial resources to continue development of, or to enter into collaborations for, a product candidate ifwe experience any problems or other unforeseen events that delay or prevent regulatory approval of, or our ability to commercialize, product candidates, including: • negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision orrequirement to conduct additional preclinical testing or clinical trials or abandon a program; • serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our productcandidates; • delays in submitting INDs or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators or IRBs tocommence a clinical trial, or a suspension or termination of a clinical trial once commenced; • conditions imposed by the FDA or comparable foreign authorities, such as the European Medicines Agency (EMA), regarding the scope or design ofour clinical trials; • delays in enrolling research subjects in clinical trials; • high drop-out rates of research subjects; • inadequate supply or quality of drug product or product candidate components or materials or other supplies necessary for the conduct of our clinicaltrials; • greater than anticipated clinical trial costs; • poor effectiveness of our product candidates during clinical trials; • unfavorable FDA or other regulatory agency inspection and review of a clinical trial site; • failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timelymanner, or at all; • delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around clinicaltesting generally or with respect to our technology in particular; or • varying interpretations of data by the FDA and similar foreign regulatory agencies.To date, our revenue has been primarily derived from our research collaboration and license agreement with KHK, and we are dependent on KHK for thesuccessful development of product candidates in the collaboration.In December 2009, we entered into a research collaboration and license agreement with KHK for the research, development and commercialization ofDsiRNA molecules and drug delivery technologies for 45Table of Contentstherapeutic targets, primarily in oncology. Under the research collaboration and license agreement with KHK, KHK has paid us a total of $17.5 million. During thefirst two years of the collaboration, we worked together with KHK to optimize KHK’s lipid nanoparticles for tumor delivery and to identify DsiRNAs optimizedagainst oncology and KRAS targets. Based on the results of this research, KHK exercised options to advance two separate DsiRNAs into the development stage,including one with a KRAS target. For each product candidate under the research collaboration and license agreement, we have the potential to receive clinical,regulatory and commercialization milestone payments of up to $110.0 million and royalties on net sales of such product candidate. The success of our collaborationprograms with KHK depends entirely upon the efforts of KHK. Except for certain co-promotion and profit sharing rights we retain with respect to the KRASproduct candidate if it is approved for marketing and commercialization in the U.S., KHK has sole discretion in determining and directing the efforts and resources,including the ability to discontinue all efforts and resources, it applies to the development and, if approval is obtained, commercialization and marketing of theproduct candidates covered by the collaboration. KHK may not be effective in obtaining approvals for the product candidates developed under the collaborationarrangement or in marketing, or arranging for necessary supply, manufacturing or distribution relationships for, any approved products. Under the researchcollaboration and license agreement, KHK may change its strategic focus or pursue alternative technologies in a manner that results in reduced, delayed or norevenue to us. KHK has a variety of marketed products and product candidates under collaboration with other companies, including some of our competitors, andits own corporate objectives may not be consistent with our best interests. If KHK fails to develop, obtain regulatory approval for or ultimately commercialize anyproduct candidate under our collaboration or if KHK terminates our collaboration, our business, financial condition, results of operations and prospects could bematerially and adversely affected. In addition, any dispute or litigation proceedings we may have with KHK in the future could delay development programs, createuncertainty as to ownership of intellectual property rights, distract management from other business activities and generate substantial expense.If third parties on which we depend to conduct our preclinical studies, or any future clinical trials, do not perform as contractually required, fail to satisfyregulatory or legal requirements or miss expected deadlines, our development program could be delayed with materially adverse effects on our business,financial condition, results of operations and prospects.We rely on third party clinical investigators, contract research organizations (CROs), clinical data management organizations and consultants to design,conduct, supervise and monitor preclinical studies of our product candidates and will do the same for any clinical trials. Because we rely on third parties and do nothave the ability to conduct preclinical studies or clinical trials independently, we have less control over the timing, quality and other aspects of preclinical studiesand clinical trials than we would if we conducted them on our own. These investigators, CROs and consultants are not our employees and we have limited controlover the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of whichmay be our competitors, which may draw time and resources from our programs. The third parties with which we contract might not be diligent, careful or timelyin conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractualduties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical developmentprograms could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring that each of our preclinical studies and clinical trials isconducted in accordance with the general investigational plan and protocols for the trial. The FDA and certain foreign regulatory authorities, such as the EuropeanMedicines Agency (EMA), require preclinical studies to be conducted in accordance with applicable Good Laboratory Practices (GLPs) and clinical trials to beconducted in accordance with applicable FDA regulations and good clinical practices (GCPs), including requirements for conducting, recording and reporting theresults of preclinical studies and clinical trials to assure that data and reported results are credible and accurate and that the 46Table of Contentsrights, integrity and confidentiality of clinical trial participants are protected. Our reliance on third parties that we do not control does not relieve us of theseresponsibilities and requirements. Any such event could have a material adverse effect on our business, financial condition, results of operations and prospects.Because we rely on third party manufacturing and supply partners, our supply of research and development, preclinical studies and clinical trial materials maybecome limited or interrupted or may not be of satisfactory quantity or quality.We rely on third party supply and manufacturing partners to supply the materials and components for, and manufacture, our research and development,preclinical study and clinical trial drug supplies. For example, pursuant to our development and supply agreement, a third party manufactures lipid nanoparticlesthat we are seeking to use for delivery of DCR-PH1 to the liver. In the event that we are unable to use the technology we licensed to deliver DCR-PH1 to the liveror if the third party experiences difficulty in manufacturing lipid nanoparticles, our DCR-PH1 program would suffer delays, which could have a material adverseeffect on our business, financial condition, results of operations and prospects.We do not own manufacturing facilities or supply sources for such components and materials. Our manufacturing requirements include lipid nanoparticlecomponents and oligonucleotide, each of which we procure from a single source supplier on a purchase order basis. In addition, for each product candidate wecurrently contract with only one drug product formulation manufacturer for the encapsulation of the oligonucleotide in a lipid particle. There can be no assurancethat our supply of research and development, preclinical study and clinical trial drugs and other materials will not be limited, interrupted, restricted in certaingeographic regions or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of our drug product formulationmanufacturer could require significant effort and expertise because there may be a limited number of qualified replacements.The manufacturing process for a product candidate is subject to FDA and foreign regulatory authority review. Suppliers and manufacturers must meetapplicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply withregulatory standards, such as current Good Manufacturing Practices (cGMPs). In the event that any of our suppliers or manufacturers fails to comply with suchrequirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited orinterrupted for other reasons, we may be forced to manufacture the materials ourselves, for which we currently do not have the capabilities or resources, or enterinto an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology requiredto manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty, or there may be contractualrestrictions prohibiting us from, transferring such skills or technology to another third party and a feasible alternative may not exist. These factors would increaseour reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our product candidates.If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that complywith quality standards and with all applicable regulations. The delays associated with the verification of a new manufacturer could negatively affect our ability todevelop product candidates in a timely manner or within budget.We expect to continue to rely on third party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing,or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistentwith contractual and regulatory requirements, including those related to quality control and assurance. If we are unable to obtain or maintain third-partymanufacturing for product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidatessuccessfully. Our or 47Table of Contentsa third party’s failure to execute on our manufacturing requirements could adversely affect our business in a number of ways, including: • an inability to initiate or continue preclinical studies or clinical trials of product candidates under development; • delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates; • loss of the cooperation of a collaborator; • subjecting manufacturing facilities of our product candidates to additional inspections by regulatory authorities; • requirements to cease distribution or to recall batches of our product candidates; and • in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to developand commercialize product candidates, impact our cash position, increase our expense and present significant distractions to our management.From time to time, we may consider strategic transactions, such as collaborations, acquisitions of companies, asset purchases and out- or in-licensing ofproduct candidates or technologies. In particular, in addition to our current arrangements with KHK and Arbutus, we will evaluate and, if strategically attractive,seek to enter into additional collaborations, including with major biotechnology or pharmaceutical companies. The competition for collaborators is intense, and thenegotiation process is time-consuming and complex. Any new collaboration may be on terms that are not optimal for us, and we may be unable to maintain anynew or existing collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not meetexpectations or the collaborator terminates the collaboration. Any such collaboration, or other strategic transaction, may require us to incur non-recurring or othercharges, increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. Thesetransactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of ourmanagement’s time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies, incurrence of substantialdebt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining theoperations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers of any acquired business due tochanges in management and ownership and the inability to retain key employees of any acquired business. Accordingly, although there can be no assurance that wewill undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing orother risks and have a material adverse effect on our business, results of operations, financial condition and prospects. Conversely, any failure to enter anycollaboration or other strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidatesand have a negative impact on the competitiveness of any product candidate that reaches market.We face competition from entities that have developed or may develop product candidates for our target disease indications, including companies developingnovel treatments and technology platforms based on modalities and technology similar to ours. If these companies develop technologies or product candidatesmore rapidly than we do or their technologies, including delivery technologies, are more effective, our ability to develop and successfully commercializeproduct candidates may be adversely affected.The development and commercialization of drugs is highly competitive. We compete with a variety of multinational pharmaceutical companies andspecialized biotechnology companies, as well as technology being 48Table of Contentsdeveloped at universities and other research institutions. Our competitors have developed, are developing or will develop product candidates and processescompetitive with our product candidates. Competitive therapeutic treatments include those that have already been approved and accepted by the medicalcommunity and any new treatments that enter the market. We are aware of multiple companies that are working in the field of RNAi therapeutics, including amajor pharmaceutical company, Takeda Pharmaceutical Company Limited, and biopharmaceutical companies such as Alnylam, which in March 2014 acquiredSirna Therapeutics, Inc. from Merck & Co., Inc., Arbutus, with which we have license and development and supply agreements, Arrowhead, Silence Therapeuticsplc, RXi Pharmaceuticals Corporation, Quark Pharmaceuticals, Inc., Marina Biotech, Inc., Benitec Biopharma Limited and Arcturus Therapeutics. In particular,Arrowhead holds a non-exclusive license to the same patent rights of City of Hope (COH) and Integrated Data Technologies, Inc. (IDT) as we are licensed underour license agreement with COH. As a result, we cannot rely on those patent rights to prevent Arrowhead or third parties working with Arrowhead fromdeveloping, marketing and selling products that compete directly with our product candidates. In March 2015 Arrowhead announced the acquisition of Novartis’RNAi research and development portfolio and associated assets. The acquisition includes assignment of certain intellectual property owned or controlled byNovartis, including access to non-delivery Alnylam RNAi IP for 30 targets, and three pre-clinical RNAi candidates for which Novartis has developed varyingamounts of preclinical data.We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment ofconditions for which we may try to develop product candidates. There are also competitors to our proprietary product candidates currently in development, some ofwhich may become commercially available before our product candidates. For example, Alnylam announced in the third quarter of 2014 a new RNAi-basedprogram for treatment of PH1. OxThera also has a competing approach to PH1 treatment, currently in Phase 2 clinical trials, that is not RNAi-based. The drugcandidates of either Alnylam or OxThera may become commercially available before or perform more effectively than DCR- PH1, our investigational treatment forPH1.We also compete with companies working to develop antisense and other RNA-based drugs. Like RNAi therapeutics, antisense drugs target messenger RNA(mRNA) with the objective of suppressing the activity of specific genes. The development of antisense drugs is more advanced than that of RNAi therapeutics, andantisense technology may become the preferred technology for products that target mRNAs. Significant competition also exists from companies such as Alnylamand Arrowhead to discover and develop safe and effective means to deliver therapeutic RNAi molecules, such as DsiRNAs, to the relevant cell and tissue types.If our lead product candidates are approved for the indications we are currently pursuing, they will compete with a range of therapeutic treatments that areeither in development or currently marketed. For example, Nexavar, marketed by Amgen Inc. and Bayer AG, is currently in use for the treatment of hepatocellularcarcinoma (HCC). Given the high unmet medical need and the commercial success of Nexavar, numerous targeted therapies for the treatment of HCC are underdevelopment. Targeted therapies represent the largest proportion of the HCC pipeline. There are also a number of pharmaceuticals and biologics that are marketedor in clinical development for the treatment of solid tumors. The most common treatments for solid tumors are various chemotherapeutic agents, radiation therapyand certain targeted therapies. Targeting therapies include monoclonal antibodies such as Avastin, Erbitux and Herceptin, and small molecules, such as Affinitor,Sutent and Tarceva. Immunotherapy regimens are also on the market and in development for the treatment of solid tumors. In addition, we believe that KadmonCorporation, LLC is evaluating salirasib (KD032) in clinical trials for the treatment of KRAS-specific non-small cell lung cancer, pancreatic cancer and other solidtumors.Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we have. Ifwe successfully obtain approval for any product candidate, we will face competition based on many different factors, including safety and effectiveness, ease withwhich our products can be administered and the extent to which patients accept relatively new routes of administration, timing and scope of regulatory approvals,availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position of our products. Competing productscould 49Table of Contentspresent superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than any products we maydevelop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializingour product candidates. Competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our businessplan.Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.Our success largely depends on the continued service of key management and other specialized personnel, including Douglas M. Fambrough, III, Ph.D., ourchief executive officer, Theodore T. Ashburn, M.D., Ph.D, our senior vice president, product strategy and operations, Pankaj Bhargava, M.D., our chief medicalofficer, Bob D. Brown, Ph.D., our chief scientific officer, John “Jack” Green, our interim chief financial officer, and James B. Weissman, our chief businessofficer. The loss of one or more members of our management team or other key employees or advisors could delay our research and development programs andmaterially harm our business, financial condition, results of operations and prospects. The relationships that our key managers have cultivated within our industrymake us particularly dependent upon their continued employment with us. We are dependent on the continued service of our technical personnel because of thehighly technical nature of our product candidates and technologies and the specialized nature of the regulatory approval process. Because our management teamand key employees are not obligated to provide us with continued service, they could terminate their employment with us at any time without penalty. We do notmaintain key person life insurance policies on any of our management team members or key employees. Our future success will depend in large part on ourcontinued ability to attract and retain other highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing,manufacturing, governmental regulation and commercialization. We face competition for personnel from other companies, universities, public and private researchinstitutions, government entities and other organizations.If our product candidates advance into clinical trials, we may experience difficulties in managing our growth and expanding our operations.We have limited experience in drug development and did not begin our first clinical trial of a product candidate until 2014. As our product candidates enterand advance through preclinical studies and any clinical trials, we will need to expand our development, regulatory and manufacturing capabilities or contract withother organizations to provide these capabilities for us. In the future, we expect to have to manage additional relationships with collaborators or partners, suppliersand other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and managementcontrols, reporting systems and procedures. We may not be able to implement improvements to our management information and control systems in an efficient ortimely manner and may discover deficiencies in existing systems and controls.If any of our product candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and distribution capabilitieson our own or enter into agreements with third parties to perform these functions on acceptable terms, we will be unable to successfully commercialize anysuch future products.We currently have no sales, marketing or distribution capabilities or experience. If any of our product candidates is approved, we will need to developinternal sales, marketing and distribution capabilities to commercialize such products, which would be expensive and time-consuming, or enter into collaborationswith third parties to perform these services. If we decide to market our products directly, we will need to commit significant financial and managerial resources todevelop a marketing and sales force with technical expertise and supporting distribution, administration and compliance capabilities. If we rely on third parties withsuch capabilities to market our approved products or decide to co-promote products with collaborators, we will need 50Table of Contentsto establish and maintain marketing and distribution arrangements with third parties, and there can be no assurance that we will be able to enter into sucharrangements on acceptable terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we receive will depend upon the effortsof the third parties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining marketacceptance of any approved product. If we are not successful in commercializing any product approved in the future, either on our own or through third parties, ourbusiness, financial condition, results of operations and prospects could be materially adversely affected.If we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercializationapprovals we may receive and subject us to other penalties that could materially harm our business.The company, our product candidates, our suppliers, and our contract manufacturers, distributors, and contract testing laboratories are subject to extensiveregulation by governmental authorities in the European Union, the United States, and other countries, with the regulations differing from country to country.Even if we receive marketing and commercialization approval of a product candidate, we and our third-party services providers will be subject to continuingregulatory requirements, including a broad array of regulations related to establishment registration and product listing, manufacturing processes, risk managementmeasures, quality and pharmacovigilance systems, post-approval clinical studies, labeling, advertising and promotional activities, record keeping, distribution,adverse event reporting, and import and export of pharmaceutical products. We are required to submit safety and other post market information and reports and aresubject to continuing regulatory review, including in relation to adverse patient experiences with the product and clinical results that are reported after a product ismade commercially available, both in the U.S. and any foreign jurisdiction in which we seek regulatory approval. The FDA and certain foreign regulatoryauthorities, such as the EMA, have significant post-market authority, including the authority to require labeling changes based on new safety information and torequire post-market studies or clinical trials to evaluate safety risks related to the use of a product or to require withdrawal of the product from the market. TheFDA also has the authority to require a risk evaluation and mitigation strategies (REMS) plan after approval, which may impose further requirements or restrictionson the distribution or use of an approved drug. The EMA now routinely requires risk management plans (RMPs) as part of the marketing authorization applicationprocess, and such plans must be continually modified and updated throughout the lifetime of the product as new information becomes available. In addition, therelevant governmental authority of any European Union member state can request an RMP whenever there is a concern about a risk affecting the benefit riskbalance of the product. The manufacturer and manufacturing facilities we use to make a future product, if any, will also be subject to periodic review and inspectionby the FDA and other regulatory agencies, including for continued compliance with cGMP requirements. The discovery of any new or previously unknownproblems with our third-party manufacturers, manufacturing processes or facilities may result in restrictions on the product, manufacturer or facility, includingwithdrawal of the product from the market. If we rely on third-party manufacturers, we will not have control over compliance with applicable rules and regulationsby such manufacturers. Any product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review. If we or ourcollaborators, manufacturers or service providers fail to comply with applicable continuing regulatory requirements in the U.S. or foreign jurisdictions in which weseek to market our products, we or they may be subject to, among other things, fines, warning and untitled letters, clinical holds, delay or refusal by the FDA orforeign regulatory authorities to approve pending applications or supplements to approved applications, suspension, refusal to renew or withdrawal of regulatoryapproval, product recalls, seizures or administrative detention of products, refusal to permit the import or export of products, operating restrictions and total orpartial suspension of production or distribution, injunction, restitution, disgorgement, debarment, civil penalties and criminal prosecution.Price controls imposed in foreign markets may adversely affect our future profitability.In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries,pricing negotiations with governmental authorities can take 51Table of Contentsconsiderable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on pricesand reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing andreimbursement negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Unionmember states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or ourcollaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our RNAi therapeutic candidates to other availabletherapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressureon the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product candidate approved for marketing isunavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, financial condition, results of operations or prospects could beadversely affected.Our business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could harm our business, financial condition,results of operations or prospects.Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments.Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in aninvestigation by certain regulatory authorities, such as FDA or foreign regulatory authorities, of the safety and effectiveness of our products, our manufacturingprocesses and facilities or our marketing programs and potentially a recall of our products or more serious enforcement action, limitations on the approvedindications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result indecreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantialmonetary awards to trial participants or patients and a decline in our stock price. We currently have product liability insurance that we believe is appropriate for ourstage of development and may need to obtain higher levels prior to marketing any of our product candidates. Any insurance we have or may obtain may not providesufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we maybe unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have a material adverse effecton our business.Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements which could havea material adverse effect on our business.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include, but is not limited to, intentional failures tocomply with FDA regulations or applicable laws, regulations, guidance or codes of conduct set by foreign governmental authorities or self-regulatory industryorganizations, provide accurate information to any governmental authorities such as FDA, comply with manufacturing standards we may establish, comply withfederal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. Inparticular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws, regulations, guidance and codes of conduct intendedto prevent fraud, kickbacks, self-dealing and other abusive practices. These laws, regulations, guidance and codes of conduct may restrict or prohibit a wide rangeof pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct couldalso involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions, including debarment ordisqualification of those employees from participation in FDA regulated activities, and serious harm to our reputation. It is not always possible to identify and deteremployee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses orin protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such 52Table of Contentslaws, regulations, guidance or codes of conduct. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting ourrights, those actions could have a significant impact on our business, including the imposition of significant fines, exclusion from government programs, or othersanctions.Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a materialdisruption of our product development programs.Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerableto damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such events could causeinterruptions of our operations. For instance, the loss of preclinical data or data from any future clinical trial involving our product candidates could result in delaysin our development and regulatory filing efforts and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of,or damage to, our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the development of our productcandidates could be delayed.If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.Our research, development and manufacturing involve the use of hazardous materials and various chemicals. We maintain quantities of various flammableand toxic chemicals in our facilities in Cambridge, Massachusetts, that are required for our research, development and manufacturing activities. We are subject tofederal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We believe ourprocedures for storing, handling and disposing these materials in our Cambridge facilities comply with the relevant guidelines of Cambridge, the Commonwealth ofMassachusetts and the Occupational Safety and Health Administration of the U.S. Department of Labor. Although we believe that our safety procedures forhandling and disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury from thesematerials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerousenvironmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and thehandling of animals and biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due toinjuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We do notmaintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological orhazardous materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial coststo comply with, and substantial fines or penalties if we violate any of these laws or regulations.Our information technology systems could face serious disruptions that could adversely affect our business.Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines and connection to the Internet, facethe risk of systemic failure that could disrupt our operations. A significant disruption in the availability of our information technology and other internalinfrastructure systems could cause interruptions in our collaborations with our partners and delays in our research and development work.Our current operations are concentrated in one location and any events affecting this location may have material adverse consequences.Our current operations are located in our facilities situated in Cambridge. Any unplanned event, such as flood, fire, explosion, earthquake, extreme weathercondition, medical epidemics, power shortage, 53Table of Contentstelecommunication failure or other natural or manmade accidents or incidents that result in us being unable to fully utilize the facilities, may have a materialadverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operatingconditions. Loss of access to these facilities may result in increased costs, delays in the development of our product candidates or interruption of our businessoperations. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the eventof an accident or incident at these facilities, we cannot assure you that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilitiesare unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and developmentprograms may be harmed. Any business interruption may have a material adverse effect on our business, financial position, results of operations and prospects.Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.We have incurred substantial losses during our history, do not expect to become profitable for the foreseeable future and may never achieve profitability. Tothe extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. Wemay be unable to use these losses to offset income before such unused losses expire. Under Section 382 of the Internal Revenue Code of 1986, as amended, if acorporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change by value in its equity ownership over athree-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-changeincome may be further limited. We have not performed an analysis on whether we have experienced any ownership changes in the past. It is possible that we haveexperienced an ownership change, including pursuant to the initial public offering of our common stock, which closed on February 4, 2014, and our net operatinglosses are subject to such limitation. As of December 31, 2015, we had U.S. federal and Massachusetts net operating loss carryforwards of $92.5 million and $77.6million, respectively. Any limit on these loss carryforwards if we have or do experience an ownership change could have an adverse effect on our business,financial position, results of operations and prospects.The investment of our cash and cash equivalents and held-to-maturity investments is subject to risks which may cause losses and affect the liquidity of theseinvestments.As of December 31, 2015, we had $94.6 million in cash and cash equivalents and held-to-maturity investments. We historically have invested substantiallyall of our available cash and cash equivalents in corporate bonds, commercial paper, securities issued by the U.S. government, certificates of deposit and moneymarket funds meeting the criteria of our investment policy, which is focused on the preservation of our capital. These investments are subject to general credit,liquidity, market and interest rate risks, including the impact of U.S. sub-prime mortgage defaults that have affected various sectors of the financial markets andcaused credit and liquidity issues. We may realize losses in the fair value of these investments or a complete loss of these investments, which would have a negativeeffect on our condensed consolidated financial statements.In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associatedwith our investment portfolio may have an adverse effect on our results of operations, liquidity and financial condition.Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change ourcompensation policies.Accounting methods and policies for biopharmaceutical companies, including policies governing revenue recognition, research and development and relatedexpenses and accounting for stock-based compensation, are subject to review, interpretation and guidance from our auditors and relevant accounting authorities,including the Securities and Exchange Commission and the Public Company Accounting Oversight Board. Changes to 54Table of Contentsaccounting methods or policies, or interpretations thereof, may require us to reclassify, restate or otherwise change or revise our financial statements, includingthose contained in this Annual Report on Form 10-K.Risks Related to Intellectual PropertyIf we are not able to obtain and enforce patent protection for our technologies or product candidates, development and commercialization of our productcandidates may be adversely affected.Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectualproperty rights of others, for our product candidates, methods used to manufacture our product candidates and methods for treating patients using our productcandidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringingupon the proprietary rights of others. As of March 1, 2016, our patent estate, including the patents and patent applications that we have licensed from COH, alongwith one of their affiliates, included over 20 issued patents and over 70 pending patent applications supporting commercial development of our DsiRNA moleculesand delivery technologies. We may not be able to apply for patents on certain aspects of our product candidates or delivery technologies in a timely fashion or atall. Our existing issued and granted patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or fromdeveloping competing products and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, that anyof our issued or granted patents will not later be found to be invalid or unenforceable or that any issued or granted patents will include claims that are sufficientlybroad to cover our product candidates or delivery technologies or to provide meaningful protection from our competitors. Moreover, the patent position ofbiotechnology and pharmaceutical companies can be highly uncertain because it involves complex legal and factual questions. We will be able to protect ourproprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology and product candidates are covered byvalid and enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially andadversely impact our position in the market.The U.S. Patent and Trademark Office (USPTO) and various foreign governmental patent agencies require compliance with a number of procedural,documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of apatent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter themarket earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent offices in granting patents are not always applieduniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnologyand pharmaceutical patents. As such, we do not know the degree of future protection that we will have on our proprietary products and technology. While we willendeavor to try to protect our product candidates with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive and sometimes unpredictable.In addition, there are numerous recent changes to the patent laws and proposed changes to the rules of the USPTO which may have a significant impact onour ability to protect our technology and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act (AIA) enacted in 2011involves significant changes in patent legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, some of which cases either narrow thescope of patent protection available in certain circumstances or weaken the rights of patent owners in certain situations. The 2013 decision by the U.S. SupremeCourt in Association for Molecular Pathology v. Myriad Genetics, Inc. precludes a claim to a nucleic acid having a stated nucleotide sequence which is identical toa sequence found in nature and unmodified. We currently are not aware of an immediate impact of this decision on our patents or patent applications because weare developing nucleic acid products that are not found in nature. However, this decision has yet to be clearly interpreted by courts and by the USPTO. We cannotassure you that the interpretations of this decision or subsequent rulings will not adversely impact our patents or 55Table of Contentspatent applications. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertaintywith respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulationsgoverning patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that wemight obtain in the future.Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation actionin court or before patent offices or similar proceedings for a given period before or after allowance or grant, during which time third parties can raise objectionsagainst such initial grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit thescope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether. Our patent risks include that: • Others may, or may be able to, make, use or sell compounds that are the same as or similar to our product candidates but that are not covered by theclaims of the patents that we own or license. • We or our licensors, collaborators or any future collaborators may not be the first to file patent applications covering certain aspects of our inventions. • Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual propertyrights. • A third party may challenge our patents and, if challenged, a court may not hold that our patents are valid, enforceable and infringed. • A third party may challenge our patents in various patent offices and, if challenged, we may be compelled to limit the scope of our allowed or grantedclaims or lose the allowed or granted claims altogether. • Any issued patents that we own or have licensed will provide us with any competitive advantages, or may be challenged by third parties. • We may not develop additional proprietary technologies that are patentable. • The patents of others could harm our business. • Our competitors could conduct research and development activities in countries where we will not have enforceable patent rights and then use theinformation learned from such activities to develop competitive products for sale in our major commercial markets.Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required to litigate orobtain licenses from third parties in order to develop or market our product candidates. Such litigation could be costly and licenses may be unavailable oncommercially reasonable terms.Research and development of RNAi-based therapeutics and other oligonucleotide-based therapeutics has resulted in many patents and patent applicationsfrom organizations and individuals seeking to obtain patent protection in the field. Our efforts are based on RNAi technology that we have licensed (DsiRNA) andthat we have developed internally and own (DsiRNA-EX). We have chosen this approach to increase our likelihood of technical success and our freedom tooperate. We have obtained grants and issuances of RNAi, RNAi therapeutic and DsiRNA patents and have licensed other patents from third parties on an exclusiveor non-exclusive basis. The issued patents and pending patent applications in the U.S. and in key markets around the world that we own or license claim manydifferent methods, compositions and processes relating to the discovery, development, manufacture and commercialization of RNAi therapeutics and DsiRNAtherapeutics. Specifically, we own and have licensed a portfolio of patents, patent applications and other intellectual property covering: (1) certain aspects of thestructure and uses of DsiRNA and DsiRNA-EX molecules, including their manufacture and use as 56Table of Contentstherapeutics, and RNAi-related mechanisms, (2) chemical modifications to DsiRNA and DsiRNA-EX molecules that improve their properties and suitability fortherapeutic uses, (3) DsiRNA and DsiRNA-EX molecules directed to specific gene sequences and drug targets as treatments for particular diseases and (4) deliverytechnologies, such as in the field of lipid nanoparticles and lipid nanoparticle formulation, and chemical modifications such as conjugation to targeting moieties.The RNAi-related intellectual property landscape, including patent applications in prosecution where no definitive claims have yet issued, is still evolving,and it is difficult to conclusively assess our freedom to operate. Other companies are pursuing patent applications and possess issued patents broadly directed toRNAi compositions, methods of making and using RNAi and to RNAi-related delivery and modification technologies. Our competitive position may suffer ifpatents issued to third parties cover our products, or our manufacture or uses relevant to our commercialization plans. In such cases, we may not be in a position tocommercialize products unless we enter into a license agreement with the intellectual property right holder, if available, on commercially reasonable terms orsuccessfully pursue litigation, opposition, interference, re-examination, post-grant review, inter partes review, nullification, derivation action, or cancellationproceeding to limit, nullify or invalidate the third party intellectual property right concerned. Even if we are successful in limiting, nullifying, or invalidating thirdparty intellectual property rights through such proceedings, we may incur substantial costs and could require significant time and attention of our personnel.While we believe our intellectual property allows us to pursue our current development programs, the biological process of RNAi is a natural process andcannot be patented. Several companies in the space are pursuing alternate methods to exploit this phenomenon and have built their intellectual property aroundthese methods. For example, Alnylam controls three patent families containing both pending patent applications and issued patents (e.g., U.S. Patent Numbers8,853,384 and 9,074,213, and European Patent EP 1 352 061 B1) that pertain to RNAi. These are referred to in their corporate literature as the “Tuschl family” (e.g.patents and applications claiming priority to WO2002/044321, filed Nov. 29, 2001, and their priority filings) and the “Kreutzer-Limmer family” (e.g. patents andapplications claiming priority to WO 2002/044895, filed Jan. 29, 2000, WO 2002/055693, filed Jan. 9, 2002, and their priority filings). Both families contain patentapplications still in prosecution, with the applicants actively seeking to extend the reach of this intellectual property in ways that might strategically impact ourbusiness. Additional areas of intellectual property pursued by Alnylam and others include oligonucleotide delivery-related technologies (such as conjugation totargeting moieties) and oligonucleotides directed to specific gene targets.Patent applications in the U.S. and elsewhere are generally published approximately 18 months after the earliest filing for which priority is claimed, withsuch earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our products or platform technology could havebeen filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be lateramended in a manner that could cover our platform technologies, our products or the use of our products. Third party intellectual property right holders may alsobring patent infringement claims against us. No such infringement actions have been brought against us. We cannot guarantee that we will be able to successfullysettle or otherwise resolve any future infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required toengage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in marketing our products. Ifwe fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our productcandidates that are held to be infringing. We might also be forced to redesign product candidates so that we no longer infringe the third party intellectual propertyrights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we wouldotherwise be able to devote to our business.As the field of RNAi therapeutics matures, patent applications are being processed by national patent offices around the world. There is uncertainty aboutwhich patents will issue, and, if they do, as to when, to whom, and with what claims. It is likely that there will be significant litigation in the courts and otherproceedings, such as 57Table of Contentsinterference, re-examination, opposition, post-grant review, inter partes review, nullification, derivation action, or cancellation proceedings, in various patentoffices relating to patent rights in the RNAi therapeutics field. In many cases, the possibility of appeal or opposition exists for either us or our opponents, and itmay be years before final, unappealable rulings are made with respect to these patents in certain jurisdictions. The timing and outcome of these and otherproceedings is uncertain and may adversely affect our business if we are not successful in defending the patentability and scope of our pending and issued patentclaims or if third parties are successful in obtaining claims that cover our DsiRNA technology or any of our product candidates. In addition, third parties mayattempt to invalidate our intellectual property rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our intellectual propertyrights. Our defense against any attempt by third parties to circumvent or invalidate our intellectual property rights could be costly to us, could require significanttime and attention of our management and could have a material adverse effect on our business and our ability to successfully compete in the field of RNAitherapeutics.There are many issued and pending patents that claim aspects of oligonucleotide chemistry and modifications that we may need to apply to our DsiRNA andDsiRNA-EX therapeutic candidates. There are also many issued patents that claim targeting genes or portions of genes that may be relevant for DsiRNA drugs wewish to develop. Thus, it is possible that one or more organizations will hold patent rights to which we will need a license. If those organizations refuse to grant us alicense to such patent rights on reasonable terms, we may be unable to market products or perform research and development or other activities covered by thesepatents.We license patent rights from third-party owners or licensees. If such owners or licensees do not properly or successfully obtain, maintain or enforce thepatents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be adverselyaffected.We do, and will continue to, rely on intellectual property rights licensed from third parties to protect our technology. We are a party to a number of licensesthat give us rights to third-party intellectual property that is necessary or useful for our business. In particular, we have a license from COH (on behalf of itself andIDT) to certain patent rights, which provide platform intellectual property for research and development of our DsiRNA molecules employed in our DCR-MYCprograms and collaborative programs with KHK. Pursuant to this agreement, we have a worldwide license from COH (subject to the pre-existing non-exclusivelicense) for the exploitation of key intellectual property rights in this respect, and COH and IDT retain ownership of the patents and patent applications to which weare licensed under the agreement. In addition, we have an exclusive worldwide license from Arbutus to their LNP technology for delivery of certain therapeutics totreat PH1, and Arbutus retains ownership of its patents. This technology could be important to us as we are seeking to use it to deliver DCR-PH1 to the liver. If weare unable to do so, our DCR-PH1 program would suffer delays, which could have a material adverse effect on our business, financial condition, results ofoperations and prospects. We also may license additional third-party intellectual property in the future. Our success will depend in part on the ability of ourlicensors to obtain, maintain and enforce patent protection for our licensed intellectual property, in particular, those patents to which we have secured exclusiverights. Our licensors may not successfully prosecute the patent applications licensed to us. Even if patents issue or are granted, our licensors may fail to maintainthese patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue litigation less aggressively than wewould. Further, we may not obtain exclusive rights, which would allow for third parties to develop competing products. Without protection for, or exclusive rightto, the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect ourcompetitive business position and harm our business prospects. In addition, we sublicense our rights under our third-party licenses to KHK and may sublicensesuch rights to current or future collaborators or any future strategic partners. Any impairment of these sublicensed rights could result in reduced revenue under ourcollaboration agreement with KHK or result in termination of an agreement by one or more of our collaborators or any future strategic partners. 58Table of ContentsCertain third parties may also have rights in the patents related to DsiRNA included in the license granted to us by COH, including the core DsiRNA patent(U.S. 8,084,599), which could allow them to develop, market and sell product candidates in competition with ours.To the extent that we do not have exclusive rights in the patents covered by the license granted to us by COH, we cannot prevent third parties fromdeveloping DsiRNA based product candidates in competition with ours. Prior to entering into the license with us, COH had entered into a non-exclusive licensewith a third party with respect to such patent rights to manufacture, use, import, offer for sale and sell products covered by the licensed patent rights for thetreatment or prevention of disease in humans (excluding viruses and delivery of products into the eye or ear). While we believe that such non-exclusive license hasbeen terminated, COH has informed us that a sublicensee to that non-exclusive license was permitted to enter into an equivalent non-exclusive license which, to ourknowledge, is subsisting with Arrowhead, as successor to the non-exclusive license holder. As successor to the non-exclusive license holder, we believe thatArrowhead has substantially similar access to the same patent rights related to DsiRNA technology granted to us under our license with COH. Arrowhead isdeveloping RNA-based therapeutics for the treatment of diseases of the liver, which may directly compete with our product candidates. In addition, the U.S.government has certain rights to the inventions covered by the patent rights and COH, as an academic research and medical center, has the right to practice thelicensed patent rights for educational, research and clinical uses. If Arrowhead or another party develops, manufactures, markets and sells any product covered bythe same patent rights and technologies that compete with ours, it could significantly undercut the value of any of our product candidates, which would materiallyadversely affect our revenue, financial condition and results of operations.We may be unable to protect our intellectual property rights throughout the world.Obtaining a valid and enforceable issued or granted patent covering our technology in the U.S. and worldwide can be extremely costly. In jurisdictions wherewe have not obtained patent protection, competitors may use our technology to develop their own products and further, may export otherwise infringing products toterritories where we have patent protection, but where it is more difficult to enforce a patent as compared to the U.S. Competitor products may compete with ourfuture products in jurisdictions where we do not have issued or granted patents or where our issued or granted patent claims or other intellectual property rights arenot sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain developing countries, make itdifficult to enforce patents and such countries may not recognize other types of intellectual property protection, particularly that relating to biopharmaceuticals.This could make it difficult for us to prevent the infringement of our patents or marketing of competing products in violation of our proprietary rights generally incertain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from otheraspects of our business.We generally file a provisional patent application first (a priority filing) at the USPTO. A U.S. utility application and international application under thePatent Cooperation Treaty (PCT) are usually filed within twelve months after the priority filing. Based on the PCT filing, national and regional patent applicationsmay be filed in the European Union, Japan, Australia and Canada and, depending on the individual case, also in any or all of, inter alia, China, India, South Korea,Singapore, Taiwan and South Africa. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may beavailable. In addition, we may decide to abandon national and regional patent applications before grant. Finally, the grant proceeding of each national or regionalpatent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant registrationauthorities, while granted by others. It is also quite common that depending on the country, various scopes of patent protection may be granted on the same productcandidate or technology.The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the U.S., and many companies have encounteredsignificant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwiseprecluded from 59Table of Contentseffectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may faceadditional competition from others in those jurisdictions. Many countries have compulsory licensing laws under which a patent owner may be compelled to grantlicenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries,the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license tothird parties with respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business and resultsof operations may be adversely affected.We or our licensors, collaborators or any future strategic partners may become subject to third party claims or litigation alleging infringement of patents orother proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents orother proprietary rights, all of which could be costly, time consuming, delay or prevent the development and commercialization of our product candidates, orput our patents and other proprietary rights at risk.We or our licensors, collaborators or any future strategic partners may be subject to third-party claims for infringement or misappropriation of patent or otherproprietary rights. We are generally obligated under our license or collaboration agreements to indemnify and hold harmless our licensors or collaborators fordamages arising from intellectual property infringement by us. If we or our licensors, collaborators or any future strategic partners are found to infringe a thirdparty patent or other intellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have willfullyinfringed. In addition, we or our licensors, collaborators or any future strategic partners may choose to seek, or be required to seek, a license from a third party,which may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could giveour competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we or our collaborator, or anyfuture collaborator, may be unable to effectively market product candidates based on our technology, which could limit our ability to generate revenue or achieveprofitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiatelawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating topatent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of ourcompetitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit ourability to continue our operations.If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or our technology, the defendant couldcounterclaim that our patent is invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability arecommonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousnessor non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevantinformation from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceabilityduring patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which weand the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose atleast part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our platform technology. Such a loss of patent protectioncould have a material adverse impact on our business. Patents and other intellectual property rights also will not protect our technology if competitors designaround our protected technology without legally infringing our patents or other intellectual property rights. 60Table of ContentsIf we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectualproperty rights that are necessary for developing and protecting our product candidates and delivery technologies or we could lose certain rights to grantsublicenses.Our current licenses impose, and any future licenses we enter into are likely to impose, various development, commercialization, funding, milestone, royalty,diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach any of these obligations, or use the intellectualproperty licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which couldresult in us being unable to develop, manufacture and sell products that are covered by the licensed technology or enable a competitor to gain access to the licensedtechnology. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims,regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannot currently determine the amount of theroyalty obligations we would be required to pay on sales of future products, if any, the amounts may be significant. The amount of our future royalty obligationswill depend on the technology and intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if wesuccessfully develop and commercialize products, we may be unable to achieve or maintain profitability.If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.In addition to seeking patent protection for certain aspects of our product candidates and delivery technologies, we also consider trade secrets, includingconfidential and unpatented know-how important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporatecollaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality andinvention or patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us.Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be ableto obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts in the U.S. and certain foreign jurisdictions are less willing or unwilling to protect tradesecrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from usingthat technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitiveposition would be harmed.We are also subject both in the U.S. and outside the U.S. to various regulatory schemes regarding requests for the information we provide to regulatoryauthorities, which may include, in whole or in part, trade secrets or confidential commercial information. While we are likely to be notified in advance of anydisclosure of such information and would likely object to such disclosure, there can be no assurance that our challenge to the request would be successful.We are currently, and may be in the future, subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets ofour employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be requiredto pay monetary damages, may be prohibited from using some of our research and development, and may lose valuable intellectual property rights orpersonnel.Many of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our competitors or potentialcompetitors. From time to time we have received 61Table of Contentscorrespondence from other companies alleging the improper use or disclosure, or inquiring regarding the use or disclosure, by certain of our employees who havepreviously been employed elsewhere in our industry, including with our competitors, of their former employer’s trade secrets or other proprietary information.Responding to these allegations can be costly and disruptive to our business, even when the allegations are without merit, and can be a distraction tomanagement. On June 10, 2015, Alnylam Pharmaceuticals, Inc. filed a complaint against us in the Superior Court of Middlesex County, Massachusetts, allegingmisappropriation of confidential information and trade secrets, as well as other related claims, in connection with our hiring of a number of former employees ofSirna Therapeutics, Inc., or Sirna, which at the time was a subsidiary of Merck & Co., Inc., and in connection with our discussion with Merck to acquire Sirna,which was subsequently acquired by Alnylam. We may be subject to additional claims in the future that these or other of our employees or we have inadvertentlyor otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims.If we fail in defending current or future claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, personnel, or the abilityto use some of our research and development. A loss of intellectual property, key research personnel, or their work product could hamper our ability tocommercialize, or prevent us from commercializing, our product candidates, which could severely harm our business.If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our businessmay be adversely affected.Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may notbe able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potentialpartners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able tocompete effectively and our business may be adversely affected.Risks Related to Government RegulationWe may be unable to obtain U.S. or foreign regulatory approval and, as a result, unable to commercialize our product candidates.Our product candidates are subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing,safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing, sampling, and distribution ofdrugs. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required to be successfully completed in the U.S. and inmany foreign jurisdictions before a new drug can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain andsubject to unanticipated delays. It is possible that none of the product candidates we may develop will obtain the regulatory approvals necessary for us or ourcollaborators to begin selling them.We have very limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA aswell as foreign regulatory authorities, such as the EMA. The time required to obtain FDA and foreign regulatory approvals is unpredictable but typically takesmany years following the commencement of clinical trials, depending upon the type, complexity and novelty of the product candidate. The standards that the FDAand its foreign counterparts use when regulating us are not always applied predictably or uniformly and can change. Any analysis we perform of data frompreclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Wemay also encounter unexpected delays or increased costs due to new government regulations, for example, from future legislation or administrative action, or fromchanges in the policy of FDA or foreign regulatory authorities during the period of product development, clinical trials and 62Table of Contentsregulatory review by the FDA or foreign regulatory authorities. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreignlaws, regulations, guidance or interpretations will be changed, or what the impact of such changes, if any, may be.Because the drugs we are developing may represent a new class of drug, the FDA and its foreign counterparts have not yet established any definitivepolicies, practices or guidelines in relation to these drugs. While we believe the product candidates that we are currently developing are regulated as new drugsunder the Federal Food, Drug, and Cosmetic Act, the FDA could decide to regulate them or other products we may develop as biologics under the Public HealthService Act. The lack of policies, practices or guidelines may hinder or slow review by the FDA or foreign regulatory authorities of any regulatory filings that wemay submit. Moreover, the FDA or foreign regulatory authorities may respond to these submissions by defining requirements we may not have anticipated. Suchresponses could lead to significant delays in the clinical development of our product candidates. In addition, because there may be approved treatments for some ofthe diseases for which we may seek approval, in order to receive regulatory approval, we may need to demonstrate through clinical trials that the product candidateswe develop to treat these diseases, if any, are not only safe and effective, but safer or more effective than existing products. Furthermore, in recent years, there hasbeen increased public and political pressure on the FDA with respect to the approval process for new drugs, and the FDA’s standards, especially regarding drugsafety, appear to have become more stringent.Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular productcandidate for which we are seeking approval. Furthermore, any regulatory approval to market a product may be subject to limitations on the approved uses forwhich we may market the product or the labeling or other restrictions. Regulatory authority also may impose requirements for costly post-marketing studies orclinical trials and surveillance to monitor the safety or efficacy of the product. In addition, the FDA has the authority to require a Risk Evaluation and MitigationStrategy (REMS) plan as part of an NDA or biologics license application (BLA) or after approval, which may impose further requirements or restrictions on thedistribution or use of an approved drug or biologic, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training,limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. These limitations and restrictions may limit thesize of the market for the product and affect reimbursement by third-party payors.We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketingauthorization, pricing and third-party reimbursement. The foreign regulatory approval process varies among countries and may include all of the risks associatedwith FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required toobtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities outside the U.S.and vice versa.If we or our existing or future collaborators, manufacturers or service providers fail to comply with healthcare laws and regulations, we or they could besubject to enforcement actions, which could affect our ability to develop, market and sell our products and may harm our reputation.We and our collaborators are subject to federal, state, and foreign healthcare laws and regulations pertaining to fraud and abuse and patients’ rights. Theselaws and regulations include, but are not limited to: • the U.S. federal anti-kickback law, which prohibits, among other things, persons from soliciting, receiving, offering or providing remuneration,directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service,for which payment may be made under a federal healthcare program such as Medicare or Medicaid; • the U.S. federal false claims law, which prohibits, among other things, individuals or entities from knowingly presenting or causing to be presented,claims for payment by government funded programs 63Table of Contents such as Medicare or Medicaid that are false or fraudulent, and which may apply to us by virtue of statements and representations made to customers orthird parties; • the Federal Food, Drug and Cosmetic Act and other laws, which prohibit promotion of drugs prior to FDA approval and prohibit dissemination ofinformation about unapproved uses of approved drugs, with very specific and limited exceptions; • the U.S. federal Health Insurance Portability and Accountability Act (HIPAA) and Health Information Technology for Economic and Clinical Health(HITECH) Act, which prohibit executing a scheme to defraud healthcare programs, impose requirements relating to the privacy, security, andtransmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certainbreaches of security of individually identifiable health information; • the federal Open Payments regulations under the National Physician Payment Transparency Program have been issued under the Patient Protectionand Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, and will require that manufacturers ofpharmaceutical and biological drugs covered by Medicare, Medicaid, and Children’s Health Insurance Programs report all consulting fees, travelreimbursements, research grants, and other payments or gifts with values over $10 made to physicians and teaching hospitals; and • state laws comparable to each of the above federal laws, such as, for example, anti-kickback and false claims laws applicable to commercial insurersand other non-federal payors, requirements for mandatory corporate regulatory compliance programs, and laws relating to patient data privacy andsecurity.If our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetarydamages, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, or exclusion from participation in governmentcontracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely our financial results.Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirelyeliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’sattention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws andregulations may be costly to us in terms of money, time and resources.If we or our collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could be subjectto enforcement actions, which could affect our ability to develop, market and sell our products successfully and could harm our reputation and lead to reducedacceptance of our products by the market. These enforcement actions include, among others: • adverse regulatory inspection findings; • warning or untitled letters; • voluntary or mandatory product recalls or public notification or medical product safety alerts to healthcare professionals; • restrictions on, or prohibitions against, marketing our products; • restrictions on, or prohibitions against, importation or exportation of our products; • suspension of review or refusal to approve pending applications or supplements to approved applications; • exclusion from participation in government-funded healthcare programs; • exclusion from eligibility for the award of government contracts for our products; 64Table of Contents • FDA debarment of individuals at our Company; • suspension or withdrawal of product approvals; • seizure or administrative detention of products; • injunctions; and • civil and criminal penalties and fines.Any drugs we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, therebyharming our business.The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries requireapproval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval isgranted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.Although we intend to monitor these regulations, our programs are currently in the early stages of development and we will not be able to assess the impact of priceregulations for a number of years. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations thatdelay our commercial launch of the product and negatively impact the revenues we are able to generate from the sale of the product in that country.Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and reimbursement for these products andrelated treatments will be available from government health administration authorities, private health insurers and other organizations. However, there may besignificant delays in obtaining coverage for newly-approved drugs. Moreover, eligibility for coverage does not necessarily signify that a drug will be reimbursed inall cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution costs. Also, interim payments for new drugs, ifapplicable, may be insufficient to cover our costs and may not be made permanent. Thus, even if we succeed in bringing one or more products to the market, theseproducts may not be considered cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitivebasis. Because our programs are in the early stages of development, we are unable at this time to determine their cost effectiveness or the likely level or method ofreimbursement. Increasingly, the third-party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are seekinggreater upfront discounts, additional rebates and other concessions to reduce the prices for pharmaceutical products. If the price we are able to charge for anyproducts we develop, or the reimbursement provided for such products, is inadequate in light of our development and other costs, our return on investment could beadversely affected.We currently expect that certain/some drugs we develop may need to be administered under the supervision of a physician on an outpatient basis. Undercurrently applicable U.S. law, certain drugs that are not usually self-administered (including injectable drugs) may be eligible for coverage under the Medicare PartB program if certain requirements, including the following, have been satisfied: • they are furnished incident to a physician’s services; • they are reasonable and necessary for the diagnosis or treatment of the illness or injury for which they are administered according to acceptedstandards of medical practice; • they are included or approved for inclusion in certain Medicare-designated pharmaceutical compendia; and • they have been approved by the FDA.Under current law, as a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs or biologicals, the manufacturer isrequired to participate in other government healthcare programs, 65Table of Contentsincluding the Medicaid Drug Rebate Program (MDRP) and the 340B Drug Discount Program. Average prices for drugs may be reduced by mandatory discounts orrebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countrieswhere they may be sold at lower prices than in the U.S. Reimbursement rates under Medicare Part B would depend in part on whether the newly approved productwould be eligible for a unique billing code. Self-administered drugs are typically reimbursed under Medicare Part D, and drugs that are administered in a hospitalsetting are typically reimbursed under Medicare Part A under a bundled payment. It is difficult for us to predict how Medicare coverage and reimbursement policieswill be applied to our products in the future and coverage and reimbursement under different federal healthcare programs are not always consistent. Medicarereimbursement rates may also reflect budgetary constraints placed on the Medicare program.Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates. Our inability to promptlyobtain coverage and adequate reimbursement rates from both government-funded and private payors for new drugs that we develop and for which we obtainregulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our financialcondition.We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare and legislative and regulatory proposals tobroaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number oflegislative and regulatory changes in the healthcare system in the U.S. and other major healthcare markets have been proposed, and such efforts have expandedsubstantially in recent years. These developments could, directly or indirectly, affect our ability to sell our products, if approved, at a favorable price.For example, in the U.S., Congress passed the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and EducationReconciliation Act of 2010 (ACA), which contains provisions that affect companies in the pharmaceutical industry and other healthcare-related industries in avariety of ways. Provisions that may affect pharmaceutical companies include, but are not limited to, the following. • Mandatory rebates for drugs sold under the Medicaid program have been increased, and the rebate requirement has been extended to drugs used inrisk-based Medicaid managed care plans. • The 340B Drug Discount Program has been extended to require discounts for “covered outpatient drugs” sold to certain children’s hospitals, criticalaccess hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospitals. • Pharmaceutical companies are required to offer discounts on brand-name drugs to patients who fall within the Medicare Part D coverage gap,commonly referred to as the “Donut Hole.” • Pharmaceutical companies are required to pay an annual non-tax-deductible fee to the federal government based on each company’s market share ofprior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs andDepartment of Defense. Since we expect our branded pharmaceutical sales to constitute a small portion of the total federal healthcare programpharmaceutical market, we do not expect this annual assessment to have a material impact on our financial condition. • For product candidates classified as biologics, marketing approval for a follow-on biologic product may not become effective until 12 years after thedate on which the reference innovator biologic product was first licensed by the FDA, with a possible six-month extension for pediatric products. Afterthis exclusivity ends, it will be easier for biosimilar manufacturers to enter the market, which is likely to reduce the pricing for such products and couldaffect our profitability if our products are classified as biologics.In addition, in recent years, U.S. Congress has enacted various laws seeking to reduce the federal debt level and contain healthcare expenditures. Forexample, the Budget Control Act of 2011 (BCA) called for the 66Table of Contentsestablishment of a Joint Select Committee on Deficit Reduction, tasked with reducing the federal debt level. However, because the Committee did not draft aproposal by the BCA’s deadline, President Obama issued a sequestration order on March 1, 2013 that imposed automatic spending cuts on various federalprograms. Under the Bipartisan Budget Act of 2013 and a bill signed by the President on February 15, 2014, sequestration has been extended through fiscal year2024. Medicare payments to providers are subject to such cuts, although the BCA generally limited the Medicare cuts to two percent. For fiscal year 2024,however, Medicare sequestration amounts will be realigned such that there will be a 4.0 percent sequester for the first six months and a zero percent sequester forthe second six months.The financial impact of the U.S. healthcare reform legislation over the next few years will depend on a number of factors, including the policies reflected inimplementing regulations and guidance and changes in sales volumes for products affected by the legislation. Moreover, we cannot predict what healthcare reforminitiatives may be adopted in the future. Further federal and state legislative, regulatory, or judicial developments are likely, and we expect ongoing initiatives inthe U.S. to reduce healthcare expenditures. Such reforms could have an adverse effect on anticipated revenues from product candidates that we may successfullydevelop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.The healthcare industry is heavily regulated in the U.S. at the federal, state, and local levels, and our failure to comply with applicable requirements maysubject us to penalties and negatively affect our financial condition.As a healthcare company, our operations, clinical trial activities and interactions with healthcare providers may be subject to extensive regulation in the U.S.,particularly if the company receives FDA approval for any of its products in the future. For example, if we receive FDA approval for a product for whichreimbursement is available under a federal healthcare program (e.g., Medicare, Medicaid), it would be subject to a variety of federal laws and regulations, includingthose that prohibit the filing of false or improper claims for payment by federal healthcare programs (e.g. the False Claims Act), prohibit unlawful inducements forthe referral of business reimbursable by federal healthcare programs (e.g. the Anti-Kickback Statute), and require disclosure of certain payments or other transfersof value made to U.S.