Company Quick10K Filing
Ionis Pharmaceuticals
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 142 $9,097
10-Q 2019-11-06 Quarter: 2019-09-30
10-Q 2019-08-08 Quarter: 2019-06-30
10-Q 2019-05-09 Quarter: 2019-03-31
10-K 2019-03-01 Annual: 2018-12-31
10-Q 2018-11-06 Quarter: 2018-09-30
10-Q 2018-08-07 Quarter: 2018-06-30
10-Q 2018-05-07 Quarter: 2018-03-31
10-K 2018-02-28 Annual: 2017-12-31
10-Q 2017-11-07 Quarter: 2017-09-30
10-Q 2017-08-09 Quarter: 2017-06-30
10-Q 2017-05-09 Quarter: 2017-03-31
10-K 2017-03-01 Annual: 2016-12-31
10-Q 2016-11-09 Quarter: 2016-09-30
10-Q 2016-08-09 Quarter: 2016-06-30
10-Q 2016-05-05 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-11-09 Quarter: 2015-09-30
10-Q 2015-08-05 Quarter: 2015-06-30
10-Q 2015-05-05 Quarter: 2015-03-31
10-K 2015-03-02 Annual: 2014-12-31
10-Q 2014-11-07 Quarter: 2014-09-30
10-Q 2014-08-04 Quarter: 2014-06-30
10-Q 2014-05-06 Quarter: 2014-03-31
10-K 2014-03-03 Annual: 2013-12-31
10-Q 2013-11-05 Quarter: 2013-09-30
10-Q 2013-08-06 Quarter: 2013-06-30
10-Q 2013-05-07 Quarter: 2013-03-31
10-K 2013-02-28 Annual: 2012-12-31
10-Q 2012-08-06 Quarter: 2012-06-30
10-Q 2012-05-09 Quarter: 2012-03-31
10-K 2012-02-29 Annual: 2011-12-31
10-Q 2011-11-08 Quarter: 2011-09-30
10-Q 2011-08-08 Quarter: 2011-06-30
10-Q 2011-05-06 Quarter: 2011-03-31
10-K 2011-03-01 Annual: 2010-12-31
10-Q 2010-11-05 Quarter: 2010-09-30
10-Q 2010-08-09 Quarter: 2010-06-30
10-Q 2010-05-07 Quarter: 2010-03-31
10-K 2010-03-01 Annual: 2009-12-31
8-K 2020-01-15 Enter Agreement, Officers, Exhibits
8-K 2020-01-09 Enter Agreement, Officers, Exhibits
8-K 2019-12-11 Off-BS Arrangement, Sale of Shares, Other Events, Exhibits
8-K 2019-12-11 Off-BS Arrangement, Sale of Shares, Other Events
8-K 2019-11-06 Earnings, Exhibits
8-K 2019-09-27 Leave Agreement
8-K 2019-08-07 Earnings, Exhibits
8-K 2019-06-10 Officers, Exhibits
8-K 2019-06-06 Shareholder Vote
8-K 2019-05-09 Earnings, Exhibits
8-K 2019-03-22 Officers, Exhibits
8-K 2019-02-27 Earnings, Exhibits
8-K 2018-12-21 Officers, Exhibits
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-10-18 Officers, Exhibits
8-K 2018-10-10 Enter Agreement, Other Events, Exhibits
8-K 2018-09-25 Officers, Exhibits
8-K 2018-08-27 Other Events, Exhibits
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-06-19 Officers, Exhibits
8-K 2018-05-30 Shareholder Vote
8-K 2018-05-04 Earnings, Other Events, Exhibits
8-K 2018-04-20 Sale of Shares, Exhibits
8-K 2018-03-15 Enter Agreement, Exhibits
8-K 2018-02-27 Earnings, Exhibits
8-K 2018-01-16 Officers
IONS 2019-09-30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Default Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 ex10_1.htm
EX-10.2 ex10_2.htm
EX-10.3 ex10_3.htm
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32.1 ex32_1.htm

