Company Quick10K Filing
Akcea Therapeutics
Price16.17 EPS-1
Shares94 P/E-14
MCap1,518 P/FCF101
Net Debt-253 EBIT-112
TEV1,265 TEV/EBIT-11
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-07
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-09
8-K 2020-06-17
8-K 2020-05-18
8-K 2020-05-05
8-K 2020-04-24
8-K 2020-04-04
8-K 2020-03-19
8-K 2020-03-16
8-K 2020-03-06
8-K 2020-03-02
8-K 2020-02-25
8-K 2020-02-12
8-K 2020-01-28
8-K 2020-01-22
8-K 2020-01-09
8-K 2020-01-02
8-K 2019-12-18
8-K 2019-12-13
8-K 2019-12-02
8-K 2019-11-05
8-K 2019-10-21
8-K 2019-10-11
8-K 2019-10-04
8-K 2019-09-18
8-K 2019-08-06
8-K 2019-05-08
8-K 2019-04-24
8-K 2019-02-26
8-K 2019-02-22
8-K 2018-11-21
8-K 2018-11-05
8-K 2018-10-05
8-K 2018-10-04
8-K 2018-09-18
8-K 2018-09-06
8-K 2018-08-27
8-K 2018-08-06
8-K 2018-08-01
8-K 2018-07-11
8-K 2018-06-01
8-K 2018-05-03
8-K 2018-04-17
8-K 2018-04-16
8-K 2018-04-05
8-K 2018-03-26
8-K 2018-03-15
8-K 2018-03-14
8-K 2018-02-26

AKCA 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Default Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.3 akca-ex103_138.htm
EX-10.4 akca-ex104_137.htm
EX-31.1 akca-ex311_6.htm
EX-31.2 akca-ex312_11.htm
EX-32.1 akca-ex321_9.htm

Akcea Therapeutics Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
0.50.40.30.10.0-0.12017201820192020
Assets, Equity
0.20.10.10.0-0.0-0.12017201820192020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22017201820192020
Ops, Inv, Fin

10-Q 1 akca-10q_20200331.htm 10-Q akca-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Commission file number 001-38137

 

 

Akcea Therapeutics, Inc.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

47-2608175

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

22 Boston Wharf Road, 9th Floor, Boston, MA 02210

(Address of principal executive offices, including zip code)

617-207-0202

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act.

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

AKCA

 

The Nasdaq Stock Market, LLC

 

Indicate 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 12 months (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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Securities Exchange Act of 1934). Yes No

 

The number of shares of common stock outstanding as of April 29, 2020 was 101,509,223.

 

 

 

 


 

AKCEA THERAPEUTICS, INC.

FORM 10-Q

INDEX

 

PART I

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited):

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019

 

4

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019

 

5

 

 

 

 

 

Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2020 and 2019

 

6

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019

 

7

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations:

 

27

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

37

 

 

 

 

Item 4.

Controls and Procedures

 

37

 

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

39

 

 

 

 

Item 1A

Risk Factors

 

39

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

72

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

72

 

 

 

 

Item 4.

Mine Safety Disclosures

 

72

 

 

 

 

Item 5.

Other Information

 

72

 

 

 

 

Item 6.

Exhibits

 

73

 

 

 

 

Signatures

 

74

 

TRADEMARKS

"Akcea," the Akcea logo, and other trademarks or service marks of Akcea Therapeutics, Inc. appearing in this Report are the property of Akcea Therapeutics, Inc. This Report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Report may appear without the ® or TM symbols.

 

2


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

163,320

 

 

$

306,866

 

Short-term investments

 

 

257,982

 

 

 

156,806

 

Accounts receivable

 

 

10,673

 

 

 

10,496

 

Receivable from Ionis Pharmaceuticals, Inc.