-licensed physicians and teaching hospitals (the Physician Payments Sunshine Act). We are not able to predict how third parties will interpretthese laws and apply applicable governmental guidance and may challenge our practices and activities under one or more of these laws. If our past or presentoperations are found to be in violation of any of these laws, we could be subject to civil and criminal penalties, which could hurt our business, our operations andfinancial condition.Similarly, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits, among other offenses, knowingly and willfully executing ascheme to defraud any health care benefit program, including private payors, or falsifying, concealing or covering up a material fact or making any materially false,fictitious or fraudulent statement in connection with the delivery of or payment for items or services under a health care benefit program. To the extent that thecompany acts as a business associate to a healthcare provider, the company may also be subject to the privacy and security provisions of HIPAA, as amended bythe Health Information Technology for Economic and Clinical Health Act of 2009, which restricts the use and disclosure of patient-identifiable health information,mandates the adoption of standards relating to the privacy and security of patient-identifiable health information, and requires the reporting of certain securitybreaches to healthcare provider customers with respect to such information. Additionally, many states have enacted similar laws that may impose more stringentrequirements on entities like ours. Failure to comply with applicable laws and regulations could result in substantial penalties and adversely affect the company’sfinancial condition and results of operations.Our ability to obtain services, reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.U.S. federal government agencies currently face potentially significant spending reductions. The Budget Control Act of 2011 (BCA) established a JointSelect Committee on Deficit Reduction, which was tasked with 67Table of Contentsachieving a reduction in the federal debt level of at least $1.2 trillion. That committee did not draft a proposal by the BCA’s deadline. As a result, automatic cuts(sequestration) in various federal programs were scheduled to take place, beginning in January 2013, although the American Taxpayer Relief Act of 2012 delayedthe BCA’s automatic cuts until March 1, 2013. While the Medicare program’s eligibility and scope of benefits are generally exempt from these cuts, Medicarepayments to providers and Part D health plans are not exempt. The BCA did, however, provide that the Medicare cuts to providers and Part D health plans wouldnot exceed two percent. President Obama issued the sequestration order on March 1, 2013, and cuts went into effect on April 1, 2013. Additionally, the BipartisanBudget Act of 2013 extended sequestration for Medicare for another two years, through 2023, and a bill signed by the President on February 15, 2014, furtherextended these cuts for an additional year, through fiscal year 2024. On January 21, 2014, President Obama signed the fiscal year 2014 omnibus appropriations bill,modifying for fiscal year 2014 and fiscal year 2015 the cuts that went into effect under the sequester on March 1, 2013.The situation with the federal budget remains in flux. From October 1, 2013 through October 16, 2013, the U.S. federal government ceased the majority ofits operations after Congress failed to enact legislation appropriating funds for fiscal year 2014. On October 17, 2013, President Obama signed into law theContinuing Appropriations Act of 2014, which included a continuing resolution to fund the government until January 15, 2014 and suspended the statutory debtceiling until February 7, 2014. After extending the government funding expiration date to January 18, 2014, Congress passed a $1.1 trillion spending bill that wassigned into law on January 17, 2014 and funds the government through September 30, 2014. While on December 9, 2014, Congress passed the Consolidated andFurther Continuing Appropriations Act of 2015, which funds the government through September 30, 2015, this new law is a temporary measure that does notresolve the debt-limit issue. Many Members of Congress have made public statements indicating that some or all of these budget-related deadlines should be usedas leverage to negotiate additional cuts in federal spending. The Medicare program is frequently mentioned as a target for spending cuts. The full impact on ourbusiness of any future cuts in Medicare or other programs would be uncertain. If federal spending is reduced, anticipated budgetary shortfalls may also impact theability of relevant agencies, such as the FDA or the National Institutes of Health to continue to function at current levels. Amounts allocated to federal grants andcontracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve drug research anddevelopment, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.If any of our product candidates receives marketing approval and we or others later identify undesirable side effects caused by the product candidate, ourability to market and derive revenue from the product candidates could be compromised.In the event that any of our product candidates receive regulatory approval and we or others identify undesirable side effects, adverse events or otherproblems caused by one of our products, any of the following adverse events could occur, which could result in the loss of significant revenue to us and materiallyand adversely affect our results of operations and business: • regulatory authorities may withdraw their approval of the product or seize the product; • we may need to recall the product or change the way the product is administered to patients; • additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any componentthereof; • we may be subject to fines, restitution or disgorgement of profits or revenues, injunctions, or the imposition of civil penalties or criminal prosecution; • regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; 68Table of Contents • regulatory authorities may require us to implement a REMS, or to conduct post-marketing studies or clinical trials and surveillance to monitor thesafety or efficacy of the product; we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients; • we could be sued and held liable for harm caused to patients; • the product may become less competitive; and • our reputation may suffer.Risks Related to Our Common StockWe are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will makeour common stock less attractive to investors.We are an “emerging growth company” as defined in the Jumpstart Our Business Act (JOBS Act). For as long as we continue to be an emerging growthcompany, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growthcompanies, including (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (3) exemptions from therequirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previouslyapproved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the marketvalue of our common stock held by non-affiliates exceeds $700.0 million as of any June 30 before that time or if we have total annual gross revenue of $1.0 billionor more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31, or if weissue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an emerging growthcompany immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allowus to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirementsof Section 404(b) of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock lessattractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply toprivate companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject tothe same new or revised accounting standards as other public companies that are not emerging growth companies.Our stock price may be volatile and purchasers of our common stock could incur substantial losses.Our stock price is volatile. From January 30, 2014, the first day of trading of our common stock, through March 9, 2016, our stock had high and low closingsale prices in the range of $46.00 and $4.96 per share. The market price for our common stock may be influenced by many factors, including the other risksdescribed in this section titled “Risk Factors” and the following: • the success of competitive products or technologies; • results of preclinical studies and clinical trials of our product candidates, or those of our competitors, our existing collaborator or any futurecollaborators; • regulatory or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our products; 69Table of Contents • introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions orannouncements; • actions taken by regulatory agencies with respect to our products, clinical studies, manufacturing process or sales and marketing terms; • actual or anticipated variations in our financial results or those of companies that are perceived to be similar to us; • the success of our efforts to acquire or in-license additional technologies, products or product candidates; • developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercializationpartners; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • developments concerning our collaborations, including those with our sources of manufacturing supply and our commercialization partners; • our ability or inability to raise additional capital and the terms on which we raise it; • the recruitment or departure of key personnel; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, othercomparable companies or our industry generally; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • announcement and expectation of additional financing efforts; • speculation in the press or investment community; • trading volume of our common stock; • sales of our common stock by us or our stockholders; • the absence of lock-up agreements in connection with the follow-on public offering of our common stock with the holders of substantially all of ouroutstanding shares; • the concentrated ownership of our common stock; • changes in accounting principles; • terrorist acts, acts of war or periods of widespread civil unrest; • natural disasters and other calamities; • general economic, industry and market conditions; and • developments concerning complaints or litigation against us.In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experiencedextreme volatility that has been often unrelated to the operating performance of the issuer. These broad market and industry factors may seriously harm the marketprice of our common stock, regardless of our operating performance. 70Table of ContentsThe future issuance of equity or of debt securities that are convertible into equity will dilute our share capital.On May 27, 2015, we completed an issuance and sale of 2,750,000 shares of our common stock at an offering price of $17.75 per share. We may choose toraise additional capital in the future, depending on market conditions, strategic considerations and operational requirements. To the extent that additional capital israised through the issuance of shares or other securities convertible into shares, our stockholders will be diluted. Future issuances of our common stock or otherequity securities, or the perception that such sales may occur, could adversely affect the trading price of our common stock and impair our ability to raise capitalthrough future offerings of shares or equity securities. We cannot predict the effect, if any, that future sales of common stock or the availability of common stockfor future sales will have on the trading price of our common stock.The employment agreements with our executive officers may require us to pay severance benefits to officers who are terminated in connection with a change ofcontrol of us, which could harm our financial condition.Our executive officers are parties to employment agreements providing, in the event of a termination of employment in connection with a change of controlof us, for significant cash payments for severance and other benefits and acceleration of vesting of up to all outstanding stock options. The accelerated vesting ofoptions could result in dilution to our existing stockholders and reduce the market price of our common stock. The payment of these severance benefits could harmour financial condition. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock,our stock price and trading volume could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, orif our target studies and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts ceasecoverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or tradingvolume to decline.Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject tostockholder approval.As of March 9, 2016, our executive officers and directors, together with holders of five percent or more of our outstanding common stock and theirrespective affiliates, beneficially own, in the aggregate, approximately 73.6 percent of our outstanding common stock, including shares subject to outstandingoptions and warrants that are exercisable within 60 days after such date, based on the Forms 3 and 4 and Schedules 13D and 13G filed by them with the SEC. As aresult, these stockholders, if acting together, will continue to have significant influence over the outcome of corporate actions requiring stockholder approval,including the election of directors, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transaction. Theinterests of these stockholders may not be the same as or may even conflict with the interests of our other stockholders. For example, these stockholders coulddelay or prevent a change of control of our company, even if such a change of control would benefit our other stockholders, which could deprive our stockholdersof an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might affect the prevailing market price of ourcommon stock. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception thatconflicts of interest may exist or arise. 71Table of ContentsAnti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders,more difficult and may prevent attempts by our stockholders to replace or remove our current management.Provisions in our certificate of incorporation and our bylaws may delay or prevent an acquisition of us or a change in our management. In addition, theseprovisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders toreplace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisionscould in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include: • a prohibition on actions by our stockholders by written consent; • a requirement that special meetings of stockholders, which the Company is not obligated to call more than once per calendar year, be called only bythe chairman of our board of directors, our chief executive officer, our board of directors pursuant to a resolution adopted by a majority of the totalnumber of authorized directors, or, subject to certain conditions, by our secretary at the request of the stockholders holding of record, in the aggregate,shares entitled to cast not less than ten percent of the votes at a meeting of the stockholders (assuming all shares entitled to vote at such meeting werepresent and voted); • advance notice requirements for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings; and • the authority of the board of directors to issue preferred stock with such terms as the board of directors may determine.Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, asamended, which prohibits a person who owns in excess of 15 percent of our outstanding voting stock from merging or combining with us for a period of three yearsafter the date of the transaction in which the person acquired in excess of 15 percent of our outstanding voting stock, unless the merger or combination is approvedin a prescribed manner. These provisions would apply even if the proposed merger or acquisition could be considered beneficial by some stockholders.We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiativesand corporate governance practices.As a public company we incur, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and otherexpenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listingrequirements of the NASDAQ and other applicable securities rules and regulations impose various requirements on public companies, including establishment andmaintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel need to devote a substantialamount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activitiesmore time-consuming and costly. For example, we expect that these rules and regulations make it more difficult and more expensive for us to obtain director andofficer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors. However, these rulesand regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolveover time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and highercosts necessitated by ongoing revisions to disclosure and governance practices.We are not currently required to comply with the SEC’s rules that implement Section 404(b) of the Sarbanes-Oxley Act (Section 404(b)), and are thereforenot required to make a formal assessment of the 72Table of Contentseffectiveness of our internal control over financial reporting for that purpose. Pursuant to Section 404(b), we will be required to furnish a report by our managementon our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report oninternal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404(b) within theprescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. Inthis regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and documentthe adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls arefunctioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, thereis a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required bySection 404(b). If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in thereliability of our financial statements. In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on The NASDAQMarket.Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source ofgain.We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth anddevelopment of our business. As a result, capital appreciation, if any, of our common stock will be sole source of gain of our stockholders for the foreseeablefuture.We may incur significant costs from class action litigation due to our historical or expected stock volatility.Our stock price has fluctuated and may fluctuate for many reasons, including as a result of public announcements regarding the progress of our developmentefforts or the development efforts of our collaborators or competitors, the addition or departure of our key personnel, variations in our quarterly operating resultsand changes in market valuations of pharmaceutical and biotechnology companies. This risk is especially relevant to us because pharmaceutical and biotechnologycompanies have experienced significant stock price volatility in recent years. When the market price of a stock has been volatile as our stock price has been andmay be, holders of that stock have occasionally brought securities class action litigation against the company that issued the stock. If any of our stockholders wereto bring a lawsuit of this type against us, even if the lawsuit is without merit, we could incur substantial costs defending the lawsuit. The lawsuit could also divertthe time and attention of our management.Our amended and restated bylaws designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions andproceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us orour directors, officers or employees.Our amended and restated bylaws provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusiveforum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors,officers or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provision of the Delaware General CorporationLaw, as amended, our amended and restated certificate of incorporation or our amended and restated bylaws, any action to interpret, apply, enforce or determine thevalidity of our amended and restated certificate of incorporation or our amended and restated bylaws, any action to interpret, apply, enforce or determine thevalidity of our amended and restated certificate of incorporation or our amended and restated bylaws or any other action asserting a claim against us that isgoverned by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to havenotice of and to have consented to the provisions of our amended and restated certificate of incorporation 73Table of Contentsdescribed above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us orour directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court wereto find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified typesof actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business andfinancial condition.Our stockholders may experience significant dilution as a result of future equity offerings and exercise of outstanding options.On May 27, 2015, we completed an issuance and sale of 2,750,000 shares of our common stock at an offering price of $17.75 per share. In order to raiseadditional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock. Wecannot assure you that we will be able to sell shares or other securities in any offering at a price per share that is equal to or greater than the price paid by ourexisting shareholders, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share atwhich we sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may behigher or lower than the price per share paid by our existing stockholders.In addition, we have a significant number of securities convertible into, or allowing the purchase of, our common stock. As of March 9, 2016, 650,272 sharesof common stock were reserved for future issuance under our stock incentive plans. As of that date, there were also stock options and awards to purchase 5,055,943shares of our common stock outstanding and warrants to purchase 87,901 shares of our common stock outstanding. The exercise price of outstanding options orwarrants having an exercise price per share that is less than the offering price per share paid by our existing stockholders will increase dilution to such stockholders.Future sales of our common stock in the public market could cause our stock price to fall.Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the marketprice of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of March 9, 2016, we have 20,647,983shares of common stock outstanding, all of which shares, other than shares held by our directors and certain officers, were eligible for sale in the public market,subject in some cases to compliance with the requirements of Rule 144, including the volume limitations and manner of sale requirements. In addition, shares ofcommon stock issuable upon exercise of outstanding options and shares reserved for future issuances under our stock incentive plans will become eligible for salein the public market to the extent permitted by applicable vesting requirements and subject in some cases to compliance with the requirements of Rule 144. Item 1B.Unresolved Staff CommentsNone. Item 2.PropertiesOur corporate headquarters are located in Cambridge, Massachusetts, where we lease 37,084 square feet of office and laboratory space. The lease term forour office and laboratory space in Cambridge, Massachusetts, commenced in December 2014 for a lease term of six years.We believe that suitable additional or alternative space will be available as needed on commercially reasonable terms. 74Table of ContentsItem 3.Legal ProceedingsWe are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on ourbusiness, financial condition or results of operations.On June 10, 2015, Alnylam Pharmaceuticals, Inc. (Alnylam) filed a complaint against the Company in the Superior Court of Middlesex Country,Massachusetts. The complaint alleges misappropriation of confidential, proprietary, and trade secret information, as well as other related claims, in connection withthe Company’s hiring of a number of former employees of Merck & Co., Inc. (Merck) and its discussions with Merck regarding the acquisition of its subsidiary,Sirna Therapeutics, Inc. (Sirna), which was subsequently acquired by Alnylam. The complaint seeks among other things, damages, attorneys’ fees, and an orderpermanently enjoining the Company from disclosing or using any of Alnylam’s confidential information or trade secrets. An unfavorable resolution of this mattercould potentially cause us to incur significant legal fees and other costs to defend this action, and could potentially have a material adverse effect on our business,financial condition, and results of operations or prospects, potentially delay or limit our ability to use some of our research and development programs, andpotentially result in paying monetary damages. We believe, however, that Alnylam’s allegations lack merit, we have filed an answer denying all liability, and weintend to continue to vigorously defend all claims asserted. We expect that a liability is not probable. Accordingly, we cannot reasonably estimate any range ofpotential future charges, and we have not recorded any accrual for a contingent liability associated with this legal proceeding. Item 4.Mine Safety DisclosuresNot applicable. 75Table of ContentsPART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket Information for Common StockOur common stock has been publicly traded on The NASDAQ Global Select Market under the symbol “DRNA” since January 30, 2014. Prior to that time,there was no public market for our common stock. As a result, we have not set forth information with respect to the high and low prices of our common stock forany full fiscal quarter during 2013 fiscal year. The following table sets forth the high and low sale prices per share for our common stock on The NASDAQ GlobalSelect Market for the periods indicated: Year Ended December 31, 2015: High Low First Quarter $27.33 $16.55 Second Quarter $25.26 $12.50 Third Quarter $15.17 $7.61 Fourth Quarter $15.93 $7.66 Year Ended December 31, 2014: First Quarter (from January 30, 2014) $46.00 $27.11 Second Quarter $28.25 $15.00 Third Quarter $22.40 $12.55 Fourth Quarter $16.82 $8.00 Holders of RecordAs of March 9, 2016, there were approximately 16 holders of record of our common stock. Because many of our shares of common stock are held by brokersand other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.Dividend PolicyWe currently intend to retain future earnings, if any, for use in the operation of our business and to fund future growth. We have never declared or paid cashdividends on our common stock and we do not intend to pay any cash dividends on our common stock for the foreseeable future. Any future determination relatedto our dividend policy will be made at the discretion of our board of directors in light of conditions then existing, including factors such as our results of operations,financial condition and requirements, business conditions and covenants under any applicable contractual arrangements. 76Table of ContentsPerformance GraphThe following graph illustrates a comparison of the total cumulative stockholder return on our common stock since January 30, 2014 (the date our stockbecame publicly traded on The NASDAQ Global Select Market) to the NASDAQ composite and NASDAQ biotechnology indices. The graph assumes an initialinvestment of $100 on January 30, 2014. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Thisperformance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), orincorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth byspecific reference in such filing. Recent Sales of Unregistered SecuritiesWe did not sell any securities during the fiscal year ended December 31, 2015, which were not registered under the Securities Act of 1933, as amended(Securities Act).Use of Proceeds from Initial Public Offering of Common StockOn February 4, 2014, we completed the initial public offering of our common stock and sold and issued a total of 6,900,000 shares of our common stock,including 900,000 shares sold pursuant to the exercise in full by the underwriters of the option to purchase additional shares, at a public offering price of $15.00 pershare for aggregate gross proceeds of $103.5 million before deducting underwriting commissions and discounts and offering expenses payable by us. The shares ofcommon stock were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-193150). The SEC declared the registration statementeffective on January 29, 2014. Shares of our common stock began trading on The NASDAQ Global Select Market on January 30, 2014. On February 4, 2014,following the sale of 6,900,000 shares of our common stock, our initial public offering ended. There has been no material change in the planned use of proceedsfrom our initial public 77Table of Contentsoffering as described in the final prospectus dated as of January 29, 2014 for the initial public offering and filed with the SEC pursuant to Rule 424(b) under theSecurities Act on January 30, 2014.The net proceeds to us from the IPO, including the shares sold pursuant to the exercise in full by the underwriters of the option to purchase additional shares,were used for preclinical studies and Phase 1 clinical trials for DCR-MYC and DCR-PH1 to evaluate safety and biological markers of efficacy in oncology patientsin patients with Primary Hyperoxaluria 1. The remaining net proceeds were used for continued technology platform development, general corporate purposes andworking capitalPurchases of Equity Securities by the Issuer and Affiliated PartiesNone. 78Table of ContentsItem 6.Selected Financial DataDICERNA PHARMACEUTICALS, INC. AND SUBSIDIARIESSELECTED FINANCIAL DATA YEARS ENDED DECEMBER 31, 2015 2014 2013 Results of operations Revenue $184 $— $— Operating expenses: Research and development 43,971 29,453 11,558 General and administrative 19,240 15,648 5,820 Total operating expenses 63,211 45,101 17,378 Loss from operations (63,027) (45,101) (17,378) Other income (expense): Preferred stock warrant re-measurement — (2,559) 126 Loss on extinguishment of debt — (143) (318) Interest income 188 63 4 Interest expense — (199) (952) Total other income (expense) 188 (2,838) (1,140) Net loss $(62,839) $(47,939) $(18,518) Less: Accretion and dividends on redeemable convertible preferred stock — 204 2,388 Net loss attributable to common stockholders (62,839) (48,143) (20,906) Net loss per share attributable to common stockholders—Basic and diluted $(3.09) $(3.00) $(709.57) Weighted average shares outstanding—Basic and diluted 20,320,628 16,070,054 29,463 Financial condition Cash and cash equivalents $56,058 $26,067 $46,595 Held-to-maturity investments $38,551 $72,556 $— Total assets $100,023 $103,605 $49,794 Long-term debt—including of current portion $— $— $4,847 Total stockholders’ equity / (deficit) $91,022 $98,340 $(68,919) The financial data included within the tables above should be read in conjunction with our consolidated financial statements and related notes and the“Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Form 10-K. 79Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from thosediscussed 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 describedin “Part I, Item 1A— Risk Factors.”OverviewWe are an RNA interference-based biopharmaceutical company focused on the discovery and development of innovative treatments for rare inheriteddiseases involving the liver, for other therapeutic areas in which the liver plays a key role, and for cancers that are genetically defined. We are using our RNAinterference (RNAi) technology platform to build a broad pipeline in these therapeutic areas. In many cases, we are pursuing targets that have historically beendifficult to inhibit using conventional approaches, but where we believe connections between targets and diseases are well understood and documented. We aim todiscover, develop and commercialize these novel therapeutics either on our own or in collaboration with pharmaceutical partners, while seeking to retain significantportions of the commercial rights in the rare disease and oncology fields.In the rare disease field, we are developing a proprietary treatment, DCR-PH1, for the rare and serious inherited disorder Primary Hyperoxaluria Type 1(PH1). In December 2015, we initiated dosing in our first PH1 clinical trial in normal healthy volunteers, and we expect to begin our first Phase 1 study of DCR-PH1 in patients with PH1 in the first half of 2016. In December 2015, we also initiated an international, multicenter, observational study designed to measurebiomarkers implicated in PH1, and enrolled our first patient in this observational study in January 2016. The FDA and the European Medicines Agency (EMA)have both granted Orphan Drug Designation to DCR-PH1. We also have discovery and early development programs against a series of additional rare inheriteddiseases involving the liver where we are utilizing our DsiRNA-EX Conjugate technology. In other therapeutic areas involving the liver, we are using our DsiRNA-EX Conjugate technology to develop potential therapeutics for a wide variety of diseases, including chronic liver diseases, cardiovascular diseases, and viralinfection diseases. We have selected these diseases and disease target genes based on criteria that include having a strong therapeutic hypothesis, a readily-identified patient population, the availability of predictive biomarkers, and favorable competitive positioning. For many of these diseases we may seek developmentpartners. In oncology, we are currently directing our development efforts towards our proprietary product candidate DCR-MYC for the treatment of MYC-relatedcancers, including hepatocellular carcinoma (HCC). In the second quarter of 2014, we initiated a multi-center, dose-escalating Phase 1 clinical study of DCR-MYCto assess the safety and tolerability of DCR-MYC in patients with solid tumors, multiple myeloma, or lymphoma who are refractory or unresponsive to standardtherapies. In the fourth quarter of 2014 we initiated a global Phase 1b/2 clinical trial of DCR-MYC in patients with advanced HCC with the first patient dosed inJanuary 2015. In the second quarter of 2015, we announced plans to expand our ongoing Phase 1 study of DCR-MYC in solid tumors, multiple myeloma, orlymphoma to include a cohort of patients with pancreatic neuroendocrine tumors (PNETs) following early signs of clinical and metabolic response and tumorshrinkage in PNET patients. In addition, once the optimal dose of DCR-MYC has been determined, we plan to initiate enrollment of a cohort of patients who willundergo pre- and post-treatment tumor biopsies. Molecular analysis of the MYC gene transcript in these biopsies will allow direct observation of the RNAi-mechanism of action of DCR-MYC. We expect to announce data from the PNET and biopsy cohorts in 2016.As part of our collaboration with Kyowa Hakko Kirin Co., Ltd. (KHK), a global pharmaceutical company, we are developing a product candidate that targetsthe oncogene KRAS, which is frequently mutated in numerous major cancers, including non-small cell lung cancer, colorectal cancer, and pancreatic cancer. KHKis responsible for global development of the KRAS program, including all development expenses. For the KRAS product candidate, we retain an option to co-promote in the U.S. for an equal share of the profits from U.S. net sales. We are also developing, with KHK, a therapeutic candidate targeting a second cancer-related gene, which we are not identifying at this time. For each product candidate in our collaboration with KHK, we have the potential to receive clinical,regulatory and commercialization milestone payments of up to $110.0 million and royalties on net sales of each such product candidate. We expect that our strategyto partner the development of 80Table of Contentsproduct candidates will help us fund the costs of clinical development and enable us to diversify risk across a number of programs. KHK is responsible for allpreclinical and clinical development activities, including the selection of patient population and disease indications for clinical trials.Since our inception in October 2006, we have devoted substantial resources to the research and development of DsiRNA molecules and drug deliverytechnologies and the protection and enhancement of our intellectual property estate. We have no products approved for sale and all of our revenue to date has beencollaboration revenue or government grant revenue. To date, we have funded our operations primarily through public offerings of our common stock, privateplacements of preferred stock and convertible debt securities, from research funding, license fees, option exercise fees, preclinical payments under our researchcollaboration and license agreement with KHK, from government grants, and from a secured term loan from Hercules Technology II, L.P. (Hercules loan). Moreparticularly, since our inception and through December 31, 2015, we have raised an aggregate of $278.8 million to fund our operations, of which approximately$45.4 million was from the May 2015 follow-on offering of common stock, $0.2 million was from a federal government grant from the National Institutes ofHealth (NIH) covering our work on cancer treatment research, $92.7 million was from the initial public offering of our common stock, which closed on February 4,2014, $110.5 million was from the sale of preferred stock and convertible debt securities (including $3.0 million from the 2013 bridge note financing), $17.5million was through our collaboration and license agreement with KHK, $0.5 million was from a federal government grant for our Qualifying TherapeuticDiscovery Project in November 2010 and $12.0 million was from borrowings under the Hercules loan. On April 7, 2014, we repaid the remaining amount of theHercules loan of approximately $3.6 million. As of December 31, 2015, we had cash and cash equivalents and held-to-maturity investments of $94.6 million andwe also had $1.1 million in assets held in restriction.On February 4, 2014, we completed the initial public offering of our common stock, in which we issued and sold a total of 6,900,000 shares of commonstock, including 900,000 shares sold pursuant to the exercise in full by the underwriters of an option to purchase additional shares, at a public offering price of$15.00 per share. We received net proceeds of approximately $92.7 million after deducting the underwriting commissions and discounts and offering expensespayable by us. All of the shares of our preferred stock were converted into shares of common stock and our warrants to purchase preferred stock becameexercisable to purchase common stock immediately prior to the completion of our initial public offering.On May 27, 2015, we completed a follow-on offering of our common stock, in which we issued and sold a total of 2,750,000 shares of common stock, at apublic offering price of $17.75 per share. We received net proceeds of approximately $45.4 million after deducting underwriting commissions and discounts andoffering expenses payable by us.Since inception, we have incurred significant operating losses. Our net loss was $62.8 million, $47.9 million and $18.5 million for the years endedDecember 31, 2015, 2014 and 2013, respectively. Substantially all of our operating losses resulted from expenses incurred in connection with our research andclinical programs and from general and administrative costs associated with our operations. We recognized $0.2 million in revenue for the year endedDecember 31, 2015 and no revenue for the years ended December 31, 2014 and 2013. Our revenue to date has been generated