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                                                                   EXHIBIT 10.25

                                                                  EXECUTION COPY

                            INVESTOR RIGHTS AGREEMENT

         THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered into as of
March 11, 2004 by and between Alnylam Pharmaceuticals, Inc., a Delaware
corporation (the "CORPORATION"), and Isis Pharmaceuticals, Inc., a Delaware
corporation (the "INVESTOR").

         WHEREAS, the Corporation proposes to issue and sell to the Investor
shares of its Series D Convertible Preferred Stock, par value $.0001 per share
(the "SERIES D PREFERRED STOCK"), pursuant to the Series D Convertible Preferred
Stock Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT"); and

         WHEREAS, as a condition to entering into the Purchase Agreement, the
Investor and the Corporation have agreed upon registration rights and certain
other rights and covenants as set forth herein.

         NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         SECTION 1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:

         (a) The term "1934 ACT" means the Securities Exchange Act of 1934, as
amended.

         (b) The term "AFFILIATE" means any Person that, directly or indirectly,
controls, is controlled by or is under common control with the Investor. For the
purposes of this definition, "CONTROL" (including with correlative meanings, the
terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the Investor, whether through the
ownership of voting securities or by contract or otherwise.

         (c) The term "COMMON STOCK" shall have the meaning set forth in the
recitals to this Agreement.

         (d) The term "HOLDER" means the Investor or any Affiliate of the
Investor to which the Investor transfers Registrable Shares.

         (e) The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement.

         (f) The term "PERSON" means any individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company, limited
partnership, joint stock company, unincorporated organization or government or
any agency or political subdivision.

         (g) The term "PREFERRED STOCK" means the Series D Preferred Stock.


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         (h) The term "QUALIFIED IPO" means the closing of the Corporation's
first firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock for the account of the Corporation to the public with gross
proceeds to the Corporation of not less than $25,000,000.

         (i) The term "REGISTRABLE SHARES" means (1) the Common Stock issuable
upon conversion of the Preferred Stock, (2) any Common Stock purchased by the
Investor (or its permitted transferees) pursuant to Section 16 hereof (or Common
Stock issuable with respect to other securities so purchased), and (3) any
Common Stock of the Corporation issued as a dividend or other distribution with
respect to, or in exchange or in replacement of, such Preferred Stock or Common
Stock; provided, that the Registrable Shares of any Holder shall be deemed not
to be Registrable Shares under this Agreement at any time when the Corporation's
Common Stock is publicly traded and all such Registrable Shares can be sold
within a 90-day period pursuant to Rule 144.

         (j) The term "RULE 144" means Rule 144 promulgated under the Securities
Act.

         (k) The term "SEC" means the Securities and Exchange Commission.

         (l) The term "SECURITIES ACT" means the Securities Act of 1933, as
amended.

         (m) The term "SERIES D PREFERRED STOCK" shall have the meaning set
forth in the recitals to this Agreement.

      In addition, for purposes of all calculations and notices under this
Agreement, and all other provisions of this Agreement where the context permits,
a holder of Preferred Stock shall be deemed the Holder of the Registrable Shares
issuable upon conversion thereof, and such Preferred Stock shall be deemed
outstanding Registrable Shares hereunder. Notwithstanding the foregoing, nothing
in this Agreement shall require the Corporation actually to register any shares
of Preferred Stock.

      SECTION 2. Restrictions on Transfer of Registrable Securities held by the
Investor. The Investor hereby agrees not to sell, transfer, assign, exchange,
pledge, hypothecate or otherwise dispose of any Preferred Stock, Common Stock or
Registrable Securities, or any right or interest therein, whether voluntary or
involuntary, by operation of law or otherwise (other than to the Corporation),
except to an Affiliate, provided, such Affiliate agrees to be bound by similar
restrictions on transfer or other disposal of such Preferred Stock, Common Stock
or Registrable Securities as contained herein, without the express written
consent of the Corporation. Notwithstanding the foregoing, the Investor may
sell, transfer, assign, exchange, pledge, hypothecate or otherwise dispose of
(i) up to the greater of (A) 555,555 shares and (B) such number of shares as may
be included in an effective registration statement of Preferred Stock, Common
Stock or Registrable Securities, or any right or interest therein (as adjusted
for any stock split, stock dividend, reclassification or similar event) on or
after the first anniversary date of this Agreement, (ii) up to the greater of
(A) an additional 555,555 shares and (B) such number of shares as may be
included in an effective registration statement of Preferred Stock, Common


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Stock or Registrable Securities, or any right or interest therein (as adjusted
for any stock split, stock dividend, reclassification or similar event) on or
after the second anniversary date of this Agreement and (iii) any additional
shares of Preferred Stock, Common Stock or Registrable Securities, or any right
or interest therein held by the Investor on or after the third anniversary date
of this Agreement.

