false12-312022Q30000874015P3MP20Y3M10.3330.3330.333P3Y6M12026-04-302024-12-3100008740152022-01-012022-09-3000008740152022-11-0300008740152022-09-3000008740152021-12-310000874015ions:ConvertibleSeniorNotes0125PercentMember2021-12-310000874015ions:ConvertibleSeniorNotes0PercentMember2022-09-300000874015ions:ConvertibleSeniorNotes0PercentMember2021-12-310000874015ions:ConvertibleSeniorNotes0125PercentMember2022-09-300000874015us-gaap:ProductMember2021-01-012021-09-300000874015ions:EplontersenJointDevelopmentRevenueMember2021-07-012021-09-300000874015ions:CommercialMember2022-07-012022-09-300000874015ions:LicensingAndOtherRoyaltiesMember2022-01-012022-09-300000874015ions:SpinrazaRoyaltiesMember2022-07-012022-09-300000874015ions:EplontersenJointDevelopmentRevenueMember2022-07-012022-09-300000874015ions:CommercialMember2022-01-012022-09-300000874015ions:EplontersenJointDevelopmentRevenueMember2022-01-012022-09-300000874015ions:CommercialMember2021-07-012021-09-3000008740152022-07-012022-09-300000874015ions:CollaborativeAgreementRevenueMember2021-07-012021-09-300000874015ions:CommercialMember2021-01-012021-09-300000874015ions:CollaborativeAgreementRevenueMember2022-01-012022-09-300000874015ions:ResearchAndDevelopmentRevenueMember2021-01-012021-09-300000874015us-gaap:ProductMember2022-07-012022-09-300000874015ions:LicensingAndOtherRoyaltiesMember2021-07-012021-09-300000874015ions:SpinrazaRoyaltiesMember2021-07-012021-09-300000874015ions:ResearchAndDevelopmentRevenueMember2022-01-012022-09-300000874015ions:SpinrazaRoyaltiesMember2021-01-012021-09-3000008740152021-01-012021-09-300000874015ions:EplontersenJointDevelopmentRevenueMember2021-01-012021-09-300000874015us-gaap:ProductMember2021-07-012021-09-300000874015ions:SpinrazaRoyaltiesMember2022-01-012022-09-300000874015ions:ResearchAndDevelopmentRevenueMember2022-07-012022-09-300000874015ions:LicensingAndOtherRoyaltiesMember2021-01-012021-09-3000008740152021-07-012021-09-300000874015us-gaap:ProductMember2022-01-012022-09-300000874015ions:ResearchAndDevelopmentRevenueMember2021-07-012021-09-300000874015ions:CollaborativeAgreementRevenueMember2022-07-012022-09-300000874015ions:LicensingAndOtherRoyaltiesMember2022-07-012022-09-300000874015ions:CollaborativeAgreementRevenueMember2021-01-012021-09-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300000874015us-gaap:RetainedEarningsMember2021-12-310000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300000874015us-gaap:RetainedEarningsMember2021-06-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-3100008740152022-06-300000874015us-gaap:AdditionalPaidInCapitalMember2021-06-300000874015us-gaap:CommonStockMember2020-12-310000874015us-gaap:CommonStockMember2022-06-300000874015us-gaap:AdditionalPaidInCapitalMember2021-12-310000874015us-gaap:RetainedEarningsMember2022-06-300000874015us-gaap:RetainedEarningsMember2020-12-3100008740152020-12-310000874015us-gaap:CommonStockMember2021-06-300000874015us-gaap:AdditionalPaidInCapitalMember2022-06-300000874015us-gaap:AdditionalPaidInCapitalMember2020-12-3100008740152021-06-300000874015us-gaap:CommonStockMember2021-12-310000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000874015us-gaap:CommonStockMember2021-07-012021-09-300000874015us-gaap:CommonStockMember2022-07-012022-09-300000874015us-gaap:RetainedEarningsMember2021-07-012021-09-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-300000874015us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-300000874015us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300000874015us-gaap:CommonStockMember2022-01-012022-09-300000874015us-gaap:CommonStockMember2021-01-012021-09-300000874015us-gaap:RetainedEarningsMember2022-07-012022-09-300000874015us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300000874015us-gaap:RetainedEarningsMember2021-01-012021-09-300000874015us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300000874015us-gaap:RetainedEarningsMember2022-01-012022-09-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300000874015us-gaap:RetainedEarningsMember2022-09-300000874015us-gaap:CommonStockMember2021-09-300000874015us-gaap:CommonStockMember2022-09-3000008740152021-09-300000874015us-gaap:AdditionalPaidInCapitalMember2022-09-300000874015us-gaap:RetainedEarningsMember2021-09-300000874015us-gaap:AdditionalPaidInCapitalMember2021-09-300000874015us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300000874015ions:ConvertibleSeniorNotes1PercentMember2021-09-300000874015ions:ConvertibleSeniorNotes0PercentMember2021-09-300000874015ions:BiogenCollaborationsMember2022-01-012022-09-300000874015ions:RocheCollaborationsMember2022-01-012022-09-300000874015ions:ConvertibleSeniorNotes0125PercentMember2022-01-012022-09-300000874015ions:ConvertibleSeniorNotes0PercentMember2022-01-012022-09-300000874015ions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMember2022-04-012022-06-300000874015ions:BiogenCollaborations2013StrategicNeurologyAnd2012NeurologyMember2022-07-012022-09-300000874015ions:AlnylamCollaborationMember2020-10-012020-12-310000874015ions:Ion859Memberions:BiogenCollaboration2013StrategicNeurologyMember2022-01-012022-03-310000874015ions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMember2022-07-012022-09-300000874015ions:AstrazenecaCollaborationEplontersenMember2021-01-012021-12-310000874015ions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMember2018-10-012018-12-310000874015ions:BiogenIncMember2018-04-012018-06-300000874015ions:AstrazenecaCollaborationEplontersenMember2021-12-310000874015ions:AstrazenecaCollaborationEplontersenMember2022-01-012022-09-300000874015ions:TwoSignificantCustomersMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-09-300000874015us-gaap:AccountsReceivableMemberus-gaap:CreditConcentrationRiskMemberions:TwoSignificantCustomersMember2021-01-012021-12-3100008740152021-01-012021-12-310000874015ions:CommercialRawMaterialsMember2022-09-300000874015ions:ClinicalRawMaterialsMember2021-12-310000874015ions:ClinicalRawMaterialsMember2022-09-300000874015ions:CommercialRawMaterialsMember2021-12-310000874015us-gaap:SubsequentEventMember2022-10-012022-10-310000874015us-gaap:LandMemberus-gaap:SubsequentEventMember2022-10-310000874015srt:ScenarioForecastMemberus-gaap:LandMember2022-10-012022-10-310000874015us-gaap:SubsequentEventMemberions:HeadquartersLocationInCarlsbadCaliforniaMember2022-10-012022-10-310000874015us-gaap:SubsequentEventMemberions:HeadquartersLocationInCarlsbadCaliforniaMember2022-10-310000874015us-gaap:SubsequentEventMemberions:DevelopmentChemistryAndManufacturingFacilityInOceansideCaliforniaMember2022-10-310000874015ions:OfficeSpaceInBostonMassachusettsMember2022-01-012022-09-300000874015ions:OfficeSpaceInBostonMassachusettsMember2022-09-300000874015ions:ConvertibleSeniorNotes0125PercentMember2021-09-300000874015us-gaap:EmployeeStockMember2022-01-012022-09-300000874015ions:ShareBasedPaymentArrangementBoardOfDirectorMemberus-gaap:EmployeeStockOptionMember2022-01-012022-09-300000874015us-gaap:EmployeeStockMember2021-01-012021-09-300000874015us-gaap:ShareBasedPaymentArrangementEmployeeMemberus-gaap:EmployeeStockOptionMember2021-01-012021-09-300000874015us-gaap:EmployeeStockOptionMemberions:ShareBasedPaymentArrangementBoardOfDirectorMember2021-01-012021-09-300000874015us-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedPaymentArrangementEmployeeMember2022-01-012022-09-300000874015ions:ShareBasedPaymentArrangementOptionsGrantedOnJanuary12022AndThereafterMember2022-01-012022-09-300000874015ions:ShareBasedPaymentArrangementOptionsGrantedPriorToJanuary12022Member2022-01-012022-09-300000874015us-gaap:ShareBasedCompensationAwardTrancheThreeMemberus-gaap:PerformanceSharesMembersrt:ExecutiveOfficerMember2022-01-012022-09-300000874015us-gaap:PerformanceSharesMemberus-gaap:ShareBasedCompensationAwardTrancheOneMembersrt:ExecutiveOfficerMember2022-01-012022-09-300000874015us-gaap:PerformanceSharesMembersrt:ExecutiveOfficerMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2022-01-012022-09-300000874015us-gaap:PerformanceSharesMembersrt:ExecutiveOfficerMember2022-01-012022-09-300000874015ions:ShareBasedPaymentArrangementBoardOfDirectorMemberus-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMember2022-01-012022-09-300000874015srt:MinimumMemberions:ShareBasedPaymentArrangementBoardOfDirectorMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300000874015us-gaap:RestrictedStockUnitsRSUMemberus-gaap:ShareBasedPaymentArrangementEmployeeMember2022-01-012022-09-300000874015us-gaap:PerformanceSharesMembersrt:MaximumMembersrt:ExecutiveOfficerMember2022-01-012022-09-300000874015srt:MinimumMembersrt:ExecutiveOfficerMemberus-gaap:PerformanceSharesMember2022-01-012022-09-300000874015ions:ShareBasedPaymentArrangementBoardOfDirectorMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300000874015us-gaap:PerformanceSharesMembersrt:ExecutiveOfficerMember2021-01-012021-09-300000874015us-gaap:EmployeeStockOptionMember2022-09-300000874015us-gaap:RestrictedStockUnitsRSUMember2022-09-300000874015us-gaap:PerformanceSharesMember2022-09-300000874015us-gaap:PerformanceSharesMember2022-01-012022-09-300000874015us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300000874015us-gaap:EmployeeStockOptionMember2022-01-012022-09-300000