through our research collaborationand license agreement with KHK and government grants. We have not generated any commercial product revenue. As of December 31, 2015, we had anaccumulated deficit of $196.2 million. We expect to continue to incur significant and increasing losses in the foreseeable future. Our net losses may fluctuatesignificantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we: • advance our product candidates into preclinical development; • conduct any clinical trials of DCR-PH1, DCR-MYC and other potential product candidates; • continue our research and development efforts, including to expand our pipeline and to enhance our technology platform; • increase research and development related activities for the discovery and development of additional product candidates; 81Table of Contents • manufacture clinical study materials and develop large-scale manufacturing capabilities; • seek regulatory approval for our product candidates that successfully complete clinical trials; • maintain, expand and protect our intellectual property portfolio; • add operational, financial and management information systems and personnel, including personnel to support our product development and plannedfuture commercialization efforts; and • operate as a public company.We do not expect to generate substantial revenue from product sales unless and until we successfully complete development and obtain regulatory approvalfor one or more of our product candidates, which is subject to significant uncertainty and which could take several years. If we obtain regulatory approval for anyof our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Until suchtime, if ever, that we generate product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financingsand research collaboration and license agreements. We may be unable to raise capital or enter into such other arrangements when needed or on favorable terms. Ourfailure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to developour product candidates.Collaboration agreementIn December 2009, we entered into a research collaboration and license agreement with KHK for the research, development and commercialization ofDsiRNA molecules and drug delivery technologies for therapeutic targets in oncology. We have granted KHK an exclusive, worldwide, royalty-bearing and sub-licensable license to our DsiRNA molecules and drug delivery technologies and intellectual property for two programs, KRAS and a second undisclosed oncologytarget. Under the research collaboration and license agreement, KHK is responsible for activities to develop, manufacture and commercialize the selected DsiRNA-based compounds and pharmaceutical products containing such compounds. For the KRAS product candidate, we have an option to co-promote in the U.S. for anequal share of the profits from U.S. net sales. In addition, for each product candidate under the research collaboration and license agreement, we have the potentialto receive clinical, regulatory and commercialization milestone payments of up to $110.0 million and royalties on net sales of such product candidate.Since the initiation of the research collaboration and license agreement, of the various targets in the collaboration, two target programs, including the initialtarget KRAS, have been nominated by KHK for formal development studies. Both programs utilize our specific RNAi-inducing double-stranded DsiRNAmolecules and a lipid nanoparticle drug delivery technology proprietary to KHK. As of December 31, 2015, we have received total payments to date of $17.5million from KHK under the research collaboration and license agreement.License agreementIn September 2007, we entered into a license agreement with City of Hope (COH), an independent academic research and medical center, pursuant to whichCOH has granted to us an exclusive (subject to certain exceptions described below), royalty-bearing, worldwide license under certain patent rights in relation toDsiRNA, including the core DsiRNA patent (U.S. 8,084,599), to manufacture, use, offer for sale, sell and import products covered by the licensed patent rights forthe prevention and treatment of any disease in humans. COH is restricted from granting any additional rights to develop, manufacture, use, offer to sell, sell orimport products covered by the licensed patent rights for the prevention and treatment of any disease in humans. In addition, COH has granted to us an exclusive,royalty-bearing, worldwide license under the licensed patent rights providing certain rights for up to 20 licensed products selected by us for human diagnostic uses,provided that COH has not granted or is not negotiating a license of rights to diagnostic uses for such licensed products to a third party. The core DsiRNA patent(U.S. 8,084,599), titled “methods and compositions for the specific 82Table of Contentsinhibition of gene expression by double-stranded RNA,” describes RNA structures having a 25 to 30 nucleotides sense strand, a blunt end at the 3’ end of the sensestrand and a one to four nucleotides overhang at the 3’ end of the antisense strand. The expiration date of this patent is July 17, 2027.Pursuant to the terms of the agreement, we paid COH a one-time, non-refundable license fee and issued shares of our common stock to COH and a co-inventor of the core DsiRNA patent. COH is entitled to receive milestone payments in an aggregate amount within the range of $5.0 million to $10.0 million uponachievement of certain clinical and regulatory milestones. COH is further entitled to receive royalties at a low single-digit percentage of any net sale revenue of thelicensed products sold by us and our sublicensees. If we sublicense the licensed patent rights to a third party, COH has the right to receive a double digit percentageof sublicense income, the percentage of which decreases after we have expended $12.5 million in development and commercialization costs. We are also obligatedto pay COH an annual license maintenance fee, which may be credited against any royalties due to COH in the same year, and reimburse COH for expensesassociated with the prosecution and maintenance of the license patent rights. The license agreement will remain in effect until the expiration of the last to expire ofthe patents or copyrights licensed under the agreement. We have not included our obligations to make future milestone payments on our balance sheet because theachievement and timing of the related milestones is not probable and estimable.In September 2013, we entered into a commercial license agreement with Plant Bioscience Limited (PBL), pursuant to which PBL has granted a license to usfor certain of its U.S. patents and patent applications to research, discover, develop, manufacture, sell, import and export, products incorporating one or more shortRNA molecules (SRMs).We have paid PBL a one-time, non-refundable signature fee and will pay PBL a nomination fee for any additional SRMs nominated by us under theagreement. We are further obligated to pay PBL milestone payments upon achievement of certain clinical and regulatory milestones. In addition, PBL is entitled toreceive royalties on any net sale revenue of any licensed product candidates sold by us. During 2014, the Company paid $0.1 million to PBL upon thecommencement of our MYC clinical trial.In November 2014, we entered into a licensing and collaboration agreement with Arbutus to license Arbutus’ LNP delivery technology for exclusive use inour PH1 development program. We will use Arbutus’ LNP technology to deliver DCR-PH1, for the treatment of PH1. As of December 31, 2015, we had paid atotal of $3.0 million in license fees to Arbutus. Arbutus is entitled to receive additional payments of $22.0 million in aggregate development milestones, plus a mid-single-digit royalty on future PH1 sales. This partnership also includes a supply agreement with Arbutus providing clinical drug supply and regulatory support.In December 2014, we licensed all of our non-U.S. intellectual property rights to a non-U.S. wholly-owned subsidiary, and, in December 2015, we licensedour U.S. intellectual property rights to the same wholly-owned subsidiary.Financial Operations OverviewRevenueOur revenue to date has been generated primarily through research funding, license fees, option exercise fees and preclinical development payments underour research collaboration and license agreement with KHK and government grants. We have not generated any commercial product revenue. For each productcandidate under our research collaboration and license agreement with KHK, we are also entitled to receive clinical, regulatory and commercialization milestonepayments of up to $110.0 million and royalties on net sales of such product candidate. We did not receive any royalty payments during 2015 or 2014.In April 2015, the National Cancer Institute (NCI), a division of the National Institutes of Health (NIH), awarded us a grant related to cancer treatmentresearch. The project period for this grant covers a three month period which commenced in April 2015, with total funds available of approximately $0.2 million.The payment of the NIH grant award was based upon subcontractor and internal costs incurred that are specifically covered by 83Table of Contentsthe grant and, where applicable, a facilities and administrative rate that provides funding for overhead expenses. During the year ended December 31, 2015, werecognized $0.2 million of revenue associated with the NIH grant award. We did not have revenue for the years ended December 31, 2014 and 2013, respectively.In the future, we may generate revenue from a combination of research and development payments, license fees and other upfront payments, milestonepayments, product sales and royalties in connection with our collaboration with KHK or future collaborations and licenses. We expect that any revenue we generatewill fluctuate in future periods as a result of the timing of our or a collaborator’s achievement of preclinical, clinical, regulatory and commercialization milestones,if at all, 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 andsuccessfully commercialized by us or a collaborator. If we, KHK or any future collaborator fails to develop product candidates in a timely manner or obtainregulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.Research and development expensesResearch and development expenses consist of costs associated with our research activities, including discovery and development of our DsiRNA andDsiRNA-EX molecules and drug delivery technologies, clinical and pre-clinical development activities and our research activities under our research collaborationand license agreement with KHK. Our research and development expenses include: • direct research and development expenses incurred under arrangements with third parties, such as contract research organizations, contractmanufacturing organizations, and consultants; • platform-related lab expenses, including lab supplies, license fees, consultants and our scientific advisory board; • 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 ofleasehold improvements and equipment and laboratory and other supplies.We expense research and development costs as they are incurred. We account for nonrefundable advance payments for goods and services that will be usedin future research and development activities as expenses when the service has been performed or when the goods have been received. A significant portion of ourresearch and development costs are not tracked by project as they benefit multiple projects or our technology platform.In the second quarter of 2014, we initiated a multi-center, dose-escalating Phase 1 clinical study of DCR-MYC to assess the safety and tolerability of DCR-MYC in patients with solid tumors, multiple myeloma, or lymphoma who are refractory or unresponsive to standard therapies, and in the fourth quarter of 2014 weinitiated a global phase 1b/2 clinical trial of DCR-MYC in patients with advanced HCC with the first patient dosed in January 2015. In the second quarter of 2015,we announced an expansion of our DCR-MYC ongoing Phase 1 trial to include a cohort of patients with pancreatic neuroendocrine tumors (PNETs) followingearly signs of clinical and metabolic response and tumor shrinkage in PNET patients. Once the maximum tolerated dose (MTD) of DCR-MYC has beendetermined, we plan to initiate enrollment of a cohort of patients who will undergo pre- and post-treatment tumor biopsies. We expect to report proof-of-conceptdata for DCR-MYC in the second half of 2016 based on anticipated results from our two ongoing trials. In December 2015, we initiated dosing in our first PH1clinical trial, which is a Single Ascending Dose (SAD) trial in normal healthy volunteers and is being conducted in the U.S. Data from the healthy volunteer studywill be used to facilitate initiation of clinical studies in patients in the U.S. We expect to begin our first Phase 1 study of DCR-PH1 in patients with PH1 in the firsthalf of 2016 at EU clinical sites. In December 2015, we also initiated an international, multicenter, observational study designed to measure biomarkers implicatedin PH1. Although the observational study will not include investigational drugs or other interventions, its participants may be considered for enrollment in plannedclinical trials of DCR-PH1. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming.We, KHK or any future collaborator may never succeed in obtaining marketing approval for any of our product candidates. The probability of success for 84Table of Contentseach product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercialviability. All of our research and development programs are at an early stage and successful development of future product candidates from these programs ishighly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each future product candidate and aredifficult to predict. We anticipate we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidateon an ongoing basis in response to our ability to maintain or enter into collaborations with respect to each product candidate, the scientific and clinical success ofeach product candidate as well as ongoing assessments as to the commercial potential of product candidates. We will need to raise additional capital and may seekadditional collaborations in the future in order to advance our various product candidates. Additional private or public financings may not be available to us onacceptable terms, or at all. Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursueour business strategy.General and administrative expensesGeneral and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance,legal, business development and support functions. Other general and administrative expenses include travel expenses, professional fees for legal, audit, tax andother professional services and allocated facility-related costs not otherwise included in research and development expenses.Interest incomeInterest income consists of interest income earned on our cash and cash equivalents, held-to-maturity investments and assets held in restriction.Interest expenseInterest expense consists of interest expense on the Hercules loan, which was repaid in full in April 2014.Preferred stock warrant re-measurementPreferred stock warrant re-measurement is associated with warrants to purchase preferred stock issued to lenders under our convertible notes and theHercules loan. The re-measurement consists of the change in value calculated using the Black-Scholes option pricing model to estimate the fair value of thewarrants. We base the estimates in the Black-Scholes option pricing model, in part, on subjective assumptions, including stock price volatility, risk-free interestrate, dividend yield and the fair value of the preferred stock underlying the warrants. The re-measurement gain or loss associated with the change in the fair valueof the preferred stock warrant liability each reporting period is recognized as a component of other income (expense). Upon the completion of our initial publicoffering of our common stock on February 4, 2014, the preferred stock warrant liability was reclassified as a component of equity and is no longer subject to re-measurement. The fair value of the preferred stock warrants as of the closing date of the initial public offering was $3.1 million.Critical Accounting Policies and Significant Judgments and EstimatesOur management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which havebeen prepared in accordance with accounting principles general accepted in the U.S. (GAAP) and in accordance with the rules and regulations of the SEC. Thepreparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities andthe disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the revenue and expenses incurred during thereported periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, revenue recognition, deferred revenueand stock-based compensation. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances,the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other 85Table of Contentssources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates underdifferent assumptions or conditions.While our significant accounting policies are described in the notes to our consolidated financial statements appearing in this Annual Report on Form 10-K,we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.Revenue recognitionCollaborative research and development and multiple-deliverable arrangementsWe have generated our revenue primarily through our research collaboration and license agreement with KHK and government grants. The terms of theresearch collaboration and license agreement with KHK include multiple deliverables by us (e.g., license rights and research and development services) inexchange for consideration to us of some combination of research funding, license fees, option exercise fees, payments based upon the achievement of specifiedmilestones and royalty payments based on product sales derived from the collaboration.We recognize revenue when all of the following four criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products orservices has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Multiple-deliverable arrangements, such as licenseand development agreements, are analyzed to determine whether the deliverables can be separated or whether they must be accounted for as a single unit ofaccounting. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method andthe appropriate revenue recognition principles are applied to each unit. When we determine that an arrangement should be accounted for as a single unit ofaccounting, we must determine the period over which the performance obligations will be performed and revenue will be recognized.At the inception of each arrangement that includes payments for optional research or milestones, we evaluate whether each option or milestone is substantiveand at risk to both parties on the basis of the contingent nature of the option or milestone. This evaluation includes an assessment of whether: (1) the considerationis commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered items; (2) as a result of a specificoutcome resulting from the entity’s performance to achieve the milestone; (3) the consideration relates solely to past performance; and (4) the consideration isreasonable relative to all of the deliverables and payment terms within the arrangement. Substantive options and milestones are recognized as revenue upon theachievement of the milestone, assuming all other revenue recognition criteria are met.License fees are initially recorded as deferred revenue upon receipt and then recognized as revenue over our performance period. Research and developmentservice revenue is recognized over the research term as the research and development services are provided. The cost of such services is reflected in research anddevelopment costs in the period in which it is incurred. Assuming all other revenue recognition criteria are met, milestone payments are recognized as revenuewhen the milestone is achieved or is probable of achievement. Royalty payments are recognized as revenue based on contract terms and reported sales of licensedproducts, when reported sales are reliably measurable and collectability is reasonably assured.Preferred stock warrant liabilityAs of December 31, 2013, we had outstanding warrants for the purchase of shares of Series A and Series B preferred stock as well as warrants issued in theSeries C bridge loan that became exercisable for shares of Series C preferred stock, (Series C warrants), upon the closing of our sale of Series C preferred stock inJuly 2013. We account for freestanding warrants related to shares that are redeemable or contingently redeemable, or 86Table of Contentsfor purchases of preferred stock that are not indexed to our stock, as liabilities. The warrants are recorded at fair value, estimated using the Black-Scholes option-pricing model, at each balance sheet date with changes in the fair value of the liability recorded in the statement of operations.Pursuant to the terms of these warrants, upon the conversion of the class of preferred stock underlying the warrant, the warrants automatically becomeexercisable for shares of our common stock based upon the conversion ratio of the underlying class of preferred stock. The consummation of our initial publicoffering resulted in the conversion of all classes of our preferred stock into common stock. Upon the conversion of the underlying classes of preferred stock, ouroutstanding warrants to purchase Series A, Series B and Series C preferred stock were reclassified as a component of equity and are no longer subject to re-measurement.Net operating loss and research and development tax credit carryforwardsWe file U.S. federal income tax returns and Massachusetts state tax returns. The deferred tax assets were primarily comprised of federal and state tax netoperating losses and tax credit carryforwards and were recorded using enacted tax rates expected to be in effect in the years in which these temporary differencesare expected to be utilized. As of December 31, 2015, the Company has approximately $92.5 million of federal and $77.6 million of state net operating losscarryforwards, and $2.1 million of federal and $1.4 million of Massachusetts research and development credits that expire starting in 2028. As of December 31,2015, we had $1.4 million of unrecognized tax benefits, of which $1.4 million would affect income tax expense if recognized, before consideration of our valuationallowance.Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to historical or future ownership percentagechange rules provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of certainnet operating loss and tax credit carryforwards before their utilization. However, due to uncertainties surrounding our ability to generate future taxable income torealize these tax assets, a full valuation allowance has been established to offset our deferred tax assets.Redeemable convertible preferred stockWe have issued preferred stock in the past to raise capital. We initially record preferred stock redeemable outside of our control outside of stockholders’equity (deficit) at the value of the proceeds received or fair value, if lower, net of issuance costs. Subsequently, if it is probable that the preferred stock will becomeredeemable, we adjust the carrying value to the redemption value over the period from the issuance date to the earliest possible redemption date.Stock-based compensation and common stock valuationStock-based compensationWe estimate the fair value of our stock-based awards to employees and non-employees using the Black-Scholes option-pricing model, which requires theinput of highly subjective assumptions, including: (1) the expected volatility of our stock, (2) the expected term of the award, (3) the risk-free interest rate and(4) expected dividends. Due to the lack of a public market history for the trading of our common stock before and after the completion of our initial public offeringand a lack of company specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group ofsimilar companies that are publicly traded. For these analyses, we have selected companies with comparable characteristics to ours, including factors such asenterprise value, risk profiles, position within the industry and historical share price information, sufficient to meet the expected life of the stock-based awards. Wecompute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected termof our stock-based awards. We have estimated the expected life of our employee stock 87Table of Contentsoptions using the “simplified” method, whereby the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted.We are also required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from estimates.We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest.Stock-based compensation expense recognized in the financial statements is based on awards that are ultimately expected to vest.Common stock valuations before the initial public offeringWe have historically granted stock options at exercise prices not less than the fair value of our common stock. As there was no public market for ourcommon stock before our initial public offering, the estimated fair value of our common stock was previously determined by our board of directors. Stock optionsgranted after the completion of initial public offering are valued using our common stock price as stated on The NASDAQ Global Select Market on the grant date.We have periodically determined, for financial reporting purposes, the estimated per share fair value of our common stock at various dates using contemporaneousvaluations performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-HeldCompany Equity Securities Issued as Compensation (Practice Aid). We performed these contemporaneous valuations as of January 31, 2012 and August 31, 2013.In conducting the contemporaneous valuations, we considered all objective and subjective factors that we believed to be relevant for each valuation conducted,including our best estimate of our business condition, prospects and operating performance at each valuation date. Within the contemporaneous valuationsperformed, a range of factors, assumptions and methodologies were used. The significant factors included: • the prices of our preferred stock sold to or exchanged between outside investors in arm’s length transactions, and the rights, preferences and privilegesof our preferred stock as compared to those of our common stock, including the liquidation preferences of our preferred stock; • our results of operations, financial position and the status of research and development efforts; • the composition of, and changes to, our management team and board of directors; • the lack of liquidity of our common stock as a private company; • our stage of development and business strategy and the material risks related to our business and industry; • the achievement of enterprise milestones, including entering into collaboration and license agreements; • the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions ofpeer companies; • any external market conditions affecting the life sciences and biotechnology industry sectors; • the likelihood of achieving a liquidity event for the holders of our common stock and stock options, such as an initial public offering or a sale of ourcompany, given prevailing market conditions; • the state of the initial public offering market for similarly situated privately held biotechnology companies; and • any recent contemporaneous valuations prepared by our board of directors and management in accordance with methodologies outlined in the PracticeAid. 88Table of ContentsStock option grants on December 4, 2013 and December 30, 2013For the stock options granted by us on December 4, 2013 and December 30, 2013, our board of directors determined that the fair value of common stock of$3.42 per share calculated in the contemporaneous valuation as of August 31, 2013 reasonably reflected the per share fair value of our common stock on each of thegrant dates. However, in the context and given the anticipated proximity of our initial public offering, for financial reporting purposes, in early January 2014 weconducted a retrospective valuation as of December 31, 2013, which reasonably assumed that examination of contemporaneous information would have concludeda price range consistent with the then estimated price range for our initial public offering of $11.00 to $13.00 per share. The retrospective valuation as ofDecember 31, 2013 indicated that the fair value of our common stock on December 31, 2013 was $7.42 per share. The valuation concluded that, with suchcontemporaneous information, the fair value of our common stock as of December 31, 2013 was $7.42 per share primarily due to feedback from investmentbankers that we had an increased probability of executing a successful initial public offering in the first quarter of 2014 and feedback from investment bankers thatpublic investors could potentially price our common stock in the range of $11.00 to $13.00 per share in such an initial public offering. Accordingly, we recognizeda stock-based compensation charge of less than $0.1 million in relation to the December 4, 2013 and December 30, 2013 option grants for the quarter endedDecember 31, 2013 based on the grant date fair value of our common stock as determined by the retrospective valuation.Held-to-Maturity InvestmentsWe account for our investment in marketable securities in accordance with FASB ASC 320, Investments — Debt and Equity Securities. We determine theappropriate classification of investments at the time of purchase and re-evaluate such designation as of each balance sheet date. Debt securities carried at amortizedcost are classified as held-to-maturity when we have the positive intent and ability to hold the securities to maturity. At December 31, 2015 and 2014, all of ourinvestments were classified as held-to-maturity.Emerging growth company statusIn April 2012, the Jumpstart Our Business Startup Act (JOBS Act) was enacted by the federal government. Section 107 of the JOBS Act provides that anemerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. Thus, an emerging growthcompany can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected notto avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption ofsuch standards is required for other public companies.Recent Accounting PronouncementsLeasesIn February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The ASUrequires lessees to put most leases on their balance sheets as a liability for the obligation to make lease payments and as a right-of-use asset, but recognize expenseson the income statements in a manner similar to today’s accounting. The guidance also eliminates the current real estate-specific provisions for all entities. Forcalendar-year public entities, the guidance becomes effective in 2019 and interim periods within that year. Early adoption is permitted for all entities. The Companyhas not chosen early adoption for this ASU and is currently evaluating its effect on the Company’s consolidated financial statements. 89Table of ContentsIncome TaxesIn November 2015, the FASB issued ASU 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes (Topic 740). ASU 2015-17 simplifies thepresentation of deferred income taxes by eliminating the separate classification of deferred income tax assets and liabilities into current and noncurrent amounts inthe consolidated balance sheet statement of financial position. The amendments in the update require that all deferred tax assets and liabilities be classified asnoncurrent in the consolidated balance sheet. The amendments in this update are effective for annual periods beginning after December 15, 2017, and interimperiods therein and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted. The Company has early adopted thisstandard in the fourth quarter of 2015 on a prospective basis, and it did not have an effect on the Company’s consolidated financial statements.Revenue RecognitionIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 amends the guidance for accounting forrevenue from contracts with customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, RevenueRecognition, and creates a new Topic 606, Revenue from Contracts with Customers. This guidance was originally pronounced to become effective for fiscal yearsbeginning after December 15, 2016, with early adoption not permitted. On July 9, 2015, the FASB decided to defer the effective date of the ASU by one year. As aresult, the Company will be required to apply the new revenue standard to annual reporting periods beginning after December 15, 2017, and would be permitted toadopt the ASU early, but not before the original public organization effective date (annual periods beginning after December 15, 2016). Two adoption methods arepermitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect ofinitially adopting the ASU recognized at the date of initial application. The Company has not yet determined which adoption method it will utilize or the effect, ifany, the adoption of this guidance will have on its consolidated financial statements through December 31, 2015 as the Company has yet to record revenue fromcontracts with customers.Comparison of the years ended December 31, 2015 and 2014The following table summarizes the results of our operations for the years ended December 31, 2015 and 2014 (in thousands, except percentages): FOR THE YEARS ENDED DECEMBER 31, INCREASE (DECREASE)         2015                 2014         Total revenue $184 $— $184 100% Expenses: Research and development 43,971 29,453 14,518 49% General and administrative 19,240 15,648 3,592 23% Total expenses 63,211 45,101 18,110 40% Loss from operations (63,027) (45,101) (17,926) (40)% Other income (expense) 188 (2,838) 3,026 107% Net loss $(62,839) $(47,939) $(14,900) (31)% RevenueDuring the year ended December 31, 2015, we recognized $0.2 million of revenue associated with the NIH grant award. We did not have revenue for theyear ended December 31, 2014. We do not expect to generate any product revenue for the foreseeable future. 90Table of ContentsResearch and development expensesThe following table summarizes our research and development expenses incurred during the years ended December 31, 2015 and 2014 (in thousands): FOR THE YEARS ENDED DECEMBER 31, INCREASE         2015                 2014         Direct research and development expenses $15,529 $11,068 $4,461 Platform-related expenses 14,066 9,984 4,082 Employee-related expenses 11,340 7,694 3,646 Facilities, depreciation and other expenses 3,036 707 2,329 Total $43,971 $29,453 $14,518 Research and development expenses were $44.0 million and $29.5 million for the years ended December 31, 2015 and 2014, respectively. For the year endedDecember 31, 2015, direct research and development expenses were $15.5 million compared to $11.1 million in the prior year. The increase of $4.4 million was theresult of increased costs related to pre-clinical and clinical start-up activities for DCR-PH1, as well as increased costs related to DCR-MYC manufacturing forclinical development and our clinical trials, including our global Phase 1b/2 trial in patients with advanced HCC, which was initiated in the fourth quarter of 2014,offset by a reduction in license fees paid to a collaboration partner. For the year ended December 31, 2015, platform-related expenses were $14.1 million comparedto $10.0 million in the prior year. The increase of $4.1 million was primarily due to increased expenses related to discovery and early development of futureprograms, offset by a decrease to non-employee stock-based compensation of $1.5 million. Employee-related expenses were $11.3 million in 2015 compared to$7.7 million in the prior year. The increase of $3.6 million was primarily due to additional headcount, along with an increase in stock-based compensation of $1.6million. Facilities, depreciation and other expenses have increased by $2.3 million for the year ended December 31, 2015 due to increased occupancy costs. Weexpect our research and development expenses to continue to increase in 2016 as we continue spending on our development programs and clinical trials.General and administrative expensesGeneral and administrative expenses were $19.2 million and $15.6 million for the years ended December 31, 2015 and 2014, respectively. The increase of$3.6 million was primarily due to an increase in payroll-related expenses of $0.7 million, an increase in stock-based compensation of $1.5 million, and an increasein professional fees of $1.9 million, primarily from legal costs incurred related to the Alnylam complaint. We expect that general and administrative expenses willcontinue to increase in 2016 as we incur additional costs to support the expanding operations.Other income (expense)Other income (expense) was $0.2 million and $(2.8) million for the years ended December 31, 2015 and 2014, respectively. The change was primarily due toa decrease in expense related to the re-measurement of the preferred stock warrant liability of $2.6 million, and a decrease in interest expense of $0.3 million due tothe Hercules loan being repaid in full in April 2014. 91Table of ContentsComparison of the years ended December 31, 2014 and 2013The following table summarizes the results of our operations for the years ended December 31, 2014 and 2013 (in thousands, except percentages): FOR THE YEARS ENDED DECEMBER 31, INCREASE (DECREASE)         2014                 2013         Total revenue $— $— $— — Expenses: Research and development 29,453 11,558 17,895 155% General and administrative 15,648 5,820 9,828 169% Total expenses 45,101 17,378 27,723 160% Loss from operations (45,101) (17,378) (27,723) (160)% Other expense (2,838) (1,140) (1,698) (149)% Net loss $(47,939) $(18,518) $(29,421) (159)% RevenueWe did not recognize any revenue for the years ended December 31, 2014 and 2013. We do not expect to generate any product revenue for the foreseeablefuture.Research and development expensesThe following table summarizes our research and development expenses incurred during the years ended December 31, 2014 and 2013 (in thousands): FOR THE YEARS ENDED DECEMBER 31, INCREASE (DECREASE)         2014                 2013         Direct research and development expenses $11,068 $4,164 $6,904 Platform-related expenses 9,984 3,492 6,492 Employee-related expenses 7,694 2,871 4,823 Facilities, depreciation and other expenses 707 1,031 (324) Total $29,453 $11,558 $17,895 Research and development expenses were $29.5 million and $11.6 million for the years ended December 31, 2014 and 2013, respectively. For the year endedDecember 31, 2014, direct research and development expenses increased by $6.9 million compared to the prior year as a result of the initiation of the clinical trialsrelated to DCR-MYC and an increase in research activities related to DCR-PH1, of which $3.0 million related to license fees paid to Arbutus for the LNP deliveryof DCR-PH1. For the year ended December 31, 2014, platform-related expenses increased by $6.5 million compared to the prior year primarily due to increasedexpenses related to discovery and early development of future programs, along with an increase in non-employee stock-based compensation of $1.7 million.Employee-related expenses increased by $4.8 million for the year ended December 31, 2014 compared to the prior year primarily due to additional hiring duringthe period, along with an increase in stock-based compensation of $2.4 million. Facilities, depreciation and other expenses have decreased by $0.3 million for theyear ended December 31, 2014 due to a reduction in occupancy costs. We expect our research and development expenses to continue to increase in the future as wecontinue spending on our development programs and clinical trials. 