      SECTION 3. Corporation Registration. If at any time the Corporation
proposes to register any of its Common Stock under the Securities Act in
connection with the public offering of such securities for its own account or
for the accounts of shareholders other than Holders, solely for cash on a form
that would also permit the registration of the Registrable Shares (other than in
connection with a Qualified IPO), the Corporation shall, each such time,
promptly give each Holder written notice of such determination. Upon the written
request of any Holder given within thirty (30) days after giving of any such
notice by the Corporation, the Corporation shall, subject to the limitations set
forth in Section 8, use its best efforts to cause to be registered under the
Securities Act all of the Registrable Shares that each such Holder has requested
be registered; provided, that the Corporation shall have the right to postpone
or withdraw any registration statement relating to an offering in which the
Holders are eligible to participate under this Section 3 without any liability
or obligation to the Holders under this Section 3.

      SECTION 4. Obligations of the Corporation. Whenever required under Section
3 or Section 11 to use its best efforts to effect the registration of any
Registrable Shares, the Corporation shall, as expeditiously as reasonably
possible:

         (a) Prepare and file with the SEC a registration statement with respect
to such Registrable Shares and use its best efforts to cause such registration
statement to become and remain effective until the distribution thereof has been
completed.

         (b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

         (c) Furnish to the selling Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of such Registrable
Shares owned by them.

         (d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement, provided that the
Corporation shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and further provided that (anything
in this Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such

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expenses shall be payable by selling shareholders pro rata, to the extent
required by such jurisdiction.

         (e) Provide a transfer agent for the Common Stock no later than the
effective date of the first registration of any Registrable Shares.

         (f) Otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC.

         (g) Use its best efforts either (i) to cause all such Registrable
Shares to be listed on a national securities exchange (if such securities are
not already so listed) and on each additional national securities exchange on
which similar securities issued by the Corporation are then listed, if the
listing of such securities is then permitted under the rules of such exchange,
or (ii) to secure designation of all such Registrable Shares as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the SEC
or, failing that, to secure listing on NASDAQ for such Registrable Shares and,
without limiting the generality of the foregoing, to arrange for at least two
(2) market makers to register as such with respect to Registrable Shares with
the National Association of Securities Dealers.

         (h) Enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions as the selling Holders
of Registrable Shares shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Shares.

         (i) Make available for inspection by any selling Holder of Registrable
Shares, by any underwriter participating in any disposition to be effected
pursuant to such registration statement and by any attorney, accountant or other
agent retained by any such selling Holder or any such underwriter, all pertinent
financial and other records and pertinent corporate documents and properties of
the Corporation, and cause all of the Corporation's officers, directors and
employees to supply all information reasonably requested by any such selling
Holder, underwriter, attorney, accountant or agent in connection with such
registration statement.

         (j) Use every reasonable effort to prevent the issuance of any stop
order suspending the effectiveness of such registration statement or of any
order preventing or suspending the use of any preliminary prospectus and, if any
such order is issued, to obtain the lifting thereof at the earliest reasonable
time.

         (k) Make such representations and warranties to the selling Holders of
Registrable Shares and the underwriters as are customarily made by issuers to
selling stockholders and underwriters, as the case may be, in primary
underwritten public offerings.

      SECTION 5. Furnish Information. It shall be a condition precedent to the
obligations of the Corporation to take any action pursuant to this Agreement
with respect to the registration of any Holder's Registrable Shares that such
Holder shall take such actions and furnish to the Corporation such information
regarding itself, the Registrable Shares held by it, and the intended method of
disposition of such securities, as the Corporation shall reasonably request and
as shall be required in connection with any registration, qualification or
compliance referred to in this agreement, including, without limitation (i) in
connection with an underwritten offering, enter


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into an appropriate underwriting agreement containing terms and provisions then
customary in agreements of that nature, (ii) enter into such custody agreements,
powers of attorney and related documents at such time and on such terms and
conditions as may then be customarily required in connection with such offering
and (iii) distribute the Registrable Shares only in accordance with and in the
manner of the distribution contemplated by the applicable registration statement
and prospectus. In addition, the Holders shall promptly notify the Corporation
of any request by the Commission or any state securities commission or agency
for additional information or for such registration statement or prospectus to
be amended or supplemented.

