EXHIBIT 10.7
 
                          ALNYLAM PHARMACEUTICALS, INC.
                               790 MEMORIAL DRIVE
                               CAMBRIDGE, MA 02139
 
October 30, 2002
 
John Maraganore                           VIA FEDERAL EXPRESS
c/o Oberoi Hotel
Baie Aux Tortues
Pointe Aux Piments
Mauritius
 
Dear John:
 
      I am very pleased to provide you with a summary of the terms and
conditions of your anticipated employment by Alnylam Pharmaceuticals, Inc.
("Alnylam" or the "Company"). The following sets forth the proposed terms and
conditions of your offer of employment. We hope that you choose to join the
Alnylam team and look forward to a mutually beneficial relationship under your
stewardship.
 
1.    POSITION. You will be the Company's Chief Executive Officer and President.
At the first meeting of the Board of Directors ("Board") following your start
date, you will be elected to the Board. As the Alnylam executive charged with
oversight for day to day operation of the Company, we expect that you will
perform any and all duties and responsibilities normally associated with such
positions and any other special responsibilities delegated by the Board in a
stellar manner and to the best of your abilities at all times. Your performance
will be reviewed formally on an annual basis in conjunction with an annual
salary review.
 
2.    STARTING DATE; COMMENCEMENT BONUS. If you accept this offer, your
employment with Alnylam will begin on December 9th, 2002. You will be expected
to devote all of your working time to the performance of your duties at Alnylam
throughout your employment. You will receive a commencement bonus of $50,000,
minus customary deductions for payroll taxes on January 3, 2003; provided you
agree to repay such commencement bonus upon the termination of your employment
if you resign your employment within two years following your start date, unless
such resignation is for Good Reason. For purposes of this offer, Good Reason
shall be defined as involuntary demotion from the positions of Chief Executive
Officer and President, reduction in your base pay rate unless such occurs in
connection with the reduction of the base pay rates of other senior executives
or relocation of your primary work location to a location more than 100 miles
from the immediately prior location.
 
3.    COMPENSATION, EQUITY AND BENEFITS. Your initial base pay shall be at an
annualized rate of $370,000 per year, minus customary deductions for federal and
state taxes and the like. Your base pay rate will be reviewed on an annual basis
by the Board, following completion of your first full calendar year of
employment with the Company, for each year that you are
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employed by the Company. Assuming you are still employed by Alnylam, you will
also be eligible to receive an Annual Bonus for each calendar year you are
employed by the Company. The award and amount of any Annual Bonus shall be
determined by the Board based on your job performance and the overall
performance of the Company, measured against goals that are mutually agreed upon
in advance by you and the Company. The bonus target for each year will be 35% of
your annualized base pay rate, and the amount of any Annual Bonus for 2002 shall
be pro-rated based on the portion of 2002 during which you are actually employed
by Alnylam.
 
      Subject to approval by the Board (or an appropriate Committee appointed by
the Board), Alnylam will grant you 610,000 stock options in Alnylam at an
exercise price of $0.25 per share, which the Board has determined to be the
current fair market value of the Company's Common Stock, pursuant to the terms
of a formal stock option agreement and the Company's option plan. Such options
shall be incentive stock options to the extent legally permissible, with 25% of
such options, to vest on the first anniversary of your start date and the
remaining options to vest in equal quarterly tranches over the three year period
thereafter, assuming you are still employed by the Company. It is anticipated
that the Board will grant such options within 30 days following your start date
(the "Initial Options").
 