92Table of ContentsGeneral and administrative expensesGeneral and administrative expenses were $15.6 million and $5.8 million for the years ended December 31, 2014 and 2013, respectively. The increase of$9.8 million, or 169 percent, was primarily due to an increase in payroll-related expenses of $3.6 million, which includes an increase in stock-based compensationof $2.6 million, an increase in professional fees of $2.9 million and an increase in non-employee stock-based compensation of $1.1 million. The remaining increasein general and administrative expenses during 2014 was primarily due to the transition and increased costs associated with operating as a public company. Weexpect that general and administrative expenses will continue to increase in the future as we expand our operating activities and incur additional costs associatedwith being a publicly-traded company. These increases will likely include legal, accounting and filing fees, directors’ and officers’ liability insurance premiums andfees associated with investor relations.Other expenseOther expense was $2.8 million and $1.1 million for the years ended December 31, 2014 and 2013, respectively. The increase of $1.7 million, or 149percent, was primarily due to the re-measurement of the preferred stock warrant liability of $2.7 million, which was partially offset by a decrease in interest andother expenses of $1.0 million. The decrease in interest expense was due to the Hercules loan being repaid in full in April 2014.Liquidity and Capital ResourcesSince our inception and through December 31, 2015, we have raised an aggregate of $278.8 million to fund our operations, of which approximately $45.4million was from the May 2015 follow-on offering of common stock, $0.2 million was from a federal government grant from the NIH covering our work on cancertreatment research, $92.7 million was from the initial public offering of our common stock, which closed on February 4, 2014, $110.5 million was from the sale ofpreferred stock and convertible debt securities (including $3.0 million from the 2013 bridge note financing), $17.5 million was through our collaboration andlicense agreement with KHK, $0.5 million was from a federal government grant for our Qualifying Therapeutic Discovery Project in November 2010 and $12.0million was from borrowings under the Hercules loan. On April 7, 2014, we repaid the remaining amount of the Hercules loan of approximately $3.6 million. As ofDecember 31, 2015, we had cash and cash equivalents and held-to-maturity investments of $94.6 million and $1.1 million in assets held in restriction.On May 27, 2015, we closed a follow-on offering of 2,750,000 shares of common stock at a price to the public of $17.75 per share, resulting in net proceedsto the Company of $45.4 million after deducting underwriting discounts and commissions of approximately $2.9 million, and costs of the offering of approximately$0.4 million.On February 4, 2014, we closed our initial public offering, in which we issued and sold a total of 6,900,000 shares of our common stock, including 900,000shares sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares, at a public offering price of $15.00 per share, andreceived net proceeds of approximately $92.7 million after deducting underwriting commissions and discounts and offering expenses payable by us.We granted to Hercules a security interest in certain of our assets. In connection with the loan and security agreement, as amended, we issued to Herculeswarrants to purchase 21,000 shares of Series A preferred stock and 26,400 shares of Series B preferred stock, respectively, each at an exercise price of $25.00 pershare. The warrants became exercisable to purchase our common stock immediately prior to the closing of our initial public offering. On February 11, 2014,Hercules net exercised these warrants in exchange for a total of 12,702 shares of our common stock. On April 7, 2014, we repaid the remaining amount of theHercules loan in full for a total payment of $3.6 million. 93Table of ContentsIn addition to our existing cash and cash equivalents, for each product candidate under our research collaboration and license agreement with KHK, we areentitled to receive clinical, regulatory and commercialization milestone payments of up to $110.0 million and royalties on net sales of such product candidate. Ourability to earn these milestone payments and the timing of achieving these milestones is dependent upon the outcome of our research and development andregulatory activities and is uncertain at this time. Our right to receive the payment of certain milestones under our agreement with KHK is our only committedexternal source of funds.Cash flowsAs of December 31, 2015, we had $94.6 million in cash and cash equivalents and held-to-maturity investments and $1.1 million in assets held in restriction.The following table shows a summary of our cash flows for the years ended December 31, 2015, 2014 and 2013 (in thousands). FOR THE YEARS ENDED DECEMBER 31,     2015         2014         2013     Net cash used in operating activities $(48,799) $(34,764) $(10,944) Net cash provided by (used in) investing activities 33,001 (75,761) (413) Net cash provided by financing activities 45,789 89,997 54,282 Increase (decrease) in cash and cash equivalents $29,991 $(20,528) $42,925 Operating activitiesNet cash used in operating activities for years ended December 31, 2015 and 2014 was $48.8 million and $34.8 million, respectively. The increase in cashused in operating activities of $14.0 million was due primarily to an increase in our net loss of $14.9 million, partially offset by non-cash items and changes inworking capital totaling $0.9 million, including non-cash items of $2.7 million in 2014 for the loss on extinguishment of debt and the increase in the fair value ofpreferred stock warrant, which did not occur in 2015.Net cash used in operating activities was $34.8 million and $10.9 million for the years ended December 31, 2014 and 2013, respectively. The increase incash used in operating activities of $23.8 million was due primarily to an increase in our net loss of $29.4 million, partially offset by non-cash items and changes inworking capital totaling $5.6 million, including a payment of $5.0 million received in 2013 under a license agreement related to an option exercise fee andpreclinical payments earned in December 2012.Investing activitiesNet cash provided by investing activities for the year ended December 31, 2015 was $33.0 million compared to net cash used in investing activities of $75.8million in the year ended December 31, 2014. The increase in net cash provided by investing activities for 2015, compared to 2014, relates to an increase inmaturities of held-to-maturity investments, a decrease in purchases of held-to-maturity investments, a decrease in purchases of property and equipment, and adecrease in assets held in restriction.Net cash used in investing activities for the years ended December 31, 2014 and 2013 was $75.8 million and $0.4 million, respectively. Net cash used ininvesting activities for the periods presented relates to net purchases of held-to-maturity investments, purchases of property and equipment, primarily laboratoryequipment, and an increase in assets held in restriction. 94Table of ContentsFinancing activitiesNet cash provided by financing activities for the years ended December 31, 2015 and 2014 was $45.8 million and $90.0 million, respectively. In 2015, netproceeds from our follow-on offering was $45.4 million and proceeds from other issuance of common stock was $0.4 million. In 2014, net proceeds from our initialpublic offering was $94.1 million and proceeds from other issuance of common stock was $0.9 million, partially offset by the repayment of principal paymentsrelated to the Hercules loan for $5.0 million.Net cash provided by financing activities for the years ended December 31, 2014 and 2013 was $90.0 million and $54.3 million, respectively. In 2014, netproceeds from our initial public offering was $94.1 million and proceeds from other issuance of common stock was $0.9 million, partially offset by the repaymentof principal payments related to the Hercules loan for $5.0 million. In 2013, we had net proceeds of $56.8 million from the issuance of redeemable convertiblepreferred stock and net proceeds of $3.0 million from a bridge loan financing, which were offset by $4.1 million of repayments on long-term debt, and $1.4 millionof deferred issuance payments.Funding requirementsWe expect that our primary uses of capital will continue to be third-party clinical research and development services and manufacturing costs, compensationand related expenses, laboratory and related supplies, legal and other regulatory expenses and general overhead costs, including the costs to defend the Alnylamtrade secret misappropriation claim against us. Because of the numerous risks and uncertainties associated with the development and commercialization of ourproduct candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization,we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated development activities.However, we continue to believe that our cash and cash equivalents as of December 31, 2015 excluding any potential option exercise fees or milestone payments,will be sufficient to meet our anticipated cash requirements for at least the next twelve months. We have based this estimate on assumptions that may prove to bewrong, and we could utilize our available capital resources sooner than we currently expect.Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement thatinvolves risks and uncertainties, and actual results could vary materially as a result of a number of factors. Our future capital requirements are difficult to forecastand will depend on many factors, including: • the receipt of milestone payments under our research collaboration and license agreement with KHK; • the terms and timing of any other collaboration, licensing and other arrangements that we may establish; • the initiation, progress, timing and completion of preclinical studies and clinical trials for our potential product candidates; • the number and characteristics of product candidates that we pursue; • the progress, costs and results of our preclinical studies and clinical trials; • the outcome, timing and cost of regulatory approvals; • delays that may be caused by changing regulatory requirements; • the cost and timing of hiring new employees to support our continued growth; • the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims; • the costs of filing and prosecuting intellectual property rights and enforcing and defending any intellectual property-related claims; 95Table of Contents • the costs of responding to and defending ourselves against complaints and potential litigation, including the Alnylam complaint of misappropriation ofconfidential information (see Legal Proceedings); • the costs and timing of procuring clinical and commercial supplies of our product candidates; • the extent to which we acquire or in-license other product candidates and technologies; and • the extent to which we acquire or invest in other businesses, product candidates or technologies.Until such time, if ever, we generate product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings andresearch collaboration and license agreements. We may be unable to raise capital or enter into such other arrangements when needed or on favorable terms, or atall. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability todevelop our product candidates.Contractual Obligations and CommitmentsThe following is a summary of our significant contractual obligations as of December 31, 2015 (in thousands). PAYMENTS DUE BY PERIOD CONTRACTUALOBLIGATIONS TOTAL LESS THAN1 YEAR MORE THAN1 YEAR AND LESS THAN 3 MORE THAN 3 YEARS ANDLESS THAN 5 MORE THAN5 YEARS Existing operating lease obligations(1) $8,006 $1,536 $3,211 $3,259 $— (1)Total commitments includes future minimum lease payments under our existing non-cancelable operating lease for our office and laboratory space inCambridge, Massachusetts, as executed on July 11, 2014 with an average rent of approximately $0.1 million per month.We also have obligations to make future payments to COH, PBL and Arbutus that become due and payable on the achievement of certain development,regulatory and commercial milestones. We have not included these commitments on our balance sheet or in the table above because the achievement and timing ofthese milestones is not probable and estimable.Off-balance Sheet ArrangementsWe did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations ofthe Securities and Exchange Commission.Segment ReportingWe view our operations and manage our business as one segment, which is the discovery, research and development of treatments based on our RNAitechnology platform. Item 7A.Quantitative and Qualitative Disclosure About Market RiskThe primary objectives of our investment activities are to ensure liquidity and to preserve principal while at the same time maximizing the income wereceive from our marketable securities without significantly increasing risk. Some of the securities that we invest in may have market risk related to changes ininterest rates. As of December 31, 2015, we had cash and cash equivalents and held-to-maturity investments of $94.6 million. Our primary exposure to market riskis interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash and cash equivalentsand held-to-maturity investments and the low risk profile of our investments an immediate 100 basis point change in interest rates would not have a material effecton the fair market value of our cash and cash equivalents and held-to-maturity investments. To minimize the risk in the future, we intend to maintain our portfolioof cash and cash equivalents and held-to-maturity investments in a variety of securities, including commercial paper, money market funds, government and non-government debt securities and corporate obligations. 96Table of ContentsItem 8.Financial Statements and Supplementary DataDICERNA PHARMACEUTICALS, INC.INDEX TO FINANCIAL STATEMENTS PAGE Report of Independent Registered Public Accounting Firm 98 Consolidated Balance Sheets as of December 31, 2015, and December 31, 2014 99 Consolidated Statements of Operations for the years ended December 31, 2015, December 31, 2014 and December 31, 2013 100 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity for the years ended December 31, 2015, December 31,2014 and December 31, 2013 101 Consolidated Statements of Cash Flows for the years ended December 31, 2015, December 31, 2014 and December 31, 2013 102 Notes to Consolidated Financial Statements 103 97Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofDicerna Pharmaceuticals, Inc.Cambridge, MassachusettsWe have audited the accompanying consolidated balance sheets of Dicerna Pharmaceuticals, Inc. and its subsidiaries (the “Company”) as of December 31, 2015and 2014, and the related consolidated statements of operations, redeemable convertible preferred stock and stockholders’ equity, and cash flows for each of thethree years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on the financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required tohave, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as wellas evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dicerna Pharmaceuticals, Inc. and itssubsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31,2015, in conformity with accounting principles generally accepted in the United States of America./s/ Deloitte & Touche LLPBoston, MassachusettsMarch 10, 2016 98Table of ContentsDICERNA PHARMACEUTICALS, INC.Consolidated Balance Sheets(In thousands, except share data and par value) DECEMBER 31, 2015 2014 ASSETS CURRENT ASSETS: Cash and cash equivalents $56,058 $26,067 Held-to-maturity investments 38,551 70,055 Prepaid expenses and other current assets 1,532 1,194 Total current assets 96,141 97,316 NONCURRENT ASSETS: Property and equipment—net 2,684 2,165 Held-to-maturity investments — 2,501 Assets held in restriction 1,116 1,380 Other noncurrent assets 82 243 Total noncurrent assets 3,882 6,289 TOTAL ASSETS $100,023 $103,605 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $2,621 $1,237 Accrued expenses and other current liabilities 6,376 3,845 Deferred rent 4 77 Total current liabilities 9,001 5,159 NONCURRENT LIABILITIES: Security deposit — 106 Total noncurrent liabilities — 106 TOTAL LIABILITIES 9,001 5,265 COMMITMENTS AND CONTINGENCIES (Note 15) STOCKHOLDERS’ EQUITY: Preferred stock, $0.0001 par value—5,000,000 shares authorized; no shares issued and outstanding at December 31, 2015and December 31, 2014, respectively — — Common stock, $0.0001 par value—150,000,000 shares authorized; 20,594,575 and 17,786,867 shares issued andoutstanding at December 31, 2015 and 2014, respectively 2 3 Additional paid-in capital 287,263 231,741 Accumulated deficit (196,243) (133,404) Total stockholders’ equity 91,022 98,340 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $100,023 $103,605 The accompanying notes are an integral part of these consolidated financial statements. 99Table of ContentsDICERNA PHARMACEUTICALS, INC.Consolidated Statements of Operations(In thousands, except share data and per share data) YEARS ENDED DECEMBER 31,       2015             2014             2013       Revenues $184 $— $— Operating expenses: Research and development 43,971 29,453 11,558 General and administrative 19,240 15,648 5,820 Total operating expenses 63,211 45,101 17,378 Loss from operations (63,027) (45,101) (17,378) Other income (expense): Preferred stock warrant liability re-measurement — (2,559) 126 Loss on extinguishment of debt — (143) (318) Interest income 188 63 4 Interest expense — (199) (952) Total other income (expense) 188 (2,838) (1,140) Net loss $(62,839) $(47,939) $(18,518) Less: Accretion and dividends on redeemable convertible preferred stock — 204 2,388 Net loss attributable to common stockholders $(62,839) $(48,143) $(20,906) Net loss per share attributable to common stockholders—basic and diluted $(3.09) $(3.00) $(709.57) Weighted average shares outstanding—basic and diluted 20,320,628 16,070,054 29,463 The accompanying notes are an integral part of these consolidated financial statements. 100Table of ContentsDICERNA PHARMACEUTICALS, INC.Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity(In thousands, except share data and par value) SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK $0.0001 PAR VALUE SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK $0.0001 PAR VALUE SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK $0.0001 PAR VALUE COMMON STOCK $0.0001 PAR VALUE ADDITIONALPAID-IN CAPITAL ACCUMULATEDDEFICIT TOTAL STOCKHOLDERS’EQUITY SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT BALANCE—January 1, 2013 855,996 29,728 1,162,021 34,520 — — 27,853 1 — (64,720) (64,719) Issuance of Series C preferred stock, net of issuance costsof $220 — — — — 8,142,891 56,780 — — — — — Issuance of Series C preferred stock, in satisfaction ofbridge loan — — — — 428,526 3,000 — — — — — Accretion of preferred stock issuance costs — 47 — 58 — 16 — — (121) — (121) Accrued dividends — 962 — 1,305 — — — — (40) (2,227) (2,267) Deemed contribution of preferred stockholders — (9,337) — (6,833) — — — — 16,170 — 16,170 Vesting of restricted common stock — — — — — — 15 — — — — Repurchase of unvested restricted common stock — — — — — — — — (5) — (5) Stock-based compensation — — — — — — — — 495 — 495 Exercise of common stock options — — — — — — 10,358 — 46 — 46 Net loss — — — — — — — — — (18,518) (18,518) BALANCE—December 31, 2013 855,996 21,400 1,162,021 29,050 8,571,417 59,796 38,226 1 16,545 (85,465) (68,919) Issuance of Common Stock from initial public offering, netof underwriting fees and issuance costs of $10,751 — — — — — — 6,900,000 1 92,749 — 92,750 Net exercise of common stock warrant — — — — — — 12,702 — — — — Reclassification of warrants to purchase shares ofredeemable convertible preferred stock into a warrant topurchase common stock — — — — — — — — 3,088 — 3,088 Accretion of preferred stock issuance costs — — — — — 204 — — (204) — (204) Conversion of preferred stock to common stock (855,996) (21,400) (1,162,021) (29,050) (8,571,417) (60,000) 10,589,434 1 110,451 — 110,452 Vesting of restricted common stock — — — — — — 4,000 — — — — Stock-based compensation — — — — — — — — 8,237 — 8,237 Exercise of common stock options — — — — — — 239,853 — 824 — 824 Sale of common stock related to employee stock purchaseplan — — — — — — 2,652 — 51 — 51 Net loss — — — — — — — — — (47,939) (47,939) BALANCE—December 31, 2014 — $— — $— — $— 17,786,867 $3 $231,741 $(133,404) $98,340 Issuance of Common Stock from public offering, net ofunderwriting fees and issuance costs of $445 — — — — — — 2,750,000 — 45,438 — 45,438 Vesting of restricted common stock — — — — — — 6,388 — — — — Stock-based compensation — — — — — — — — 9,732 — 9,732 Exercise of common stock options — — — — — — 29,506 — 149 — 149 Settlement of restricted stock for tax withholding — — — — — — — (1) (75) — (76) Sale of common stock related to employee stock purchaseplan — — — — — — 21,814 — 278 — 278 Net loss — — — — — — — — — (62,839) (62,839) BALANCE—December 31, 2015 — $— — $— — $— 20,594,575 $2 $287,263 $(196,243) $91,022 The accompanying notes are an integral part of these consolidated financial statements. 101Table of ContentsDICERNA PHARMACEUTICALS, INC.Consolidated Statements of Cash Flows(In thousands) YEARS ENDED DECEMBER 31,       2015              2014             2013       CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(62,839) $(47,939) $(18,518) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 727 848 740 Net amortization of premium/discount on investments 134 — — Stock-based compensation 9,732 8,237 495 Loss on extinguishment of debt — 143 318 Increase (Decrease) in fair value of preferred stock warrant — 2,559 (126) Changes in operating assets and liabilities: Research and license receivable — — 5,018 Prepaid expenses and other assets (177) (1,171) 57 Accounts payable 1,384 (97) 116 Accrued expenses and other liabilities 2,313 2,684 1,016 Deferred rent (73) (28) (60) Net cash used in operating activities (48,799) (34,764) (10,944) CASH FLOWS FROM INVESTING ACTIVITIES: Changes in assets held in restriction 264 (1,116) — Purchases of property and equipment (1,134) (2,013) (413) Maturities of held-to-maturity investments 70,000 9,995 — Purchases of held-to-maturity investments (36,129) (82,627) — Net cash provided by (used in) investing activities 33,001 (75,761) (413) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock option exercise and issuances under Employee Stock Purchase Plan 427 875 46 Proceeds from public offering of common stock, net of costs 45,438 94,148 — Repurchase of restricted common stock — — (5) Settlement of restricted stock for tax withholding (76) — — Payments of deferred issuance costs — — (1,399) Proceeds from issuance of redeemable convertible preferred stock — — 57,000 Redeemable preferred stock issuance costs — — (220) Proceeds from bridge loan financing — — 3,000 Repayments of long-term debt principal — (5,026) (4,140) Net cash provided by financing activities 45,789 89,997 54,282 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,991 (20,528) 42,925 CASH AND CASH EQUIVALENTS—Beginning of year 26,067 46,595 3,670 CASH AND CASH EQUIVALENTS—End of year $56,058 $26,067 $46,595 NONCASH INVESTING ACTIVITIES: Property and equipment purchases included in accrued expenses $112 $— $— NONCASH FINANCING ACTIVITIES: Accretion of redeemable convertible preferred stock $— $204 $2,388 Deemed contribution of preferred stockholders $— $— $16,170 Conversion of bridge loan financing $— $— $3,000 Tenant allowances $— $— $104 SUPPLEMENTAL CASH FLOW INFORMATION: Warrant conversion to common stock $— $3,088 $— Cash paid for interest $— $194 $771 The accompanying notes are an integral part of these consolidated financial statements. 102Table of ContentsDICERNA PHARMACEUTICALS, INC.Notes to Consolidated Financial Statements(In thousands, except share and per share data)1. Description of Business and Basis of PresentationNature of businessDicerna Pharmaceuticals, Inc., and its subsidiaries, (the Company) is a biopharmaceutical company focused on the discovery and development of innovativetreatments for rare inherited diseases involving the liver and for cancers that are genetically defined. The Company is using its proprietary RNA interference(RNAi) technology platform to build a broad pipeline in these therapeutic areas. The Company intends to discover, develop and commercialize novel therapeuticseither on its own or in collaboration with pharmaceutical partners.The Company continues to be subject to a number of risks common to companies in similar stages of development. Principal among these risks are theuncertainties of technological innovations, which are particularly high in the field of drug discovery and development, dependence on key individuals, developmentof the same or similar technological innovations by the Company’s competitors and protection of proprietary technology.The Company’s ability to fund its planned preclinical and clinical operations, including completion of its clinical trials, is expected to depend on the amount andtiming of cash receipts under any future collaborations, financing transactions, its existing collaboration agreement, as well as any product sales.In February 2014, the Company completed the sale of 6,900,000 shares of common stock in an initial public offering of its common stock (the IPO) at a price to thepublic of $15.00 per share, resulting in net proceeds to the Company of $92.7 million after deducting underwriting discounts and commissions of approximately$7.2 million and offering expenses paid by the Company of approximately $3.5 million. In connection with the close of the IPO, all of the outstanding shares ofSeries A mandatorily redeemable, convertible preferred stock (Series A preferred stock), Series B mandatorily redeemable, convertible preferred stock (Series Bpreferred stock) and Series C mandatorily redeemable, convertible preferred stock (Series C preferred stock) were converted into shares of common stock on a one-for-one basis immediately prior to the closing of the IPO.In May 2015, the Company completed the sale of 2,750,000 shares of common stock in a public offering of its common stock at a price to the public of $17.75 pershare, resulting in proceeds to the Company of $45.4 million after deducting underwriting discounts and commissions of approximately $2.9 million and offeringcosts incurred by the Company of approximately $0.4 million.2. Summary of Significant Accounting PoliciesBasis of presentation and consolidationThe accompanying consolidated financial statements have been prepared under accounting principles generally accepted in the United States of America, or GAAP,and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.Significant judgments and estimatesThe preparation of these financial statements is in conformity with GAAP which requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the revenuesand expenses incurred during the reporting periods. On an ongoing basis, the Company evaluates judgments and estimates, including those related to accruedexpenses, revenue recognition, deferred revenue and stock-based compensation. The Company bases its estimates on historical experience and on various otherfactors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value ofassets and liabilities that are not apparent from other sources. Changes in 103Table of Contentsestimates are reflected in reported results for the period in which they become known. Actual results could differ materially from those estimates.Cash equivalentsCash equivalents include all highly liquid investments maturing within 90 days from the date of purchase. Cash equivalents consist of money market funds as ofDecember 31, 2015 and 2014 and are valued at cost, plus accrued interest, which approximates fair value.Held-to-Maturity InvestmentsThe Company accounts for its investments in marketable securities in accordance with FASB ASC 320, Investments—Debt and Equity Securities . The Companydetermines the appropriate classification of investments at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securitiescarried at amortized cost are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. At December 31,2015 and 2014, all of the Company’s investments are classified as held-to-maturity.Assets held in restrictionAs of December 31, 2015, assets held in restriction was comprised of a money market collateral account that is restricted and secures the Company’s outstandingletter of credit of $1.1 million for the operating lease for office and laboratory space. The letter of credit is required to be maintained throughout the term of theCompany’s lease which expires on December 1, 2020. As of December 31, 2014, assets held in restriction were comprised of a money market collateral accountthat is restricted and two certificates of deposit that mature annually, and secure the Company’s outstanding letters of credit of $1.1 million and $0.3 million for theoperating leases for office and laboratory space, respectively. The letters of credit are required to be maintained throughout the term of the Company’s leases whichexpire on December 1, 2020 and April 9, 2015, as amended, respectively.Concentrations of credit riskFinancial instruments that subject the Company to significant concentrations of credit risk consist of cash and cash equivalents, assets held in restriction and held-to-maturity investments. All of the Company’s cash and cash equivalents, assets held in restriction and held-to-maturity investments are invested in money marketfunds or U.S. Treasury or agency securities that management believes to be of high credit quality. During 2015, one counterparty accounted for all of theCompany’s revenue.Deferred stock issuance costsDeferred stock issuance costs, which consisted of direct incremental legal and professional accounting fees relating to the Company’s IPO, totaling $1.8 million,were initially capitalized in 2013 and subsequently offset against IPO proceeds in 2014, when the offering was completed. No amounts were deferred as ofDecember 31, 2015 and 2014.Property and equipmentProperty and equipment are stated at cost. Major betterments are capitalized whereas expenditures for maintenance and repairs which do not improve or extend thelife of the respective assets are charged to operations as incurred. Depreciation is provided using the straight-line method over the estimated useful lives: ASSET CATEGORY USEFUL LIVES Office and computer equipment 3-5 years Laboratory equipment 5 years Furniture and fixtures 5 years Leasehold improvements 5 years or the remaining term of lease, if shorter 104Table of ContentsImpairment of long-lived assetsLong-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicatesthat there is an impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value of the related asset. For the yearsended December 31, 2015, 2014 and 2013, no impairments have been recorded.Segment and geographic informationOperating segments are defined as components (business activity from which it earns revenue and incurs expenses) of an enterprise about which discrete financialinformation is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. TheCompany, through its Chief Executive Officer in his role as chief operating decision maker, views its operations and manages its business as one operatingsegment. All material long-lived assets of the Company are located in the United States.Revenue recognitionThe Company generates revenue from research collaboration and license agreements with third parties which contain multiple deliverables. The deliverables in theagreements include (a) the use of the Company’s technology and (b) research and development of product candidates. Such agreements may provide forconsideration to the Company in the form of up-front payments, research and development services, milestone payments and royalties. Revenue is recognized whenthe following criteria have been met: (1) pervasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered and risk of loss haspassed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Multiple-deliverable arrangements are analyzed todetermine whether the deliverables can be separated or whether they must be accounted for as a single unit of accounting. When deliverables are separable,consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principlesare applied to each unit.At the inception of each arrangement that includes payments for optional research or milestones, the Company evaluates whether each option or milestone issubstantive and at risk to both parties on the basis of the contingent nature of the option or milestone. This evaluation includes an assessment of whether (1) theconsideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s); (2) as a resultof a specific outcome resulting from the entity’s performance to achieve the milestone; (3) the consideration relates solely to past performance; and (4) theconsideration is reasonable relative to all of the deliverables and payment terms within the arrangement. Substantive options and milestones are recognized asrevenue upon the achievement of the milestone, assuming all other revenue recognition criteria are met.When the Company determines that an arrangement should be accounted for as a single unit of accounting, it must determine the period over which theperformance obligations will be performed and revenue will be recognized. The Company’s revenue to date results from a research collaboration and licenseagreement entered into in December 2009 and an NIH grant awarded in 2015. Non-refundable up-front license fees under the agreement were initially recorded asdeferred revenue upon receipt and are being recognized as revenue over the Company’s performance period as defined in the agreement. Research anddevelopment service revenue is recognized over the research term as the research and development services are provided. The cost of such services is reflected inresearch and development costs in the period in which it is incurred.Royalty payments are recognized as revenue based on contract terms and reported sales of licensed products, when reported sales are reliably measurable andcollectability is reasonably assured. 105Table of ContentsGrant revenue is recognized in the period during which the related grant research and activities are incurred, provided that the conditions under which the grant wasprovided have been met and the Company only has perfunctory obligations outstanding. Any amounts received in advance of revenue recognition are classified asdeferred revenue in the consolidated balance sheets. Costs associated with grants are included in research and development expenses in the consolidated statementsof operations.Research and development costsResearch and development costs consist of expenses incurred in performing research and development activities, including compensation and benefits for full-timeresearch and development employees, an allocation of facility expenses, overhead expenses and other outside expenses. Research and development costs areexpensed as incurred. Research and development costs that are paid in advance of performance are deferred as a prepaid expense and amortized over the serviceperiod as the services are provided.Preferred stock warrant liabilityFreestanding warrants related to shares that are redeemable, contingently redeemable, or for purchases of preferred stock that are not indexed to the Company’sown stock are classified as a liability on the Company’s balance sheet. The preferred stock warrants were recorded at fair value, estimated using the Black-Scholesoption-pricing model for the year ended December 31, 2013 and until the conversion date of February 4, 2014, and marked to market at each balance sheet datewith changes in the fair value of the liability recorded in the statements of operations. After the closing of the IPO, the preferred stock warrants were no longerclassified as a liability subject to re-measurement as the preferred stock warrants became warrants to purchase shares of common stock. There were no preferredstock warrants outstanding as of December 31, 2015 and 2014.Deferred RentDeferred rent consists of rent escalation payment terms, tenant improvement allowances and other incentives received from landlords related to the Company’soperating leases. Rent escalation represents the difference between actual operating lease payments due and straight-line rent expense, which is recorded by theCompany over the term of the lease. Tenant improvement allowances and other incentives are recorded as deferred rent and amortized as a reduction of periodicrent expense, over the term of the applicable lease.Redeemable convertible preferred stockThe Company initially records preferred stock that may be redeemed at the option of the holder or based on the occurrence of events not under the Company’scontrol outside of stockholders’ equity at the value of the proceeds received or fair value, if lower, net of issuance costs. Subsequently, if it is probable that thepreferred stock will become redeemable, the Company adjusts the carrying value to the redemption value over the period from the issuance date to the earliestpossible redemption date using the effective interest method. If it is not probable that the preferred stock will become redeemable, the Company does not adjust thecarrying value. In the absence of retained earnings these accretion charges are recorded against additional paid-in-capital, if any, and then to accumulated deficit.Common stock valuationDue to the absence of an active market for the Company’s common stock prior to the IPO, the Company utilized methodologies in accordance with the frameworkof the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation ,to estimate the fair value of its common stock. In determining the exercise prices for options granted, the Company has considered the fair value of the commonstock as of the measurement date. The fair value of the common stock has been determined at each award grant date based upon a variety of factors, including theilliquid nature 106Table of Contentsof the common stock, arm’s-length sales of the Company’s capital stock (including redeemable convertible preferred stock), the effect of the rights and preferencesof the preferred stockholders, and the prospects of a liquidity event. Among other factors are the Company’s financial position and historical financial performance,the status of technological developments within the Company’s research, the composition and ability of the current research and management team, an evaluationor benchmark of the Company’s competition, and the current business climate in the marketplace. Significant changes to the key assumptions underlying thefactors used could result in different fair values of common stock at each valuation date.Stock-based compensationThe Company accounts for stock options granted as share-based awards at fair value, which is measured using the Black-Scholes option pricing model. The fairvalue measurement date for employee awards is the date of grant. The fair value measurement date for nonemployee awards is generally the date the performanceof services is completed. Share-based compensation costs are recognized as expense over the requisite service period, which is generally the vesting period, on astraight-line basis for all time-vested awards.For performance-based stock awards, compensation costs are recorded when the Company determines that the achievement of such performance conditions isdeemed probable. This determination requires significant judgment by management. At the probable date, the Company records a cumulative expense catch-up,with the remaining compensation cost being amortized over the remaining vesting period.The Company accounts for restricted stock awards granted to employees at fair value, which is measured based upon the quoted closing market price per share onthe date of grant, adjusted for assumed forfeitures. The compensation costs are recognized over the vesting period, commencing when the Company determines thatit is probable that the awards will vest.Share-based awards to non-employees are re-measured at each reporting date and compensation costs are recognized as services are rendered, generally on astraight-line basis. The Company believes that the fair value of these awards is more reliably measurable than the fair value of the services rendered.Income taxesThe Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financialstatement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences areexpected to reverse. A valuation allowance is provided to reduce the net deferred tax assets to the amount that will more likely than not be realized.The Company also assesses the probability that the positions taken or expected to be taken in its income tax returns will be sustained by taxing authorities. A “morelikely than not” (more than 50 percent) recognition threshold must be met before a tax benefit can be recognized. Tax positions that are more likely than not to besustained are reflected in the Company’s financial statements. Tax positions are measured as the largest amount of tax benefit that is greater than 50 percent likelyof being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The difference between the benefit recognized for aposition and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit. Potential interest and penalties associated with such uncertain taxpositions are recorded as a component of income tax expense.Net loss per common shareThe Company computes basic net loss per common share by dividing net loss attributable to common stockholders by the weighted average number of commonshares outstanding. During periods where the Company earns net income, the Company allocates participating securities a proportional share of net incomedetermined by dividing total weighted average participating securities by the sum of the total weighted average 107Table of Contentscommon shares and participating securities (the “two-class method”). The Company’s preferred stock and vested restricted stock participate in any dividendsdeclared by the Company and are therefore considered to be participating securities. Participating securities have the effect of diluting both basic and dilutedearnings per share during periods of income. During periods where the Company incurred net loss, the Company allocates no loss to participating securitiesbecause they have no contractual obligation to share in the losses of the Company. The Company computes diluted net loss per common share after givingconsideration 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.Comprehensive lossThe Company has no comprehensive loss items other than net loss.Guarantees and indemnificationsThe Company is not a guarantor under any agreements.The Company leases office space under an operating lease. The Company has standard indemnification arrangements under these leases that require the Companyto indemnify the landlord against losses, liabilities, and claims incurred in connection with the premises covered by the Company’s lease, the Company’s use of thepremises, property damage or personal injury, and breach of the agreement.Through December 31, 2015, the Company had not experienced any