874015us-gaap:CostOfSalesMember2021-07-012021-09-300000874015us-gaap:CostOfSalesMember2021-01-012021-09-300000874015us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-07-012021-09-300000874015ions:ResearchDevelopmentAndPatentExpensesMember2021-07-012021-09-300000874015ions:ResearchDevelopmentAndPatentExpensesMember2022-01-012022-09-300000874015us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-07-012022-09-300000874015us-gaap:CostOfSalesMember2022-01-012022-09-300000874015us-gaap:CostOfSalesMember2022-07-012022-09-300000874015us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-09-300000874015ions:ResearchDevelopmentAndPatentExpensesMember2022-07-012022-09-300000874015us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-09-300000874015ions:ResearchDevelopmentAndPatentExpensesMember2021-01-012021-09-300000874015us-gaap:USStatesAndPoliticalSubdivisionsMember2022-09-300000874015us-gaap:USTreasurySecuritiesMember2022-09-300000874015us-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-09-300000874015us-gaap:CorporateDebtSecuritiesMember2021-12-310000874015us-gaap:USTreasurySecuritiesMember2021-12-310000874015us-gaap:USStatesAndPoliticalSubdivisionsMember2021-12-310000874015us-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310000874015us-gaap:OtherDebtSecuritiesMember2022-09-300000874015us-gaap:CorporateDebtSecuritiesMember2022-09-300000874015us-gaap:OtherDebtSecuritiesMember2021-12-310000874015ions:EquitySecuritiesPrivateCompaniesMember2022-09-300000874015ions:EquitySecuritiesPrivateCompaniesMember2021-12-310000874015ions:EquitySecuritiesPubliclyTradedCompaniesMember2021-12-310000874015ions:EquitySecuritiesPubliclyTradedCompaniesMember2022-09-300000874015ions:EquitySecuritiesPubliclyTradedCompaniesMember2022-01-012022-09-300000874015us-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:OtherDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-09-300000874015us-gaap:FairValueInputsLevel1Memberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:OtherDebtSecuritiesMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310000874015us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:OtherDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-09-300000874015us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:CashAndCashEquivalentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2022-09-300000874015us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-12-310000874015us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000874015us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USStatesAndPoliticalSubdivisionsMember2021-12-310000874015us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel1Member2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310000874015us-gaap:OtherDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherDebtSecuritiesMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:OtherDebtSecuritiesMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-09-300000874015us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel2Member2022-09-300000874015us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:OtherDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-09-300000874015us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-09-300000874015us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000874015us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel3Member2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USStatesAndPoliticalSubdivisionsMember2022-09-300000874015us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-09-300000874015us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberions:EquitySecuritiesPubliclyTradedCompaniesMember2021-12-310000874015ions:EquitySecuritiesPubliclyTradedCompaniesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueMeasurementsRecurringMemberions:EquitySecuritiesPubliclyTradedCompaniesMemberus-gaap:OtherCurrentAssetsMember2022-09-300000874015us-gaap:FairValueInputsLevel3Memberions:EquitySecuritiesPubliclyTradedCompaniesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:OtherCurrentAssetsMemberions:EquitySecuritiesPubliclyTradedCompaniesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000874015us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberions:EquitySecuritiesPubliclyTradedCompaniesMember2022-09-300000874015us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberions:EquitySecuritiesPubliclyTradedCompaniesMember2022-09-300000874015ions:EquitySecuritiesPubliclyTradedCompaniesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-09-300000874015us-gaap:FairValueInputsLevel2Memberions:ConvertibleSeniorNotes0125PercentMember2022-09-300000874015us-gaap:FairValueInputsLevel2Memberions:ConvertibleSeniorNotes0PercentMember2022-09-300000874015ions:BiogenCollaborationsMember2022-09-300000874015ions:SpinrazaRoyaltiesMemberions:BiogenCollaborationsMember2021-07-012021-09-300000874015ions:BiogenCollaborationsMemberions:ResearchAndDevelopmentRevenueMember2022-07-012022-09-300000874015ions:ResearchAndDevelopmentRevenueMemberions:BiogenCollaborationsMember2021-01-012021-09-300000874015ions:ResearchAndDevelopmentRevenueMemberions:BiogenCollaborationsMember2021-07-012021-09-300000874015ions:SpinrazaRoyaltiesMemberions:BiogenCollaborationsMember2022-07-012022-09-300000874015ions:BiogenCollaborationsMemberions:SpinrazaRoyaltiesMember2021-01-012021-09-300000874015ions:BiogenCollaborationsMemberions:SpinrazaRoyaltiesMember2022-01-012022-09-300000874015ions:BiogenCollaborationsMember2021-07-012021-09-300000874015ions:BiogenCollaborationsMember2022-07-012022-09-300000874015ions:BiogenCollaborationsMember2021-01-012021-09-300000874015ions:BiogenCollaborationsMemberions:ResearchAndDevelopmentRevenueMember2022-01-012022-09-300000874015us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberions:BiogenCollaborationsMember2021-07-012021-09-300000874015us-gaap:CustomerConcentrationRiskMemberions:BiogenCollaborationsMemberus-gaap:RevenueFromContractWithCustomerMember2022-01-012022-09-300000874015ions:BiogenCollaborationsMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-09-300000874015us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberions:BiogenCollaborationsMember2022-07-012022-09-300000874015ions:BiogenCollaborationsMember2021-12-310000874015srt:MaximumMemberions:BiogenCollaboration2013StrategicNeurologyMember2022-09-300000874015ions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMember2022-09-300000874015ions:RocheCollaborationHuntingtonsDiseaseMember2022-09-300000874015ions:RocheCollaborationsMember2022-09-300000874015ions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMemberions:ImmunoglobulinANephropathyMember2022-09-300000874015ions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMemberions:GeographicAtrophyMember2022-09-300000874015ions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMembersrt:MaximumMember2022-01-012022-09-300000874015ions:RocheCollaborationsMemberions:ResearchAndDevelopmentRevenueMember2021-07-012021-09-300000874015ions:RocheCollaborationsMemberions:ResearchAndDevelopmentRevenueMember2022-07-012022-09-300000874015ions:ResearchAndDevelopmentRevenueMemberions:RocheCollaborationsMember2022-01-012022-09-300000874015ions:RocheCollaborationsMemberions:ResearchAndDevelopmentRevenueMember2021-01-012021-09-300000874015ions:RocheCollaborationsMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-09-300000874015us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberions:RocheCollaborationsMember2021-01-012021-09-300000874015us-gaap:CustomerConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberions:RocheCollaborationsMember2021-07-012021-09-300000874015us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberions:RocheCollaborationsMember2022-07-012022-09-300000874015ions:RocheCollaborationsMember2021-12-310000874015srt:MaximumMemberions:RocheCollaborationIonisFbLForComplementMediatedDiseasesMember2022-09-300000874015ions:BayerCollaborationIonisFxiMember2022-09-300000874015ions:ConvertibleSeniorNotes0PercentMember2021-04-300000874015ions:ConvertibleSeniorNotes1PercentMember2021-04-300000874015ions:ConvertibleSeniorNotes1PercentMember2021-11-012021-11-300000874015ions:ConvertibleSeniorNotes1PercentMember2021-04-012021-04-300000874015ions:ConvertibleSeniorNotes1PercentMember2022-09-3000008740152021-04-012021-04-3000008740152019-12-012019-12-310000874015ions:ConvertibleSeniorNotes1PercentMember2021-04-012021-06-300000874015ions:JohnMakrisEtAlVIonisPharmaceuticalsIncEtAlMember2021-08-052021-08-050000874015ions:JohnMakrisEtAlVIonisPharmaceuticalsIncEtAlMember2022-06-032022-06-030000874015ions:JohnMakrisEtAlVIonisPharmaceuticalsIncEtAlMemberus-gaap:OtherNonoperatingIncomeExpenseMember2022-04-012022-06-300000874015ions:JohnMakrisEtAlVIonisPharmaceuticalsIncEtAlMember2022-07-012022-09-30xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesions:Targetions:Agreementions:Componentions:PerformanceObligationions:Partnerions:Companyions:Lotions:Optionions:Segmentions:Periodions:Investmentions:Paymentions:Indicationions:Plaintiff
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 September 30, 2022
OR
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission file number 000-19125
Ionis Pharmaceuticals, Inc.