      SECTION 6. Expenses of Demand Registration. All expenses incurred in
connection with any registration pursuant to Section 11 (excluding underwriters'
discounts and commissions), including, without limitation, all registration and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Corporation, and the reasonable fees and disbursements of one
special counsel for the selling Holders collectively, shall be borne by the
Corporation.

      SECTION 7. Corporation Registration Expenses. All expenses (excluding
underwriters' discounts and commissions) incurred in connection with any
registration pursuant to Section 3, including, without limitation, any
additional registration and qualification fees and any additional fees and
disbursements of counsel to the Corporation that result from the inclusion of
securities held by the selling Holders in such registration and the reasonable
fees and disbursements of one special counsel for the selling Holders
collectively, shall be borne by the Corporation.

      SECTION 8. Underwriting Requirements.

         (a) In connection with any offering under Section 3 involving an
underwriting of shares being issued by the Corporation, the Corporation shall
not be required to include any Holder's Registrable Shares in such underwriting
unless such Holder accepts the terms of the underwriting as agreed upon between
the Corporation and the underwriters selected by it, and then only in such
quantity as will not, in the reasonable opinion of the underwriters, jeopardize
the success of the offering by the Corporation. If the total amount of
securities that all Holders and other persons having contractual registration
rights request to be included in an underwritten offering under Section 3
exceeds the amount of securities that the underwriters reasonably believe
compatible with the success of the offering, no securities of any shareholder
except (i) securities included in such underwritten offering pursuant to the
exercise of contractual registration rights and (ii) Registrable Shares of
Holders shall be included in such offering unless all Registrable Shares and all
shares of other persons having contractual registration rights which the Holders
and the holders of shares having contractual registration rights have requested
to be included are included, and the Corporation shall only be required to
include in the offering so many of the Registrable Shares of the Holders as the
underwriters reasonably believe will not jeopardize the success of the offering
(the Registrable Shares so included to be apportioned pro rata among the selling
Holders and the holders of other shares seeking registration under other
registration rights agreements with the Corporation according to the total
amount of Registrable Shares owned by such selling Holders and the holders of
other shares seeking registration under other registration rights agreements
with the Corporation, or in such other proportions as shall mutually be agreed
to by such selling Holders). Notwithstanding the foregoing, prior to the third

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anniversary date of this Agreement, the Corporation shall be entitled to exclude
from the offering any or all Registrable Shares of the Holders if the
underwriters reasonably believe that inclusion of such Registrable Shares of the
Holders will jeopardize the success of the offering, provided, that prior to the
third anniversary date of this Agreement, such Registrable Shares of the Holders
shall not be excluded if any shares of capital stock of the Corporation held by
Merck & Co., Inc. are included in such offering.

         (b) In connection with any underwritings of shares to be registered
under Section 3 or Section 11, the Corporation shall have the right to designate
the managing underwriter or underwriters.

      SECTION 9. Delay of Registration. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.

      SECTION 10. Indemnification. In the event any Registrable Shares are
included in a registration statement under this Agreement:

         (a) To the extent permitted by law, the Corporation will indemnify and
hold harmless each Holder requesting or joining in a registration, any
underwriter (as defined in the Securities Act) for it, and each person, if any,
who controls any such Holder or underwriter within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which they may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based on (i) any untrue or alleged untrue statement of any
material fact contained in such registration statement, including, without
limitation, any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading or (iii) any violation by the
Corporation of any rule or regulation promulgated under the Securities Act
applicable to the Corporation and relating to action or inaction required of the
Corporation in connection with any such registration; and will promptly
reimburse each such Holder, underwriter, or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action, provided, however,
that the indemnity agreement contained in this Section 10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Corporation (which
consent shall not be unreasonably withheld or delayed) nor shall the Corporation
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it (i) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in connection with
such registration statement, preliminary prospectus, final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished to the Corporation expressly for use in connection
with such registration by or on behalf of any such Holder, underwriter or
controlling person, (ii) is caused by the failure of a Holder to deliver a copy
of the final prospectus relating to such Registrable Shares, as then amended or
supplemented, in connection with a purchase, if the Corporation had previously
furnished copies thereof to such Holder or (iii) is caused by such


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Holder's disposition of Registrable Shares during any period during which such
Holder is obligated to discontinue any disposition of Registrable Shares under
Section 15.

         (b) To the extent permitted by law, each Holder requesting or joining
in a registration will indemnify and hold harmless the Corporation, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Corporation within the meaning of the
Securities Act, and any underwriter (within the meaning of the Securities Act)
for the Corporation against any losses, claims, damages or liabilities to which
the Corporation or any such director, officer, controlling person or underwriter
may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto or (ii) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information relating to and furnished to the Corporation by such Holder
expressly for use in connection with such registration; and will promptly
reimburse the Corporation or any such director, officer, controlling person or
underwriter for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 10(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably withheld or
delayed) and, provided, further, that no Holder shall have any liability under
this Section 10(b) in excess of the net proceeds actually received by such
Holder in the relevant public offering.