losses related to this indemnification obligation and no claims with respect thereto wereoutstanding. The Company does not expect material claims related to this indemnification obligation, and consequently, concluded that the fair value of thisobligation is negligible and no related liabilities were established.The Company has indemnified, under pre-determined conditions and limitations, a counterparty for infringement of third-party intellectual property rights by theCompany. The Company does not believe, based on information available, that it is probable that any material amounts will be paid under these indemnificationprovisions.As permitted under Delaware law, the Company indemnifies its officers, directors, and employees for certain events or occurrences while the officer or director is,or was, serving at the Company’s request in such capacity. The term of the indemnification is for the officer’s or director’s lifetime.Recent Accounting PronouncementsLeasesIn February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The ASU requireslessees to put most leases on their balance sheets as a liability for the obligation to make lease payments and as a right-of-use asset, but recognize expenses on theincome statements in a manner similar to today’s accounting. The guidance also eliminates the current real estate-specific provisions for all entities. For calendar-year public entities, the guidance becomes effective in 2019 and interim periods within that year. Early adoption is permitted for all entities. The Company has notchosen early adoption for this ASU and is currently evaluating its effect on the Company’s consolidated financial statements.Income TaxesIn November 2015, the FASB issued ASU 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes (Topic 740). ASU 2015-17 simplifies thepresentation of deferred income taxes by eliminating the separate classification of deferred income tax assets and liabilities into current and noncurrent amounts inthe consolidated balance sheet statement of financial position. The amendments in the update require that all deferred tax assets and liabilities be classified asnoncurrent in the consolidated balance sheet. The amendments in this update are 108Table of Contentseffective for annual periods beginning after December 15, 2017, and interim periods therein and may be applied either prospectively or retrospectively to allperiods presented. Early adoption is permitted. The Company has early adopted this standard in the fourth quarter of 2015 on a prospective basis, and it did nothave an effect on the Company’s consolidated financial statements.Revenue RecognitionIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 amends the guidance for accounting for revenuefrom contracts with customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition,and creates a new Topic 606, Revenue from Contracts with Customers. This guidance was originally pronounced to become effective for fiscal years beginningafter December 15, 2016, with early adoption not permitted. On July 9, 2015, the FASB decided to defer the effective date of the ASU by one year. As a result, theCompany will be required to apply the new revenue standard to annual reporting periods beginning after December 15, 2017, and would be permitted to adopt theASU early, but not before the original public organization effective date (annual periods beginning after December 15, 2016). Two adoption methods are permitted:retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adoptingthe ASU recognized at the date of initial application. The Company has not yet determined which adoption method it will utilize or the effect, if any, the adoptionof this guidance will have on its consolidated financial statements through December 31, 2015 as the Company has yet to record revenue from contracts withcustomers.3. Net Loss Per Share Attributable to Common StockholdersThe following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company (in thousands, exceptshare and per share data): YEARS ENDED DECEMBER 31,     2015         2014         2013     Net loss $(62,839) $(47,939) $(18,518) Accretion of preferred stock issuance costs to redemption value — (204) (121) Accrued dividends on preferred stock — — (2,267) Net loss attributable to common stockholders—basic and diluted $(62,839) $(48,143) $(20,906) Weighted-average number of common shares—basic and diluted 20,320,628 16,070,054 29,463 Net loss per share attributable to common stockholders—basicand diluted $(3.09) $(3.00) $(709.57) The following potentially dilutive securities outstanding during the period, prior to the use of the treasury stock method or if-converted method, have been excludedfrom the computation of diluted weighted-average common shares outstanding, because such securities had an anti-dilutive impact since the Company has a netloss attributable to common stockholders: AS OF DECEMBER 31,       2015             2014             2013       Options to purchase common stock 4,297,300 2,764,144 403,959 Warrants to purchase common stock 87,901 80,722 2,198 Warrants to purchase redeemable convertible preferred stock — 12,763 91,543 Redeemable convertible preferred stock — 1,015,426 5,634,458 Unvested restricted stock 68,656 92,932 7 109Table of Contents4. Held-to-maturity InvestmentsThe Company invests its excess cash balances in short-term and long-term fixed-income investments. The Company determines the appropriate classification ofinvestments at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities carried at amortized cost are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity.The following tables provide information relating to held-to-maturity investments: AmortizedCost Gross UnrealizedGains Gross UnrealizedLosses Fair Value At December 31, 2015: Held-to-maturity investments U.S. Government treasury $38,551 $— $(47) $38,504 Total held-to-maturity investments $38,551 $— $(47) $38,504 AmortizedCost Gross UnrealizedGains Gross UnrealizedLosses Fair Value At December 31, 2014: Held-to-maturity investments U.S. Government treasury and agency securities $72,556 $2 $(26) $72,532 Total held-to-maturity investments $72,556 $2 $(26) $72,532 The amortized cost and fair value of held-to-maturity investments by contractual maturities at December 31, 2015, are as follows: Held-to-Maturity AmortizedCost Fair Value Maturing in one year or less $38,551 $38,504 Total $38,551 $38,504 5. Prepaid Expenses and Other Current AssetsPrepaid expenses and other current assets consists of the following: AS OF DECEMBER 31, 2015 2014 Prepaid expenses $1,479 $1,115 Interest receivable and other current assets 53 79 Prepaid expenses and other current assets $1,532 $1,194 110Table of Contents6. Property and Equipment, NetProperty and equipment, net consists of the following: AS OF DECEMBER 31, 2015 2014 Office and computer equipment $705 $503 Laboratory equipment 4,161 3,209 Leasehold improvements 257 887 Furniture and fixtures 477 624 Property and equipment—at cost 5,600 5,223 Less accumulated depreciation (2,916) (3,058) Property and equipment—net $2,684 $2,165 Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $0.7 million, $0.7 million and, $0.5 million, respectively.7. Accrued Expenses and Other Current LiabilitiesAccrued expenses and other current liabilities consists of the following: AS OF DECEMBER 31, 2015 2014 Other accrued expenses $4,284 $2,362 Accrued compensation and benefits 2,092 1,483 Accrued expenses and other current liabilities $6,376 $3,845 8. Long-term DebtOn March 26, 2009, as amended in June 2011, the Company entered into a loan and security agreement with an independent finance company, HerculesTechnology II, LP (Hercules), for up to $7.0 million. The Hercules loan, which has since been repaid, was collateralized by a security interest in all tangible assets.The applicable annual interest rate was 10.15% from December 31, 2013 through April 7, 2014, the date the Company repaid the remaining amount of the Herculesloan in full for a total amount of $3.6 million.In connection with the Hercules loan, the Company issued warrants to Hercules for the purchase of an aggregate of 21,000 shares of the Series A preferred stockand 26,400 shares of the Series B preferred stock each at an exercise price of $25.00 per share. Immediately prior to the closing of the IPO on February 4, 2014, allof the outstanding shares of the Series A, Series B and Series C preferred stock were automatically converted into shares of common stock on a one-for-one basis.The fair value of the warrants was classified as a liability in the accompanying consolidated balance sheet as of December 31, 2013. After the conversion of SeriesA and Series B preferred stock, the fair value of the warrants was reclassified as a part of stockholders’ equity. The re-measurement of the liability continued untilthe date of the closing of the IPO. The fair value of the outstanding Hercules warrants as of the IPO closing date was $0.8 million and was determined using theBlack-Scholes option-pricing model with the following assumptions: FEBRUARY 4,2014 Stock price $32.66 Expected option term (in years) 3.0 Expected volatility 62% Risk-free interest rate 0.7% Expected dividend yield 0.0% 111Table of ContentsOn February 11, 2014, Hercules net exercised the warrants in exchange for a total of 12,702 shares of common stock. There were no Series A and Series B warrantsoutstanding at December 31, 2015 and 2014.The adjustment to this preferred stock warrant liability related to the Hercules warrants was recorded in other income (expense) and amounted to $0, $(0.7) millionand $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.9. Bridge Loan FinancingOn June 26, 2013, the Company issued convertible notes and warrants for the purchase of preferred stock in the next qualified financing to then existing preferredand common stockholders for approximately $3.0 million (bridge loan financing). The notes were due to mature on June 26, 2018, unless previously converted orrepaid. In the event the Company were to obtain financing through the issuance of equity securities, including an IPO, prior to the maturity date, the notes wouldautomatically convert into shares of the equity issued in such a qualified financing and at the lowest price per share of the equity securities issued and sold in thatfinancing. If a liquidation event were to occur prior to June 26, 2018, the notes could be converted at the option of the holder for an amount equal to two times theoutstanding principal balance of the notes in cash or the issuance of Series B preferred stock equal to the outstanding principal balance of the notes divided by 0.9.The notes had an interest rate of 7% per year, payable at the earlier of the notes’ conversion or maturity.The purpose of this bridge loan financing was to provide operating cash to the Company until it completed the issuance of the Series C in July 2013, at which timethe notes were converted into 428,526 shares of Series C preferred shares at $7.00 per share and the related accrued interest of $20 became payable.In connection with the issuance of the bridge loan financing, the Company issued warrants for the purchase of an aggregate of 85,703 shares of the Company’spreferred stock in the next qualified financing at an exercise price of $7.00 per share. The warrants are immediately exercisable and expire 5 years from the date ofissuance. The Company estimated the fair value of the warrants at the date of issuance to be $0.3 million. The fair value of the warrants was recorded as a discountto the convertible notes upon issuance, and was initially classified as a liability in the accompanying consolidated balance sheets. The issuance date fair value wasdetermined using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of approximately 1.2%, expected life of 5 years,volatility of 64%, and no expected dividends. After the conversion of Series C preferred stock, the fair value of the warrants related to Series C preferred stockoutstanding immediately prior to the closing of the IPO was reclassified as a part of stockholders’ equity (deficit). The re-measurement of the Series C preferredstock warrant liability continued until the closing date of the IPO.The estimated fair value of the outstanding Series C warrants at the IPO closing date and December 31, 2013 was $2.3 million and $0.4 million, respectively. Theestimated fair values were determined using the Black-Scholes option-pricing model with the following assumptions: FEBRUARY 4,2014 DECEMBER 31,2013 Stock price $32.66 $8.84 Expected option term (in years) 4.4 4.5 Expected volatility 65% 64% Risk-free interest rate 1.5% 1.3% Expected dividend yield 0.0% 0.0% There were no Series C warrants outstanding at December 31, 2015 and 2014. As of the closing of the IPO on February 4, 2014, the conversion of Series Cpreferred stock into common stock triggered the conversion all Series C warrants into common share warrants. As of December 31, 2015 and 2014 there were85,703 common share warrants outstanding. 112Table of ContentsThe adjustment to this preferred stock warrant liability was recorded in other income (expense) and for the years ended December 31, 2015, 2014, and 2013amounted to $0, $(1.9) million and $(0.1) million, respectively.The bridge loan discount was amortized to interest expense using the effective interest method over the loan repayment term, and the unamortized discount of $0.3million was reflected as a loss on extinguishment of the bridge loan in the accompanying statement of operations, when the notes were converted to Series C in July2013.10. RevenueNIH Grants – In April 2015, the National Cancer Institute (NCI), a division of the National Institutes of Health (NIH), awarded the Company a grant related tocancer treatment research. The project period for this grant covers a three month period which commenced in April 2015, with total funds available ofapproximately $0.2 million. The payment of the NIH grant award was based upon subcontractor and internal costs incurred that are specifically covered by thegrant, and where applicable, a facilities and administrative rate that provides funding for overhead expenses. During the year ended December 31, 2015, theCompany recognized $0.2 million of revenue associated with the NIH grant award.Collaboration and License Agreements – In December 2009, the Company entered into a research collaboration and license agreement with Kyowa HakkoKirin Co., Ltd. (KHK) for the research, development and commercialization of drug delivery systems and DsiRNA pharmaceuticals for therapeutic targetsprimarily in oncology. The Company granted KHK an exclusive, worldwide, royalty-bearing and sub-licensable license to the DsiRNA and drug deliverytechnologies and intellectual property for certain selected DsiRNA-based compounds. Under the agreement, KHK is responsible for activities to develop,manufacture and commercialize the selected DsiRNA-based compounds and pharmaceutical products containing such compounds.Since the initiation of the research collaboration and license agreement two target programs, including the initial target KRAS, have been nominated by KHK forformal development studies. Both target programs utilize the Company’s specific RNAi-inducing double-stranded DsiRNA molecules and a lipid nanoparticle drugdelivery system proprietary to KHK.The Company is entitled to receive up to $110.0 million in regulatory, clinical and commercialization milestone payments, and royalties on net sales of eachproduct candidate under the KHK agreement. Since contract inception, the Company has received payments totaling $17.5 million.The deliverables at the effective date of the agreement include delivery of intellectual property, conducting the KRAS research and development program, andproviding KHK the exclusive option right to reserve additional targets. The Company concluded the performance of additional research for each additional target,if exercised by KHK, is not a deliverable of the agreement at inception because it is a substantive option and is not priced at a significant and incremental discount.The performance period is the expected period over which the services of the combined unit are performed which spans from the contract inception through the endof 2011.The Company has no further obligations under the research collaboration and license agreement related to the KRAS target or the additional target.11. Redeemable Convertible Preferred StockThe consummation of the IPO on February 4, 2014 resulted in the conversion of all of the shares of the Company’s Series A, Series B and Series C preferred stockinto shares of common stock. Each share of Series A, Series B and Series C preferred stock was automatically converted into common stock on a one-for-one basis.The conversion of Series A, Series B and Series C preferred stock resulted in the issuance of 10,589,434 shares of common stock. 113Table of ContentsAfter the conversion of Series C preferred stock, the fair value of the warrants related to Series C preferred stock outstanding immediately prior to the closing of theIPO was reclassified as a part of stockholders’ equity. The re-measurement of the Series C preferred stock warrant liability continued until the closing date of theIPO. The fair value of the Series C preferred stock warrants as of the IPO closing date was $2.3 million and was determined using the Black-Scholes option-pricingmodel with the following assumptions: FEBRUARY 4,2014 Stock price $32.66 Expected option term (in years) 4.39 Expected volatility 65% Risk-free interest rate 1.52% Expected dividend yield 0.00% The adjustment to the Series C preferred stock warrant liability was recorded in other income (expense) and amounted to $0 and ($1.9) million for the years endedDecember 31, 2015 and 2014, respectively.12. Common Stock and Stock Option PlanCommon stockPrior to the IPO, voting, dividend and liquidation rights of the holders of the common stock were subject to and qualified by the rights, powers and preferences ofthe holders of the preferred stock.VotingThe holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders. The number of authorized shares ofcommon stock may be increased or decreased (but not below the number of shares thereof) by the affirmative vote of the holders of shares of capital stock of theCompany representing a majority of the votes represented by all outstanding shares of capital stock of the Company entitled to vote.Stock option planOn July 1, 2007, the Board of Directors approved the 2007 Employee, Director, and Consultant Stock Plan, which provides for the grant of qualified incentivestock options, nonqualified stock options, and restricted stock to employees, directors, and non-employees. On May 5, 2010, the Board of Directors approved theFourth Amended and Restated 2007 Employee, Director, and Consultant Stock Plan (the “2007 Plan”), which authorizes further issuances of up to 30,254 shares ofthe Company’s common stock. On October 14, 2010, the Board of Directors approved the retirement of the 2007 Plan and adopted the 2010 Employee Director andConsultant Equity Incentive Plan (the “2010 Plan”). The 2010 Plan, as adopted, authorizes further issuances of up to 45,214 shares of the Company’s commonstock. On February 9, 2012, the Board of Directors approved an amendment to the 2010 Plan to increase the number of shares authorized for purchase by 4,800shares, thereby providing for the purchase of up to 49,014 shares of the Company’s common stock. On July 30, 2013, the Board of Directors approved anamendment to the 2010 Plan to increase the number of shares authorized for purchase by 1,715,851 shares, thereby providing for the purchase of up to 1,764,865shares of the Company’s common stock. The stock options generally vest 25% after 12 months, followed by ratable vesting over 36 months and expire 10 yearsfrom the grant date. On January 14, 2014, the Board of Directors approved the retirement of the 2010 Plan and adopted the 2014 Performance Incentive Plan (the“2014 Plan”). The 2014 Plan, as adopted, authorizes the issuances of up to 1,900,000 shares of the Company’s common stock, with an additional 4% of the totaloutstanding common shares becoming available at each year ending December 31. In June 2015, the 2014 plan was amended to increase the replenishmentpercentage from 4% to 5% of outstanding common shares annually and to allow the reissuance thereunder of awards and grants that expire or are canceled,terminated, 114Table of Contentsforfeited or fail to vest under the 2007 Plan and the 2010 Plan. The stock options for new hires generally vest 25% after 12 months, followed by ratable vestingover 36 months and expire 10 years from the grant date.The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in thetable below. Expected volatility for the Company’s common stock was determined based on an average of the historical volatility of a peer group of similarcompanies. The Company has limited stock option exercise information, as such; the expected term of stock options granted was calculated using the simplifiedmethod, which represents the average of the contractual term of the stock option and the weighted-average vesting period of the stock option. The assumeddividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The risk-free rate for periods within the expected life ofthe stock option is based upon the U.S. Treasury yield curve in effect at the time of grant.The assumptions used in the Black-Scholes option-pricing model for stock options granted during the years ended December 31, 2015, 2014 and 2013 are asfollows: DECEMBER 31,     2015         2014         2013     Expected option term (in years) 5.5 – 6.3 5.5 – 6.3 6.0 Expected volatility 67% – 71% 64% – 65% 64% – 69% Risk-free interest rate 1.5% – 1.9% 1.7% – 2.0% 1.2% – 1.9% Expected dividend yield 0.0% 0.0% 0.0% The weighted-average grant date fair value of stock options granted during the years ended December 31, 2015, 2014 and 2013 was $9.67, $9.62, and $2.52 pershare, respectively. As of December 31, 2015, there was $18.6 million of unrecognized compensation cost related to unvested employee stock options which areexpected to be recognized over a weighted-average period of approximately 3 years. The intrinsic value of stock options exercised was $0.4 million, $3.2 millionand $0 for the years ended December 31, 2015, 2014 and 2013, respectively. Cash received from stock option exercises for the year ended December 31, 2015 was$0.1 million.On September 24, 2013, the Board of Directors approved the repricing of all of the then outstanding 24,811 stock options, with an original per-share weightedaverage exercise price of $45.16, to a new per-share exercise price of $3.42, which represented the current per-share fair market value. The repricing was treated bythe Company as an exchange of the original awards for new awards. The incremental fair value of the modification, which was $30, was recognized in thestatement of operations in 2013, representing the value of vested awards.A summary of stock option activity for employee and non-employee awards under the Plan are presented below: NUMBER OF OPTIONS WEIGHTED- AVERAGE PRICE PER SHARE WEIGHTED- AVERAGE REMAINING CONTRACTUALTERM (YEARS) OUTSTANDING—January 1, 2015 3,604,713 $ 11.28 9.1 Granted 1,160,626 15.39 Exercised (29,506) 4.98 Forfeited/Canceled (336,408) 13.46 OUTSTANDING—December 31, 2015 4,399,425 12.24 8.1 EXERCISABLE—December 31, 2015 2,058,772 11.05 7.5 Vested and expected to vest as of December 31, 2015 4,281,737 $12.22 8.1 Under the Company’s 2014 stock option plans, the Company has reserved 429,821 shares of common stock for future issuance at December 31, 2015. 115Table of ContentsStock options granted to non-employeesIn September 2013, the Company granted stock options to purchase 132,500 shares of common stock to non-employees with an initial fair value of $0.3 million.These options vest ratably over forty-eight months from the initial vesting date of July 30, 2013. Based on the terms of the non-employee stock option agreements,the Company recorded stock-based compensation expense of $0.2 million, $1.9 million and $0 during the years ended December 31, 2015, 2014 and 2013,respectively. The assumptions used to estimate fair value were as follows: DECEMBER 31, 2015 2014 2013 Stock price $8.21 – $24.43 $9.37 – $41.12 $7.42 Expected option term (in years) 4.37 – 5.29 0.25 – 6.86 7.0 Expected volatility 66% – 73% 56% – 68% 66% Risk-free interest rate 1.2% – 1.6% 0.1% – 2.3% 2.8% Expected dividend yield 0.0% 0.0% 0.0% As of December 31, 2015, there were 26,250 unvested stock options held by non-employees. The remaining unrecognized compensation cost related to unvestednon-employee stock options is dependent on the valuation inputs used on each re-measurement date and will be recognized over a weighted-average period of thirtymonths.Restricted common stockDuring 2014, the Company issued a total of 44,000 shares of the Company’s restricted common stock, of which 4,000 were fully-vested at grant date. The fairvalue of these shares were $0.7 million at the grant date.As of December 31, 2015 and 2014 the unrecognized compensation cost related to restricted common stock was $0.4 million and $0.5 million, respectively. Thetotal fair value of restricted stock awards that vested during the years ended December 31, 2015, 2014 and 2013 (measured on the date of vesting) was $0.2 million,$0.1 million and $0.A summary of the Company’s restricted common stock is presented below: SHARES WEIGHTED- AVERAGE GRANT DATEFAIR VALUE PER SHARE Nonvested—January 1, 2014 — $— Issued 44,000 16.30 Vested (4,000) 14.34 Nonvested—December 31, 2014 40,000 16.30 Issued — — Vested (10,000) 16.30 Nonvested—December 31, 2015 30,000 $16.30 Stock-based compensation expense is classified in the statements of operations as follows: YEAR ENDED DECEMBER 31,     2015         2014         2013     Research and development $ 4,202 $ 4,183 $ 124 General and administrative 5,530 4,054 371 Total $9,732 $8,237 $495 116Table of Contents13. Fair Value MeasurementsFair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction betweenmarket participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use inpricing an asset or liability. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize theuse of unobservable inputs. As a basis for considering such assumption the accounting literature establishes a three-tier value hierarchy which prioritizes the inputsused in measuring fair value as follows: (Level 1) observable inputs, such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in activemarkets that are observable either directly or indirectly; and (Level 3) unobservable inputs for which there is little or no market data, which requires the Companyto develop its own assumptions.A summary of the Company’s assets that are measured or disclosed at fair value on a recurring basis as of December 31, 2015 and 2014 are presented below: Description At December 31,2015 (Level 1) (Level 2) (Level 3) Cash equivalents Money market fund $45,557 $45,557 $— $— Held-to-maturity investments U.S. treasury securities 38,504 — 38,504 — Assets held in restriction Money market fund 1,116 — 1,116 — Total $85,177 $45,557 $39,620 $— Description At December 31,2014 (Level 1) (Level 2) (Level 3) Cash equivalents Money market fund $20,425 $20,425 $— $— Held-to-maturity investments U.S. treasury securities and governmentagency bonds 72,532 — 72,532 — Assets held in restriction Money market fund and certificate ofdeposit 1,380 — 1,380 — Total $94,337 $20,425 $73,912 $— The Company’s cash equivalents, primarily money market accounts are classified within Level 1 of the fair value hierarchy because they are valued using quotedprices as of December 31, 2015 and 2014, respectively.The Company’s assets held in restriction bore interest at the prevailing market rates for instruments with similar characteristics and, accordingly, the carrying valueof these instruments also approximated their fair value and the financial instruments were classified within Level 2 of the fair value hierarchy because the inputs tothe fair value measurement are valued using observable inputs as of December 31, 2015 and 2014, respectively.The Company’s held-to-maturity investments bore interest at the prevailing market rates for instruments with similar characteristics. The financial instruments wereclassified within Level 2 of the fair value hierarchy because the inputs to the fair value measurement are valued using observable inputs as of December 31, 2015and 2014, respectively. 117Table of ContentsFor the years ended December 31, 2015 and 2014, there were no transfers between Level 1 and Level 2.The fair value of the preferred stock warrant liability was determined using the Black-Scholes option-pricing model until the IPO conversion date of February 4,2014. After the closing of the IPO, the remaining preferred stock warrant liability was no longer subject to re-measurement as the warrants to purchase theCompany’s preferred stock became warrants to purchase shares of the Company’s common stock. As of the IPO closing date, the fair value of the preferred stockwarrants was based significantly on the fair value of the Company’s publicly traded common stock and other observable inputs and was reclassified to Level 2.The fair value of the preferred stock warrant prior to the closing of the IPO was based significantly on the fair value of the preferred stock, which was developedusing unobservable inputs, and was classified within Level 3. The following table provides a roll-forward of the Company’s liabilities measured at fair value on arecurring basis using unobservable inputs (Level 3): BALANCE—January 1, 2013 331 Issuance of preferred stock warrants 324 Change in fair value of warrant liability (126) BALANCE—December 31, 2013 529 Change in fair value of warrant liability 2,559 Transfers to Level 2 (3,088) BALANCE—December 31, 2014 $— There were no preferred stock warrants outstanding as of December 31, 2015 and 2014, respectively.14. Income TaxesThe Company has no current and no deferred income tax expense for the year ended December 31, 2015, and $0.1 million of current and no deferred income taxexpense for 2014. The Company did not record a federal income tax provision or benefit for the year ended December 31, 2015 and 2014, respectively.The reconciliation between income taxes computed at the federal statutory income tax rate and the provision for (benefit from) income taxes is as follows: YEARS ENDED DECEMBER 31,     2015         2014         2013     Federal statutory rate 34.0% 34.0% 34.0% Effect of: Impact of foreign rate differential (12.6) — — Change in valuation allowance (24.4) (32.0) (35.4) Research and development tax credit 0.9 0.8 2.5 Stock-based compensation (0.9) (2.6) (1.3) Other 3.0 (0.2) 0.2 Total 0.0% 0.0% 0.0% 118Table of ContentsThe components of the deferred tax assets are as follows: As of December 31, 2015 2014 Deferred tax assets: Net operating loss carryforwards $37,017 $41,846 Capitalized research and development costs 2,431 2,646 Research and development credit carryforwards 3,510 2,360 Stock compensation 5,369 2,479 Depreciation and other costs (74) 372 Net deferred tax assets 48,253 49,703 Valuation allowance (48,253) (49,703) Net deferred tax assets $— $— Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets and determined that it ismore likely than not that the Company will not recognize the benefits of the net deferred tax assets. As a result, the Company has a valuation allowance atDecember 31, 2015 and 2014. The valuation allowance increased in 2014 and decreased in 2015 by $18.7 million and $1.4 million, primarily due to the increase inthe Company’s net operating loss carryforwards, capitalized costs and stock compensation for 2014 and a decrease in 2015 as a result of prior year losses utilized tooffset an intercompany gain. As of December 31, 2015, the Company has approximately $92.5 million of federal and $77.6 million of state net operating losscarryforwards, and $2.1 million of federal and $1.4 million of Massachusetts tax credits that expire starting in 2028.Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating losscarryforward period. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership, including a sale of the Companyor significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which couldbe used annually to offset future taxable income.As of December 31, 2015, the Company had $1.4 million of unrecognized tax benefits, of which $1.4 million would affect income tax expense if recognized,before consideration of the Company’s valuation allowance. The Company does not expect the unrecognized tax benefits to change significantly over the next 12months. The Company recognizes both interest and penalties associated with uncertain tax positions as a component of income tax expense. As of December 31,2015 and 2014, the Company has not accrued any penalties or made provisions for interest.A reconciliation of the gross unrecognized tax benefit is as follows (in thousands): Year Ended December 31,     2015         2014     Unrecognized tax benefits at the beginning of the period $1,216 $ 865 Additions for current tax positions 421 220 Changes for previous tax positions (207) 131 Unrecognized tax benefits at the end of the period $1,430 $1,216 The Company files income tax returns in the United States and Commonwealth of Massachusetts. The tax years 2007 through 2015 remain open to examination bythese jurisdictions, as carryforward attributes generated in past years may be adjusted in a future period. The Company is not currently under examination by theInternal 119Table of ContentsRevenue Service or any other jurisdiction for these years. The Company has not recorded any interest or penalties for unrecognized tax benefits since its inception.In December 2014, the Company licensed all of its non-U.S. intellectual property rights to a non-U.S. wholly-owned subsidiary and, in December 2015, theCompany licensed its U.S. intellectual property rights to the same wholly-owned subsidiary. For financial reporting purposes 2015 loss before provision for incometaxes includes foreign losses of $23.0 million.15. Commitments and ContingenciesFacility leaseOn July 11, 2014, the Company executed a non-cancelable operating lease for office and laboratory space in Cambridge, Massachusetts. The lease agreementobligates the Company to future minimum payments totaling $9.5 million over a six-year lease term. Rent expense is recorded on the straight-line basis and,therefore, the Company had a deferred rent obligation in the amount of $4 and $10 as of December 31, 2015 and 2014, respectively. The lease commenced onDecember 1, 2014. As part of the lease agreement, the Company established a $1.1 million letter of credit, secured by a restricted money market account which wasincluded in assets held in restriction at December 31, 2015 and 2014.On April 9, 2015, the Company terminated its lease and sub-lease at 480 Arsenal Street in Watertown. The transactions did not have a material impact on theCompany’s financial statements. The associated letter of credit was cancelled by the bank during the second quarter of 2015, and a $0.3 million certificate ofdeposit that secured the letter of credit was redeemed and transferred to cash and cash equivalents.Rent expense was $1.7 million, $0.7 million and $0.9 million for the years ended December 31, 2015, 2014 and 2013, respectively.Under the current lease agreement, future minimum payments payable are approximately as follows: PERIOD ENDING DECEMBER 31 OPERATINGLEASES 2016 $1,536 2017 1,582 2018 1,629 2019 1,678 2020 1,581 Total $8,006 City of Hope license agreementIn September 2007, the Company entered into a license agreement with City of Hope, an independent academic research and medical center (the “MedicalCenter”). In consideration for the right to develop, manufacture, and commercialize products based on certain of the Medical Center’s intellectual property, theCompany paid a one-time, non-refundable license fee and issued shares of common stock as consideration for the license.The Company is required to pay an annual license maintenance fee, reimburse the Medical Center for patent costs incurred, and pay an amount within the range of$5.0 million to $10.0 million upon the achievement of certain milestones, and royalties on future sales, if any. There were no sublicense and other fees accrued atDecember 31, 2015, and 2014. The license agreement will remain in effect until the expiration of the last patents or copyrights licensed under the agreement oruntil all obligations under the agreement with respect to payment of milestones have terminated or expired. The Company may terminate the license agreement atany time upon 120Table of Contents90 days written notice to the Medical Center. The Company recorded research and development expense, related to the agreement with the Medical Center, of $0.1million, $0.1 million and $0.5 million in 2015, 2014 and 2013, respectively.Plant Bioscience Limited license agreementIn September 2013, the Company entered into a commercial license agreement with Plant Bioscience Limited (PBL), pursuant to which PBL has granted to theCompany a license to certain of its U.S. patents and patent applications to research, discover, develop, manufacture, sell, import and export, products incorporatingone or more short RNA molecules (SRMs).The Company has paid PBL a one-time, non-refundable signature fee and will pay PBL a nomination fee for any additional SRMs nominated by the Companyunder the agreement. The Company is further obligated to pay PBL milestone payments upon achievement of certain clinical and regulatory milestones. During2014, the Company paid $0.1 million to PBL based on meeting a clinical milestone. In addition, PBL is entitled to receive royalties of any net sales revenue of anylicensed product candidates sold by the Company. Research and development expense related to this agreement was $0, $0.1 million and $0.1 million in 2015,2014 and 2013, respectively.Arbutus Biopharma Corporation license agreementIn November 2014, the Company signed a licensing and collaboration agreement with Arbutus to license Arbutus’ LNP delivery technology for exclusive use in theCompany’s primary hyperoxaluria type 1 (PH1) development program. The Company will use Arbutus’ LNP technology to deliver DCR-PH1, for the treatment ofPH1. As of December 31, 2015, the Company paid $3.0 million in cumulative license fees. Arbutus is entitled to receive additional payments of $22.0 million inaggregate development milestones, plus a mid-single-digit royalty on future PH1 sales. This new partnership also includes a supply agreement with Arbutusproviding clinical drug supply and regulatory support.16. LitigationOn June 10, 2015, Alnylam Pharmaceuticals, Inc. (Alnylam) filed a complaint against the Company in the Superior Court of Middlesex County, Massachusetts.The complaint alleges misappropriation of confidential, proprietary, and trade secret information, as well as other related claims, in connection with the Company’shiring of a number of former employees of Merck & Co., Inc. (Merck) and its discussions with Merck regarding the acquisition of its subsidiary, SirnaTherapeutics, Inc. (Sirna), which was subsequently acquired by Alnylam. The complaint seeks among other things, unspecified damages, attorneys’ fees, and anorder permanently enjoining the Company from disclosing or using any of Alnylam’s confidential information or trade secrets.The Company believes that these allegations lack merit, has filed an answer denying all liability and intends to continue to vigorously defend all claims asserted. Atthis time, the Company has not recorded a liability in connection with these matters because it believes that any potential loss is neither probable nor reasonablyestimable.From time to time, the Company may be subject to various claims and legal proceedings. If the potential loss from any claim, asserted or unasserted, or legalproceeding is considered probable and the amount is reasonably estimable, the Company will accrue a liability for the estimated loss. There were no litigationliabilities outstanding as of December 31, 2015 and December 31, 2014.17. Employee Benefit PlanThe Company has a 401(k) retirement plan in which substantially all employees are eligible to participate. Eligible employees may elect to contribute up to themaximum limits, as set by the Internal Revenue Service, of their eligible compensation. The Company made discretionary plan contributions of $0.4 million, $0.2million and $0.1 million in 2015, 2014 and 2013, respectively. 121Table of Contents18. Quarterly Financial Data (Unaudited) FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL YEAR 2015 Revenue $— $184 $— $— $184 Net loss (14,084) (16,176) (16,944) (15,635) (62,839) Net loss attributable to common stockholders (14,084) (16,176) (16,944) (15,635) (62,839) Net loss per share attributable to common stockholders—basicand diluted $(0.79) $(0.86) $(0.82) $(0.76) $(3.09) FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL YEAR 2014 Revenue $— $— $— $— $— Net loss (10,804) (11,355) (11,193) (14,587) (47,939) Net loss attributable to common stockholders (11,008) (11,355) (11,193) (14,587) (48,143) Net loss per share attributable to common stockholders—basicand diluted $(1.02) $(0.64) $(0.63) $(0.82) $(3.00) Full year amounts may not sum due to rounding.****** Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and ProceduresDisclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports thatwe file under the Securities Exchange Act of 1934, as amended (Exchange Act), with the Securities and Exchange Commission (SEC) is recorded, processed,summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to ourmanagement, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.As of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation ofour management, including the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of our disclosure controls andprocedures pursuant to Exchange Act Rule 13a-15. Based upon, and as of the date of, this evaluation, the chief executive officer and the chief financial officerconcluded that our disclosure controls and procedures were effective. Accordingly, management believes that the financial statements included in this report fairlypresent in all material respects our financial condition, results of operations and cash flows for the periods presented.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 122Table of Contents2015 based on the guidelines established in Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the TreadwayCommission. Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2015.Attestation Report of the Registered Public Accounting FirmThis Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm as we are an “emerging growthcompany” as of December 31, 2015, as defined in the Jumpstart Our Business Startups Act of 2012.Changes in Internal Control Over Financial ReportingWe continuously seek to improve the efficiency and effectiveness of our internal controls. This results in refinements to processes throughout the Company.There was no change in our internal control over financial reporting during the quarter ended December 31, 2015, which was identified in connection with ourmanagement’s evaluation required by Exchange Act Rules 13a-15(f) and 15d-15(f) that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.Inherent Limitations on the Effectiveness of ControlsOur management, including the chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internalcontrol over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, notabsolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include therealities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system ofcontrols also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achievingits stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliancewith the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud mayoccur and not be detected. Item 9B.Other InformationNone. 123Table of ContentsPART III Item 10.Directors, Executive Officers and Corporate GovernanceThe information required by this item and not set forth below will be set forth in the definitive proxy statement for our 2016 Annual Meeting of Stockholdersto be filed with the Securities and Exchange Commission (SEC) pursuant to Regulation 14A (Proxy Statement) not later than 120 days after the end of the fiscalyear covered by this Annual Report on Form 10-K, and is incorporated herein by reference.Information regarding our audit committee financial expert will be set forth in the Proxy Statement and is incorporated herein by reference.We have adopted a Code of Business Conduct and Ethics applicable to all employees, including the principal executive officer, principal financial officerand principal accounting officer or controller, or persons performing similar functions. The Code of Business Conduct and Ethics is posted on our website atwww.dicerna.com . Amendments to, and waivers from, the Code of Business Conduct and Ethics that apply to any of these officers, or persons performing similarfunctions, and that relate to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K will be disclosed at the website addressprovided above and, to the extent required by applicable regulations, on a current report on Form 8-K. Item 11.Executive CompensationThe information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 13.Certain Relationships and Related Transactions and Director IndependenceThe information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 14.Principal Accountant Fees and ServicesThe information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. 124Table of ContentsPART IV Item 15.Exhibits and Financial Statement Schedules (1)Consolidated Financial Statements:The following consolidated financial statements are filed as part of this Annual Report on Form 10-K under Item 8 “Financial Statements and SupplementaryData.” Page Report of Independent Registered Public Accounting Firm 98 Consolidated Balance Sheets 99 Consolidated Statements of Operations 100 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity / (Deficit) 101 Consolidated Statements of Cash Flows 102 Notes to Consolidated Financial Statements 103 (2)Financial Statement Schedules: None (3)Exhibits.Except as so indicated in Exhibit 32.1, the following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. Exhibit Number Description ofDocuments 3.1(1) Amended and Restated Certificate of Incorporation of the Company. 3.2(1) Amended and Restated Bylaws of the Company. 4.1(2) Specimen Common Stock Certificate. 4.2(3) Form of Warrant to Purchase Common Stock. 4.3(3) Form of Warrant to Purchase Preferred Stock. 4.4(3) Amended and Restated Registration Rights Agreement dated as of July 30, 2013, by and among the Company and the investors named therein.10.1(3) 2007 Employee, Director and Consultant Stock Plan, as amended (the 2007 Plan).++10.2(3) Form of Restricted Stock Agreement under the 2007 Plan.++10.3(3) Form of Incentive Stock Option Agreement under the 2007 Plan.++10.4(3) Form of Non-Qualified Stock Option Agreement under the 2007 Plan.++10.5(3) 2010 Employee, Director and Consultant Equity Incentive Plan, as amended (the 2010 Plan).++10.6(3) Form of Stock Option Grant Notice and Stock Option Agreement under the 2010 Plan.++10.7(3) Form of Restricted Stock Agreement under the 2010 Plan.++10.8(2) 2014 Employee Stock Purchase Plan.++10.9(2) Form of Indemnification Agreement by and between the Company and each of its directors.++10.10(3) Employment Agreement dated as of May 6, 2010, by and between the Company and Douglas M. Fambrough, III, Ph.D.++ 125Table of Contents10.11(3) Employment Agreement dated as of May 1, 2008, by and between the Company and Bob D. Brown, Ph.D.++10.12(3) Employment Agreement dated as of December 5, 2011, by and between the Company and James B. Weissman.++10.13(3) Letter agreement dated as of June 2, 2009, by and between the Company and David M. Madden.++10.14(3) Letter agreement dated as of February 28, 2011, by and between the Company and Dennis H. Langer M.D., J.D.++10.15(3) Transition Agreement dated as of September 8, 2009, as amended by Amendment to Transition Agreement dated as of February 1, 2010 andSecond Amendment to the Transition Agreement dated as of July 29, 2013, by and between the Company and James C. Jenson, Ph.D.++10.16(4) Employment agreement dated as of November 24, 2013, by and between the Company and James E. Dentzer.++10.17(2) Loan and Security Agreement dated as of March 25, 2009, as amended by Amendment No. 1 to Loan and Security Agreement dated as of May28, 2010, and Second Amendment to Loan and Security Agreement dated as of June 28, 2011, by and between the Company and HerculesTechnology II, L.P.10.18(5) Research Collaboration and License Agreement dated as of December 21, 2009, as amended by Amendment No. 1 to Research Collaboration andLicense Agreement dated as of December 2, 2010, by and between the Company and Kyowa Hakko Kirin Co., Ltd.†10.19(2) Exclusive License Agreement dated as of September 28, 2007, by and between the Company and City of Hope.†10.20(2) Commercial License Agreement dated as of September 2, 2013, by and between the Company and Plant Bioscience Limited.†10.21(2) Lease Agreement dated as of March 14, 2008, as amended by First Amendment to Lease dated as of September 12, 2008 and Second Amendmentto Lease dated as of July 3, 2013, by and between the Company and ARE-480 Arsenal Street, LLC.†10.22(2) Letter agreement dated as of January 24, 2014, by and between the Company and James E. Dentzer.++10.23(6) Lease agreement dated as of July 11, 2014, by and between the Company and King 87 CPD LLC10.24(7) Employment Agreement dated as of March 7, 2014, by and between the Company and Pankaj Bhargava, M.D.++10.25(7) Letter Agreement dated as of September 12, 2014, by and between the Company and Bruce Peacock.++10.26(7) Employment Agreement dated as of November 22, 2014, by and between the Company and Theodore Ashburn, M.D., Ph.D.++10.27(7) License Agreement dated as of November 16, 2014 by and between the Company, on one hand, and Protiva Biotherapeutics Inc. and TekmiraPharmaceuticals Corporation, on the other hand. †10.28(7) Development and Supply Agreement dated as of November 16, 2014 by and between Protiva Biotherapeutics Inc. and Tekmira PharmaceuticalsCorporation, on one hand, and the Company, on the other hand.†10.29(8) Underwriting Agreement dated as of May 20, 2015 by and between the Company, Jeffries LLC and Leerink Partners LLC.10.30(9) Amended and Restated 2014 Performance Incentive Plan.++10.31(10) Form of Incentive Stock Option Agreement under the Amended and Restated 2014 Performance Incentive Plan.++ 126Table of Contents10.32(10) Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2014 Performance Incentive Plan.++10.33(10) Separation Agreement dated as of December 15, 2015 by and between the Company and James E. Dentzer.++10.34(10) Offer Letter dated as of January 14, 2016 by and between the Company and John “Jack” Green.++21.1(7) Subsidiaries of the Company.23.1(10) Consent of Independent Registered Accounting Firm.24 Power of Attorney (reference is made to the signature page).31.1(10) Certification of the Company’s principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a).31.2(10) Certification of the Company’s principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a).32.1* Section 1350 Certifications.101.INS(10) XBRL Report Instance Document101.SCH(10) XBRL Taxonomy Extension Schema Document101.CAL(10) XBRL Taxonomy Calculation Linkbase Document101.LAB(10) XBRL Taxonomy Label Linkbase Document101.PRE(10) XBRL Taxonomy Presentation Linkbase Document101.DEF(10) XBRL Taxonomy Extension Definition Linkbase Document †Confidential treatment with respect to specific portions of this Exhibit has been requested, and such portions are omitted and have been filed separately withthe Securities and Exchange Commission.++Management contract or compensatory plan or arrangement.*Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended(Exchange Act), or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registrationstatement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise stated in such filing.(1)Incorporated by reference to the indicated exhibit in the Company’s Current Report on Form 8-K filed on February 5, 2014.(2)Incorporated by reference to the indicated exhibit in the Company’s Amendment No. 3 to Registration Statement on Form S-1 (No. 333-193150) filed onJanuary 28, 2014.(3)Incorporated by reference to the indicated exhibit in the Company’s Registration Statement on Form S-1 (No. 333-193150) filed on December 31, 2013.(4)Incorporated by reference to the indicated exhibit in the Company’s Amendment No. 1 to Registration Statement on Form S-1 (No. 333-193150) filed onJanuary 17, 2014.(5)Incorporated by reference to the indicated exhibit in the Company’s Amendment No. 5 to Registration Statement on Form S-1 (No. 333-193150) filed onJanuary 29, 2014.(6)Incorporated by reference to the indicated exhibit in the Company’s Registrant’s Quarterly Report on Form 10-Q filed on November 6, 2014 (File No. 001-36281) for the quarterly period ended September 30, 2014.(7)Incorporated by reference to the indicated exhibit in the Company’s Annual Report on Form 10-K filed on March 12, 2015 (File No. 001-36281) for theannual period ended December 31, 2014.(8)Incorporated by reference to the indicated exhibit in the Company’s Current Report on Form 8-K filed on May 22, 2015.(9)Incorporated by reference to the indicated exhibit in the Company’s Current Report on Form 8-K filed on July 7, 2015.(10)Filed herewith. 127Table of ContentsSIGNATURESPursuant to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized, in Cambridge, Commonwealth of Massachusetts on March 10, 2016. By: /s/ Douglas M. Fambrough, III Douglas M. Fambrough, III, Ph.D.Chief Executive Officer and Director (PrincipalExecutive Officer) By: /s/ John B. Green, CPA John B. Green, CPAInterim Chief Financial Officer (Principal FinancialOfficer and Principal Accounting Officer) 128Table of ContentsPOWER OF ATTORNEYKNOW ALL PERSON BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Douglas M. Fambrough, III,Ph.D. and John B. Green and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in hisname, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits theretoand other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, fullpower and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposesas he might or could do in person, hereby ratify and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes,may lawfully do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities andon the dates indicated: Signature Title Date/s/ Douglas M. Fambrough, IIIDouglas M. Fambrough, III, Ph.D. Chief Executive Officer and Director(Principal Executive Officer) March 10, 2016/s/ John B. Green, CPAJohn B. Green, CPA Chief Financial Officer(Principal Financial Officer andPrincipal Accounting Officer) March 10, 2016/s/ David M. MaddenDavid M. Madden Chairman March 10, 2016/s/ Brian K. HalakBrian K. Halak, Ph.D. Director March 10, 2016/s/ Stephen J. HoffmanStephen J. Hoffman, M.D., Ph.D. Director March 10, 2016/s/ Peter KolchinskyPeter Kolchinsky, Ph.D. Director March 10, 2016/s/ Dennis H. LangerDennis H. Langer, M.D., J.D. Director March 10, 2016/s/ Bruce PeacockBruce Peacock Director March 10, 2016 129Table of ContentsExcept as so indicated in Exhibit 32.1, the following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. ExhibitNumber Description ofDocuments 3.1(1) Amended and Restated Certificate of Incorporation of the Company. 3.2(1) Amended and Restated Bylaws of the Company. 4.1(2) Specimen Common Stock Certificate. 4.2(3) Form of Warrant to Purchase Common Stock. 4.3(3) Form of Warrant to Purchase Preferred Stock. 4.4(3) Amended and Restated Registration Rights Agreement dated as of July 30, 2013, by and among the Company and the investors named therein.10.1(3) 2007 Employee, Director and Consultant Stock Plan, as amended (the 2007 Plan).++10.2(3) Form of Restricted Stock Agreement under the 2007 Plan.++10.3(3) Form of Incentive Stock Option Agreement under the 2007 Plan.++10.4(3) Form of Non-Qualified Stock Option Agreement under the 2007 Plan.++10.5(3) 2010 Employee, Director and Consultant Equity Incentive Plan, as amended (the 2010 Plan).++10.6(3) Form of Stock Option Grant Notice and Stock Option Agreement under the 2010 Plan.++10.7(3) Form of Restricted Stock Agreement under the 2010 Plan.++10.8(2) 2014 Employee Stock Purchase Plan.++10.9(2) Form of Indemnification Agreement by and between the Company and each of its directors.++10.10(3) Employment Agreement dated as of May 6, 2010, by and between the Company and Douglas M. Fambrough, III, Ph.D.++10.11(3) Employment Agreement dated as of May 1, 2008, by and between the Company and Bob D. Brown, Ph.D.++10.12(3) Employment Agreement dated as of December 5, 2011, by and between the Company and James B. Weissman.++10.13(3) Letter agreement dated as of June 2, 2009, by and between the Company and David M. Madden.++10.14(3) Letter agreement dated as of February 28, 2011, by and between the Company and Dennis H. Langer M.D., J.D.++10.15(3) Transition Agreement dated as of September 8, 2009, as amended by Amendment to Transition Agreement dated as of February 1, 2010 andSecond Amendment to the Transition Agreement dated as of July 29, 2013, by and between the Company and James C. Jenson, Ph.D.++10.16(4) Employment agreement dated as of November 24, 2013, by and between the Company and James E. Dentzer.++10.17(2) Loan and Security Agreement dated as of March 25, 2009, as amended by Amendment No. 1 to Loan and Security Agreement dated as of May28, 2010, and Second Amendment to Loan and Security Agreement dated as of June 28, 2011, by and between the Company and HerculesTechnology II, L.P. 130Table of Contents10.18(5) Research Collaboration and License Agreement dated as of December 21, 2009, as amended by Amendment No. 1 to ResearchCollaboration and License Agreement dated as of December 2, 2010, by and between the Company and Kyowa Hakko Kirin Co., Ltd.†10.19(2) Exclusive License Agreement dated as of September 28, 2007, by and between the Company and City of Hope.†10.20(2) Commercial License Agreement dated as of September 2, 2013, by and between the Company and Plant Bioscience Limited.†10.21(2) Lease Agreement dated as of March 14, 2008, as amended by First Amendment to Lease dated as of September 12, 2008 and SecondAmendment to Lease dated as of July 3, 2013, by and between the Company and ARE-480 Arsenal Street, LLC.†10.22(2) Letter agreement dated as of January 24, 2014, by and between the Company and James E. Dentzer.++10.23(6) Lease agreement dated as of July 11, 2014, by and between the Company and King 87 CPD LLC10.24(7) Employment Agreement dated as of March 7, 2014, by and between the Company and Pankaj Bhargava, M.D.++10.25(7) Letter Agreement dated as of September 12, 2014, by and between the Company and Bruce Peacock.++10.26(7) Employment Agreement dated as of November 22, 2014, by and between the Company and Theodore Ashburn, M.D., Ph.D.++10.27(7) License Agreement dated as of November 16, 2014 by and between the Company, on one hand, and Protiva Biotherapeutics Inc. andTekmira Pharmaceuticals Corporation, on the other hand. †10.28(7) Development and Supply Agreement dated as of November 16, 2014 by and between Protiva Biotherapeutics Inc. and TekmiraPharmaceuticals Corporation, on one hand, and the Company, on the other hand.†10.29(8) Underwriting Agreement dated as of May 20, 2015 by and between the Company, Jefferies LLC and Leerink Partners LLC.10.30(9) Amended and Restated 2014 Performance Incentive Plan.++10.31(10) Form of Incentive Stock Option Agreement under the Amended and Restated 2014 Performance Incentive Plan.++10.32(10) Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2014 Performance Incentive Plan.++10.33(10) Separation Agreement dated as of December 15, 2015 by and between the Company and James E. Dentzer.++10.34(10) Offer Letter dated as of January 14, 2016 by and between the Company and John “Jack” Green.++21.1(7) Subsidiaries of the Company.23.1(10) Consent of Independent Registered Accounting Firm.24 Power of Attorney (reference is made to the signature page).31.1(10) Certification of the Company’s principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a).31.2(10) Certification of the Company’s principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a).32.1* Section 1350 Certifications.101.INS(10) XBRL Report Instance Document101.SCH(10) XBRL Taxonomy Extension Schema Document 131Table of Contents101.CAL(10) XBRL Taxonomy Calculation Linkbase Document101.LAB(10) XBRL Taxonomy Label Linkbase Document101.PRE(10) XBRL Taxonomy Presentation Linkbase Document101.DEF(10) XBRL Taxonomy Extension Definition Linkbase Document †Confidential treatment with respect to specific portions of this Exhibit has been requested, and such portions are omitted and have been filed separately withthe Securities and Exchange Commission.++Management contract or compensatory plan or arrangement.*Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended(Exchange Act), or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registrationstatement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise stated in such filing.(1)Incorporated by reference to the indicated exhibit in the Company’s Current Report on Form 8-K filed on February 5, 2014.(2)Incorporated by reference to the indicated exhibit in the Company’s Amendment No. 3 to Registration Statement on Form S-1 (No. 333-193150) filed onJanuary 28, 2014.(3)Incorporated by reference to the indicated exhibit in the Company’s Registration Statement on Form S-1 (No. 333-193150) filed on December 31, 2013.(4)Incorporated by reference to the indicated exhibit in the Company’s Amendment No. 1 to Registration Statement on Form S-1 (No. 333-193150) filed onJanuary 17, 2014.(5)Incorporated by reference to the indicated exhibit in the Company’s Amendment No. 5 to Registration Statement on Form S-1 (No. 333-193150) filed onJanuary 29, 2014.(6)Incorporated by reference to the indicated exhibit in the Company’s Registrant’s Quarterly Report on Form 10-Q filed on November 6, 2014 (File No. 001-36281) for the quarterly period ended September 30, 2014.(7)Incorporated by reference to the indicated exhibit in the Company’s Annual Report on Form 10-K filed on March 10, 2015 (File No. 001-36281) for theannual period ended December 31, 2014.(8)Incorporated by reference to the indicated exhibit in the Company’s Current Report on Form 8-K filed on May 22, 2015.(9)Incorporated by reference to the indicated exhibit in the Company’s Current Report on Form 8-K filed on July 7, 2015.(10)Filed herewith. 132Exhibit 10.31Notice of Grant of Stock OptionandTerms and Conditions of Stock Option Grantee: [Name] Option Number: [                        ] [Address] Plan: 2014 [Address] ID: [                        ]Effective [  ] (the “Award Date”), you (the “Grantee”) have been granted an incentive stock option (the “Option”) to buy [  ] shares 1 ofCommon Stock of Dicerna Pharmaceuticals, Inc. (the “Corporation”) at a price of $ [  ] per share 1 (the “Exercise Price”).The aggregate Exercise Price of the shares subject to the Option is $ [  ] . 1[ The Option will become vested as to 25% of the total number of shares of Common Stock subject to the Option on the first anniversary of the Award Date. Theremaining 75% of the total number of shares of Common Stock subject to the Option shall become vested in 36 substantially equal monthly installments, with thefirst installment vesting on the last day of the month following the month in which the first anniversary of the Award Date occurs and an additional installmentvesting on the last day of each of the 35 months thereafter. 1, 2 ] [Modify as needed for vesting terms of the particular grant.]The Option will expire on [  ] (the “Expiration Date”). 1, 2By your signature and the Corporation’s signature below, you and the Corporation agree that the Option is granted under and governed by the terms and conditionsof the Corporation’s 2014 Performance Incentive Plan (the “Plan”) and the Terms and Conditions of Incentive Stock Option (the “Terms”), which are attached andincorporated herein by this reference. This Notice of Grant of Stock Option, together with the Terms, will be referred to as your Option Agreement. The Option hasbeen granted to you in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to you. Capitalized terms are defined in thePlan if not defined herein or in the Terms. You acknowledge receipt of a copy of the Terms, the Plan and the Prospectus for the Plan. Dicerna Pharmaceuticals, Inc. Date [ Grantee Name ] Date 1 Subject to adjustment under Section 7.1 of the Plan.2 Subject to early termination under Section 5 of the Terms and Section 7.2 of the Plan.DICERNA PHARMACEUTICALS, INC.2014 PERFORMANCE INCENTIVE PLANTERMS AND CONDITIONS OF INCENTIVE STOCK OPTION 1.General .These Terms and Conditions of Incentive Stock Option (these “ Terms ”) apply to a particular stock option (the “ Option ”) if incorporated by reference inthe Notice of Grant of Stock Option (the “ Grant Notice ”) corresponding to that particular grant. The recipient of the Option identified in the Grant Notice isreferred to as the “ Grantee .” The per share exercise price of the Option as set forth in the Grant Notice is referred to as the “ Exercise Price .” The effective dateof grant of the Option as set forth in the Grant Notice is referred to as the “ Award Date .” The exercise price and the number of shares covered by the Option aresubject to adjustment under Section 7.1 of the Plan.The Option was granted under and subject to the Dicerna Pharmaceuticals, Inc. 2014 Performance Incentive Plan (the “ Plan ”). Capitalized terms aredefined in the Plan if not defined herein. The Option has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwisepayable or to be paid to the Grantee. The Grant Notice and these Terms are collectively referred to as the “Option Agreement” applicable to the Option. 2.Vesting; Limits on Exercise; Incentive Stock Option Status .The Option shall vest and become exercisable in percentage installments of the aggregate number of shares subject to the Option as set forth on the GrantNotice; provided, however, that the Option shall be subject to accelerated vesting as provided in Section 5.3 below in the event of the Grantee’s death or TotalDisability (as defined in Section 5.3 below). The Option may be exercised only to the extent the Option is vested and exercisable. • Cumulative Exercisability . To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the extent notpreviously exercised), and such right shall continue, until the expiration or earlier termination of the Option. • No Fractional Shares . Fractional share interests shall be disregarded, but may be cumulated. • Minimum Exercise . No fewer than 100 shares of Common Stock (subject to adjustment under Section 7.1 of the Plan) may be purchased at any onetime, unless the number purchased is the total number at the time exercisable under the Option. • ISO Status . The Option is intended as an incentive stock option within the meaning of Section 422 of the Code (an “ ISO ”). • ISO Value Limit . If the aggregate fair market value of the shares with respect to which ISOs (whether granted under the Option or otherwise) firstbecome exercisable by the Grantee in any calendar year exceeds $100,000, as measured on the applicable Award Dates, the limitations of Section5.1.2 of the Plan shall apply and to such extent the Option will be rendered a nonqualified stock option.3.Continuance of Employment/Service Required; No Employment/Service Commitment .The vesting schedule applicable to the Option requires continued employment or service through each applicable vesting date as a condition to the vesting ofthe applicable installment of the Option and the rights and benefits under this Option Agreement. Employment or service for only a portion of the vesting period,even if a substantial portion, will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following atermination of employment or services as provided in Section 5 below or under the Plan.Nothing contained in this Option Agreement or the Plan constitutes a continued employment or service commitment by the Corporation or any of itsSubsidiaries, affects the Grantee’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Granteeany right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at anytime to terminate such employment or service, or affects the right of the Corporation or any Subsidiary to increase or decrease the Grantee’s other compensation.Nothing in this Option Agreement, however, is intended to adversely affect any independent contractual right of the Grantee without his/her consent thereto. 4.Method of Exercise of Option .The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such other person as the Administrator may require pursuant to suchadministrative exercise procedures as the Administrator may implement from time to time) of: • a written notice stating the number of shares of Common Stock to be purchased pursuant to the Option or by the completion of such otheradministrative exercise procedures as the Administrator may require from time to time, • payment in full for the Exercise Price of the shares to be purchased in cash, check or by electronic funds transfer to the Corporation; • any written statements or agreements required pursuant to Section 8.1 of the Plan; and • satisfaction of the tax withholding provisions of Section 8.5 of the Plan.The Administrator also may, but is not required to, authorize a non-cash payment alternative by one or more of the following methods (subject in each caseto compliance with all applicable laws, rules, regulations and listing requirements and further subject to such rules as the Administrator may adopt as to any suchpayment method): • notice and third party payment in such manner as may be authorized by the Administrator; • in shares of Common Stock already owned by the Grantee, valued at their fair market value (as determined under the Plan) on the exercise date; • a reduction in the number of shares of Common Stock otherwise deliverable to the Grantee (valued at their fair market value on the exercise date, asdetermined under the Plan) pursuant to the exercise of the Option; or • a “cashless exercise” with a third party who provides simultaneous financing for the purposes of (or who otherwise facilitates) the exercise of theOption.The Option will qualify as an ISO only if it meets all of the applicable requirements of the Code. The Option may be rendered a nonqualified stock option ifthe Administrator permits the use of one or more of the non-cash payment alternatives referenced above. 5.Early Termination   of   Option .5.1 Expiration Date . Subject to earlier termination as provided below in this Section 5, the Option will terminate on the “Expiration Date” set forth in theGrant Notice (the “ Expiration Date ”).5.2 Possible Termination of Option upon Certain Corporate Events.  The Option is subject to termination in connection with certain corporate events asprovided in Section 7.2 of the Plan.5.3 Termination of Option upon a Termination of Grantee’s Employment or Services. Subject to earlier termination on the Expiration Date of theOption or pursuant to Section 5.2 above, if the Grantee ceases to be employed by or ceases to provide services to the Corporation or a Subsidiary, the followingrules shall apply (the last day that the Grantee is employed by or provides services to the Corporation or a Subsidiary is referred to as the Grantee’s “ SeveranceDate ”): • other than as expressly provided below in this Section 5.3, (a) the Grantee will have until the date that is 3 months after his or her Severance Date toexercise the Option (or portion thereof) to the extent that it was vested on the Severance Date, (b) the Option, to the extent not vested on the SeveranceDate, shall terminate on the Severance Date, and (c) the Option, to the extent exercisable for the 3-month period following the Severance Date and notexercised during such period, shall terminate at the close of business on the last day of the 3-month period; • if the termination of the Grantee’s employment or services is the result of the Grantee’s death or Total Disability (as defined below), (a) the Optionshall accelerate and be vested and exercisable as of the Grantee’s Severance Date with respect to fifty percent (50%) of the then-outstanding andunvested portion of the Option, (b) any portion of the Option that is not vested after giving effect to the foregoing clause (a) shall terminate on theSeverance Date, (c) the Grantee (or his beneficiary or personal representative, as the case may be) will have until the date that is 12 months after theGrantee’s Severance Date to exercise the vested portion of the Option, and (d) the Option, to the extent exercisable for the 12-month period following the Severance Date and not exercised during such period, shall terminate at theclose of business on the last day of the 12-month period; • if the Grantee’s employment or services are terminated by the Corporation or a Subsidiary for Cause (as defined below), the Option (whether vested ornot) shall terminate on the Severance Date.For purposes of the Option, “ Total Disability ” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or asotherwise determined by the Administrator).For purposes of the Option, “ Cause ” means that the Grantee: (1)has been negligent in the discharge of his or her duties to the Corporation or any of its Subsidiaries, has refused to perform stated or assigned duties oris incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties; (2)has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use ofinside information, customer lists, trade secrets or other confidential information; has breached a fiduciary duty, or willfully and materially violatedany other duty, law, rule, regulation or policy of the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries;or has been convicted of a felony or misdemeanor (other than minor traffic violations or similar offenses); (3)has materially breached any of the provisions of any agreement with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or anyof its Subsidiaries; or (4)has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Corporation,any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; has improperly induced a vendor or customer to break or terminateany contract with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; or has induced a principal forwhom the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries acts as agent to terminate such agencyrelationship.In all events the Option is subject to earlier termination on the Expiration Date of the Option or as contemplated by Section 5.2. The Administrator shall bethe sole judge of whether the Grantee continues to render employment or services for purposes of this Option Agreement.Notwithstanding any post-termination exercise period provided for herein or in the Plan, the Option will qualify as an ISO only if it is exercised within theapplicable exercise periods for ISOs under, and meets all of the other requirements of, the Code. If the Option is not exercised within the applicable exerciseperiods for ISOs or does not meet such other requirements, the Option will be rendered a nonqualified stock option.6.Non-Transferability .The Option and any other rights of the Grantee under this Option Agreement or the Plan are nontransferable and exercisable only by the Grantee, except asset forth in Section 5.7 of the Plan. 7.Notices .Any notice to be given under the terms of this Option Agreement shall be in writing and addressed to the Corporation at its principal office to the attention ofthe Secretary, and to the Grantee at the address last reflected on the Corporation’s payroll records, or at such other address as either party may hereafter designate inwriting to the other. Any such notice shall be delivered in person or shall be enclosed in a properly sealed envelope addressed as aforesaid, registered or certified,and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government. Anysuch notice shall be given only when received, but if the Grantee is no longer employed by the Corporation or a Subsidiary, shall be deemed to have been dulygiven five business days after the date mailed in accordance with the foregoing provisions of this Section 7. 8.Plan .The Option and all rights of the Grantee under this Option Agreement are subject to the terms and conditions of the Plan, incorporated herein by thisreference. The Grantee agrees to be bound by the terms of the Plan and this Option Agreement. The Grantee acknowledges having read and understanding the Plan,the Prospectus for the Plan, and this Option Agreement. Unless otherwise expressly provided in other sections of this Option Agreement, provisions of the Plan thatconfer discretionary authority on the Board or the Administrator do not and shall not be deemed to create any rights in the Grantee unless such rights are expresslyset forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator underthe Plan after the date hereof. 9.Entire Agreement .This Option Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of theparties hereto with respect to the subject matter hereof. The Plan and this Option Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendmentmust be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver doesnot adversely affect the interests of the Grantee hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or awaiver of any other provision hereof.10.Governing Law .This Option Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict oflaw principles thereunder. 11.Effect of this Agreement .Subject to the Corporation’s right to terminate the Option pursuant to Section 7.2 of the Plan, this Option Agreement shall be assumed by, be binding uponand inure to the benefit of any successor or successors to the Corporation. 12.Counterparts .This Option Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which togethershall constitute one and the same instrument. 13.Section Headings .The section headings of this Option Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof. 14.Clawback Policy .The Option is subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similarprovisions of applicable law, any of which could in certain circumstances require forfeiture of the Option and repayment or forfeiture of any shares of CommonStock or other cash or property received with respect to the Option (including any value received from a disposition of the shares acquired upon exercise of theOption). 15.No Advice Regarding Grant .The Grantee is hereby advised to consult with his or her own tax, legal and/or investment advisors with respect to any advice the Grantee may determine isneeded or appropriate with respect to the Option (including, without limitation, to determine the foreign, state, local, estate and/or gift tax consequences withrespect to the Option and any shares that may be acquired upon exercise of the Option). Neither the Corporation nor any of its officers, directors, affiliates oradvisors makes any representation (except for the terms and conditions expressly set forth in this Option Agreement) or recommendation with respect to theOption. Except for the withholding rights contemplated by Section 4 above and Section 8.5 of the Plan, the Grantee is solely responsible for any and all tax liabilitythat may arise with respect to the Option and any shares that may be acquired upon exercise of the Option.Exhibit 10.32Notice of Grant of Stock OptionandTerms and Conditions of Stock Option Grantee: [Name] Option Number: [                    ] [Address] Plan: 2014 [Address] ID: [                    ]Effective [  ] (the “Award Date”), you (the “Grantee”) have been granted a nonqualified stock option (the “Option”) to buy [  ] shares 1 ofCommon Stock of Dicerna Pharmaceuticals, Inc. (the “Corporation”) at a price of $ [  ] per share 1 (the “Exercise Price”).The aggregate Exercise Price of the shares subject to the Option is $ [  ] . 1[ The Option will become vested as to 25% of the total number of shares of Common Stock subject to the Option on the first anniversary of the Award Date. Theremaining 75% of the total number of shares of Common Stock subject to the Option shall become vested in 36 substantially equal monthly installments, with thefirst installment vesting on the last day of the month following the month in which the first anniversary of the Award Date occurs and an additional installmentvesting on the last day of each of the 35 months thereafter. 1, 2 ] [Modify as needed for vesting terms of the particular grant.]The Option will expire on [  ] (the “Expiration Date”). 1, 2By your signature and the Corporation’s signature below, you and the Corporation agree that the Option is granted under and governed by the terms and conditionsof the Corporation’s 2014 Performance Incentive Plan (the “Plan”) and the Terms and Conditions of Nonqualified Stock Option (the “Terms”), which are attachedand incorporated herein by this reference. This Notice of Grant of Stock Option, together with the Terms, will be referred to as your Option Agreement. The Optionhas been granted to you in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to you. Capitalized terms are defined inthe Plan if not defined herein or in the Terms. You acknowledge receipt of a copy of the Terms, the Plan and the Prospectus for the Plan. Dicerna Pharmaceuticals, Inc. Date [ Grantee Name ] Date 1 Subject to adjustment under Section 7.1 of the Plan.2 Subject to early termination under Section 5 of the Terms and Section 7.2 of the Plan.DICERNA PHARMACEUTICALS, INC.2014 PERFORMANCE INCENTIVE PLANTERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTION 1.General .These Terms and Conditions of Nonqualified Stock Option (these “ Terms ”) apply to a particular stock option (the “ Option ”) if incorporated by referencein the Notice of Grant of Stock Option (the “ Grant Notice ”) corresponding to that particular grant. The recipient of the Option identified in the Grant Notice isreferred to as the “ Grantee .” The per share exercise price of the Option as set forth in the Grant Notice is referred to as the “ Exercise Price .” The effective dateof grant of the Option as set forth in the Grant Notice is referred to as the “ Award Date .” The exercise price and the number of shares covered by the Option aresubject to adjustment under Section 7.1 of the Plan.The Option was granted under and subject to the Dicerna Pharmaceuticals, Inc. 2014 Performance Incentive Plan (the “ Plan ”). Capitalized terms aredefined in the Plan if not defined herein. The Option has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwisepayable or to be paid to the Grantee. The Grant Notice and these Terms are collectively referred to as the “Option Agreement” applicable to the Option. 