(Exact name of Registrant as specified in its charter)
Delaware |
|
33-0336973 |
(State or other jurisdiction of incorporation or organization) |
|
(IRS Employer Identification No.) |
2855 Gazelle Court, Carlsbad, California |
|
92010 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
760-931-9200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading symbol |
|
Name of each exchange on which registered |
Common Stock, $.001 Par Value |
|
“IONS” |
|
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 and posted 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 voting common stock outstanding as of November 3, 2022 was 142,050,336.
IONIS PHARMACEUTICALS, INC.
FORM 10-Q
INDEX
PART I |
FINANCIAL INFORMATION |
|
|
|
|
ITEM 1: |
Financial Statements: |
|
|
|
|
|
|
3 |
|
|
|
|
|
4 |
|
|
|
|
|
5 |
|
|
|
|
|
6 |
|
|
|
|
|
8 |
|
|
|
|
|
9 |
|
|
|
ITEM 2: |
|
|
|
|
|
|
|
29 |
|
|
|
|
|
33 |
|
|
|
|
|
39 |
|
|
|
ITEM 3: |
|
41 |
|
|
|
ITEM 4: |
|
41 |
|
|
|
PART II |
|
41 |
|
|
|
ITEM 1: |
|
41 |
|
|
|
ITEM 1A: |
|
42 |
|
|
|
ITEM 2: |
|
60 |
|
|
|
ITEM 3: |
|
60 |
|
|
|
ITEM 4: |
|
60 |
|
|
|
ITEM 5: |
|
60 |
|
|
|
ITEM 6: |
|
61 |
|
|
|
|
62 |
TRADEMARKS
“Ionis,” the Ionis logo, and other trademarks or service marks of Ionis Pharmaceuticals, Inc. appearing in this report are the property of Ionis Pharmaceuticals, Inc. “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., Ionis’ wholly owned subsidiary. 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.
IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
314,993 |
|
|
$ |
869,191 |
|
Short-term investments |
|
|
1,666,670 |
|
|
|
1,245,782 |
|
Contracts receivable |
|
|
6,645 |
|
|
|
61,896 |
|
Inventories |
|
|
20,645 |
|
|
|
24,806 |
|
Other current assets |
|
|
143,173 |
|
|
|
143,374 |
|
Total current assets |
|
|
2,152,126 |
|
|
|
2,345,049 |
|
Property, plant and equipment, net |
|
|
180,806 |
|
|
|
178,069 |
|
Patents, net |
|
|
29,605 |
|
|
|
29,005 |
|
Deposits and other assets |
|
|
59,434 |
|
|
|
59,567 |
|
Total assets |
|
$ |
2,421,971 |
|
|
$ |
2,611,690 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
20,545 |
|
|
$ |
11,904 |
|
Accrued compensation |
|
|
30,410 |
|
|
|
38,810 |
|
Accrued liabilities |
|
|
128,002 |
|
|
|
88,560 |
|
Income taxes payable |
|
|
16 |
|
|
|
36 |
|
Current portion of long-term obligations |
|
|
4,970 |
|
|
|
3,526 |
|
Current portion of deferred contract revenue |
|
|
99,511 |
|
|
|
97,714 |
|
Total current liabilities |
|
|
283,454 |
|
|
|
240,550 |
|
Long-term deferred contract revenue |
|
|
294,656 |
|
|
|
351,879 |
|
0 percent convertible senior notes, net |
|
|
621,460 |
|
|
|
619,119 |
|
0.125 percent convertible senior notes, net |
|
|
543,955 |
|
|
|
542,314 |
|
Long-term obligations, less current portion |
|
|
25,107 |
|
|
|
26,378 |
|
Long-term mortgage debt |
|
|
58,978 |
|
|
|
59,713 |
|
Total liabilities |
|
|
1,827,610 |
|
|
|
1,839,953 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 300,000,000 shares authorized, 142,017,411 and 141,210,015 shares issued and outstanding at September 30, 2022 (unaudited) and December 31, 2021, respectively |
|
|
142 |
|
|
|
141 |
|
Additional paid-in capital |
|
|
2,034,554 |
|
|
|
1,964,167 |
|
Accumulated other comprehensive loss |
|
|
(63,140 |
) |
|
|
(32,668 |
) |
Accumulated deficit |
|
|
(1,377,195 |
) |
|
|
(1,159,903 |
) |
Total stockholders’ equity |
|
|
594,361 |
|
|
|
771,737 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,421,971 |
|
|
$ |
2,611,690 |
|
See accompanying notes.
IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
SPINRAZA royalties |
|
$ |
61,647 |
|
|
$ |
66,572 |
|
|
$ |
175,092 |
|
|
$ |
198,726 |
|
TEGSEDI and WAYLIVRA revenue, net |
|
|
5,920 |
|
|
|
15,519 |
|
|
|
22,467 |
|
|
|
46,901 |
|
Licensing and other royalty revenue |
|
|
4,843 |
|
|
|
2,729 |
|
|
|
25,320 |
|
|
|
9,502 |
|
Total commercial revenue |
|
|
72,410 |
|
|
|
84,820 |
|
|
|
222,879 |
|
|
|
255,129 |
|
Research and development revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collaborative agreement revenue |
|
|
69,250 |
|
|
|
48,273 |
|
|
|
157,282 |
|
|
|
115,321 |
|
Eplontersen joint development revenue |
|
|
18,107 |
|
|
|
— |
|
|
|
55,317 |
|
|
|
— |
|
Total research and development revenue |
|
|
87,357 |
|
|
|
48,273 |
|
|
|
212,599 |
|
|
|
115,321 |
|
Total revenue |
|
|
159,767 |
|
|
|
133,093 |
|
|
|
435,478 |
|
|
|
370,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
1,515 |
|
|
|
3,079 |
|
|
|
10,430 |
|
|
|
8,616 |
|
Research, development and patent |
|
|
182,990 |
|
|
|
184,770 |
|
|
|
524,875 |
|
|
|
463,878 |
|
Selling, general and administrative |
|
|
34,416 |
|
|
|
31,093 |
|
|
|
102,345 |
|
|
|
148,747 |
|
Total operating expenses |
|
|
218,921 |
|
|
|
218,942 |
|
|
|
637,650 |
|
|
|
621,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(59,154 |
) |
|
|
(85,849 |
) |
|
|
(202,172 |
) |
|
|
(250,791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net |
|
|
7,524 |
|
|
|
872 |
|
|
|
13,447 |
|
|
|
8,236 |
|
Interest expense |
|
|
(2,139 |
) |
|
|
(2,340 |
) |
|
|
(6,391 |
) |
|
|
(7,111 |
) |
Gain (loss) on investments |
|
|
2,347 |
|
|
|
4,013 |
|
|
|
(10,616 |
) |
|
|
4,885 |
|
Other income (expense) |
|
|
4,713 |
|
|
|
(469 |
) |
|
|
(7,923 |
) |
|
|
(9,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax (expense) benefit |
|
|
(46,709 |
) |
|
|
(83,773 |
) |
|
|
(213,655 |
) |
|
|
(254,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
|
|
(283 |
) |
|
|
1,307 |
|
|
|
(3,637 |
) |
|
|
854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(46,992 |
) |
|
$ |
(82,466 |
) |
|
$ |
(217,292 |
) |
|
$ |
(253,210 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
|
$ |
(0.33 |
) |
|
$ |
(0.58 |
) |
|
$ |
(1.53 |
) |
|
$ |
(1.80 |
) |
Shares used in computing basic and diluted net loss per share |
|
|
141,950 |
|
|
|
141,139 |
|
|
|
141,782 |
|
|
|
140,958 |
|
See accompanying notes.
IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(46,992 |
) |
|
$ |
(82,466 |
) |
|
$ |
(217,292 |
) |
|
$ |
(253,210 |
) |
Unrealized losses on debt securities, net of tax |
|
|
(8,734 |
) |
|
|
(1,618 |
) |
|
|
(29,508 |
) |
|
|
(6,321 |
) |
Currency translation adjustment |
|
|
(399 |
) |
|
|
(23 |
) |
|
|
(964 |
) |
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(56,125 |
) |
|
$ |
(84,107 |
) |
|
$ |
(247,764 |
) |
|
$ |
(259,576 |
) |
See accompanying notes.
IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three Months Ended September 30, 2021 and 2022
(In thousands)
(Unaudited)
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated Other |
|
|
Accumulated |
|
|
Total Stockholders’ |
|
Description |
|
Shares |
|
|
Amount |
|
|
Paid in Capital |
|
|
Comprehensive Loss |
|
|
Deficit |
|
|
Equity |
|
Balance at June 30, 2021 |
|
|
141,022 |
|
|
$ |
141 |
|
|
$ |
1,910,379 |
|
|
$ |
(25,796 |
) |
|
$ |
(1,302,050 |
) |
|
$ |
582,674 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(82,466 |
) |
|
|
(82,466 |
) |
Change in unrealized losses, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,618 |
) |
|
|
— |
|
|
|
(1,618 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23 |
) |
|
|
— |
|
|
|
(23 |
) |
Issuance of common stock in connection with employee stock plans |
|
|
176 |
|
|
|
— |
|
|
|
1,922 |
|
|
|
— |
|
|
|
— |
|
|
|
1,922 |
|
Issuance of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Purchase of note hedges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
30,537 |
|
|
|
— |
|
|
|
— |
|
|
|
30,537 |
|
Payments of tax withholdings related to vesting of employee stock awards and exercise of employee stock options |
|
|
(14 |
) |
|
|
— |
|
|
|
(490 |
) |
|
|
— |
|
|
|
— |
|
|
|
(490 |
) |
Balance at September 30, 2021 |
|
|
141,184 |
|
|
$ |
141 |
|
|
$ |
1,942,348 |
|
|
$ |
(27,437 |
) |
|
$ |
(1,384,516 |
) |
|
$ |
530,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2022 |
|
|
141,831 |
|
|
$ |
142 |
|
|
$ |
2,008,794 |
|
|
$ |
(54,007 |
) |
|
$ |
(1,330,203 |
) |
|
$ |
624,726 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(46,992 |
) |
|
|
(46,992 |
) |
Change in unrealized losses, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,734 |
) |
|
|
— |
|
|
|
(8,734 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(399 |
) |
|
|
— |
|
|
|
(399 |
) |
Issuance of common stock in connection with employee stock plans |
|
|
203 |
|
|
|
— |
|
|
|
2,567 |
|
|
|
— |
|
|
|
— |
|
|
|
2,567 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
23,837 |
|
|
|
— |
|
|
|
— |
|
|
|
23,837 |
|
Payments of tax withholdings related to vesting of employee stock awards and exercise of employee stock options |
|
|
(17 |
) |
|
|
— |
|
|
|
(644 |
) |
|
|
— |
|
|
|
— |
|
|
|
(644 |
) |
Balance at September 30, 2022 |
|
|
142,017 |
|
|
$ |
142 |
|
|
$ |
2,034,554 |
|
|
$ |
(63,140 |
) |
|
$ |
(1,377,195 |
) |
|
$ |
594,361 |
|
See accompanying notes.
IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Nine Months Ended September 30, 2021 and 2022
(In thousands)
(Unaudited)
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated Other |
|
|
Accumulated |
|
|
Total Ionis Stockholders’ |
|
Description |
|
Shares |
|
|
Amount |
|
|
Paid in Capital |
|
|
Comprehensive Loss |
|
|
Deficit |
|
|
Equity |
|
Balance at December 31, 2020 |
|
|
140,366 |
|
|
$ |
140 |
|
|
$ |
1,895,519 |
|
|
$ |
(21,071 |
) |
|
$ |
(1,131,306 |
) |
|
$ |
743,282 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(253,210 |
) |
|
|
(253,210 |
) |
Change in unrealized losses, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,321 |
) |
|
|
— |
|
|
|
(6,321 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(45 |
) |
|
|
— |
|
|
|
(45 |
) |
Issuance of common stock in connection with employee stock plans |
|
|
1,094 |
|
|
|
1 |
|
|
|
11,563 |
|
|
|
— |
|
|
|
— |
|
|
|
11,564 |
|
Issuance of warrants |
|
|
— |
|
|
|
— |
|
|
|
89,752 |
|
|
|
— |
|
|
|
— |
|
|
|
89,752 |
|
Purchase of note hedges |
|
|
— |
|
|
|
— |
|
|
|
(136,620 |
) |
|
|
— |
|
|
|
— |
|
|
|
(136,620 |
) |
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
98,419 |
|
|
|
— |
|
|
|
— |
|
|
|
98,419 |
|
Payments of tax withholdings related to vesting of employee stock awards and exercise of employee stock options |
|
|
(276 |
) |
|
|
— |
|
|
|
(16,285 |
) |
|
|
— |
|
|
|
— |
|
|
|
(16,285 |
) |
Balance at September 30, 2021 |
|
|
141,184 |
|
|
$ |
141 |
|
|
$ |
1,942,348 |
|
|
$ |
(27,437 |
) |
|
$ |
(1,384,516 |
) |
|
$ |
530,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
|
141,210 |
|
|
$ |
141 |
|
|
$ |
1,964,167 |
|
|
$ |
(32,668 |
) |
|
$ |
(1,159,903 |
) |
|
$ |
771,737 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(217,292 |
) |
|
|
(217,292 |
) |
Change in unrealized losses, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(29,508 |
) |
|
|
— |
|
|
|
(29,508 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(964 |
) |
|
|
— |
|
|
|
(964 |
) |
Issuance of common stock in connection with employee stock plans |
|
|
1,138 |
|
|
|
1 |
|
|
|
6,029 |
|
|
|
— |
|
|
|
— |
|
|
|
6,030 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
74,575 |
|
|
|
— |
|
|
|
— |
|
|
|
74,575 |
|
Payments of tax withholdings related to vesting of employee stock awards and exercise of employee stock options |
|
|
(331 |
) |
|
|
— |
|
|
|
(10,217 |
) |
|
|
— |
|
|
|
— |
|
|
|
(10,217 |
) |
Balance at September 30, 2022 |
|
|
142,017 |
|
|
$ |
142 |
|
|
$ |
2,034,554 |
|
|
$ |
(63,140 |
) |
|
$ |
(1,377,195 |
) |
|
$ |
594,361 |
|
See accompanying notes.
IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(217,292 |
) |
|
$ |
(253,210 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
11,301 |
|
|
|
11,665 |
|
Amortization of right-of-use operating lease assets |
|
|
1,970 |
|
|
|
1,171 |
|
Amortization of patents |
|
|
1,805 |
|
|
|
1,740 |
|
Amortization of premium on investments, net |
|
|
9,072 |
|
|
|
13,515 |
|
Amortization of debt issuance costs |
|
|
4,035 |
|
|
|
3,586 |
|
Stock-based compensation expense |
|
|
74,575 |
|
|
|
98,419 |
|
Loss (gain) on investments |
|
|
228 |
|
|
|
(933 |
) |
Loss on early retirement of debt |
|
|
— |
|
|
|
8,627 |
|
Non-cash losses related to disposal of property, plant and equipment |
|
|
528 |
|
|
|
— |
|
Non-cash losses related to patents |
|
|
1,155 |
|
|
|
1,150 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Contracts receivable |
|
|
55,251 |
|
|
|
67,136 |
|
Inventories |
|
|
4,161 |
|
|
|
(965 |
) |
Other current and long-term assets |
|
|
(988 |
) |
|
|
10,358 |
|
Income taxes payable |
|
|
(20 |
) |
|
|
134 |
|
Accounts payable |
|
|
5,607 |
|
|
|
(10,737 |
) |
Accrued compensation |
|
|
(8,400 |
) |
|
|
(33,408 |
) |
Accrued liabilities and other current liabilities |
|
|
38,263 |
|
|
|
(19,526 |
) |
Deferred contract revenue |
|
|
(55,426 |
) |
|
|
(71,610 |
) |
Net cash used in operating activities |
|
|
(74,175 |
) |
|
|
(172,888 |
) |
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchases of short-term investments |
|
|
(1,223,791 |
) |
|
|
(930,963 |
) |
Proceeds from sale of short-term investments |
|
|
764,101 |
|
|
|
1,051,857 |
|
Purchases of property, plant and equipment |
|
|
(11,582 |
) |
|
|
(9,453 |
) |
Acquisition of licenses and other assets, net |
|
|
(3,511 |
) |
|
|
(4,459 |
) |
Purchase of Bicycle Therapeutics plc common stock |
|
|
— |
|
|
|
(7,185 |
) |
Net cash (used in) provided by investing activities |
|
|
(474,783 |
) |
|
|
99,797 |
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from equity, net |
|
|
6,030 |
|
|
|
11,564 |
|
Payments of tax withholdings related to vesting of employee stock awards and exercise of employee stock options |
|
|
(10,217 |
) |
|
|
(16,285 |
) |
Proceeds from the issuance of 0 percent convertible notes |
|
|
— |
|
|
|
632,500 |
|
0 percent convertible senior notes issuance costs |
|
|
— |
|
|
|
(15,525 |
) |
Repurchase of $247.9 million principal amount of the 1 percent convertible senior notes |
|
|
— |
|
|
|
(256,963 |
) |
Proceeds from issuance of warrants |
|
|
— |
|
|
|
89,752 |
|
Purchase of note hedges |
|
|
— |
|
|
|
(136,620 |
) |
Principal payments on mortgage debt |
|
|
(89 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
(4,276 |
) |
|
|
308,423 |
|
|
|
|
|
|
|
|
|
|
Effects of exchange rates on cash |
|
|
(964 |
) |
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(554,198 |
) |
|
|
235,289 |
|
Cash and cash equivalents at beginning of period |
|
|
869,191 |
|
|
|
397,664 |
|
Cash and cash equivalents at end of period |
|
$ |
314,993 |
|
|
$ |
632,953 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
2,204 |
|
|
$ |
3,527 |
|
Income taxes paid |
|
$ |
2 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Amounts accrued for capital and patent expenditures |
|
$ |
3,032 |
|
|
$ |
1,811 |
|
Right-of-use assets obtained in exchange for lease liabilities |
|
$ |
657 |
|
|
$ |
— |
|
See accompanying notes.
