Alnylam Announces Amendment to Merck Collaboration to Increase Focus on Development of RNAi Therapeutics; Milestone Payments to Alnylam Could Exceed $120 Million.

CAMBRIDGE, Mass. -- Alnylam Pharmaceuticals, Inc. (Nasdaq: ALNY), a leading RNAi therapeutics company, announced today that it has amended its two existing RNAi collaboration agreements with Merck and consolidated the efforts into a single ongoing collaboration. The revised terms provide Merck with a more active role in the development of RNAi therapeutic products, and Alnylam with an opportunity to receive accelerated research and development (R&D) funding at an earlier stage and the potential for significant milestones in addition to royalty payments or profit-sharing on any commercialized products resulting from the collaboration.

The collaboration has been amended to focus on the nine new therapeutic targets that remain to be nominated by Merck. Under the revised terms, Merck may participate at an earlier stage in the research and development of these nine targets whereas under the previous agreement, Merck had the right to nominate these new targets for initial development by Alnylam. These new programs are in addition to the existing program directed to the NOGO pathway on which Alnylam and Merck are already collaborating. Also under the revised terms, Alnylam may select three of the nine new programs as joint development programs, which Merck will co-fund and participate in from the outset, thereby providing Alnylam with accelerated R&D funding for its efforts. Previously, the agreement was structured so that co-funding by Merck would not begin until after the completion of defined pre-clinical work. In the U.S., Alnylam will have the right to co-promote RNAi therapeutic products developed in these three programs. Merck will assume primary responsibility for the remaining six programs and Alnylam is eligible to receive milestone payments and royalties on RNAi therapeutic products developed and commercialized by Merck in these programs. Specifically, under the revised terms the successful development and approval of three RNAi therapeutic products developed solely by Merck on a worldwide basis would result in milestone payments to Alnylam of over $120 million.

"We look forward to continuing our productive collaboration with Alnylam," said Stephen Friend, M.D., Ph.D., Executive Vice President, Merck Research Laboratories. "We have seen significant progress in the RNAi field over the past three years and are truly excited by the opportunity to play a continued role in the development of this new class of drugs."

"We are delighted by Merck's continued and increasing enthusiasm for RNAi therapeutics, and their commitment to play an expanded role in our collaboration. We deeply value the commitment from Merck to advance RNAi therapeutic products as a new approach for the discovery of innovative medicines," said John Maraganore, Ph.D., President and Chief Executive Officer of Alnylam Pharmaceuticals. "The amended agreement represents a new and stronger phase of our relationship, and significantly increases the ability of both companies to realize value from our collaboration. Indeed, the accelerated funding will bolster our efforts as we aim to bring RNAi therapeutics to patients."

As part of the amended terms, Alnylam will continue its ongoing efforts with Merck to develop an RNAi therapeutic product directed to the NOGO pathway for the treatment of spinal cord injury. However, in light of advances in the treatment of age-related macular degeneration (AMD) and the newly modified agreement, Alnylam and Merck will not jointly advance their July 2004 Ocular Disease alliance and all rights to ALN-VEG01 will be retained by Alnylam. Alnylam is evaluating partnership opportunities for this program, which has shown encouraging pre-clinical efficacy data and has successfully completed investigational new drug (IND) enabling toxicology studies.

About RNA Interference (RNAi)

RNA interference, or RNAi, is a naturally occurring mechanism within cells for selectively silencing and regulating specific genes. Since many diseases are caused by the inappropriate activity of specific genes, the ability to silence genes selectively through RNAi could provide a new way to treat a wide range of human diseases. RNAi is induced by small, double-stranded RNA molecules. One method to activate RNAi is with chemically synthesized small interfering RNAs, or siRNAs, which are double-stranded RNAs that are targeted to a specific disease-associated gene. The siRNA molecules are used by the natural RNAi machinery in cells to cause highly targeted gene silencing.

About Alnylam

Alnylam is a biopharmaceutical company developing novel therapeutics based on RNA interference, or RNAi. The company is applying its therapeutic expertise in RNAi to address significant medical needs, many of which cannot effectively be addressed with small molecules or antibodies, the current major classes of drugs. Alnylam is building a pipeline of RNAi therapeutics; its lead program is in Phase 1 human clinical trials for the treatment of respiratory syncytial virus (RSV) infection, which is the leading cause of hospitalization in infants in the U.S. The company's leadership position in fundamental patents, technology, and know-how relating to RNAi has enabled it to form major alliances with leading companies including Merck, Medtronic, and Novartis. The company, founded in 2002, maintains global headquarters in Cambridge, Massachusetts, and has an additional operating unit in Kulmbach, Germany. Alnylam is honored to be the "emerging/mid-cap" company recipient of the 2006 James D. Watson Helix Award, the biotechnology industry's award for outstanding achievement. For more information, visit www.alnylam.com.

Alnylam Forward-Looking Statements

Various statements in this release concerning our future expectations, plans, and prospects, including with respect to the development of RNAi therapeutics, constitute forward-looking statements for the purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including without limitation risks related to: our approach to discover and develop novel drugs, which is unproven and may never lead to marketable products; our ability to collaborate successfully with Merck and our other collaborators; obtaining, maintaining, and protecting intellectual property utilized by our products; our ability to enforce our patents against infringers and to defend our patent portfolio against challenges from third parties; our ability to obtain additional funding to support our business activities; our dependence on third parties, including without limitation Merck, for development, manufacture, marketing, sales, and distribution of products; the successful development of our product candidates, all of which are in early stages of development; obtaining regulatory approval for products; competition from others using technology similar to ours and others developing products for similar uses; our dependence on Merck and our other collaborators; and our short operating history; as well as those risks more fully discussed in the "Risk Factors" section of our most recent report on Form 10-Q on file with the Securities and Exchange Commission. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We do not assume any obligation to update any forward-looking statements.