         (c) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 10, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties. The failure to notify an indemnifying
party promptly of the commencement of any such action, if prejudicial to his
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 10, but the omission so to
notify the indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this Section 10.

         (d) If the indemnification provided for in this Section 10 is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under Section 10(a) or
Section 10(b) in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Corporation and the selling Holders from the offering


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of securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Corporation and the selling Holders in connection with the
statements or omissions described in such Section 10(a) or Section 10(b) which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The respective relative benefits
received by the Corporation and the selling Holders shall be deemed to be in the
same proportion as the total price paid to the Corporation and the selling
Holders, respectively, for the securities sold by them in the offering. The
relative fault of the Corporation and the selling Holders shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Corporation or the selling Holders and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in this Section 10, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim. The provisions set forth in Section 10(c) with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this Section 10(d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
subsection Section 10(c) for purposes of indemnification. The Corporation and
the selling Holders agree that it would not be just and equitable if
contribution pursuant to this Section 10 were determined solely by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this paragraph. Notwithstanding the
provisions of this Section 10(d), no Holder shall be required to contribute an
amount in excess of the net proceeds actually received by such Holder in the
relevant public offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

         (e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification contained in the underwriting agreements entered into among the
Holders, the Corporation and the underwriters in connection with an underwritten
public offering are in conflict with the foregoing provisions, the provisions in
the underwriting agreement shall be controlling as to the Registrable Shares
included in the public offering.

      SECTION 11. Registrations on Form S-3.

         (a) If (i) the Corporation shall receive a written request (specifying
that it is being made pursuant to this Section 11) from one or more Holders that
the Corporation file a registration statement on Form S-3 (or any successor form
to Form S-3 regardless of its designation) for a public offering of Registrable
Shares the reasonably anticipated aggregate price to the public of which would
equal or exceed $3,000,000, and (ii) the Corporation is a registrant entitled to
use Form S-3 (or any successor form to Form S-3) to register such shares, then
the Corporation shall promptly notify all other Holders of such request and
shall use its best efforts to cause all Registrable Shares that Holders have
requested be registered to be registered on Form S-3 (or any successor form to
Form S-3).

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         (b) Notwithstanding the foregoing, (i) the Corporation shall not be
obligated to effect a registration pursuant to this Section 11 during the period
starting with the date sixty (60) days prior to the Corporation's estimated date
of filing of, and ending on a date six (6) months following the effective date
of, a registration statement pertaining to an underwritten public offering of
securities for the account of the Corporation, provided, that the Corporation is
actively employing in good faith its best efforts to cause such registration
statement to become effective and that the Corporation's estimate of the date of
filing such registration statement is made in good faith; (ii) the Corporation
shall not be obligated to effect a registration pursuant to this Section 11
within six (6) months after the effective date of a prior registration under
this Section 11; and (iii) if the Corporation shall furnish to the Holders a
certificate signed by the President of the Corporation stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Corporation or its shareholders for a registration statement to be filed in
the near future, then the Corporation's obligation to use its best efforts to
file a registration statement shall be deferred for a period not to exceed 45
days.

         (c) The Holders' rights to registration under this Section 11 are in
addition to, and not in lieu of, their rights to registration under Section 3 of
this Agreement.

      SECTION 12. Transfer of Registration Rights. Subject to the provisions of
Section 2 hereof, the registration rights and obligations of the Investor under
this Agreement with respect to any Registrable Shares may be transferred to any
Affiliate of the Investor, provided, however, that (a) the Corporation shall be
given written notice by the Investor at the time of any permitted transfer
stating the name and address of the transferee and identifying the securities
with respect to which the rights and obligations under this Agreement are being
assigned and (b) the transferee shall execute an agreement to be bound by the
terms of this Agreement.

      SECTION 13. Mergers, Etc. The Corporation shall not, directly or
indirectly, enter into any merger, consolidation or reorganization in which the
Corporation shall not be the surviving corporation unless the proposed surviving
corporation shall, prior to such merger, consolidation or reorganization, agree
in writing to assume the obligations of the Corporation under this Agreement,
and for that purpose references hereunder to "Registrable Shares" shall be
deemed to be references to the securities which the Holders would be entitled to
receive in exchange for Registrable Shares under any such merger, consolidation
or reorganization; provided, however, that the provisions of this Agreement
shall not apply in the event of any merger, consolidation or reorganization in
which the Corporation is not the surviving corporation if the holders of
Registrable Shares are entitled to receive in exchange therefor (i) cash or (ii)
securities of the acquiring corporation which may be immediately sold to the
public without registration under the Securities Act.