 

 

2,432

 

 

 

3,231

 

Inventories

 

 

13,723

 

 

 

8,817

 

Other current assets

 

 

10,813

 

 

 

10,689

 

Total current assets

 

 

458,943

 

 

 

496,905

 

Property, plant and equipment, net

 

 

5,437

 

 

 

5,261

 

Operating lease right-of-use assets

 

 

10,868

 

 

 

11,094

 

Intangible assets, net

 

 

81,589

 

 

 

83,051

 

Deposits and other assets

 

 

3,084

 

 

 

2,939

 

Total assets

 

$

559,921

 

 

$

599,250

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,372

 

 

$

10,216

 

Accrued compensation

 

 

6,996

 

 

 

12,793

 

Accrued liabilities

 

 

14,131

 

 

 

14,191

 

Deferred revenue

 

 

832

 

 

 

2,165

 

Other current liabilities

 

 

4,001

 

 

 

2,633

 

Total current liabilities

 

 

36,332

 

 

 

41,998

 

Long-term portion of lease liabilities

 

 

13,898

 

 

 

14,248

 

Total liabilities

 

 

50,230

 

 

 

56,246

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 125,000,000 shares authorized at March 31,

   2020 and December 31, 2019; 101,348,633 and 100,993,173 shares issued and

   outstanding at March 31, 2020 and December 31, 2019, respectively.

 

 

101

 

 

 

101

 

Additional paid-in capital

 

 

1,033,319

 

 

 

1,024,168

 

Accumulated other comprehensive income

 

 

391

 

 

 

5

 

Accumulated deficit

 

 

(524,120

)

 

 

(481,270

)

Total stockholders’ equity

 

 

509,691

 

 

 

543,004

 

Total liabilities and stockholders’ equity

 

$

559,921

 

 

$

599,250

 

 

See accompanying notes.

3


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

Product revenue, net

 

$

15,159

 

 

$

6,754

 

Research and development and license revenue under

   collaborative agreements

 

 

915

 

 

 

157,062

 

Total revenue

 

 

16,074

 

 

 

163,816

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Cost of sales - product

 

 

3,364

 

 

 

1,041

 

Cost of sales - intangible asset amortization

 

 

1,419

 

 

 

1,403

 

Research and development

 

 

17,355

 

 

 

99,619

 

Selling, general and administrative

 

 

46,246

 

 

 

44,602

 

Net loss share from commercial activities under arrangement

   with Ionis Pharmaceuticals, Inc.

 

 

(7,051

)

 

 

(9,056

)

Total expenses

 

 

61,333

 

 

 

137,609

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

 

(45,259

)

 

 

26,207

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Investment income

 

 

1,771

 

 

 

1,224

 

Other expense

 

 

(130

)

 

 

(112

)

 

 

 

 

 

 

 

 

 

(Loss) income before income tax expense

 

 

(43,618

)

 

 

27,319

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

768

 

 

 

(132

)

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(42,850

)

 

$

27,187

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share of common stock owned by Ionis, basic

 

$

(0.42

)

 

$

0.35

 

Weighted-average shares of common stock outstanding owned by

   Ionis, basic

 

 

77,094,682

 

 

 

68,581,967

 

Net (loss) income per share of common stock owned by others, basic

 

$

(0.42

)

 

$

0.15

 

Weighted-average shares of common stock outstanding owned by

   others, basic

 

 

24,010,388

 

 

 

22,126,363

 

Net (loss) income per share of common stock owned by Ionis, diluted

 

$

(0.42

)

 

$

0.34

 

Weighted-average shares of common stock outstanding owned by Ionis,

   diluted

 

 

77,094,682

 

 

 

68,581,967

 

Net (loss) income per share of common stock owned by others, diluted

 

$

(0.42

)

 

$

0.15

 

Weighted-average shares of common stock outstanding owned by others,

   diluted

 

 

24,010,388

 

 

 

25,545,975

 

 

See accompanying notes.

4


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Net (loss) income

 

$

(42,850

)

 

$

27,187

 

Unrealized gains on investments, net of tax

 

377

 

 

 

212

 

Currency translation adjustment

 

 

9

 

 

85

 

Comprehensive (loss) income

 

$

(42,464

)

 

$

27,484

 

 

See accompanying notes.