2.Vesting; Limits on Exercise; Incentive Stock Option Status .The Option shall vest and become exercisable in percentage installments of the aggregate number of shares subject to the Option as set forth on the GrantNotice; provided, however, that the Option shall be subject to accelerated vesting as provided in Section 5.3 below in the event of the Grantee’s death or TotalDisability (as defined in Section 5.3 below). The Option may be exercised only to the extent the Option is vested and exercisable. • Cumulative Exercisability . To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the extent notpreviously exercised), and such right shall continue, until the expiration or earlier termination of the Option. • No Fractional Shares . Fractional share interests shall be disregarded, but may be cumulated. • Minimum Exercise . No fewer than 100 shares of Common Stock (subject to adjustment under Section 7.1 of the Plan) may be purchased at any onetime, unless the number purchased is the total number at the time exercisable under the Option. • Nonqualified Stock Option . The Option is a nonqualified stock option and is not, and shall not be, an incentive stock option within the meaning ofSection 422 of the Code.3.Continuance of Employment/Service Required; No Employment/Service Commitment .The vesting schedule applicable to the Option requires continued employment or service through each applicable vesting date as a condition to the vesting ofthe applicable installment of the Option and the rights and benefits under this Option Agreement. Employment or service for only a portion of the vesting period,even if a substantial portion, will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following atermination of employment or services as provided in Section 5 below or under the Plan.Nothing contained in this Option Agreement or the Plan constitutes a continued employment or service commitment by the Corporation or any of itsSubsidiaries, affects the Grantee’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Granteeany right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at anytime to terminate such employment or service, or affects the right of the Corporation or any Subsidiary to increase or decrease the Grantee’s other compensation.Nothing in this Option Agreement, however, is intended to adversely affect any independent contractual right of the Grantee without his/her consent thereto. 4.Method of Exercise of Option .The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such other person as the Administrator may require pursuant to suchadministrative exercise procedures as the Administrator may implement from time to time) of: • a written notice stating the number of shares of Common Stock to be purchased pursuant to the Option or by the completion of such otheradministrative exercise procedures as the Administrator may require from time to time; • payment in full for the Exercise Price of the shares to be purchased in cash, check or by electronic funds transfer to the Corporation; • any written statements or agreements required pursuant to Section 8.1 of the Plan; and • satisfaction of the tax withholding provisions of Section 8.5 of the Plan.The Administrator also may, but is not required to, authorize a non-cash payment alternative by one or more of the following methods (subject in each caseto compliance with all applicable laws, rules, regulations and listing requirements and further subject to such rules as the Administrator may adopt as to any suchpayment method): • notice and third party payment in such manner as may be authorized by the Administrator; • in shares of Common Stock already owned by the Grantee, valued at their fair market value (as determined under the Plan) on the exercise date; • a reduction in the number of shares of Common Stock otherwise deliverable to the Grantee (valued at their fair market value on the exercise date, asdetermined under the Plan) pursuant to the exercise of the Option; or • a “cashless exercise” with a third party who provides simultaneous financing for the purposes of (or who otherwise facilitates) the exercise of theOption. 5.Early Termination   of   Option .5.1 Expiration Date . Subject to earlier termination as provided below in this Section 5, the Option will terminate on the “Expiration Date” set forth in theGrant Notice (the “ Expiration Date ”).5.2 Possible Termination of Option upon Certain Corporate Events.  The Option is subject to termination in connection with certain corporate events asprovided in Section 7.2 of the Plan.5.3 Termination of Option upon a Termination of Grantee’s Employment or Services. Subject to earlier termination on the Expiration Date of theOption or pursuant to Section 5.2 above, if the Grantee ceases to be employed by or ceases to provide services to the Corporation or a Subsidiary, the followingrules shall apply (the last day that the Grantee is employed by or provides services to the Corporation or a Subsidiary is referred to as the Grantee’s “ SeveranceDate ”): • other than as expressly provided below in this Section 5.3, (a) the Grantee will have until the date that is 3 months after his or her Severance Date toexercise the Option (or portion thereof) to the extent that it was vested on the Severance Date, (b) the Option, to the extent not vested on the SeveranceDate, shall terminate on the Severance Date, and (c) the Option, to the extent exercisable for the 3-month period following the Severance Date and notexercised during such period, shall terminate at the close of business on the last day of the 3-month period; • if the termination of the Grantee’s employment or services is the result of the Grantee’s death or Total Disability (as defined below), (a) the Optionshall accelerate and be vested and exercisable as of the Grantee’s Severance Date with respect to fifty percent (50%) of the then-outstanding andunvested portion of the Option, (b) any portion of the Option that is not vested after giving effect to the foregoing clause (a) shall terminate on theSeverance Date, (c) the Grantee (or his beneficiary or personal representative, as the case may be) will have until the date that is 12 months after theGrantee’s Severance Date to exercise the vested portion of the Option, and (d) the Option, to the extent exercisable for the 12-month period followingthe Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 12-month period; • if the Grantee’s employment or services are terminated by the Corporation or a Subsidiary for Cause (as defined below), the Option (whether vested ornot) shall terminate on the Severance Date.For purposes of the Option, “ Total Disability ” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or asotherwise determined by the Administrator).For purposes of the Option, “ Cause ” means that the Grantee: (1)has been negligent in the discharge of his or her duties to the Corporation or any of its Subsidiaries, has refused to perform stated or assigned duties oris incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties; (2)has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use ofinside information, customer lists, trade secrets or other confidential information; has breached a fiduciary duty, or willfully and materially violatedany other duty, law, rule, regulation or policy of the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries;or has been convicted of a felony or misdemeanor (other than minor traffic violations or similar offenses); (3)has materially breached any of the provisions of any agreement with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or anyof its Subsidiaries; or (4)has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Corporation,any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; has improperly induced a vendor or customer to break or terminateany contract with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; or has induced a principal forwhom the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries acts as agent to terminate such agencyrelationship.In all events the Option is subject to earlier termination on the Expiration Date of the Option or as contemplated by Section 5.2. The Administrator shall bethe sole judge of whether the Grantee continues to render employment or services for purposes of this Option Agreement. 6.Non-Transferability .The Option and any other rights of the Grantee under this Option Agreement or the Plan are nontransferable and exercisable only by the Grantee, except asset forth in Section 5.7 of the Plan. 7.Notices .Any notice to be given under the terms of this Option Agreement shall be in writing and addressed to the Corporation at its principal office to the attention ofthe Secretary, and to the Grantee at the address last reflected on the Corporation’s payroll records, or at such other address as either party may hereafter designate inwriting to the other. Any such notice shall be deliveredin person or shall be enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification feeprepaid) in a post office or branch post office regularly maintained by the United States Government. Any such notice shall be given only when received, but if theGrantee is no longer employed by the Corporation or a Subsidiary, shall be deemed to have been duly given five business days after the date mailed in accordancewith the foregoing provisions of this Section 7. 8.Plan .The Option and all rights of the Grantee under this Option Agreement are subject to the terms and conditions of the Plan, incorporated herein by thisreference. The Grantee agrees to be bound by the terms of the Plan and this Option Agreement. The Grantee acknowledges having read and understanding the Plan,the Prospectus for the Plan, and this Option Agreement. Unless otherwise expressly provided in other sections of this Option Agreement, provisions of the Plan thatconfer discretionary authority on the Board or the Administrator do not and shall not be deemed to create any rights in the Grantee unless such rights are expresslyset forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator underthe Plan after the date hereof. 9.Entire Agreement .This Option Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of theparties hereto with respect to the subject matter hereof. The Plan and this Option Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendmentmust be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver doesnot adversely affect the interests of the Grantee hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or awaiver of any other provision hereof. 10.Governing Law .This Option Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict oflaw principles thereunder. 11.Effect of this Agreement .Subject to the Corporation’s right to terminate the Option pursuant to Section 7.2 of the Plan, this Option Agreement shall be assumed by, be binding uponand inure to the benefit of any successor or successors to the Corporation. 12.Counterparts .This Option Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which togethershall constitute one and the same instrument.13.Section Headings .The section headings of this Option Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof. 14.Clawback Policy .The Option is subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similarprovisions of applicable law, any of which could in certain circumstances require forfeiture of the Option and repayment or forfeiture of any shares of CommonStock or other cash or property received with respect to the Option (including any value received from a disposition of the shares acquired upon exercise of theOption). 15.No Advice Regarding Grant .The Grantee is hereby advised to consult with his or her own tax, legal and/or investment advisors with respect to any advice the Grantee may determine isneeded or appropriate with respect to the Option (including, without limitation, to determine the foreign, state, local, estate and/or gift tax consequences withrespect to the Option and any shares that may be acquired upon exercise of the Option). Neither the Corporation nor any of its officers, directors, affiliates oradvisors makes any representation (except for the terms and conditions expressly set forth in this Option Agreement) or recommendation with respect to theOption. Except for the withholding rights contemplated by Section 4 above and Section 8.5 of the Plan, the Grantee is solely responsible for any and all tax liabilitythat may arise with respect to the Option and any shares that may be acquired upon exercise of the Option.Exhibit 10.33 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927December 15, 2015Mr. James E. DentzerDear Jim:This letter will confirm that your employment with Dicerna Pharmaceuticals, Inc., a Delaware corporation (the “Company”) is terminating effective as of theSeparation Date (as set forth below). This letter sets forth the terms of the Separation Agreement (the “Agreement”) that the Company is offering to you withrespect to your termination of employment. 1.Separation. Your employment with the Company is being terminated at the close of business on Tuesday, December 15, 2015 (the “Separation Date”).Effective as of the Separation Date, you also will be removed from any and all officer, director, management, or other positions that you hold with theCompany and any of its subsidiaries or affiliates (as applicable) as of the Separation Date. You agree that you have no present or future right to employmentwith the Company or any of the other Released Parties (defined below). 2.Severance Pay. If you sign this Agreement, return it by the deadline specified below, and comply with its terms, and provided that you do not revoke thisAgreement in accordance with Section 13 below, the Company will pay you, as severance pay:(a) the equivalent of fifty-two (52) weeks of your current base salary, which equals the gross aggregate amount of $378,000, less all applicable taxwithholdings and authorized deductions, and which will be paid in prorated installments over a twelve (12) month period in accordance with the Company’snormal payroll schedule, commencing on the first-regularly scheduled pay date following the sixtieth (60th) calendar date following the Separation Date(provided that you have signed and returned this Agreement and the revocation period set forth in Section 13 has passed without any revocation by you),with the first installment to include all amounts which would have been paid between the Separation Date and the date of such first installment; and(b) a pro-rata portion of your 2015 annual bonus, based on your 2015 personal performance as determined by the Chief Executive Officer of the Company inhis discretion and the corporate bonus funding level as determined by the Compensation Committee of the Board after the conclusion of the 2015 bonus year,with such pro-rata portion calculated by multiplying the amount of such bonus for the 2015 bonus year by a number: (x) the numerator of which is thenumber of days worked by you during the fiscal year prior to the Separation Date, and (y) the denominator of which is three hundred sixty five (365), withsuch payment to be made on the first-regularly scheduled pay date following the sixtieth (60th) calendar date following the Separation Date. 1 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927 These amounts shall collectively be referred to herein as the “Severance Pay.” You agree that you would not otherwise be entitled to, or receive, the Severance Payif you did not sign this Agreement. 3.Accrued Wages. On the Separation Date, the Company will pay you all accrued salary earned through the Separation Date. On the first-regularly scheduledpay date following the Separation Date, the Company will pay you an additional amount equivalent to thirty (30) days of pay at your current base salary,subject to all applicable tax withholdings and authorized deductions. You are entitled to these payments regardless of whether or not you sign thisAgreement. 4.Health Insurance. If you sign this Agreement, return it by the deadline specified below, and comply with its terms, and provided that you do not revoke thisAgreement in accordance with Section 13 below, and if you are eligible for and properly elect to receive continued coverage under the Company’s grouphealth care plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or the appropriate state equivalent, theCompany will pay the premiums for such group health insurance coverage for the shorter of (a) twelve (12) months or (b) until you become eligible forhealth benefits through another employer or otherwise. At that time, you will be eligible to continue your group health insurance benefits at your ownexpense, subject to the terms and conditions of the benefit plan, federal COBRA law, and, as applicable, state insurance laws. You will receive additionalinformation regarding your right to elect continued coverage under COBRA in a separate communication. 5.Tax Matters. The Company will withhold required federal, state and local taxes from any and all payments contemplated by this Agreement. Other than theCompany’s obligation and right to withhold, you will be responsible for any and all taxes, interest, and penalties that may be imposed with respect to thepayments contemplated by this Agreement (including, but not limited to, those imposed under Internal Revenue Code Section 409A). 6.Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, you are not entitled to and will not receive anyadditional compensation, benefits or separation pay after the Separation Date. Thus, for any employee benefits sponsored by the Company not specificallyreferenced in this Agreement, you will be treated as a terminated employee effective on the Separation Date. This includes but is not limited to theCompany’s 401(k) plan, life insurance, accidental death and dismemberment insurance, and short and long-term disability insurance. In accordance with theterms of the Dicerna Employee Stock Purchase Plan (“ESPP”), the Company will refund any contributions you made to the ESPP during the currentpurchase period in the first-regularly scheduled payroll following the Separation Date. 7.Expense Reimbursement. You agree that, within ten (10) calendar days after the Separation Date, you will submit your final documented expensereimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. TheCompany will reimburse you for these expenses pursuant to its regular business practice and in accordance with its expense reimbursement policy, regardlessof whether or not you sign this Agreement (provided that any reimbursements shall be paid no later than the last day of the calendar year following the yearin which the expenses are incurred). 2 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927 8.Return of Company Property. By the Separation Date, you must return to the Company all Company property that you have had in your possession at anytime, including, but not limited to, files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recordedinformation (including email), tangible property (laptop computer, cell phone, PDA, etc.), credit cards, entry cards, identification badges and keys; and, anymaterials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof) (collectively,“Company Property”). If you discover after the Separation Date that you have retained any Company Property, you agree, immediately upon discovery, tocontact the Company and make arrangements for returning the Company Property. The Severance Pay and other consideration under this Agreement iscontingent on you returning all Company Property to the Company. 9.Post Employment Restrictions. You acknowledge and agree that you must comply with your continuing obligations under the Nondisclosure,Noncompetition, Nonsolicitation and Inventions Agreement (the “Confidentiality Agreement”), which you signed on November 24, 2013, and isincorporated into this Agreement by reference. 10.Confidentiality. Except as otherwise provided by law or in Section 19 below, the existence of this Agreement and its provisions will be held in strictestconfidence by you and will not be publicized or disclosed in any manner whatsoever; provided, however, that you may disclose this Agreement: (a) to yourimmediate family; and (b) to your attorney, accountant, auditor, tax preparer, and financial advisor. You agree not to disclose the terms of this Agreement toany current or former Company employee. 11.Non-disparagement. Except as otherwise provided by law or in Section 19 below, you agree not to disparage the Company or its officers, directors,employees, agents, products, research, services or business practices in any manner likely to be harmful to them or their business, business reputation orpersonal reputation. 12.Release of All Claims and Waiver. Except as otherwise set forth in this Agreement, in exchange for the payments and benefits hereunder, you (includingyour heirs, assigns, executors, administrators and anyone claiming for or on your behalf) hereby release, acquit and forever discharge the Company, officers,agents, administrators, servants, employees, attorneys, successors, parent, subsidiaries, assigns and affiliates (the “Released Party” or “Released Parties”), ofand from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind andnature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related toagreements, events, acts, omissions, or conduct at any time prior to and including the date you sign this Agreement. This general release includes, but is notlimited to: (a) claims and demands arising out of or in any way connected with your employment with the Company (including without limitation relating tothat certain Employment Agreement between you and the Company, dated November 13, 2013 (the “Employment Agreement”)), or the termination of thatemployment; (b) claims or demands related to your compensation or benefits with the Company, including but not limited to, wages, salary, bonuses,commissions, vacation pay, fringe benefits, expense reimbursements, incentive pay, equity interest, severance pay, or any other form of compensation; 3 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927 (c) claims pursuant to any federal, state or local law, statute, or cause of action including, but not limited to, claims for discrimination, harassment,retaliation, attorneys’ fees or other claim arising under the federal Civil Rights Act of 1964, as amended; the federal Americans with Disabilities Act of 1990,as amended; the federal Age Discrimination in Employment Act of 1967, as amended (the “ADEA”); the federal Family Medical Leave Act, as amended; thefederal Worker Adjustment and Retraining Notification Act, as amended; the Employee Retirement Income Security Act of 1974, as amended; theMassachusetts Fair Employment Practices Act, M.G.L. c.151B, § 1 et seq., the Massachusetts Civil Rights Act, M.G.L. c.12, §§ 11H and 11I, theMassachusetts Equal Rights Act, M.G.L. c.93, § 102 and M.G.L. c.214, § 1C, the Massachusetts Labor and Industries Act, M.G.L. c.149, § 1 et seq., theMassachusetts Privacy Act, M.G.L. c.214, § 1B, the Massachusetts Maternity Leave Act, M.G.L. c.149, § 105D; and/or any other applicable employmentlaws, regulations, or ordinances; (d) all tort claims, including without limitation, claims for fraud, defamation, emotional distress, and discharge in violationof public policy; and (e) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing.You further agree to waive and release, and agree not to accept, any monetary or other personal recovery from the Company or any of the Released Partieson account of or as a remedy for your actual or alleged injury or damages, as a result of or in connection with any claims released herein against theCompany or any of the Released Parties in any forum, including federal, state or local court or in arbitration or any administrative proceeding with anyfederal, state or local administrative agency.Notwithstanding the foregoing, excluded from this Agreement are any claims which by applicable law cannot be waived in a private agreement between anemployer and employee. 13.ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the Age Discrimination inEmployment Act, as amended (the “ADEA”). You also acknowledge that the consideration given for the waiver and release herein is in addition to anythingof value to which you were already entitled. You further acknowledge that you have been advised by this writing, as required by the ADEA, that:(a) your waiver and release do not apply to any rights or claims that may arise after the execution date of this Agreement;(b) you have been advised hereby to consult with an attorney prior to executing this Agreement;(c) you have up to 21 calendar days from the date of this Agreement to execute this Agreement (although you may choose to voluntarily execute thisAgreement earlier and if you do sign this Agreement before the end of such 21-day period, you acknowledge and agree that you will have done sovoluntarily and with full knowledge that you are waiving your right to have 21 days to consider the Agreement);(d) you have seven (7) calendar days following the execution of this Agreement by the parties to revoke the Agreement; 4 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927 (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth (8 th ) calendar day afterthis Agreement is executed by you; and(f) this Agreement does not affect your ability to test the knowing and voluntary nature of this Agreement or the validity of this waiver of your claimsunder the ADEA . 14.No Pending or Future Actions or Claims. Except as otherwise provided by law or in Section 19 below: (a) you represent that you have not filed anycharges, complaints, grievances, arbitrations, lawsuits, or claims against the Company, with any local, state or federal agency, union or court from thebeginning of time to the date of execution of Agreement and that you will not do so at any time hereafter, based upon events occurring prior to the date ofexecution of this Agreement; and (b) in the event any agency, union, or court ever assumes jurisdiction of any lawsuit, claim, charge, grievance, arbitration,or complaint, or purports to bring any legal proceeding on your behalf, you will ask any such agency, union, or court to withdraw from and/or dismiss anysuch action, grievance, or arbitration, with prejudice. 15.Waiver. You acknowledge and agree that the waivers and releases in Sections 12, 13 and 14 of this Agreement include a release of all claims, whetherknown or unknown, suspected or unsuspected. In giving this release, you hereby expressly waive and relinquish all rights and benefits under any state,federal or local law that may restrict or prohibit a release of unknown or unsuspected claims, including but not limited to Section 1542 of the California CivilCode (which is set forth below) and any analogous law of any jurisdiction of similar effect:A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS ORHER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLYAFFECTED HIS SETTLEMENT WITH THE DEBTOR.” 16.Equity. You acknowledge and agree that (a) the Company previously granted you options to purchase up to 340,000 shares of the Company’s common stock(the “Options”) pursuant to the terms of Stock Option Agreements that you entered into with the Company (the “Option Agreements”) and the Company’s2014 Performance Incentive Plan (the “2014 Plan”) and the 2010 Employee, Director and Consultant Equity Incentive Plan (the “2010 Plan”); (b) as of theSeparation Date, you have vested in 147,421 shares of the Company common stock underlying the Options (the “Vested Option Shares”), which you mayexercise in accordance with the terms of the Option Agreements and the 2014 Plan and the 2010 Plan; and (c) as of the Separation Date, the remaining192,579 shares of the Company common stock underlying the Options are unvested (the “Unvested Option Shares”) and, in accordance with the terms of theOption Agreements, you will cease vesting in the Unvested Option Shares and they will be forfeited as of the Separation Date; and (d), except with respect toyour right to exercise the Vested Option Shares as provided above, you do not have any right to acquire or receive, any equity, security or derivative securityin the Company or any of its parent, subsidiary or affiliated entities. 5 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927 17.Acknowledgements and Representations. You acknowledge and represent that you have not been denied any leave, benefits or rights to which you mayhave been entitled under the Family Medical Leave Act or any other federal or state law, and that you have not suffered any job-related wrongs or injuriesfor which you might still be entitled to compensation or relief. You further acknowledge and represent that, except as expressly provided in this Agreement,you have been paid all wages, bonuses, compensation, benefits and other amounts that any of the Released Parties have ever owed to you, and youunderstand that you will not receive any additional compensation, severance, or benefits after the Separation Date, with the exception of: (a) the SeverancePay described above in Section 2 in accordance with the terms and conditions of this Agreement; (b) the continuation of health insurance premiumsdescribed above in Section 4 in accordance with the terms of this Agreement and (c) any vested right you may have under the terms of a written ERISA-qualified benefit plan. 18.No Admission of Liability. You understand and acknowledge that this Agreement constitutes a compromise and settlement of any and all potential disputedclaims. No action shall be taken by the Company hereto, either previously or in connection with this Agreement, shall be deemed or construed to be: (a) anadmission of the truth or falsity of any potential claims; or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to youor to any third party. 19.Limitations on Employee’s Promises. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement prohibits you fromconfidentially or otherwise communicating or filing a charge or complaint with a governmental or regulatory entity, participating in a governmental orregulatory entity investigation, or making other disclosures to a governmental or regulatory entity, in each case without having to disclose any such conductto the Company, or from responding if properly subpoenaed or otherwise required to do so under applicable law. 20.Entire Agreement. This Agreement, along with the Confidentiality Agreement and Option Agreement, constitutes the complete, final and exclusiveembodiment of the entire agreement between you and the Company regarding your employment with the Company, the termination of your employment,and the other subject matters addressed herein between the parties. It is entered into without reliance on any promise or representation, written or oral, otherthan those expressly contained herein, and, except as otherwise expressly set forth in this Section 20, it supersedes any other such promises, warranties,representations, or prior negotiations and agreements (including without limitation the Employment Agreement, which hereby is terminated, null and void).This is a fully integrated agreement. This Agreement may not be modified or amended except in a writing signed by both you and the Chief ExecutiveOfficer of the Company, to the extent authorized by the Compensation Committee of the Board. 21.Successors and Assigns. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to thebenefit of both you and the Company, their heirs, successors and assigns. This Agreement may be assigned by the Company without restriction (includingbut not limited to, in connection with any merger, reorganization, sale of assets or securities of the Company or otherwise). Because this Agreement containsobligations that are personal to you, you shall not be entitled to assign this Agreement. 6 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927 22.Severability. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any otherprovision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable. 23.Counterparts. You agree that this Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constituteone agreement. Execution of a facsimile copy shall have the same force and effect as execution of an original, and a facsimile signature shall be deemed anoriginal and valid signature. 24.Governing Law. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the State ofMassachusetts. 25.Section 409A. The payments pursuant to this Agreement are intended to be exempt from Section 409A of the Internal Revenue Code to the maximum extentpossible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasuryregulation §1.409A-1(b)(4), and for such purposes, each payment under this Agreement shall be considered a separate payment. 7 Dicerna Pharmaceuticals, Inc.87 Cambridgepark DriveCambridge, Massachusetts 02140617-621-8097Fax: 617-252-0927 This Agreement must be signed, initialed on each page, and returned to the Company by you no sooner than the Separation Date but no later than January 5, 2016,and not revoked by you in accordance with the terms of the Agreement, in order to be valid.I wish you good luck in your future endeavors.Sincerely, By: /s/ Douglas M. Fambrough III Douglas M. Fambrough III Chief Executive OfficerEmployee Acknowledgment and AgreementMy agreement with the terms of this Agreement is signified by my signature below. Furthermore, I acknowledge that I have had the opportunity to review thisAgreement carefully with an attorney of my choice, that I have read and understand this Agreement and that I sign this release of all claims voluntarily, with fullappreciation that at no time in the future may I pursue any of the rights I have waived in this Agreement. Signature: /s/ James DentzerPrint Name: James DentzerDate: December 29, 2015 8Exhibit 10.34 January 1, 2015John GreenVIA HAND DELIVERYRe: Employment OfferDear Jack:We are pleased to offer you employment with Dicerna Pharmaceuticals, Inc. (the “Company”) as the Interim Chief Financial Officer. This letter sets forththe terms of the Company’s employment offer. Should you accept this offer, your start date will be January 1, 2016.In this position, you will report to the Chief Executive Officer. You will perform the duties customarily associated, in the Company’s judgment, with a chieffinancial officer position for an organization of the Company’s size, nature and objectives (which duties are subject to change in the Company’s discretion), andsuch other duties as may from time to time be assigned to you.As we have discussed, this is a temporary and interim position while the Company is engaging in a search for a new Chief Financial Officer for theCompany. We invite you to apply for the Chief Financial Officer position through the search process. If you choose to do so, your application will be considered inthe same manner as the applications of other candidates.This is a part-time position, and you will work onsite at the Company two days per week. You will be required to devote appropriate business time, attentionand effort to your responsibilities for the Company; to perform your assigned responsibilities faithfully, to the best of your abilities and in full compliance withapplicable industry, professional, legal and/or other standards and requirements; and not to engage in any other business activities (whether or not for gain or profit)or other actions which you know or reasonably should know could harm the business or reputation of the Company or any of its affiliates. You also will beexpected to comply with all Company policies (as in effect or amended from time to time). You will be required to perform your duties for the Company incompliance with all applicable laws, rules and regulations, including but not limited to the U.S. Food, Drug and Cosmetic Act, as amended from time to time.Should you accept this offer, your gross annual salary will be $195,520.00. As an “exempt” employee, you are not eligible for overtime compensation. Theforegoing compensation generally will be paid to you (less any withholdings and deductions required by law or authorized by you) in biweekly installments inaccordance with the Company’s regular payroll practices, and may be adjusted periodically in the Company’s discretion. During your employment, you will not beeligible to participate in any Company employee benefit plans and policies, including without limitation with respect to severance or equity, except to the extent aplan or policy extends to all employees of the Company. For the avoidance of doubt, during your employment you will be subject to our Company Security TradingPolicy and our Code of Business Conduct and Ethics.This offer of employment is contingent upon the successful completion of all pre-employment screening required by the Company, including but not limitedto reference verification and background screen, as well as proof of eligibility to work in the United States. You also are required as a condition ofemployment to sign a Nondisclosure, Noncompetition, Nonsolicitation and Inventions Agreement, a copy of which is enclosed for you to review while youconsider our offer.We are extending this offer to you based on the understanding that your employment with the Company does not and will not conflict with any of yourobligations to any third parties and will not violate or be restricted by any non-competition or other agreement with anyone else. Furthermore, we are extending youthis offer to you on the condition that you have not brought and will not bring with you to the Company or use in your employment with the Company anyequipment, confidential information or trade secrets of any third party. If you are a faculty member at or employee of a university, hospital, or another company, wealso are extending this offer to you on the condition that your employment with the Company will not violate any agreements with or policies of any such entities,and that you have made any required disclosures about your employment with the Company to any such entities. If any of this is not the case, please inform us inwriting immediately.To be eligible for employment with the Company, you also must hold and maintain any and all certifications), registrations), license(s) and othercredential(s) required for your position and/or duties under applicable law, professional regulations or standards, or other requirements. Failure to do so at any timemay render you ineligible for employment. This offer also is contingent on your representation that you have not been debarred and are not under consideration tobe debarred by the U.S. Food and Drug Administration from working in or providing consulting services to any Pharmaceutical or Biotechnology Company underthe Generic Drug Enforcement Act of 1992. You further represent and warrant that you have not purchased or sold any securities of the Company except asdisclosed in writing below your signature to this letter.Please note that this letter does not constitute a contract of employment, and does not create any right to continued employment for any period of time. If youaccept this offer, your employment with the Company at all times will be “at will”. This means that either you or the Company may end your employment at anytime for any or no reason.*******We congratulate you on your offer and sincerely hope that you will accept. To do so, please sign and date this letter and the enclosed Nondisclosure,Noncompetition, Nonsolicitation and Inventions Agreement and return them to me. In the meantime, please do not hesitate to call me should you have anyquestions. Very truly yours, /s/ Douglas Fambrough, IIIACCEPTED: Chief Executive Officer/s/ John B. Green Dated: January 14, 201687 Cambridgepark Drive Cambridge, MA 02140Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement No. 333-202687 on Form S-3, in Registration Statement No. 333-193795 on Form S-8, andin the Registration Statement on Form S-8 filed on March 10, 2016 of our report dated March 10, 2016, relating to the consolidated financial statements of DicernaPharmaceuticals, Inc. and its subsidiaries appearing in this Annual Report on Form 10-K of Dicerna Pharmaceuticals, Inc. for the year ended December 31, 2015./s/ Deloitte & Touche LLPBoston, MassachusettsMarch 10, 2016Exhibit 31.1CERTIFICATIONSI, Douglas M. Fambrough, III, Ph.D., certify that:1. I have reviewed this Annual Report on Form 10-K of Dicerna Pharmaceuticals, Inc. for the year ended December 31, 2015;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 10, 2016 /s/ Douglas M. Fambrough, III, Ph.D.Douglas M. Fambrough, III, Ph.D.Chief Executive Officer and DirectorExhibit 31.2CERTIFICATIONSI, John B. Green, CPA, certify that:1. I have reviewed this Annual Report on Form 10-K of Dicerna Pharmaceuticals, Inc. for the year ended December 31, 2015;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting;5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 10, 2016 /s/ John B. Green, CPAJohn B. Green, CPAChief Financial OfficerExhibit 32.1SECTION 1350 CERTIFICATIONS*Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 ofChapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), Douglas M. Fambrough, III, Ph.D., Chief Executive Officer and Director of DicernaPharmaceuticals, Inc. (the “Company”), and John B. Green, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:1. The Company’s Annual Report on Form 10-K, for the year ended December 31, 2015, to which this Certification is attached as Exhibit 32.1 (the “AnnualReport”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Companyfor the period covered by the Annual Report.Dated: March 10, 2016 /s/ Douglas M. Fambrough, III, Ph.D. /s/ John B. Green, CPADouglas M. Fambrough, III, Ph.D. John B. Green, CPAChief Executive Officer and Director Chief Financial Officer *This certification accompanies the Annual Report on Form 10-K, to which it relates, is not deemed filed with the Securities and Exchange Commission and isnot to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.

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