      SECTION 14. Stand-Off Agreement. Each Holder, if requested by the
Corporation and the managing underwriter of an offering by the Corporation of
Common Stock pursuant to a registration statement under the Securities Act,
shall agree not to sell publicly or otherwise transfer or dispose of any
Registrable Shares or other securities of the Corporation held by such Holder
for a specified period of time (not to exceed 180 days) immediately following
the effective date of such registration statement; provided, that the foregoing
shall only apply if all persons who hold shares of Common Stock, or securities
convertible into or exchangeable or exercisable for shares of Common Stock,
which in aggregate represent one percent (1%) or more


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of the shares of Common Stock then outstanding, and all officers and directors
of the Corporation, enter into similar agreements.

      SECTION 15. Future Events. The Corporation will notify each Holder
participating in a registration of the occurrence of any of the following events
of which the Corporation is actually aware, and when so notified, each Holder
will immediately discontinue any disposition of Registrable Shares until
notified by the Corporation that such event is no longer applicable:

         (a) the issuance by the Commission or any state securities commission
or agency of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose (in which case
the Corporation will make reasonable efforts to obtain the withdrawal of any
such order or the cessation of any such proceedings); or

         (b) the existence of any fact which makes untrue any material statement
made in the registration statement or prospectus or any document incorporated
therein by reference or which requires the making of any changes in the
registration statement or prospectus or any document incorporated therein by
reference in order to make the statements therein not misleading (in which case
the Corporation will make reasonable efforts to amend the applicable document to
correct the deficiency).

      SECTION 16. Right of First Refusal.

         (a) The Corporation hereby grants to the Investor the right of first
refusal to purchase all (or any part) of the Investor's pro rata share of any
New Securities (as defined below) that the Corporation may, from time to time,
propose to sell or issue (the "BASIC AMOUNT"). The Investor's pro rata share or
"BASIC AMOUNT", for purposes of this right of first refusal, is the ratio of (i)
the number of shares of Common Stock then held of record by, or issuable on
conversion of the shares of Preferred Stock then held of record by, the Investor
to (ii) the sum of the total number of shares of Common Stock issued and
outstanding plus the total number of shares of Common Stock issuable upon
conversion of the shares of Preferred Stock outstanding at such time, provided,
however, (A) the Investor shall not have the right to acquire more than an
amount equal to the percentage of the outstanding shares of the Corporation held
by the Investor on a fully diluted basis immediately after the Closing (as
defined in the Purchase Agreement) of any New Securities (as defined below),
unless expressly agreed to in writing by both the Corporation and the Investor,
and (B) the Investor shall not have the right to acquire greater than 19.9% of
the total outstanding shares of the Corporation's capital stock, on a
fully-diluted basis, unless expressly agreed to in writing by both the
Corporation and the Investor; provided, however, that the Basic Amount shall be
adjusted downward to reflect the restrictions set forth in (A) and (B).

         (b) "NEW SECURITIES" shall mean any equity securities of the
Corporation, whether now authorized or not, and rights, options, or warrants to
purchase said equity securities, and securities of any type whatsoever that are,
or may become, convertible into said equity securities; provided, that "NEW
SECURITIES" does not include (i) securities offered to the public pursuant to a
Qualified IPO; (ii) securities issued pursuant to the acquisition of another
corporation by the Corporation by merger, purchase of substantially all of the
assets, or other


                                      -10-
<PAGE>

reorganization whereby the Corporation acquires not less than 51% of the voting
power of such corporation in a transaction approved by a majority of the
directors of the Corporation; (iii) shares of Common Stock issued or issuable to
employees, consultants or directors of the Corporation pursuant to any stock
purchase plan, stock option plan or other employee stock bonus arrangement of
the Corporation (including shares issued or issuable upon exercise of options
already granted); (iv) securities issued in connection with any stock split or
stock dividend by the Corporation; (v) shares of Common Stock issued upon
conversion of the Series A Convertible Preferred Stock, par value $.0001 per
share, of the Corporation ("SERIES A PREFERRED STOCK"), the Series B Convertible
Preferred Stock, $.0001 par value per share, of the Corporation ("SERIES B
PREFERRED STOCK"), the Series C Convertible Preferred Stock, $.0001 par value
per share, of the Corporation (the "SERIES C PREFERRED STOCK") and the Series D
Preferred Stock; (vi) securities issued in connection with capital leases, bank
financing or other similar transactions with a non-equity financing purpose, in
each case as approved by a majority of the directors of the Corporation; (vii)
securities issued in connection with licensing or strategic alliance
transactions, in each case as approved by a majority of the directors of the
Corporation; (viii) up to an aggregate of 16,328 shares of Series B Preferred
Stock issued to Garching Innovation GmbH, Massachusetts Institute of Technology,
Whitehead Institute for Biomedical Research and Max-Planck-Gesellschaft zur
Foerderung der Wissenschaften e.V in connection with certain license agreements
between Alnylam US, Inc. ("ALNYLAM US") and such entities; or (ix) shares of
capital stock of the Corporation issued or issuable at any time to the former
stockholders of Ribopharma AG ("RIBOPHARMA") pursuant to that certain Share
Exchange Agreement dated as of July 3, 2003 by and among the Corporation,
Ribopharma, the stockholders of Ribopharma and Alnylam.