IONIS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
1. Basis of Presentation
We prepared the unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 on the same basis as the audited financial statements for the year ended December 31, 2021. We included all normal recurring adjustments in the financial statements, which we considered necessary for a fair presentation of our financial position at such dates and our operating results and cash flows for those periods. Our operating results for the interim periods may not be indicative of what our operating results will be 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 for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC.
In our condensed consolidated financial statements, we included the accounts of Ionis Pharmaceuticals, Inc. and the consolidated results of our wholly owned subsidiary, Akcea Therapeutics, Inc. and its wholly owned subsidiaries (“we”, “us” or “our”).
2. Significant Accounting Policies
Revenue Recognition
Our Revenue Sources
We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue. In the instances in which we have received payment from our customers in advance of recognizing revenue, we include the amounts within deferred revenue in our condensed consolidated balance sheet.
At contract inception, we analyze our collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of Accounting Standards Codification, or ASC, Topic 808, Collaborative Arrangements, or ASC 808. ASC 808 does not address the recognition and measurement of collaborative arrangements and instead refers companies to use other authoritative accounting literature. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, we first determine which elements of the collaboration reflect a vendor-customer relationship and therefore are within the scope of ASC 606, Revenue from Contracts with Customers. When we determine elements of a collaboration do not reflect a vendor-customer relationship, we consistently apply the reasonable and rational policy election we made by analogizing to authoritative accounting literature.
Commercial Revenue: SPINRAZA royalties and Licensing and other royalty revenue
We earn commercial revenue primarily in the form of royalty payments on net sales of SPINRAZA. We also recognize sales milestone payments and royalties we earn under our other partnerships as commercial revenue.
Commercial Revenue: TEGSEDI and WAYLIVRA revenue, net
In January 2021 and April 2021, we entered into distribution agreements with Swedish Orphan Biovitrum AB, or Sobi, in which Sobi began commercializing TEGSEDI and WAYLIVRA in Europe and TEGSEDI in North America, respectively. Under our agreements, we are responsible for supplying finished goods inventory to Sobi and Sobi is responsible for selling each medicine to the end customer. As a result of these agreements, we earn a distribution fee on net sales from Sobi for each medicine.
Prior to the second quarter of 2021 in North America, we sold TEGSEDI through exclusive distribution agreements with third-party logistics companies, or 3PLs, that took title to TEGSEDI. The 3PLs then distributed TEGSEDI to a specialty pharmacy and a specialty distributor, which we collectively refer to as wholesalers, who then distributed TEGSEDI to health care providers and patients. In the United States, or U.S., we had a single 3PL as our sole customer and in Canada we also had a single 3PL as our sole customer. Prior to 2021 in Europe, we sold TEGSEDI and WAYLIVRA to hospitals and pharmacies, which were our customers, using 3PLs as distributors.
Under our collaboration agreement with PTC Therapeutics International Limited, or PTC, PTC is responsible for commercializing TEGSEDI and WAYLIVRA in Latin America and Caribbean countries. Under our agreement, we started receiving royalties from PTC for TEGSEDI sales in December 2021.
Research and development revenue under collaborative agreements
We enter into collaboration agreements to license and sell our technology on an exclusive or non-exclusive basis. Our collaboration agreements typically contain multiple elements, or performance obligations, including technology licenses or options to obtain technology licenses, research and development, or R&D, services, and manufacturing services.
See Note 6, Collaborative Arrangements and Licensing Agreements, for collaborations with substantive changes that occurred in 2022. Additionally, see Note 6, Collaborative Arrangements and Licensing Agreements, in our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for a summary of each of our material collaborative agreements.
Steps to Recognize Revenue
For elements of our contractual relationships that we account for under ASC 606, we use a five-step process to determine the amount of revenue we should recognize and when we should recognize it. The five-step process is as follows:
Accounting rules require us to first determine if we have a contract with our partner, including confirming that we have met each of the following criteria:
|
● |
We and our partner approved the contract and we are both committed to perform our obligations; |
|
● |
We have identified our rights, our partner’s rights and the payment terms; |
|
● |
We have concluded that the contract has commercial substance, meaning that the risk, timing, or amount of our future cash flows is expected to change as a result of the contract; and |
|
● |
We believe collectability of the consideration is probable. |
|
2. |
Identify the performance obligations |
We next identify our performance obligations, which represent the distinct goods and services we are required to provide under the contract.
Often we enter into a collaboration agreement in which we provide our partner with an option to license a medicine in the future. We may also provide our partner with an option to request that we provide additional goods or services in the future, such as active pharmaceutical ingredient, or API. We evaluate whether these options are material rights at the inception of the agreement. If we determine an option is a material right, we will consider the option a separate performance obligation. Historically, we have concluded that the options we grant to license a medicine in the future or to provide additional goods and services as requested by our partner are not material rights because these items are contingent upon future events that may not occur and are not priced at a significant discount. When a partner exercises its option to license a medicine or requests additional goods or services, then we identify a new performance obligation for that item.
In some cases, we deliver a license at the start of an agreement. If we determine that our partner has full use of the license and we do not have any additional material performance obligations related to the license after delivery, then we consider the license to be a separate performance obligation.
|
3. |
Determine the transaction price |
We then determine the transaction price by reviewing the amount of consideration we are eligible to earn under the collaboration agreement, including any variable consideration. Under our collaboration agreements, consideration typically includes fixed consideration in the form of an upfront payment and variable consideration in the form of potential milestone payments, license fees and royalties. At the start of an agreement, our transaction price usually consists of only the upfront payment. We do not typically include any payments we may receive in the future in our initial transaction price because the payments are not probable and are contingent on certain future events. We reassess the total transaction price at each reporting period to determine if we should include additional payments in the transaction price.
Milestone payments are our most common type of variable consideration. We recognize milestone payments using the most likely amount method because we will either receive the milestone payment or we will not, which makes the potential milestone payment a binary event. The most likely amount method requires us to determine the likelihood of earning the milestone payment. We include a milestone payment in the transaction price once it is probable we will achieve the milestone event. Most often, we do not consider our milestone payments probable until we or our partner achieve the milestone event because the majority of our milestone payments are contingent upon events that are not within our control and/or are usually based on scientific progress which is inherently uncertain. For example, in the first quarter of 2022, we earned a $10 million milestone payment from Biogen when Biogen advanced the Phase 1/2 study for ION859, an investigational antisense medicine targeting leucine rich repeat kinase 2, or LRRK2, in patients with Parkinson’s disease. We did not consider the milestone payment probable until Biogen achieved the milestone event because advancing ION859 was contingent on Biogen advancing a Phase 1/2 study and was not within our control. We recognized the milestone payment in full in the period the milestone event was achieved because we did not have any remaining performance obligations related to the milestone payment.
|
4. |
Allocate the transaction price |
Next, we allocate the transaction price to each of our performance obligations. When we have to allocate the transaction price to more than one performance obligation, we make estimates of the relative stand-alone selling price of each performance obligation because we do not typically sell our goods or services on a stand-alone basis. We then allocate the transaction price to each performance obligation based on the relative stand-alone selling price. We do not reallocate the transaction price after the start of an agreement to reflect subsequent changes in stand-alone selling prices.
We may engage a third party, independent valuation specialist to assist us with determining a stand-alone selling price for collaborations in which we deliver a license at the start of an agreement. We estimate the stand-alone selling price of these licenses using valuation methodologies, such as the relief from royalty method. Under this method, we estimate the amount of income, net of taxes, for the license. We then discount the projected income to present value. The significant inputs we use to determine the projected income of a license could include:
|
● |
Estimated future product sales; |
|
● |
Estimated royalties we may receive from future product sales; |
|
● |
Estimated contractual milestone payments we may receive; |
|
● |
Estimated expenses we may incur; |
|
● |
Estimated income taxes; and |
We typically estimate the selling price of R&D services by using our internal estimates of the cost to perform the specific services. The significant inputs we use to determine the selling price of our R&D services include:
|
● |
The estimated number of internal hours we will spend performing these services; |
|
● |
The estimated cost of work we will perform; |
|
● |
The estimated cost of work that we will contract with third parties to perform; and |
|
● |
The estimated cost of API we will use. |
For purposes of determining the stand-alone selling price of the R&D services we perform and the API we will deliver, accounting guidance requires us to include a markup for a reasonable profit margin.