5


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended March 31, 2019 and 2020

(In thousands)

(Unaudited)

 

 

 

For the Three Months Ended March 31, 2019

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

Description

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2018

 

 

89,346

 

 

$

89

 

 

$

799,001

 

 

$

(324

)

 

$

(522,042

)

 

$

276,724

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,187

 

 

 

27,187

 

Change in unrealized gains (losses), net of tax

 

 

 

 

 

 

 

 

 

 

 

212

 

 

 

 

 

 

212

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

85

 

 

 

 

 

 

85

 

Issuance of common stock in connection with employee stock plans

 

 

452

 

 

 

1

 

 

 

4,587

 

 

 

 

 

 

 

 

 

4,588

 

Issuance of common stock in connection with Ionis

   sublicense fee

 

 

2,837

 

 

 

3

 

 

 

74,997

 

 

 

 

 

 

 

 

 

75,000

 

Distribution to Ionis

 

 

 

 

 

 

 

 

(13,492

)

 

 

 

 

 

 

 

 

(13,492

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

18,560

 

 

 

 

 

 

 

 

 

18,560

 

Balance at March 31, 2019

 

 

92,635

 

 

$

93

 

 

$

883,653

 

 

$

(27

)

 

$

(494,855

)

 

$

388,864

 

 

 

 

 

For the Three Months Ended March 31, 2020

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

Description

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

100,993

 

 

$

101

 

 

$

1,024,168

 

 

$

5

 

 

$

(481,270

)

 

$

543,004

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,850

)

 

 

(42,850

)

Change in unrealized gains (losses), net of tax

 

 

 

 

 

 

 

 

 

 

 

377

 

 

 

 

 

 

377

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Issuance of common stock in connection with employee stock plans

 

 

360

 

 

 

 

 

 

1,945

 

 

 

 

 

 

 

 

 

1,945

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,282

 

 

 

 

 

 

 

 

 

7,282

 

Payments of tax withholdings related to exercise of

   employee stock options

 

 

(4

)

 

 

 

 

 

(76

)

 

 

 

 

 

 

 

 

(76

)

Balance at March 31, 2020

 

 

101,349

 

 

$

101

 

 

$

1,033,319

 

 

$

391

 

 

$

(524,120

)

 

$

509,691

 

 

See accompanying notes.

6


 

AKCEA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(42,850

)

 

$

27,187

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

212

 

 

 

207

 

Amortization of right-of-use operating lease assets

 

 

226

 

 

 

330

 

Amortization of intangibles

 

 

1,462

 

 

 

1,446

 

Amortization of premium/discount on investment securities, net

 

 

311

 

 

 

(229

)

Non-cash sublicensing expense

 

 

 

 

 

75,000

 

Stock-based compensation expense

 

 

7,282

 

 

 

18,560

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(177

)

 

 

(5,672

)

Other current and long-term assets

 

 

(2,664

)

 

 

(1,327

)

Inventories

 

 

(2,382

)

 

 

(272

)

Accounts payable

 

 

156

 

 

 

(4,673

)

Receivable from Ionis Pharmaceuticals, Inc.

 

 

620

 

 

 

(26,165

)

Income tax receivable

 

 

(129

)

 

 

 

Accrued compensation

 

 

(5,797

)

 

 

(2,283

)

Accrued liabilities

 

 

1,729

 

 

 

2,063

 

Income taxes payable

 

 

(771

)

 

 

(56

)

Deferred revenue

 

 

(1,333

)

 

 

(5,524

)

Net cash (used in) provided by operating activities

 

 

(44,105

)

 

 

78,592

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(154,910

)

 

 

(13,858

)

Proceeds from maturity of short-term investments

 

 

53,800

 

 

 

59,689

 

Purchases of property, plant and equipment

 

 

(209

)

 

 

(1,031

)

Net cash (used in) provided by investing activities

 

 

(101,319

)

 

 

44,800

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options and employee stock

   purchase plan issuances

 

 

1,945

 

 

 

4,588

 

Distribution to Ionis Pharmaceuticals, Inc.