         (c) The Corporation shall not issue, sell or exchange, agree to issue,
sell or exchange, or reserve or set aside for issuance, sale or exchange any New
Securities unless the Corporation shall deliver to the Investor a written notice
of any proposed or intended issuance, sale or exchange of New Securities (the
"OFFER"), which Offer shall (i) identify and describe the New Securities, (ii)
describe the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the New Securities to be issued, sold or
exchanged, (iii) identify the persons or entities, if known, to which or with
which the New Securities are to be offered, issued, sold or exchanged, (iv) if
applicable, notify the Investor of any mandatory conversion of the Investor's
shares of Preferred Stock that would result from the Investor's failure to
purchase its Basic Amount and (v) offer to issue and sell to or exchange with
the Investor (A) the Investor's Basic Amount, and (B) any additional portion of
the Available Undersubscription Amount (as defined in that certain Investor
Rights Agreement dated as of July 31, 2003 by and among the Corporation and the
persons and entities listed thereon (as amended and/or restated from time to
time, the "INVESTOR RIGHTS AGREEMENT")) as the Investor shall indicate it will
purchase or acquire should the Right Holders (as defined in the Investor Rights
Agreement) subscribe for less than the total Available Undersubscription Amount
(the "UNDERSUBSCRIPTION AMOUNT"), subject to the limitations set forth in
Section 16(a). The Investor shall have the right, for a period of 30 days
following delivery of the Offer, to purchase or acquire, at a price and upon the
other terms specified in the Offer, the number or amount of New Securities
described above. The Offer by its terms shall remain open and irrevocable for
such 30-day period.

                                      -11-
<PAGE>

         (d) To accept an Offer, in whole or in part, the Investor must deliver
a written notice to the Corporation prior to the end of the 30-day period of the
Offer, setting forth the portion of the Investor's Basic Amount that the
Investor elects to purchase and, if the Investor shall elect to purchase all of
its Basic Amount, the Undersubscription Amount (if any) that the Investor elects
to purchase, subject to the limitations set forth in Section 16(a) (the "NOTICE
OF ACCEPTANCE"). If the Right Holders do not elect to purchase all of the
Available Undersubscription Amount pursuant to Section 3.4 of the Investor
Rights Agreement, then the Investor, if it has set forth an Undersubscription
Amount in its Notice of Acceptance, shall be entitled to purchase, in addition
to its Basic Amount subscribed for, the Undersubscription Amount it has
subscribed for to the extent such Undersubscription Amount does not exceed the
total Available Undersubscription Amount not subscribed for by the Right Holders
pursuant to Section 3.4 of the Investor Rights Agreement.

         (e) The Corporation shall have 90 days from the expiration of the
period set forth in Section 16(c) above to issue, sell or exchange all or any
part of such New Securities as to which a Notice of Acceptance has not been
given by the Investor (the "REFUSED SECURITIES"), but only to the offerees or
purchasers (if identified) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) which are described in the
Offer.

         (f) In the event the Corporation shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 16(e) above), then the Investor may, at its sole option and
in its sole discretion, reduce the number or amount of the New Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the New Securities that the Investor elected to purchase
pursuant to Section 16(d) above multiplied by a fraction, (i) the numerator of
which shall be the number or amount of New Securities the Corporation actually
proposes to issue, sell or exchange (including New Securities to be issued or
sold to the Investor pursuant to Section 16(d) above prior to such reduction)
and (ii) the denominator of which shall be the amount of all New Securities that
the Corporation initially proposed to offer, sell or exchange as described in
the Offer. In the event that the Investor so elects to reduce the number or
amount of New Securities specified in its Notice of Acceptance, the Corporation
may not issue, sell or exchange more than the reduced number or amount of the
New Securities unless and until such securities have again been offered to the
Investor in accordance with Section 16(c) above.