We recognize revenue in one of two ways, over time or at a point in time. We recognize revenue over time when we are executing on our performance obligation over time and our partner receives benefit over time. For example, we recognize revenue over time when we provide R&D services. We recognize revenue at a point in time when our partner receives full use of an item at a specific point in time. For example, we recognize revenue at a point in time when we deliver a license or API to a partner.
For R&D services that we recognize over time, we measure our progress using an input method. The input methods we use are based on the effort we expend or costs we incur toward the satisfaction of our performance obligation. We estimate the amount of effort we expend, including the time we estimate it will take us to complete the activities, or costs we incur in a given period, relative to the estimated total effort or costs to satisfy the performance obligation. This results in a percentage that we multiply by the transaction price to determine the amount of revenue we recognize each period. This approach requires us to make numerous estimates and use significant judgement. If our estimates or judgements change over the course of the collaboration, they may affect the timing and amount of revenue that we recognize in the current and future periods.
The following are examples of when we typically recognize revenue based on the types of payments we receive.
Commercial Revenue: SPINRAZA royalties and Licensing and other royalty revenue
We recognize royalty revenue, including royalties from SPINRAZA sales, in the period in which the counterparty sells the related product and recognizes the related revenue, which in certain cases may require us to estimate our royalty revenue.
Commercial Revenue: TEGSEDI and WAYLIVRA revenue, net
Under our distribution agreements with Sobi we concluded that our performance obligation is to provide services to Sobi over the term of the agreement, which includes supplying finished goods inventory to Sobi. We are also responsible for maintaining the marketing authorization for TEGSEDI and WAYLIVRA in major markets and for leading the global commercial strategy for each medicine. We view this performance obligation as a series of distinct activities that are substantially the same. Therefore, we recognize as revenue the price Sobi pays us for the inventory when we deliver the finished goods inventory to Sobi. We also recognize distribution fee revenue based on Sobi’s net sales of TEGSEDI and WAYLIVRA. Under our agreements with Sobi, Sobi does not generally have a right of return.
Prior to our distribution agreements with Sobi, we recognized TEGSEDI and WAYLIVRA commercial revenue in the period when our customer obtained control of our products, which occurred at a point in time upon transfer of title to the customer. We classified payments to customers or other parties in the distribution channel for services that were distinct and priced at fair value as selling, general and administrative, or SG&A, expenses in our condensed consolidated statements of operations. We classified payments to customers or other parties in the distribution channel that did not meet those criteria as a reduction of revenue, as discussed further below. We excluded from revenues taxes collected from customers relating to TEGSEDI and WAYLIVRA commercial revenue and remitted these amounts to governmental authorities.
Reserves for TEGSEDI and WAYLIVRA commercial revenue
Under our distribution agreements with Sobi, Sobi is responsible for any applicable reserves.
Prior to our distribution agreements with Sobi, we recorded TEGSEDI and WAYLIVRA commercial revenue at our net sales price, or transaction price. We included in our transaction price estimated reserves for discounts, returns, chargebacks, rebates and other allowances that we offered within contracts between us and our customers, wholesalers, distributors, health care providers and other indirect customers. We estimated our reserves using the amounts we have earned or we could claim on the associated sales. We classified our reserves as a reduction of accounts receivable when we were not required to make a payment or as a current liability when we were required to make a payment. In certain cases, our estimates included a range of possible outcomes that were probability weighted for relevant factors such as our historical experience, contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, our reserves reflected our best estimates under the terms of our respective contracts. When calculating our reserves and related TEGSEDI and WAYLIVRA commercial revenue, we only recognized amounts to the extent that we considered it probable that we would not have to reverse a significant amount of the cumulative sales we previously recognized in a future period. Under our agreements with Sobi, we transferred all reserves to Sobi. See our revenue recognition policy in Note 1, Organization and Significant Accounting Policies, of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional details regarding how we accounted for the reserves related to TEDSEDI and WAYLIVIRA product sales prior to our agreements with Sobi.
Research and development revenue under collaboration agreements:
Upfront payments
When we enter into a collaboration agreement and receive an upfront payment, we typically record the entire upfront payment as deferred revenue if our only performance obligation is for R&D services we will provide in the future. We amortize the upfront payment into revenue as we perform the R&D services. For example, under our collaboration agreement with Roche to develop IONIS-FB-LRx for the treatment of complement-mediated diseases, we received a $75 million upfront payment in the fourth quarter of 2018. We allocated the upfront payment to our single performance obligation, R&D services. We are amortizing the $75 million upfront payment using an input method over the estimated period of time we are providing R&D services.
Milestone payments
We are required to include additional consideration in the transaction price when it is probable. We typically include milestone payments for R&D services in the transaction price when they are achieved. We include these milestone payments when they are achieved because typically there is considerable uncertainty in the research and development processes that trigger these payments. Similarly, we include approval milestone payments in the transaction price once the medicine is approved by the applicable regulatory agency. We will recognize sales-based milestone payments in the period in which we achieve the milestone under the sales-based royalty exception allowed under accounting rules.
We recognize milestone payments that relate to an ongoing performance obligation over our period of performance. For example, in the second quarter of 2022, we achieved a $20 million milestone payment from Roche when we advanced the Phase 2 study in patients with dry age-related macular degeneration, or AMD, under our collaboration agreement with Roche to develop IONIS-FB-LRx. We added this payment to the transaction price and allocated it to our R&D services performance obligation for IONIS-FB-LRx. We are recognizing revenue related to this milestone payment over our estimated period of performance. As a result, we recorded a cumulative catch-up adjustment of $13.8 million to increase revenue in the second quarter of 2022 for this payment. We estimate we will satisfy our performance obligation in the fourth quarter of 2023.
Conversely, we recognize in full those milestone payments that we earn based on our partners’ activities when our partner achieves the milestone event and we do not have a performance obligation. For example, in the third quarter of 2022, we recognized $13 million in milestone payments when Biogen advanced two targets under our neurology collaborations. We concluded that these milestone payments were not related to our R&D services performance obligations for these collaborations. Therefore, we recognized the milestone payments in full in the third quarter of 2022.
License fees
We generally recognize as revenue the total amount we determine to be the relative stand-alone selling price of a license when we deliver the license to our partner. This is because our partner has full use of the license and we do not have any additional performance obligations related to the license after delivery. For example, in the third quarter of 2022, we earned a $35 million license fee from Roche when Roche licensed IONIS-FB-LRx, an investigational medicine in development to treat complement-mediated diseases.
Sublicense fees
We recognize sublicense fee revenue in the period in which a party, who has already licensed our technology, further licenses the technology to another party because we do not have any performance obligations related to the sublicense. For example, in the fourth quarter of 2020, we earned a $41.2 million sublicense fee from Alnylam Pharmaceuticals for its sublicense of our technology to Sanofi Genzyme.
Amendments to Agreements
From time to time we amend our collaboration agreements. When this occurs, we are required to assess the following items to determine the accounting for the amendment:
|
1) |
If the additional goods and/or services are distinct from the other performance obligations in the original agreement; and |
|
2) |
If the goods and/or services are sold at a stand-alone selling price. |
If we conclude the goods and/or services in the amendment are distinct from the performance obligations in the original agreement and at a stand-alone selling price, we account for the amendment as a separate agreement. If we conclude the goods and/or services are not distinct and are sold at a stand-alone selling price, we then assess whether the remaining goods or services are distinct from those already provided. If the goods and/or services are distinct from what we have already provided, then we allocate the remaining transaction price from the original agreement and the additional transaction price from the amendment to the remaining goods and/or services. If the goods and/or services are not distinct from what we have already provided, we update the transaction price for our single performance obligation and recognize any change in our estimated revenue as a cumulative adjustment.
Multiple agreements
From time to time, we may enter into separate agreements at or near the same time with the same partner. We evaluate such agreements to determine whether we should account for them individually as distinct arrangements or whether the separate agreements should be combined and accounted for together. We evaluate the following to determine the accounting for the agreements:
|
● |
Whether the agreements were negotiated together with a single objective; |
|
● |
Whether the amount of consideration in one contract depends on the price or performance of the other agreement; or |
|
● |
Whether the goods and/or services promised under the agreements are a single performance obligation. |
Our evaluation involves significant judgment to determine whether a group of agreements might be so closely related that accounting guidance requires us to account for them as a combined arrangement.
For example, in the second quarter of 2018, we entered into two separate agreements with Biogen at the same time: a new strategic neurology collaboration agreement and a stock purchase agreement. We evaluated the Biogen agreements to determine whether we should treat the agreements separately or combine them. We considered that the agreements were negotiated concurrently and in contemplation of one another. Based on these facts and circumstances, we concluded that we should evaluate the provisions of the agreements on a combined basis.
Eplontersen Collaboration with AstraZeneca
In December 2021, we entered into a joint development and commercialization agreement with AstraZeneca to develop and commercialize eplontersen for the treatment of transthyretin amyloidosis, or ATTR. We are jointly developing and preparing to commercialize eplontersen with AstraZeneca in the U.S. We granted AstraZeneca exclusive rights to commercialize eplontersen outside the U.S., except certain countries in Latin America. Under the terms of the agreement, we received a $200 million upfront payment in 2021.