 

 

 

 

 

(13,492

)

Payments of tax withholdings related to exercise of employee stock awards

 

 

(76

)

 

 

 

Net cash provided by (used in) financing activities

 

 

1,869

 

 

 

(8,904

)

Effect of exchange rates on cash

 

 

9

 

 

 

85

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(143,546

)

 

 

114,573

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

309,250

 

 

 

88,838

 

Cash, cash equivalents and restricted cash at end of period

 

$

165,704

 

 

$

203,411

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash financing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment included in payable to Ionis Pharmaceuticals, Inc.

 

$

179

 

 

$

 

 

See accompanying notes.

7


 

The following table presents the line items and amounts of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash and cash equivalents

 

$

163,320

 

 

$

201,027

 

Restricted cash included in deposits and other assets

 

 

2,384

 

 

 

2,384

 

Total cash, cash equivalents and restricted cash

 

$

165,704

 

 

$

203,411

 

 

See accompanying notes.

8


 

AKCEA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(Unaudited)

1.

Organization and Basis of Presentation

We were incorporated in Delaware in December 2014. We were organized by Ionis Pharmaceuticals, Inc., or Ionis, to focus on developing and commercializing medicines to treat patients with serious and rare diseases. On July 19, 2017, we completed our initial public offering, or IPO. As of March 31, 2020, Ionis owned approximately 76% of our common stock and is our majority shareholder. Prior to our IPO, we were wholly owned by Ionis.

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP.

The condensed consolidated financial statements include the accounts of Akcea Therapeutics, Inc. and our wholly owned subsidiaries ("we," "our," and "us"). All intercompany transactions and balances were eliminated in consolidation. We included all normal recurring adjustments in the financial statements that we considered necessary for a fair presentation of our financial position and our operating results and cash flows for the interim periods ended March 31, 2020 and 2019. Results for the interim periods are not necessarily indicative of the results for the entire year. For more complete financial information, these financial statements, and notes thereto, should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

In accordance with Accounting Standards Codification, or ASC, 205-40, Going Concern, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. We have generally incurred losses since our inception and have funded our cash flow deficits primarily through the issuance of capital stock and proceeds from license and collaboration agreements. As of March 31, 2020, we had an accumulated deficit of $524.1 million. During the three months ended March 31, 2020, we generated a loss of $42.9 million and we used $44.1 million in cash from operations. We expect to generate operating losses and negative operating cash flows for the foreseeable future; however, we may generate positive cash flows from significant upfront payments associated with out-licensing transactions. The transition to sustained profitability is dependent upon the successful development, approval, and commercialization of our products and product candidates and the achievement of a level of revenue adequate to support our cost structure. Since December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, has spread to multiple countries, including the United States, or U.S., and several European countries. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, or the COVID-19 Pandemic. Although there is uncertainty related to the anticipated impact of the COVID-19 Pandemic on our future results, we believe that our currently available funds of $421.3 million as of March 31, 2020 and cash we expect to generate from sales of TEGSEDI, which has been approved in the U.S., the European Union, or E.U., Canada and Brazil, and cash we expect to generate from sales of WAYLIVRA, which has been approved in the E.U., will be sufficient to fund our operations through at least the next 12 months from the issuance of this Quarterly Report on Form 10-Q. Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, we may need to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and commercialize our medicines even if we would otherwise prefer to develop and commercialize the medicines ourselves.

2.

Summary of Significant Accounting Policies

The accounting policies followed in the preparation of these interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 2 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, revenue recognition, the accrual for research and development expenses, stock-based compensation and income taxes. Estimates are periodically reviewed in light of changes in facts, circumstances and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

 

9


 

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivable. We place our cash, cash equivalents and short-term investments with reputable financial institutions. We primarily invest our excess cash in commercial paper and debt instruments of the U.S. Treasury, financial institutions, corporations and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody's, Standard & Poor's, or S&P, or Fitch, respectively. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

 

New Accounting Pronouncements – Recently Issued

 

In June 2016, the Financial Accounting Standards Board, or FASB, issued guidance that changes the measurement of credit losses for most financial assets and certain other instruments. This standard requires us to estimate the expected credit loss of an instrument over its lifetime using an expected credit loss model, which represents the portion of the amortized cost basis we do not expect to collect. The new guidance requires us to remeasure our allowance in each reporting period we have credit losses. We adopted this guidance on January 1, 2020 and it did not have a significant impact on our condensed consolidated financial statements and disclosures.