         (g) Upon the closing of the issuance, sale or exchange of all or less
than all the Refused Securities, the Investor shall acquire from the
Corporation, and the Corporation shall issue to the Investor, the number or
amount of New Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 16(f) above if the Investor have so elected, upon the terms
and conditions specified in the Offer. The purchase by the Investor of any New
Securities is subject in all cases to the preparation, execution and delivery by
the Corporation and the Investor of a purchase agreement relating to such New
Securities reasonably satisfactory in form and substance to the Investor and the
Corporation and their respective counsel.

         (h) Any New Securities not acquired by the Investor or other persons in
accordance with Section 16(e) above may not be issued, sold or exchanged until
they are again offered to the Investor under the procedures specified in this
Agreement.

                                      -12-
<PAGE>

         (i) This right of first refusal may not be assigned other than to an
Affiliate, in whole or in part, by the Investor without the express written
consent of the Corporation.

      SECTION 17. Voting. In any and all elections of directors of the
Corporation (whether at a meeting or by written consent in lieu of a meeting),
each Holder agrees to vote all shares of Common Stock, Series D Preferred Stock
and any other class of voting security of the Corporation now or hereinafter
owned or controlled by them, and otherwise use their respective best efforts as
shareholders of the Corporation, to fix the number of directors constituting the
whole Board of Directors of the Corporation and to elect directors of the
Corporation according to the provisions of Section 1 of that certain Voting
Agreement dated as of July 31, 2003 by and among the Corporation and the persons
and entities listed thereon, as amended and/or restated from time to time.

      SECTION 18. Financial Reports. The Corporation agrees to furnish and to
cause each Subsidiary to furnish to the investor the following:

         (a) Monthly Summaries. Within 30 days after the end of each month, a
financial summary of the revenues, expenses and cash flows of the Corporation
and each Subsidiary for such month, together with a statement of cash balance
and headcount as of the end of such month.

         (b) Quarterly Reports. Within 30 days after the end of each fiscal
quarter, an unaudited financial report of the Corporation and each Subsidiary,
which report shall be prepared in accordance with United States
generally-accepted accounting principles ("GAAP") (except that it may (i) be
subject to normal year-end audit adjustments and (ii) not contain all notes
thereto which may be required in accordance with GAAP) and be certified by
either the Chief Executive Officer or the Chief Financial Officer of the
Corporation or such Subsidiary to have been so prepared, and which shall include
the following:

                  (1) an income statement for such quarter, together with a
         cumulative income statement from the first day of the then-current
         fiscal year to the last day of such quarter;

                  (2) a balance sheet as of the last day of such quarter;

                  (3) a statement of cash flows for such quarter, and

                  (4) a comparison between the actual figures for such quarter
         and the comparable figures (with respect to the foregoing clauses (a)
         and (b) only) for the prior year (if any).

      The financial report for each such quarter shall be accompanied by a
report by the Chief Executive Officer or Chief Financial Officer of the
Corporation or such Subsidiary outlining for each such quarter significant
business developments, including the status of the Corporation's or such
Subsidiary's activities related to Intellectual Property, research, development,
sales, marketing and other operating activities (personnel, financing, etc.),
and material problems occurring during such quarter, together with a statement
of projected cash flows for the following quarter. Within 30 days after the end
of each such quarter, the Corporation shall also


                                      -13-
<PAGE>

provide a report to the Board of Directors of the Corporation regarding its
projected budget for the following quarter.

         (c) Annual Reports. Within 90 days after the end of each fiscal year of
the Corporation and each Subsidiary, financial statements of the Corporation and
each Subsidiary which shall (a) include an income statement for such fiscal
year, a balance sheet as of the last day thereof, and statements of
stockholders' equity and cash flows for such fiscal year, and (b) each be
prepared in accordance with GAAP.

         (d) Consolidated Financial Statements. If for any period the
Corporation shall have any Subsidiary whose accounts are consolidated with those
of the Corporation, then in respect of such period the financial statements
delivered pursuant to the foregoing Sections 18(b) and 18(c) shall be the
consolidated and consolidating financial statements of the Corporation and all
such consolidated Subsidiaries. Notwithstanding the foregoing, the Corporation
shall cause each of Alnylam and Ribopharma to provide such financial statements
on an unconsolidated basis.

         (e) Other Reports and Information. Promptly upon becoming available,
copies of all financial statements, reports, notices, press releases, proxy
statements and other documents sent by the Corporation and each Subsidiary to
its stockholders or released to the public and copies of all regular and
periodic reports, if any, filed by the Corporation or such Subsidiary with the
U.S. Securities and Exchange Commission or any securities exchange, securities
trading system or regulatory body (including without limitation the German trade
register).

         (f) Definitions. For purposes of this Section 18, "SUBSIDIARY" shall
mean any corporation, association, trust, partnership, limited liability
company, limited liability partnership, joint venture or other entity, a
majority of the outstanding equity interest of which is owned, directly or
indirectly, by the Corporation; and "INTELLECTUAL PROPERTY" shall mean all
patents, trademarks, service marks, trade names, copyrights, inventions, trade
secrets, know-how, proprietary processes and formulae, applications for patents,
trademarks, service marks and copyrights, and other industrial and intellectual
property rights.

         (g) Use of Information and Confidentiality Restrictions. Investor
hereby agrees that it shall not (i) use any information provided by the
Corporation pursuant to this Section 18 other than for the evaluation of its
investment in the Corporation, or (ii) disclose any information provided by the
Corporation pursuant to this Section 18 to any third party unless otherwise
disclosable pursuant to the terms of the Research Agreement. Notwithstanding the
foregoing, the Corporation may exclude from any or all of the foregoing reports
any material which (i) the Corporation has a good faith belief, upon advice of
counsel, that such exclusion is necessary to preserve the attorney-client
privilege, or (ii) the Corporation has a good faith belief that such exclusion
is required by its confidentiality obligations to third parties.

      SECTION 19. Notices. All notices, requests, consents and other
communications hereunder ("NOTICES") to any party shall be contained in a
written instrument addressed to such party at the address set forth below or
such other address as may hereafter be designated in writing by the addressee to
the addressor listing all parties and shall be deemed given (a) when


                                      -14-
<PAGE>


delivered in person or duly sent by fax showing confirmation of receipt, (b)
three days after being duly sent by first class mail postage prepaid (other than
in the case of Notices to or from any non-U.S. resident, which Notices must be
sent in the manner specified in clause (a) or (c)), or (c) two days after being
duly sent by DHL, Federal Express or other recognized express international
courier service:

      (a)                  if to the Corporation, to:

                           Alnylam Pharmaceuticals, Inc.
                           c/o John Maraganore
                           790 Memorial Drive, Suite 202
                           Cambridge, MA 02139
                           Facsimile:  (617) 252-0011

                           with a copy to:

                           Hale and Dorr LLP
                           60 State Street
                           Boston, MA 02109

                           Attention:  Steven D. Singer, Esq.
                           Facsimile:  (617) 526-5000

      (b)                  if to the Investor, to:

                           Isis Pharmaceuticals, Inc.
                           2292 Faraday Avenue
                           Carlsbad, CA  92008
                           Attn: Office of the Secretary

      SECTION 20. Miscellaneous.

         (a) This Agreement states the entire agreement of the parties
concerning the subject matter hereof, and supersedes all prior agreements,
written or oral, between or among them concerning such subject matter.

         (b) This Agreement may be amended, and compliance with any provision of
this Agreement may be omitted or waived, only by the written agreement of the
Corporation and the Holders of at east 66 2/3% in voting power of the then
outstanding Registrable Shares.

         (c) This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware, without regard
to its principles of conflicts of laws.

         (d) This Agreement may be executed in any number of counterparts, each
such counterpart shall be deemed to be an original instrument, and all such
counterparts together shall constitute but one agreement. Any such counterpart
may contain one or more signature pages. This Agreement may be executed by
facsimile signature pages.

                                      -15-
<PAGE>

         (e) This Agreement and all rights contained herein shall terminate upon
the three-year anniversary of the closing of the Qualified IPO, except for the
rights contained in Sections 16, 17 and 18, which shall terminate upon the
closing of the Qualified IPO.

                  [Remainder of page intentionally left blank.]



                                      -16-
<PAGE>


         IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as a contract under seal as of the date first written above.

                            THE CORPORATION:

                            ALNYLAM PHARMACEUTICALS, INC.

                            By:      /s/ Vincent Miles
                                     ----------------------------------
                            Name:    Vincent Miles

                            Title:   Senior Vice President, Business Development

                            THE INVESTOR:

                            ISIS PHARMACEUTICALS, INC.

                            By:      /s/ B. Lynne Parshall
                                     ----------------------------------
                            Name: B. Lynne Parshall
                            Title:   Executive Vice President


<PAGE>


                                   Schedule A

                                     Holders


Isis Pharmaceuticals, Inc.
2292 Faraday Avenue
Carlsbad, CA  92008
Attn: Office of the Secretary