We evaluated our eplontersen collaboration under ASC 808 and identified four material components: (i) the license we granted to AstraZeneca in 2021, (ii) the co-development activities that we and AstraZeneca are performing, (iii) the co-commercialization activities that we and AstraZeneca are performing and (iv) the co-medical affairs activities that we and AstraZeneca are performing.
We determined that we had a vendor-customer relationship within the scope of ASC 606 for the license we granted to AstraZeneca and as a result we had one performance obligation. For our sole performance obligation, we determined the transaction price was the $200 million upfront payment we received. We recognized the upfront payment in full in 2021 because we did not have any remaining performance obligations after we delivered the license to AstraZeneca.
We also concluded that the co-development activities, the co-commercialization activities and the co-medical affairs activities are within the scope of ASC 808 because we and AstraZeneca are active participants exposed to the risks and benefits of the activities under the collaboration and therefore do not have a vendor-customer relationship. AstraZeneca is responsible for 55 percent of the costs associated with the ongoing global Phase 3 development program. Because we are leading the Phase 3 development program, we made an accounting policy election to recognize as non-customer revenue the cost-share funding from AstraZeneca, net of our share of AstraZeneca’s development expenses, in the same period we incur the related development expenses. As AstraZeneca is responsible for the majority of the commercial and medical affairs costs in the U.S. and all costs associated with bringing eplontersen to market outside the U.S., we made an accounting policy election to recognize cost-share funding we receive from AstraZeneca related to commercial and medical affairs activities as reductions of our SG&A expense and R&D expense, respectively. Refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for further details on the financial statement impacts of our eplontersen collaboration with AstraZeneca.
Contracts Receivable
Our contracts receivable balance represents the amounts we have billed our partners or customers and that are due to us unconditionally for goods we have delivered or services we have performed. When we bill our partners or customers with payment terms based on the passage of time, we consider the contracts receivable to be unconditional. We typically receive payment within one quarter of billing our partner or customer.
As of September 30, 2022, approximately 73.1 percent of our contracts receivables were from two significant customers. As of December 31, 2021, approximately 93.8 percent of our contracts receivables were from two significant customers.
Unbilled SPINRAZA Royalties
Our unbilled SPINRAZA royalties represent our right to receive consideration from Biogen in advance of when we are eligible to bill Biogen for SPINRAZA royalties. We include these unbilled amounts in other current assets on our condensed consolidated balance sheet.
Deferred Revenue
We are often entitled to bill our customers and receive payment from our customers in advance of our obligation to provide services or transfer goods to our partners. In these instances, we include the amounts in deferred revenue on our condensed consolidated balance sheet. During the three months ended September 30, 2022 and 2021, we recognized $23.1 million and $21.1 million of revenue from amounts that were in our beginning deferred revenue balance for each respective period. During the nine months ended September 30, 2022 and 2021, we recognized $69.8 million and $71.9 million of revenue from amounts that were in our beginning deferred revenue balance for each respective period. For further discussion, refer to our revenue recognition policy above.
Cost of Sales
Our cost of sales is comprised of costs related to our commercial revenue, including manufacturing costs, transportation and freight costs and indirect overhead costs associated with the manufacturing and distribution of our products. We also may include certain period costs related to manufacturing services and inventory adjustments in cost of sales.
Accrued Liabilities
Our accrued liabilities consisted of the following (in thousands):
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
Clinical development expenses |
|
$ |
103,635 |
|
|
$ |
65,730 |
|
In-licensing expenses |
|
|
7,130 |
|
|
|
8,044 |
|
Commercial expenses |
|
|
4,188 |
|
|
|
2,471 |
|
Other miscellaneous expenses |
|
|
13,049 |
|
|
|
12,315 |
|
Total accrued liabilities |
|
$ |
128,002 |
|
|
$ |
88,560 |
|
Estimated Liability for Clinical Development Expenses
We have numerous medicines in preclinical studies and/or clinical trials at clinical sites throughout the world. On at least a quarterly basis, we estimate our liability for preclinical and clinical development expenses we have incurred and services that we have received but for which we have not yet been billed and maintain an accrual to cover these expenses. These expenses primarily relate to third-party clinical management costs, laboratory and analysis costs, toxicology studies and investigator grants. We estimate our liability using assumptions about study and patient activities and the related expected expenses for those activities determined based on the contracted fees with our service providers. The assumptions we use represent our best estimates of the activity and expenses at the time of our accrual and involve inherent uncertainties and the application of our judgment. Upon settlement, these expenses may differ materially from the amounts accrued in our consolidated financial statements. Our historical accrual estimates have not been materially different from our actual amounts.
Cash, Cash Equivalents and Investments
We consider all liquid investments with maturities of three months or less when we purchase them to be cash equivalents. Our short-term investments have initial maturities of greater than three months from date of purchase. We classify our short-term debt investments as “available-for-sale” and carry them at fair market value based upon prices on the last day of the fiscal period for identical or similar items. We record unrealized gains and losses on debt securities as a separate component of comprehensive income (loss) and include net realized gains and losses in gain (loss) on investments in our condensed consolidated statement of operations. We use the specific identification method to determine the cost of securities sold.
We also have equity investments of less than 20 percent ownership in publicly and privately held biotechnology companies that we received as part of a technology license or partner agreement. At September 30, 2022, we held equity investments in three publicly held companies and eight privately held companies.
We are required to measure and record our equity investments at fair value and to recognize the changes in fair value in our condensed consolidated statement of operations. We account for our equity investments in publicly held companies based on observable inputs such as quoted prices in active markets for identical assets. We account for our equity investments in privately held companies at their cost minus impairments, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. We recorded an immaterial amount of fair value adjustments related to our equity investments for the three and nine months ended September 30, 2022 and 2021.
Inventory Valuation
We reflect our inventory on our condensed consolidated balance sheet at the lower of cost or net realizable value under the first-in, first-out method, or FIFO. We capitalize the costs of raw materials that we purchase for use in producing our medicines because until we use these raw materials, they have alternative future uses, which we refer to as clinical raw materials. We include in inventory raw material costs for medicines that we manufacture for our partners under contractual terms and that we use primarily in our clinical development activities and drug products. We can use each of our raw materials in multiple products and, as a result, each raw material has future economic value independent of the development status of any single medicine. For example, if one of our medicines failed, we could use the raw materials for that medicine to manufacture our other medicines. We expense these costs as R&D expenses when we begin to manufacture API for a particular medicine if the medicine has not been approved for marketing by a regulatory agency. Our raw materials - commercial inventory includes API for our commercial medicines. We capitalize material, labor and overhead costs as part of our raw materials - commercial inventory.
We review our inventory periodically and reduce the carrying value of items we consider to be slow moving or obsolete to their estimated net realizable value based on forecasted demand compared to quantities on hand. We consider several factors in estimating the net realizable value, including shelf life of our inventory, alternative uses for our medicines in development and historical write-offs.
Our inventory consisted of the following (in thousands):
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
Raw materials: |
|
|
|
|
|
|
Raw materials- clinical |
|
$ |
15,598 |
|
|
$ |
14,507 |
|
Raw materials- commercial |
|
|
1,019 |
|
|
|
4,139 |
|
Total raw materials |
|
|
16,617 |
|
|
|
18,646 |
|
Work in process |
|
|
3,740 |
|
|
|
5,770 |
|
Finished goods |
|
|
288 |
|
|
|
390 |
|
Total inventory |
|
$ |
20,645 |
|
|
$ |
24,806 |
|
Leases
We determine if an arrangement contains a lease at inception of the arrangement. As of September 30, 2022, we only had operating leases. We recognize a right-of-use operating lease asset and associated short- and long-term operating lease liability on our condensed consolidated balance sheet for operating leases greater than one year. Our right-of-use assets represent our right to use an underlying asset for the lease term and our lease liabilities represent our obligation to make lease payments arising from the lease arrangement. We recognize our right-of-use operating lease assets and lease liabilities based on the present value of the future minimum lease payments we will pay over the lease term. We determine the lease term at the inception of each lease, and in certain cases our lease term could include renewal options if we concluded we were reasonably certain that we will exercise the renewal option. When we exercise a lease option that was not previously included in the initial lease term, we reassess our right-of-use asset and lease liabilities for the new lease term.
As our leases do not provide an interest rate implicit in the lease, we use our incremental borrowing rate, based on the information available as of the lease inception date or at the lease option extension date in determining the present value of future payments. We recognize rent expense for our minimum lease payments on a straight-line basis over the expected term of our lease. We recognize period expenses, such as common area maintenance expenses, in the period we incur the expense.
In January 2022, we entered into a sublease agreement for our office space located in Boston, Massachusetts. The sublease commenced in January 2022 when the office space was ready for our tenant’s occupancy. We are subleasing this space under a non-cancelable operating sublease with a sublease term ending in November 2028 with no option to extend the sublease. Under the sublease agreement we provided a seven-month free rent period, which commenced in January 2022. We will receive lease payments over the sublease term totaling $9.6 million. We are recognizing sublease payments as other income on a straight-line, gross basis over the term of our sublease.