Ionis Pharmaceuticals Earnings 2019-09-30

IONS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
MYL 9,779 31,817 19,914 11,245 3,793 34 2,748 22,896 34% 8.3 0%
TEVA 9,708 59,424 44,173 17,720 7,741 -3,851 -2,437 33,498 44% -13.7 -6%
SRPT 9,465 1,748 649 345 0 -570 -518 8,352 0% -16.1 -33%
IONS 9,097 2,878 1,421 799 459 495 287 8,825 57% 30.7 17%
SAGE 8,814 1,316 113 2 1 -613 -612 8,646 51% -14.1 -47%
BHC 8,750 32,354 29,666 8,425 0 -911 1,285 32,239 0% 25.1 -3%
ALNY 7,978 2,716 959 101 92 -858 -856 6,838 91% -8.0 -32%
CTLT 7,731 6,184 3,896 2,518 805 137 408 10,377 32% 25.4 2%
JAZZ 7,584 5,489 2,505 2,027 441 656 858 8,730 22% 10.2 12%
RDY 6,726 225,427 85,230 0 0 0 0 6,714 0%


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-Q
(Mark One)

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

For the Quarterly Period Ended September 30, 2019

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
 
Name of each exchange on which registered
 
 
Trading symbol
Common Stock, $.001 Par Value
 
The Nasdaq Stock Market LLC
 
IONS

Securities registered pursuant to Section 12(g) of the Act: None
     

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 and posted on its corporate Web site, if any, 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 and post 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. (Check one):

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 7(a)(2)(B) of the Securities 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 October 31, 2019 was 140,663,254.



IONIS PHARMACEUTICALS, INC.
FORM 10-Q
INDEX

PART I
FINANCIAL INFORMATION
 
     
ITEM 1:
Financial Statements:
 
     
 
Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018
3
     
 
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)
4
     
 
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and 2018 (unaudited)
5
     
 
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)
6
     
 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)
8
     
 
Notes to Condensed Consolidated Financial Statements (unaudited)
9
     
ITEM 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations:
 
     
 
Overview
32
     
 
Results of Operations
35
     
 
Liquidity and Capital Resources
41
     
ITEM 3:
Quantitative and Qualitative Disclosures about Market Risk
43
     
ITEM 4:
Controls and Procedures
43
     
PART II
OTHER INFORMATION
44
     
ITEM 1:
Legal Proceedings
44
     
ITEM 1A:
Risk Factors
44
     
ITEM 2:
Unregistered Sales of Equity Securities and Use of Proceeds
54
     
ITEM 3:
Default upon Senior Securities
54
     
ITEM 4:
Mine Safety Disclosures
54
     
ITEM 5:
Other Information
54
     
ITEM 6:
Exhibits
55
     
SIGNATURES
56

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 appearing in this report, including TEGSEDI (inotersen) and WAYLIVRA (volanesorsen), are the property of Akcea Therapeutics, Inc. This report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this report may appear without the ® or TM symbols.
2


IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

   
September 30,
2019
   
December 31,
2018
 
   
(Unaudited)
       
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
247,939
   
$
278,820
 
Short-term investments
   
1,972,891
     
1,805,252
 
Contracts receivable
   
49,077
     
12,759
 
Inventories
   
19,375
     
8,582
 
Other current assets
   
118,809
     
102,473
 
Total current assets
   
2,408,091
     
2,207,886
 
Property, plant and equipment, net
   
148,717
     
132,160
 
Patents, net
   
26,985
     
24,032
 
Long-term deferred tax assets
   
284,997
     
290,796
 
Deposits and other assets
   
26,199
     
12,910
 
Total assets
 
$
2,894,989
   
$
2,667,784
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
 
$
13,146
   
$
28,660
 
Accrued compensation
   
24,404
     
29,268
 
Accrued liabilities
   
52,615
     
47,503
 
Income taxes payable
   
1,945
     
858
 
Current portion of long-term obligations
   
2,060
     
13,749
 
Current portion of deferred contract revenue
   
137,607
     
160,256
 
Total current liabilities
   
231,777
     
280,294
 
Long-term deferred contract revenue
   
492,979
     
567,359
 
1 percent convertible senior notes
   
596,355
     
568,215
 
Long-term obligations, less current portion
   
16,016
     
4,914
 
Long-term mortgage debt
   
59,896
     
59,842
 
Total liabilities
   
1,397,023
     
1,480,624
 
Stockholders’ equity:
               
Common stock, $0.001 par value; 300,000,000 shares authorized, 140,636,397 and 137,928,828 shares issued and outstanding at September 30, 2019 (unaudited) and December 31, 2018, respectively
   
141
     
138
 
Additional paid-in capital
   
2,219,090
     
2,047,250
 
Accumulated other comprehensive loss
   
(25,375
)
   
(32,016
)
Accumulated deficit
   
(857,563
)
   
(967,293
)
Total Ionis stockholders’ equity
   
1,336,293
     
1,048,079
 
   Noncontrolling interest in Akcea Therapeutics, Inc.
   