 

In August 2018, the FASB issued clarifying guidance on how to account for implementation costs related to cloud-servicing arrangements. The guidance states that if these fees qualify to be capitalized and amortized over the service period, they need to be expensed in the same line item as the service expense and recognized in the same balance sheet category. The update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We adopted this guidance on January 1, 2020 on a prospective basis and it did not have a significant impact on our condensed consolidated financial statements and disclosures.

In November 2018, the FASB issued clarifying guidance on the interaction between the collaboration accounting guidance and the new revenue recognition guidance we adopted on January 1, 2018 (Topic 606). Below is the clarifying guidance and how we implemented it (in italics):  

 

1)

When a participant is considered a customer in a collaborative arrangement, all of the associated accounting under Topic 606 should be applied.

 

We apply all of the associated accounting under Topic 606 when we determine a participant in a collaborative arrangement is a customer.

 

2)

Adds “unit of account” concept to collaboration accounting guidance to align with Topic 606. The “unit of account” concept is used to determine if revenue is recognized or if a contra expense is recognized from consideration received under a collaboration.

 

We use the “unit of account” concept when we receive consideration under a collaboration agreement to determine when we recognize revenue or a contra expense.

 

3)

The clarifying guidance precludes us from recognizing revenue under Topic 606 when we determine a transaction with a collaborative partner is not a customer and is not directly related to the sales to third parties.

 

When we conclude a collaboration partner is not a customer and is not directly related to sales to third parties, we do not recognize revenue for the transaction.  

We adopted this guidance on January 1, 2020 and it did not have a significant impact on our condensed consolidated financial statements and disclosures.

 

10


 

3.

Net Product Revenue

Net product revenue consists of sales of TEGSEDI and WAYLIVRA. TEGSEDI is sold in the U.S. and E.U. On May 7, 2019, we obtained regulatory approval of WAYLIVRA in Europe, following which we began to sell WAYLIVRA in the E.U.

During the three months ended March 31, 2020 and 2019, we recorded product revenue, net, of $15.2 million and $6.8 million, respectively. The following table summarizes balances and activity in each of our product revenue allowance and reserve categories for the three months ended March 31, 2020 and 2019 (in thousands):

 

 

 

Chargebacks,

discounts and

fees

 

 

Government

and other

rebates

 

 

Returns

 

 

Total

 

Balance at December 31, 2018

 

$

50

 

 

$

293

 

 

$

5

 

 

$

348

 

Provision related to current period sales

 

 

155

 

 

 

375

 

 

 

52

 

 

 

582

 

Adjustment related to prior period sales

 

 

 

 

 

(30

)

 

 

 

 

 

(30

)

Credits or payments made during the period

 

 

(104

)

 

 

 

 

 

 

 

 

(104

)

Balance at March 31, 2019

 

$

101

 

 

$

638

 

 

$

57

 

 

$

796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

$

270

 

 

$

1,353

 

 

$

197

 

 

$

1,820

 

Provision related to current period sales

 

 

470

 

 

 

1,621

 

 

 

58

 

 

 

2,149

 

Adjustment related to prior period sales

 

 

(66

)

 

 

69

 

 

 

 

 

 

3

 

Credits or payments made during the period

 

 

(498

)

 

 

(554

)

 

 

 

 

 

(1,052

)

Balance at March 31, 2020

 

$

176

 

 

$

2,489

 

 

$

255

 

 

$

2,920

 

 

The following table presents the balance of our receivables and contract liabilities related to net product revenue (in thousands):

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Receivables included in "Accounts receivable"

 

$

10,330

 

 

$

6,946

 

Contract liabilities included in "Accrued liabilities"

 

 

2,645

 

 

 

1,550

 

 

4.