In October 2022, we entered into a build-to-suit lease agreement to lease a development chemistry and manufacturing facility in Oceanside, California. The lessor will develop and construct a building composed of manufacturing space, office space, research and development space and warehouse space. We will design and construct tenant improvements to customize the facility’s interior space. We will lease the facility for an initial term of 20 years and 3 months with options to extend the lease for two additional terms of 10 years each. The lease will commence when the lessor's construction is complete and we are able to occupy the facility.
In October 2022, we concurrently entered into two purchase and sale agreements with a real estate investor. Under the agreements, we sold and leased back the facilities at our headquarters location in Carlsbad, California and will sell, subject to meeting certain closing conditions, two lots of undeveloped land adjacent to our headquarters. We sold the facilities at our headquarters for a total purchase price of $263.4 million and we expect to receive total proceeds of $33.0 million upon the close of the sale of the two lots. We used a portion of the sale proceeds to extinguish our mortgage debt on our headquarters facilities of $51.3 million. The initial lease term for our headquarters facilities is 15 years with options to extend the lease for two additional terms of five years each. In connection with the sale of our two undeveloped lots, we will enter into a build-to-suit lease agreement with the same real estate investor who will build a new R&D facility for us on those lots. Once this new facility is completed, our lease will commence.
Research, Development and Patent Expenses
Our research and development expenses include wages, benefits, facilities, supplies, external services, clinical trial and manufacturing costs and other expenses that are directly related to our research and development operations. We expense research and development costs as we incur them. When we make payments for research and development services prior to the services being rendered, we record those amounts as prepaid assets on our condensed consolidated balance sheet and we expense them as the services are provided.
We capitalize costs consisting principally of outside legal costs and filing fees related to obtaining patents. We amortize patent costs over the useful life of the patent, beginning with the date the U.S. Patent and Trademark Office, or foreign equivalent, issues the patent. We review our capitalized patent costs regularly to ensure that they include costs for patents and patent applications that have future value. When we identify patents and patent applications that we are not actively pursuing, we write off any associated costs.
Income Taxes
We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carryforwards. We record a valuation allowance when necessary to reduce our net deferred tax assets to the amount expected to be realized.
We apply the authoritative accounting guidance prescribing a threshold and measurement attribute for the financial recognition and measurement of a tax position taken or expected to be taken in a tax return. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely to be realized upon ultimate settlement.
We are required to use significant judgment in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, we can provide no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our historical income tax provisions and accruals. We adjust these reserves for changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may impact the provision for income taxes in the period in which we make such determination.
We are also required to use significant judgment in determining any valuation allowance recorded against our deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including scheduled reversal of deferred tax liabilities, past operating results, the feasibility of tax planning strategies and estimates of future taxable income. We base our estimates of future taxable income on assumptions that are consistent with our plans. The assumptions we use represent our best estimates and involve inherent uncertainties and the application of our judgment. Should actual amounts differ from our estimates, the amount of our tax expense and liabilities we recognize could be materially impacted. We record a valuation allowance to reduce the balance of our net deferred tax assets to the amount we believe is more-likely-than-not to be realized.
We do not provide for a U.S. income tax liability and foreign withholding taxes on undistributed foreign earnings of our foreign subsidiaries.
Long-lived Assets
We evaluate long-lived assets, which include property, plant and equipment, right-of-use assets and patent costs, for impairment on at least a quarterly basis and whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of such assets.
Use of Estimates
We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. that require us to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Actual results could differ from our estimates.
Basic and Diluted Net Loss Per Share
Basic net loss per share
We calculated our basic net loss per share for the three and nine months ended September 30, 2022 and 2021 by dividing our net loss by our weighted-average number of common shares outstanding during the period. Our basic net loss per share for the three months ended September 30, 2022 and 2021 were $0.33 and $0.58, respectively. Our basic net loss per share for the nine months ended September 30, 2022 and 2021 were $1.53 and $1.80, respectively.
Diluted net loss per share
For the three and nine months ended September 30, 2022 and 2021, we incurred a net loss; therefore, we did not include dilutive common equivalent shares in the computation of diluted net loss per share because the effect would have been anti-dilutive. Common stock from the following would have had an anti-dilutive effect on net loss per share:
|
● |
0 percent convertible senior notes, or 0% Notes; |
|
● |
Note hedges related to the 0% Notes; |
|
● |
0.125 percent convertible senior notes, or 0.125% Notes; |
|
● |
Note hedges related to the 0.125% Notes; |
|
● |
Dilutive stock options; |
|
● |
Unvested restricted stock units, or RSUs; |
|
● |
Unvested performance restricted stock units, or PRSUs; and |
|
● |
Employee Stock Purchase Plan, or ESPP. |
For the three and nine months ended September 30, 2021, common stock that we could have issued from our 1 percent convertible senior notes, or 1% Notes, would also have had an anti-dilutive effect on net loss per share.
Additionally as of September 30, 2022, we had warrants related to our 0% and 0.125% Notes outstanding. We will include the shares issuable under these warrants in our calculation of diluted earnings per share when the average market price per share of our common stock for the reporting period exceeds the strike price of the warrants.
Convertible Debt
We account for each of our convertible debt instruments as a single unit of accounting, a liability, because we concluded that the conversion features do not require bifurcation as a derivative under ASC 815, Derivatives and Hedging, or ASC 815, and our convertible debt instruments were not issued at a substantial premium. We record the entire debt issuance costs as a contra-liability in our condensed consolidated balance sheet at issuance and we amortize them over the contractual term using an updated effective interest rate. As such, the ending balances for our 0% and 0.125% Notes represent the principal balance of each convertible debt instrument less debt issuance costs. We amortize debt issuance costs for our 0% and 0.125% Notes over the respective contractual term using an effective interest rate of 0.5 percent for each note. Refer to Note 7, Convertible Debt, for further details on our convertible debt instruments.
Call Spread
In conjunction with the issuance of our 0% Notes and 0.125% Notes in April 2021 and December 2019, respectively, we entered into call spread transactions, which were comprised of purchasing note hedges and selling warrants. We account for the note hedges and warrants as separate freestanding financial instruments and treat each instrument as a separate unit of accounting. We determined that the note hedges and warrants do not meet the definition of a liability using the guidance contained in ASC Topic 480, therefore we account for the note hedges and warrants using the Derivatives and Hedging – Contracts in Entity’s Own Equity accounting guidance contained in ASC 815. We determined that the note hedges and warrants meet the definition of a derivative, are indexed to our stock and meet the criteria to be classified in shareholders’ equity. We recorded the aggregate amount paid for the note hedges and the aggregate amount received for the warrants as additional paid-in capital in our condensed consolidated balance sheet. We reassess our ability to continue to classify the note hedges and warrants in shareholders’ equity at each reporting period.
Segment Information
We operate as a single segment, Ionis operations, because our chief decision maker reviews operating results on an aggregate basis and manages our operations as a single operating segment.
Stock-based Compensation Expense
We measure stock-based compensation expense for equity-classified awards, principally related to stock options, RSUs, PRSUs and stock purchase rights under our ESPP based on the estimated fair value of the award on the date of grant. We recognize the value of the portion of the award that we ultimately expect to vest as stock-based compensation expense over the requisite service period in our condensed consolidated statements of operations. We reduce stock-based compensation expense for estimated forfeitures at the time of grant and revise in subsequent periods if actual forfeitures differ from those estimates. We use the Black-Scholes model to estimate the fair value of stock options granted and stock purchase rights under our ESPP.
On the grant date, we use our stock price and assumptions regarding a number of variables to determine the estimated fair value of stock-based payment awards. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.
We recognize compensation expense for stock options granted, RSUs, PRSUs and stock purchase rights under the ESPP using the accelerated multiple-option approach. Under the accelerated multiple-option approach (also known as the graded-vesting method), we recognize compensation expense over the requisite service period for each separately vesting tranche of the award as though the award were in substance multiple awards, which results in the expense being front-loaded over the vesting period.
In December 2020, we amended and restated the Akcea 2015 equity plan, including renaming the plan as the Ionis Pharmaceuticals, Inc. 2020 Equity Incentive Plan, or 2020 Plan. As a result, all employees are now under an Ionis stock plan and subject to the same Black-Scholes assumptions.
For the nine months ended September 30, 2022 and 2021, we used the following weighted-average assumptions in our Black-Scholes calculations:
Employee Stock Options:
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
Risk-free interest rate |
|
|
1.9 |
% |
|
|
0.5 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Volatility |
|
|
54.9 |
% |
|
|
54.3 |
% |
Expected life* |
|
6.3 years |
|
|
4.9 years |
|
Ionis Board of Director Stock Options:
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
Risk-free interest rate |
|
|
2.9 |
% |
|
|
1.2 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Volatility |
|
|
56.2 |
% |
|
|
55.9 |
% |
Expected life |
|
7.4 years |
|
|
7.3 years |
|
ESPP:
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
Risk-free interest rate |
|
|
1.2 |
% |
|
|
0.1 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Volatility |
|
|
50.1 |
% |
|
|
|