161,673
     
139,081
 
Total stockholders’ equity
   
1,497,966
     
1,187,160
 
Total liabilities and stockholders’ equity
 
$
2,894,989
   
$
2,667,784
 


See accompanying notes.

3


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,
 
   
2019
   
2018
   
2019
   
2018
 
Revenue:
                       
Commercial revenue:
                       
SPINRAZA royalties
 
$
81,672
   
$
70,010
   
$
211,884
   
$
167,743
 
Product sales, net
   
11,945
     
     
28,563
     
 
Licensing and other royalty revenue
   
2,082
     
12,746
     
11,638
     
14,232
 
Total commercial revenue
   
95,699
     
82,756
     
252,085
     
181,975
 
Research and development revenue under collaborative agreements
   
72,193
     
62,639
     
376,833
     
225,584
 
Total revenue
   
167,892
     
145,395
     
628,918
     
407,559
 
                                 
Expenses:
                               
Cost of products sold
   
967
     
     
3,373
     
 
Research, development and patent
   
104,366
     
95,255
     
316,948
     
301,153
 
Selling, general and administrative
   
60,036
     
68,712
     
203,368
     
178,563
 
Total operating expenses
   
165,369
     
163,967
     
523,689
     
479,716
 
                                 
Income (loss) from operations
   
2,523
     
(18,572
)
   
105,229
     
(72,157
)
                                 
Other income (expense):
                               
Investment income
   
13,136
     
9,963
     
39,015
     
18,711
 
Interest expense
   
(12,002
)
   
(11,282
)
   
(35,404
)
   
(33,332
)
Other income (expenses)
   
(140
)
   
(22
)
   
(332
)
   
(145
)
                                 
Income (loss) before income tax (expense) benefit
   
3,517
     
(19,913
)
   
108,508
     
(86,923
)
                                 
Income tax (expense) benefit
   
14,915
     
(452
)
   
(9,204
)
   
(824
)
                                 
Net income (loss)
   
18,432
     
(20,365
)
   
99,304
     
(87,747
)
                                 
Net loss attributable to noncontrolling interest in Akcea Therapeutics, Inc.
   
7,732
     
15,806
     
10,426
     
41,412
 
                                 
Net income (loss) attributable to Ionis Pharmaceuticals, Inc. common stockholders
 
$
26,163
   
$
(4,559
)
 
$
109,730
   
$
(46,335
)
                                 
Basic net income (loss) per share
 
$
0.19
   
$
(0.03
)
 
$
0.81
   
$
(0.33
)
Shares used in computing basic net income (loss) per share
   
140,551
     
137,346
     
139,800
     
130,507
 
Diluted net income (loss) per share
 
$
0.18
   
$
(0.03
)
 
$
0.79
   
$
(0.33
)
Shares used in computing diluted net income (loss) per share
   
143,408
     
137,346
     
142,821
     
130,507
 


 See accompanying notes.

4


IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(Unaudited)

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2019
   
2018
   
2019
   
2018
 
                         
Net income (loss)
 
$
18,432
   
$
(20,365
)
 
$
99,304
   
$
(87,747
)
Unrealized gains (losses) on debt securities, net of tax
   
(1,110
)
   
133
     
6,666
     
(834
)
Currency translation adjustment
   
(13
)
   
(31
)
   
(25
)
   
61
 
                                 
Comprehensive income (loss)
   
17,309
     
(20,263
)
   
105,945
     
(88,520
)
                                 
Comprehensive loss attributable to noncontrolling interests
   
(7,729
)
   
(13,943
)
   
(10,423
)
   
(38,005
)
                                 
Comprehensive income (loss) attributable to Ionis Pharmaceuticals, Inc. stockholders
 
$
25,038
   
$
(6,320
)
 
$
116,368
   
$
(50,515
)


See accompanying notes.