Revenue from Collaboration and License Agreements

 

Net revenue from our partners in connection with our collaboration and license agreements consisted of the following (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Strategic Collaboration with Novartis

 

$

311

 

 

$

157,062

 

Vupanorsen (AKCEA-ANGPTL3-LRx) License Agreement with Pfizer

 

 

604

 

 

 

 

Total net revenue from partners

 

$

915

 

 

$

157,062

 

 

The following table presents the balance of our receivables and contract liabilities related to our collaboration and license agreements associated with our partners as of March 31, 2020 and December 31, 2019 (in thousands):

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Receivables included in "Accounts receivable"

 

$

717

 

 

$

3,550

 

Contract liabilities included in "Deferred revenue"

 

 

718

 

 

 

1,322

 

 

During the three months ended March 31, 2020, we recognized the following revenue as a result of the change in the contract liability balances related to our collaboration and license agreements associated with our partners (in thousands):

 

Revenue recognized in current period from:

 

Three Months Ended

March 31, 2020

 

Amounts included in deferred revenue at the beginning of the period

 

$

604

 

 

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Strategic collaboration with Novartis

In January 2017, we initiated a strategic collaboration with Novartis Pharma AG, or Novartis, for the development and commercialization of AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx. Under the terms of the Novartis collaboration, we agreed to complete a Phase 2 program, conduct an end-of-Phase 2 meeting with the U.S. Food and Drug Administration, or FDA, and provide initial quantities of the active pharmaceutical ingredient, or API, for each medicine. In March 2018, we extended our Phase 2 programs to include an expanded diverse population in which Novartis agreed to reimburse us for all costs. We recognized revenue of $0.3 million and $0.9 million for the three months ended March 31, 2020 and 2019, respectively, relating to the extended programs.

AKCEA-APO(a)-LRx

In February 2019, Novartis exercised its exclusive option to license AKCEA-APO(a)-LRx. Novartis is responsible for conducting and funding all future development, regulatory and commercialization activities for AKCEA-APO(a)-LRx. Novartis has full use of the license without any continuing involvement from us, therefore making the license distinct from other performance obligations. Accordingly, we recognized the related license fee of $150.0 million in full in February 2019 upon exercise. We issued 2,837,373 shares of our common stock to Ionis to satisfy the $75.0 million sublicense fee due to Ionis for Novartis’ option exercise under our development, commercialization and license agreement related to our cardiometabolic franchise, or Cardiometabolic License Agreement, with Ionis.

In the second quarter of 2019, we completed the development services performance obligation for AKCEA-APO(a)-LRx and all revenue allocated to this revenue stream was fully recognized as of June 30, 2019.

We are eligible to receive up to $675.0 million in additional milestone payments, including $25.0 million for the achievement of a development milestone, up to $290.0 million for the achievement of regulatory milestones and up to $360.0 million for the achievement of commercialization milestones. In connection with Novartis’ exercise of its option to exclusively license AKCEA-APO(a)-LRx, we and Novartis established a more definitive co-commercialization framework under which we and Novartis may negotiate the co-commercialization of AKCEA-APO(a)-LRx in select markets. Included in this framework is an option by which Novartis could solely commercialize AKCEA-APO(a)-LRx in exchange for Novartis paying us increased commercial milestone payments based on sales of AKCEA-APO(a)-LRx.

We will earn the next milestone payment of $25.0 million under this collaboration if Novartis reaches a specific level of enrollment related to the Phase 3 study for AKCEA-APO(a)-LRx. We are also eligible to receive tiered royalties in the mid-teens to low twenty percent range on net sales of AKCEA-APO(a)-LRx. Novartis will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the product in a specific country. We will share any milestone payments and royalties equally with Ionis. AKCEA-APO(a)-LRx was recently granted Fast Track Designation by the FDA as a potential treatment for people at significant risk for cardiovascular disease due to elevated levels of lipoprotein(a), or Lp(a).

AKCEA-APOCIII-LRx

In December 2019, we received written notice from Novartis electing not to exercise its option to license AKCEA-APOCIII-LRx and terminating the strategic collaboration solely in relation to AKCEA-APOCIII-LRx.  As such, the development services performance obligation relating to AKCEA-APOCIII-LRx no longer exists and all revenue allocated to the development services revenue stream was fully recognized as of December 31, 2019.

As a result of Novartis’ election not to exercise its option, we retain the rights to further develop and commercialize AKCEA-APOCIII-LRx. We are no longer entitled to any future license fees, milestone payments or royalties from Novartis relating to AKCEA-APOCIII-LRx.

We did not recognize any revenue relating to AKCEA-APO(a)-LRx or APOCIII-LRx during the three months ended March 31, 2020, compared to $156.2 million of revenue recognized during the three months ended March 31, 2019. As of March 31, 2020 and December 31, 2019, we did not have any remaining deferred revenue related to the strategic collaboration with Novartis on our condensed consolidated balance sheet.

Collaboration and License Agreement with PTC Therapeutics

In August 2018, we entered into a collaboration and license agreement with PTC Therapeutics, or the PTC License Agreement, to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries, or the PTC Territory. In addition, in April 2019, we entered into a supply agreement with PTC Therapeutics providing them the option to purchase product from us subject to terms as described in the agreement. During the three months ended March 31, 2020, we recognized revenue of $0.4 million relating to the sale of TEGSEDI to PTC Therapeutics. This amount is included in net product revenue on our condensed consolidated statement of operations.

12


 

In May 2019, we received $6.0 million from PTC Therapeutics as a result of regulatory approval of WAYLIVRA in Europe. We paid Ionis a $3.0 million sublicense fee under our Cardiometabolic License Agreement and recorded it as a cost of license in our condensed consolidated statement of operations. In October 2019, we received $4.0 million from PTC Therapeutics as a result of regulatory approval of TEGSEDI in Brazil. We paid Ionis a $2.4 million sublicense fee under our development, commercialization, collaboration and license agreement with Ionis dated March 2018, or the TTR License Agreement, and recorded it as a cost of license in our condensed consolidated statement of operations. After receiving regulatory approval for WAYLIVRA and TEGSEDI, we deemed the milestone consideration probable, therefore we updated the transaction price to include these payments and accordingly, we recognized the $6.0 million and $4.0 million as license revenue during the second and fourth quarter of 2019, respectively. Prior to receiving regulatory approvals, we fully constrained these payments because regulatory approvals are not within our control.

We are eligible to receive an additional $4.0 million for the achievement of a regulatory milestone and royalties in the mid-twenty percent range on net sales of TEGSEDI and WAYLIVRA in the PTC Territory.

PTC Therapeutics’ obligation to pay royalties to us begins on the earlier of 12 months after the first commercial sale of a product in Brazil or the date that PTC Therapeutics recognizes revenue of at least $10.0 million in the PTC Territory. PTC Therapeutics will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the market share of the product in the PTC Territory. Milestone payments and royalties that we are eligible to receive from PTC Therapeutics for TEGSEDI are split 60% to Ionis and 40% to Akcea in accordance with our TTR License Agreement. All WAYLIVRA milestone payments and royalties that we are eligible to receive from PTC Therapeutics are split equally with Ionis in accordance with our Cardiometabolic License Agreement. PTC Therapeutics is solely responsible for the commercialization of the products in the PTC Territory at its sole cost and expense, including the pursuit and maintenance of applicable regulatory approvals. Unless earlier terminated, the PTC License Agreement will continue in effect until the date on which the royalty term and all payment obligations with respect to all products in all countries in the PTC Territory have expired.

Pfizer Vupanorsen License Agreement

In October 2019, we entered into a license agreement with Pfizer, or the Pfizer Vupanorsen License Agreement, for the development and commercialization of vupanorsen (previously referred to as AKCEA-ANGPTL3-LRx). Under the terms of the Pfizer Vupanorsen License Agreement, we granted Pfizer an exclusive license to further develop, manufacture and commercialize vupanorsen worldwide, subject to our potential participation in co-commercialization. We are responsible for completing a Phase 2 study and providing quantities of API for vupanorsen.

We received a $250.0 million upfront payment in the fourth quarter of 2019 from Pfizer. We issued 6,873,344 shares of our common stock to Ionis as payment of the $125.0 million sublicense fee due under our Cardiometabolic License Agreement with Ionis.

At commencement of the Pfizer Vupanorsen License Agreement, we identified the following three distinct performance obligations:

 

License to develop and commercialize vupanorsen and the related know-how;

 

 

Development activities for vupanorsen; and

 

 

API for vupanorsen.

We considered the manufacturing capabilities of Pfizer and the fact that manufacturing services are not proprietary and can be provided by another third party to conclude that the license has stand-alone functionality and is distinct. Further, the development activities and the supply of API are distinct because Pfizer or another third party could provide these items without our assistance.

We determined the transaction price for the Pfizer Vupanorsen License Agreement to be $250.0 million comprised of the upfront payment we received. None of the development or regulatory milestone payments under this agreement were included in the upfront transaction price as all future payments were fully constrained.

Based on the distinct performance obligations under the Pfizer Vupanorsen License Agreement, we allocated the $250.0 million transaction price based on the relative stand-alone selling prices of each of our performance obligations as follows:

 

$245.6 million for the transfer of the license of vupanorsen and the related know-how;

 

 

$2.2 million for the development services for vupanorsen; and

 

 

$2.2 million for the delivery of vupanorsen API.

13


 

We are recognizing revenue related to each of our performance obligations as follows:

 

We recognized the full amount related to the license and related know-how in the fourth quarter of 2019 because Pfizer, upon the date of closing, had full use of the license and related know-how without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the license after the license was transferred to Pfizer;

 

 

We are satisfying the development services performance obligation for vupanorsen as the research and development services are performed. The development services performance obligation consists of us completing the Phase 2 clinical trial in non-alcoholic fatty liver disease. We expect development services related to this trial to be completed by mid-2020. We recognize revenue related to development services performed using an input method by calculating costs incurred to date at each period end relative to total costs expected to be incurred. Pfizer is responsible for conducting and funding all future development, regulatory and commercialization activities for vupanorsen once we complete the Phase 2 program; and

 

 

We recognized the amount attributed to the vupanorsen API supply when we delivered the API to Pfizer in the fourth quarter of 2019.

 

In addition, we are eligible to receive up to $1.3 billion in milestone payments, including up to $205.0 million for the achievement of development milestones, up to $250.0 million for the achievement of regulatory milestones and up to $850.0 million for the achievement of commercialization milestones. We will achieve the next milestone payment of $75.0 million when Pfizer advances vupanorsen. We are also eligible to receive tiered royalties in the mid-teens to low twenty percent range on net sales of vupanorsen. Pfizer will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the product in a specific country. We will share any milestone payments and royalties equally with Ionis.

During the three months ended March 31, 2020, we recognized $0.6 million of revenue that was in our beginning deferred revenue balance.  Our condensed consolidated balance sheet at March 31, 2020 and December 31, 2019 included deferred revenue of $0.7 million and $1.3 million, respectively, related to our development services obligation under the Pfizer Vupanorsen License Agreement.

 

5.

Investments and Fair Value Measurements

Investments

As of March 31, 2020 and December 31, 2019, we primarily invested our excess cash in money market funds and debt instruments of the U.S. Treasury, financial institutions, corporations and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody’s, S&P or Fitch, respectively. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The following is a summary of our investments at March 31, 2020 and December 31, 2019 (in thousands):

 

 

 

 

 

 

 

Gross Unrealized

 

 

Estimated

 

March 31, 2020

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

112,967

 

 

$

14

 

 

$

(414

)

 

$

112,567

 

Debt securities issued by U.S. government agencies

 

 

85,776

 

 

 

558

 

 

 

 

 

 

86,334

 

Total securities with a maturity of one year or less

 

$

198,743

 

 

$

572

 

 

$