      In addition to the Initial Options, and subject to approval by the Board
(or an appropriate Committee appointed by the Board), Alnylam will grant you
183,000 non-qualified stock options in Alnylam at an exercise price of $0.25 per
share, pursuant to the terms of a formal stock option agreement and the
Company's option plan. Such options shall be incentive stock options to the
extent legally permissible, which will depend of the vesting schedule of other
options granted to you. Assuming you are still employed by the Company, 50% of
such stock options shall vest if and when the Company executes a Significant
Strategic Alliance Agreement prior to the third anniversary of your start date,
and the other 50% of such stock options shall vest in equal quarterly tranches
over the four year period thereafter, provided that all such options shall vest
on the seventh anniversary of your start date, if and to the extent that they
have not vested earlier, assuming you are still employed by the Company. For
purposes of this offer, Significant Strategic Alliance Agreement shall be
defined as an agreement between Alnylam and a pharmaceutical company for the
development of one or more siRNA therapeutics which is executed prior to the
third anniversary of your start date and entails research payments, license fees
and equity purchases paid to Alnylam and the value of product rights granted to
the Company collectively in excess of $10,000,000 over a period of no more than
three years. The value of product rights granted to the Company will be
determined in good faith by the Board, and will be binding and conclusive on the
Company and you. It is anticipated that the Board will grant such options within
30 days following your start date (the "Strategic Alliance Options").
 
      The Initial Options and the Strategic Alliance Options (if a Significant
Strategic Alliance has previously been consummated) shall accelerate fully upon
the occurrence of a Change in Control, as defined in the Company's stock option
plan.
 
      In addition to base pay, bonuses and the foregoing stock options, you will
be entitled to take advantage of any benefits offered by Alnylam, including,
without limitation, periodic grants of additional stock options if the Company
adopts a policy of periodic grants of stock options to senior executives, to the
same extent as such benefits are offered to other Alnylam senior executives.
Alnylam benefits, of course, maybe modified or changed from time to time at the
 
 
                                      -2-
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sole discretion of the Company, and where a particular benefit is subject to a
formal plan (for example, medical insurance), eligibility to participate in and
receive any particular benefit is governed solely by the applicable plan
document.
 
4.    WORK ELIGIBILITY. Your employment with Alnylam is conditioned on your
eligibility to work in the United States. On your first day, you must complete
an I-9 Form and provide the Company with any of the accepted forms of
identification specified on the I-9 Form. A copy of an I-9 Form is enclosed for
your information.
 
5.    CONFIDENTIALITY, INVENTIONS AND NON-COMPETITION. The Company considers the
protection of its confidential information, proprietary materials and goodwill
to be extremely important. Given the confidential nature of various aspects of
our business, you may not discuss the fact or terms of this offer or any
employment discussions with anyone other than members of the Board, members of
your immediate family (and, if relevant, your financial advisor or lawyer) or
me. In addition, you agree to sign and return the Company's agreement relating
to confidentiality, inventions and non-competition by no later than your start
date as a condition of this offer of employment. A copy of that agreement is
enclosed.
 
      The Company agrees not to make any public disclosure of your employment
until your start date, except as you may otherwise agree. At your request, the
Company will coordinate with your present employer regarding the public
announcement of your employment by the Company.
 
6.    MISCELLANEOUS. This letter constitutes our entire offer regarding the
terms and conditions of your prospective employment with Alnylam. It supersedes
any prior agreements, or other promises or statements (whether oral or written)
regarding the offered terms of employment. The terms of your employment shall be
governed by the law of the Commonwealth of Massachusetts. By accepting this
offer of employment, you agree that any action, demand, claim or counterclaim in
connection with any aspect of your employment with Alnylam shall be resolved by
a judge alone, and you waive and forever renounce your right to a trial before a
civil jury.
 
      You may accept this offer of employment and the terms and conditions
hereof by signing the enclosed additional copy of this letter. Your signature on
the copy of this letter and your submission of the signed copy to me will
evidence your agreement with the terms and conditions set forth herein. This
offer will expire on November 15, 2002, unless accepted by you prior to such
date. I am excited to offer you the opportunity to join Alnylam, and we look
forward to having you aboard. We are confident that you will make important
contributions to our unique and exciting enterprise.
 
                                    Sincerely,
 
 
                                    John K. Clarke
                                    Chairman of the Board
 
 
                                      -3-
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Acknowledgment:
 
      I, John Maraganore, have read, understand, and accept employment on the
terms and conditions outlined in this letter. I am not relying on any
representations made to me by anyone other than as set forth above.
 
   /s/ John Maraganore
-------------------------------------
Signature
 
     11/19/02
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Date
 
 
                                      -4-
 
 
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