5


IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Three Months Ended September 30, 2018 and 2019
(In thousands)
(Unaudited)

   
Common Stock
   
Additional
   
Accumulated Other
   
Accumulated
   
Total Ionis
Stockholders
   
Noncontrolling
Interest in Akcea
   
Total
Stockholders
 
Description
 
Shares
   
Amount
   
Paid in Capital
   
Comprehensive Loss
   
Deficit
   
Equity
   
Therapeutics, Inc.
   
Equity
 
Balance at June 30, 2018
   
137,157
   
$
137
   
$
2,011,561
   
$
(32,634
)
 
$
(1,282,810
)
 
$
696,254
   
$
121,181
   
$
817,436
 
Net loss attributable to Ionis Pharmaceuticals, Inc. common stockholders
   
     
     
     
     
(4,559
)
   
(4,559
)
   
     
(4,559
)
Change in unrealized gains (losses), net of tax
   
     
     
     
133
     
     
133
     
     
133
 
Foreign currency translation
   
     
     
     
(31
)
   
     
(31
)
   
     
(31
)
Issuance of common stock in connection with employee stock plans
   
350
     
1
     
6,225
     
     
     
6,226
     
     
6,226
 
Stock-based compensation expense
   
     
     
34,883
     
     
     
34,883
     
     
34,883
 
Noncontrolling interest in Akcea Therapeutics, Inc
   
     
     
(22,356
)
   
     
     
(22,356
)
   
8,413
     
(13,943
)
Balance at September 30, 2018
   
137,507
   
$
138
   
$
2,030,313
   
$
(32,532
)
 
$
(1,287,369
)
 
$
710,550
   
$
129,594
   
$
840,144
 
                                                                 
Balance at June 30, 2019
   
140,393
   
$
140
   
$
2,177,222
   
$
(24,252
)
 
$
(883,726
)
 
$
1,269,384
   
$
187,818
   
$
1,457,202
 
Net income attributable to Ionis Pharmaceuticals, Inc. common stockholders
   
     
     
     
     
26,163
     
26,163
     
     
26,163
 
Change in unrealized gains (losses), net of tax
   
     
     
     
(1,110
)
   
     
(1,110
)
   
     
(1,110
)
Foreign currency translation
   
     
     
     
(13
)
   
     
(13
)
   
     
(13
)
Issuance of common stock in connection with employee stock plans
   
255
     
1
     
10,130
     
     
     
10,131
     
     
10,131
 
Stock-based compensation expense
   
     
     
24,126
     
     
     
24,126
     
     
24,126
 
Payments of tax withholdings related to vesting of employee stock awards and exercise of employee stock options
 
   
(11
)
   
     
(10,804
)
   
     
     
(10,804
)
   
     
(10,804
)
Noncontrolling interest in Akcea Therapeutics, Inc.
   
     
     
18,416
     
     
     
18,416
     
(26,145
)
   
(7,729
)
Balance at September 30, 2019
   
140,637
   
$
141
   
$
2,219,090
   
$
(25,375
)
 
$
(857,563
)
 
$
1,336,293
   
$
161,673
   
$
1,497,966
 


See accompanying notes.

6


IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Nine Months Ended September 30, 2018 and 2019
(In thousands)
(Unaudited)

   
Common Stock
   
Additional
   
Accumulated Other
   
Accumulated
   
Total Ionis
Stockholders
   
Noncontrolling
Interest in Akcea
   
Total
Stockholders
 
Description
 
Shares
   
Amount
   
Paid in Capital
   
Comprehensive Loss
   
Deficit
   
Equity
   
Therapeutics, Inc.
   
