Alnylam Pharmaceuticals (ALNY)

 

The fair value of stock options at date of grant, based on the following assumptions, was estimated using the Black-Scholes option-pricing model. The Company’s expected stock-price volatility assumption for 2009, 2008 and the three months ended December 31, 2007 is based on a combination of implied volatilities of its publicly traded stock option prices as well as the historical volatility of the Company’s publicly traded stock. During the nine months ended September 30, 2007, the Company’s expected stock-price volatility assumption was based on a combination of implied volatilities of similar entities whose share or option prices are publicly available as well as the historical volatility of the Company’s publicly traded stock. The expected life assumption for 2009, 2008 and for the three months ended December 31, 2007 is based on the equal weighting of the Company’s historical data and the historical data of the Company’s pharmaceutical and biotechnology peers. During the nine months ended September 30, 2007, the expected life assumption was based on the simplified method, which averages the contractual term of the Company’s options (ten years) with the ordinary vesting term (2.2 years). The dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The risk-free interest rate used for each grant is equal to the zero coupon rate for instruments with a similar expected life. The Company currently expects, based on an analysis of its historical forfeitures, that approximately 83% of its options will actually vest, and therefore have applied an annual forfeiture rate of 4.5% to all unvested options as of December 31, 2009. The Company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeitures are higher than estimated.

 

 

At December 31, 2009, there remained $44.7 million of unearned compensation expense related to unvested employee stock options to be recognized as expense over a weighted-average period of approximately 1.5 years.

 

The fair value of stock options at date of grant, based on the following assumptions, was estimated using the Black-Scholes option-pricing model. The Company’s expected stock-price volatility assumption for 2008 and the three months ended December 31, 2007 is based on a combination of implied volatilities of its publicly traded stock option prices as well as the historical volatility of the Company’s publicly traded stock. During the nine months ended September 30, 2007 and during 2006, the Company’s expected stock-price volatility assumption was based on a combination of implied volatilities of similar entities whose share or option prices are publicly available as well as the historical volatility of the Company’s publicly traded stock. The expected life assumption for 2008 and for the three months ended December 31, 2007 is based on the equal weighting of the Company’s historical data and the historical data of the Company’s pharmaceutical and biotechnology peers. During the nine months ended

 

The fair value of stock options at date of grant, based on the following assumptions, was estimated using the Black-Scholes option-pricing model. During the nine months ended September 30, 2007, the Company’s expected stock-price volatility assumption was based on a combination of implied volatilities of similar entities whose share or option prices are publicly available as well as the historical volatility of the Company’s publicly traded stock. During the three months ended December 31, 2007, the Company’s expected stock-price volatility assumption is based on a combination of implied volatilities of its publicly traded stock option prices as well as the historical volatility of the Company’s publicly traded stock. During the nine months ended September 30, 2007, the expected life assumption is based on the simplified method provided for under SAB 107, which averages the contractual term of the Company’s options (10 years) with the ordinary vesting term (2.2 years). During the three months ended December 31, 2007, in anticipation of the sunset of the simplified method provided for in SAB 107, the expected life assumption is based on the equal weighting of the Company’s historical data and the historical data of the Company’s pharmaceutical and biotechnology peers. The dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The risk-free interest rate used for each grant is equal to the zero coupon rate in effect at the time of grant for instruments with a similar expected life. The Company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeitures are higher than estimated.