Equity
 
Balance at December 31, 2017
   
124,976
   
$
125
   
$
1,553,681
   
$
(31,759
)
 
$
(1,241,034
)
 
$
281,013
   
$
84,267
   
$
365,280
 
Net loss attributable to Ionis Pharmaceuticals, Inc. common stockholders
   
     
     
     
     
(46,335
)
   
(46,335
)
   
     
(46,335
)
Change in unrealized gains (losses), net of tax
   
     
     
     
(834
)
   
     
(834
)
   
     
(834
)
Foreign currency translation
   
     
     
     
61
     
     
61
     
     
61
 
Biogen stock purchase
   
11,502
     
11
     
447,954
     
     
     
447,965
     
     
447,965
 
Issuance of common stock in connection with employee stock plans
   
1,029
     
2
     
14,800
     
     
     
14,802
     
     
14,802
 
Stock-based compensation expense
   
     
     
97,210
     
     
     
97,210
     
     
97,210
 
Noncontrolling interest in Akcea Therapeutics, Inc
   
     
     
(83,332
)
   
     
     
(83,332
)
   
45,327
     
(38,005
)
Balance at September 30, 2018
   
137,507
   
$
138
   
$
2,030,313
   
$
(32,532
)
 
$
(1,287,369
)
 
$
710,550
   
$
129,594
   
$
840,144
 
                                                                 
Balance at December 31, 2018
   
137,929
   
$
138
   
$
2,047,250
   
$
(32,016
)
 
$
(967,293
)
 
$
1,048,079
   
$
139,081
   
$
1,187,160
 
Net income attributable to Ionis Pharmaceuticals, Inc. common stockholders
   
     
     
     
     
109,730
     
109,730
     
     
109,730
 
Change in unrealized gains (losses), net of tax
   
     
     
     
6,666
     
     
6,666
     
     
6,666
 
Foreign currency translation
   
     
     
     
(25
)
   
     
(25
)
   
     
(25
)
Issuance of common stock in connection with employee stock plans
   
2,855
     
3
     
112,132
     
     
     
112,135
     
     
112,135
 
Stock-based compensation expense
   
     
     
111,564
     
     
     
111,564
     
     
111,564
 
Payments of tax withholdings related to vesting of employee stock awards and exercise of employee stock options
   
(147
)
   
     
(18,841
)
   
     
     
(18,841
)
   
     
(18,841
)
Noncontrolling interest in Akcea Therapeutics, Inc.
   
     
     
(33,015
)
   
     
     
(33,015
)
   
22,592
     
(10,423
)
Balance at September 30, 2019
   
140,637
   
$
141
   
$
2,219,090
   
$
(25,375
)
 
$
(857,563
)
 
$
1,336,293
   
$
161,673
   
$
1,497,966
 


See accompanying notes.

7



IONIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

   
Nine Months Ended
September 30,
 
   
2019
   
2018
 
Operating activities:
           
Net income (loss)
 
$
99,304
   
$
(87,747
)
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation
   
9,345
     
7,650
 
Amortization of right-of-use operating lease assets
   
1,433
     
 
Amortization of patents
   
1,139
     
1,356
 
Amortization of premium (discount) on investments, net
   
(7,064
)
   
791
 
Amortization of debt issuance costs
   
1,448
     
1,343
 
Amortization of convertible senior notes discount
   
26,747
     
24,781
 
Stock-based compensation expense
   
111,564
     
97,210
 
Non-cash losses related to patents, licensing and property, plant and equipment
   
216
     
482
 
Provision for deferred income taxes
   
4,103
     
 
Changes in operating assets and liabilities:
               
Contracts receivable
   
(33,716
)
   
48,223
 
Inventories
   
(6,606
)
   
1,604
 
Other current and long-term assets
   
(23,377
)
   
(26,573
)
Accounts payable
   
(18,764
)
   
(13,606
)
Accrued compensation
   
(4,864
)
   
(892
)
Accrued liabilities and deferred rent
   
3,909
     
(14,392
)
Deferred contract revenue
   
(97,029
)
   
447,168
 
Net cash provided by operating activities
   
67,788
     
487,398
 
                 
Investing activities:
               
Purchases of short-term investments
   
(1,617,726
)
   
(1,156,335
)
Proceeds from short-term investments
   
1,465,600
     
568,517
 
Purchases of property, plant and equipment
   
(23,143
)
   
(12,221
)
Acquisition of licenses and other assets, net
   
(4,196
)
   
(3,317
)
Net cash used in investing activities
   
(179,465
)
   
(603,356
)
                 
Financing activities:
               
Proceeds from equity awards
   
112,137
     
18,254
 
Payments of tax withholdings related to vesting of employee stock awards and exercise of
employee stock options
   
(18,841
)
   
 
Proceeds from the issuance of common stock to Biogen
   
     
447,965
 
Principal payments on debt obligations
   
(12,500
)
   
 
Net cash provided by financing activities
   
80,796
     
466,219
 
                 
Net increase in cash and cash equivalents
   
(30,881
)
   
350,261
 
Cash and cash equivalents at beginning of period
   
278,820
     
129,630
 
Cash and cash equivalents at end of period
 
$
247,939
   
$
479,891
 
                 
Supplemental disclosures of cash flow information:
               
Interest paid
 
$
5,474
   
$
5,434
 
Income taxes paid
 
$
9,037
   
$
 
                 
Supplemental disclosures of non-cash investing and financing activities:
               
Right-of-use assets obtained in exchange for lease liabilities
 
$
14,178
   
$
 
Amounts accrued for capital and patent expenditures
 
$
3,251
   
$
2,296
 
Purchases of property, plant and equipment included in long-term obligations
 
$
   
$
3,596
 


See accompanying notes.
8


IONIS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)

1.  Basis of Presentation


We prepared the unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2019 and 2018 on the same basis as the audited financial statements for the year ended December 31, 2018. 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. Results for the interim periods are not necessarily indicative of the results for the entire year. For more complete financial information, these financial statements, and notes thereto, should be read in conjunction with the audited financial statements for the year ended December 31, 2018 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC.


In the condensed consolidated financial statements, we included the accounts of Ionis Pharmaceuticals, Inc. and the consolidated results of our majority owned affiliate, Akcea Therapeutics, Inc. and its wholly owned subsidiaries. We formed Akcea in December 2014. In July 2017, Akcea completed an initial public offering, or IPO, and therefore, beginning in July 2017, we no longer owned 100 percent of Akcea. In the first quarter of 2019, we received 2.8 million shares of Akcea common stock as payment for the sublicense fee Akcea owed us when Novartis licensed AKCEA-APO(a)-LRx.. At September 30, 2019, our ownership was approximately 75 percent. In the fourth quarter of 2019, we expect to receive an additional 6.9 million shares of Akcea common stock as payment for the sublicense fee Akcea owes us for Pfizer’s license of AKCEA-ANGPTL3-LRx. We reflect changes in our ownership of Akcea in our financial statements in the period the change occurs. Refer to the section titled “Noncontrolling Interest in Akcea” in Note 2, Significant Accounting Policies, for further information related to our accounting for our investment in Akcea.


Unless the context requires otherwise, “Ionis”, “Company,” “we,” “our,” and “us” refers to Ionis Pharmaceuticals, Inc. and its majority owned affiliate, Akcea Therapeutics, Inc. and its wholly owned subsidiaries.

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 in deferred revenue on our consolidated balance sheet.


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 will also recognize as commercial revenue future sales milestone payments and royalties we earn under our partnerships.



Commercial Revenue: Product sales, net



We added product sales from TEGSEDI to our commercial revenue in the fourth quarter of 2018 and we added product sales from WAYLIVRA to our commercial revenue in the third quarter of 2019. In the U.S., we distribute TEGSEDI through an exclusive distribution agreement with a third-party logistics company, or 3PL, that takes title to TEGSEDI. The 3PL is our sole customer in the U.S. The 3PL then distributes TEGSEDI to a specialty pharmacy and a specialty distributor, which we collectively refer to as wholesalers, who then distribute TEGSEDI to health care providers and patients. In Europe, prior to the third quarter of 2019 we distributed TEGSEDI through a non-exclusive distribution model with a 3PL that takes title to TEGSEDI. The 3PL was our sole customer in Europe. The 3PL in Europe then distributed TEGSEDI to hospitals and pharmacies. In the third quarter of 2019, we entered into a distribution arrangement with a 3PL and began to sell both TEGSEDI and WAYLIVRA directly to hospitals and pharmacies in Europe.



Research and development revenue under collaborative agreements


We often 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.



We provide details about our collaboration agreements in Note 7, Collaborative Arrangements and Licensing Agreements, in our Annual Report on Form 10-K for the year ended December 31, 2018. Under each collaboration note we discuss our specific revenue recognition conclusions, including our significant performance obligations under each collaboration.


9



Steps to Recognize Revenue



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: