Document/ExhibitDescriptionPagesSize 1: 10-K Ionis Pharmaceuticals, Inc. 10-K 12-31-2022 HTML 3.36M
2: EX-10.10 Exhibit 10.1 HTML 48K
3: EX-10.13 Material Contract -- exhibit10-13 HTML 47K
4: EX-10.14 Material Contract -- exhibit10-14 HTML 61K
5: EX-10.16 Material Contract -- exhibit10-16 HTML 81K
6: EX-10.23 Material Contract -- exhibit10-23 HTML 1.08M
7: EX-10.24 Material Contract -- exhibit10-24 HTML 1.24M
8: EX-10.25 Material Contract -- exhibit10-25 HTML 1.53M
9: EX-10.26 Material Contract -- exhibit10-26 HTML 785K
10: EX-10.27 Material Contract -- exhibit10-27 HTML 295K
11: EX-10.28 Material Contract -- exhibit10-28 HTML 134K
12: EX-10.29 Material Contract -- exhibit10-29 HTML 141K
13: EX-10.80 Material Contract -- exhibit10-80 HTML 836K
14: EX-10.81 Material Contract -- exhibit10-81 HTML 298K
15: EX-14 Code of Ethics -- exhibit14 HTML 96K
16: EX-21.1 Subsidiaries List -- exhibit21-1 HTML 30K
17: EX-23.1 Consent of Expert or Counsel -- exhibit23-1 HTML 29K
18: EX-31.1 Certification -- §302 - SOA'02 -- exhibit31-1 HTML 36K
19: EX-31.2 Certification -- §302 - SOA'02 -- exhibit31-2 HTML 36K
20: EX-32 Certification -- §906 - SOA'02 -- exhibit32-1 HTML 32K
26: R1 Document and Entity Information HTML 96K
27: R2 Consolidated Balance Sheets HTML 137K
28: R3 Consolidated Balance Sheets (Parenthetical) HTML 45K
29: R4 Consolidated Statements of Operations HTML 132K
30: R5 Consolidated Statements of Comprehensive Loss HTML 62K
31: R6 Consolidated Statements of Stockholders' Equity HTML 107K
32: R7 Consolidated Statements of Cash Flows HTML 179K
33: R8 Consolidated Statements of Cash Flows HTML 38K
(Parenthetical)
34: R9 Organization and Significant Accounting Policies HTML 192K
35: R10 Investments HTML 171K
36: R11 Fair Value Measurements HTML 76K
37: R12 Long-Term Obligations and Commitments HTML 105K
38: R13 Stockholders' Equity HTML 135K
39: R14 Income Taxes HTML 162K
40: R15 Collaborative Arrangements and Licensing HTML 145K
Agreements
41: R16 Employment Benefits HTML 35K
42: R17 Legal Proceedings HTML 39K
43: R18 Fourth Quarter Financial Data (Unaudited) HTML 63K
44: R19 Organization and Significant Accounting Policies HTML 245K
(Policies)
45: R20 Organization and Significant Accounting Policies HTML 111K
(Tables)
46: R21 Investments (Tables) HTML 173K
47: R22 Fair Value Measurements (Tables) HTML 72K
48: R23 Long-Term Obligations and Commitments (Tables) HTML 96K
49: R24 Stockholders' Equity (Tables) HTML 113K
50: R25 Income Taxes (Tables) HTML 162K
51: R26 Collaborative Arrangements and Licensing HTML 84K
Agreements (Tables)
52: R27 Fourth Quarter Financial Data (Unaudited) (Tables) HTML 63K
53: R28 Organization and Significant Accounting Policies, HTML 34K
Basis of Presentation (Details)
54: R29 Organization and Significant Accounting Policies, HTML 45K
Revenue Recognition (Details)
55: R30 Organization and Significant Accounting Policies, HTML 44K
Contracts Receivable (Details)
56: R31 Organization and Significant Accounting Policies, HTML 31K
Deferred Revenue (Details)
57: R32 Organization and Significant Accounting Policies, HTML 31K
Research, Development and Patent Expenses
(Details)
58: R33 Organization and Significant Accounting Policies, HTML 85K
Basic and Diluted Net Loss per Share (Details)
59: R34 Organization and Significant Accounting Policies, HTML 67K
Stock-Based Compensation Expense (Details)
60: R35 Organization and Significant Accounting Policies, HTML 36K
Noncontrolling Interest in Akcea Therapeutics,
Inc. (Details)
61: R36 Organization and Significant Accounting Policies, HTML 65K
Accumulated Other Comprehensive Loss (Details)
62: R37 Organization and Significant Accounting Policies, HTML 33K
Cash, Cash Equivalents and Investments (Details)
63: R38 Organization and Significant Accounting Policies, HTML 42K
Inventory Valuation (Details)
64: R39 Organization and Significant Accounting Policies, HTML 76K
Property, Plant and Equipment (Details)
65: R40 Organization and Significant Accounting Policies, HTML 39K
Accrued Liabilities (Details)
66: R41 Organization and Significant Accounting Policies, HTML 38K
Convertible Debt (Details)
67: R42 Organization and Significant Accounting Policies, HTML 36K
Call Spread (Details)
68: R43 Organization and Significant Accounting Policies, HTML 32K
Segment Information (Details)
69: R44 Investments, Contract Maturity of HTML 44K
Available-for-Sale Securities (Details)
70: R45 Investments, Summary of Investments (Details) HTML 128K
71: R46 Investments, Investments Temporarily Impaired HTML 76K
(Details)
72: R47 Fair Value Measurements (Details) HTML 122K
73: R48 Long-Term Obligations and Commitments, Long-Term HTML 52K
Obligations (Details)
74: R49 Long-Term Obligations and Commitments, Convertible HTML 96K
Debt and Call Spread (Details)
75: R50 Long-Term Obligations and Commitments, Financing HTML 71K
Arrangements (Details)
76: R51 Long-Term Obligations and Commitments, Debt HTML 59K
Maturity Schedules (Details)
77: R52 Long-Term Obligations and Commitments, Operating HTML 83K
Leases (Details)
78: R53 Long-Term Obligations and Commitments, Future HTML 56K
Payments for Operating Lease Liabilities (Details)
79: R54 Long-Term Obligations and Commitments, Royalty HTML 47K
Revenue Monetization (Details)
80: R55 Stockholders' Equity, Preferred and Common Stock HTML 59K
(Details)
81: R56 Stockholders' Equity, Share Repurchase Program HTML 37K
(Details)
82: R57 Stockholders' Equity, Stock Plans (Details) HTML 136K
83: R58 Stockholders' Equity, Stock Option Activity HTML 87K
(Details)
84: R59 Stockholders' Equity, Restricted Stock Unit HTML 62K
Activity (Details)
85: R60 Stockholders' Equity, Performance Restricted Stock HTML 62K
Unit Activity (Details)
86: R61 Stockholders' Equity, Stock-based Compensation HTML 43K
Expense (Details)
87: R62 Stockholders' Equity, Stock-based Valuation HTML 58K
Information (Details)
88: R63 Income Taxes, Income (Loss) Before Income Taxes HTML 39K
(Details)
89: R64 Income Taxes, Income Tax Expense (Benefit) HTML 55K
(Details)
90: R65 Income Taxes, Reconciliation of Statutory to HTML 106K
Effective Tax Rate (Details)
91: R66 Income Taxes, Deferred Tax Assets and Liabilities HTML 70K
(Details)
92: R67 Income Taxes, Tax Credit Carryforwards (Details) HTML 41K
93: R68 Income Taxes, Gross Unrecognized Tax Benefits HTML 46K
(Details)
94: R69 Collaborative Arrangements and Licensing HTML 230K
Agreements, Biogen (Details)
95: R70 Collaborative Arrangements and Licensing HTML 94K
Agreements, AstraZeneca (Details)
96: R71 Collaborative Arrangements and Licensing HTML 69K
Agreements, GSK (Details)
97: R72 Collaborative Arrangements and Licensing HTML 99K
Agreements, Novartis (Details)
98: R73 Collaborative Arrangements and Licensing HTML 95K
Agreements, Roche (Details)
99: R74 Collaborative Arrangements and Licensing HTML 32K
Agreements, PTC Therapeutics (Details)
100: R75 Collaborative Arrangements and Licensing HTML 41K
Agreements, Bicycle License Agreement (Details)
101: R76 Collaborative Arrangements and Licensing HTML 41K
Agreements, Metagenomi License Agreement (Details)
102: R77 Collaborative Arrangements and Licensing HTML 60K
Agreements, Alnylam Pharmaceuticals, Inc.
(Details)
103: R78 Employment Benefits (Details) HTML 37K
104: R79 Legal Proceedings (Details) HTML 39K
105: R80 Fourth Quarter Financial Data (Unaudited) HTML 139K
(Details)
108: XML IDEA XML File -- Filing Summary XML 185K
106: XML XBRL Instance -- form10k_htm XML 3.74M
107: EXCEL IDEA Workbook of Financial Reports XLSX 246K
22: EX-101.CAL XBRL Calculations -- ions-20221231_cal XML 357K
23: EX-101.DEF XBRL Definitions -- ions-20221231_def XML 1.54M
24: EX-101.LAB XBRL Labels -- ions-20221231_lab XML 3.41M
25: EX-101.PRE XBRL Presentations -- ions-20221231_pre XML 2.04M
21: EX-101.SCH XBRL Schema -- ions-20221231 XSD 289K
109: JSON XBRL Instance as JSON Data -- MetaLinks 627± 1.02M
110: ZIP XBRL Zipped Folder -- 0000874015-23-000105-xbrl Zip 2.55M
‘10-K’ — Ionis Pharmaceuticals, Inc. 10-K 12-31-2022
(Exact name of Registrant as specified in its charter)
iDelaware
i33-0336973
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
i2855 Gazelle Court, iCarlsbad, iCA
i92010
(Address of Principal Executive Offices)
(Zip Code)
i760-i931-9200
(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
iCommon Stock, $.001 Par Value
“iIONS”
iThe Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. iYes☒ No ☐
Indicate by check if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ iNo☒
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. iYes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
iLarge Accelerated Filer☒
Accelerated Filer ☐
Non-accelerated Filer ☐
Smaller Reporting Company i☐
Emerging Growth Company i☐
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 Securities Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management assessment of the effectiveness of its internal
controls over financial reporting under Section 4049b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report i☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes i☐No ☒
The approximate aggregate market value of the voting common stock held by non-affiliates of the Registrant, based upon the last sale price of the common
stock reported on The Nasdaq Global Select Market was $i3,804,704,734 as of June 30, 2022.*
The number of shares of voting common stock outstanding as of February 16, 2023 was i142,953,993.
Excludes 39,056,355 shares of common stock held by directors and officers and by stockholders whose beneficial ownership is known by the Registrant to exceed 10 percent
of the common stock outstanding at June 30, 2022. Exclusion of shares held by any person should not be construed to indicate that such
person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant, or that such person is controlled by or under common control with the Registrant.
FORWARD-LOOKING STATEMENTS
This report on Form 10-K and the information incorporated herein by reference includes forward-looking statements
regarding our business and the therapeutic and commercial potential of SPINRAZA (nusinersen), TEGSEDI (inotersen), WAYLIVRA (volanesorsen), eplontersen, olezarsen, donidalorsen, ION363, tofersen, pelacarsen, bepirovirsen and our technologies and
products in development. Any statement describing our goals, expectations, financial or other projections, intentions or beliefs, is a forward-looking statement and should be considered an at-risk statement. Such statements are subject to certain risks
and uncertainties and particularly those inherent in the process of discovering, developing and commercializing medicines that are safe and effective for use as human therapeutics, and in the endeavor of building a business around such medicines. Our
forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed in this report on Form 10-K, including those identified in Item 1A entitled “Risk Factors”. Although our forward-looking statements reflect the good faith judgment of our
management, these statements are based only on facts and factors currently known by us. As a result, you are cautioned not to rely on these forward-looking statements.
In this report, unless the context requires otherwise, “Ionis,”“Company,”“we,”“our,” and “us” refers to Ionis Pharmaceuticals, Inc. and
its subsidiaries.
Summary of Risk Factors
There are a number of risks related to our business and our securities. Below is a summary of material factors that make an investment in
our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found in this report
on Form 10-K in Item 1A entitled “Risk Factors”:
●
Οur ability to generate substantial revenue from the sale of our medicines;
●
The availability of adequate coverage and payment rates for our medicines;
●
Our and our partners’ ability to compete effectively;
●
Our ability to successfully manufacture our medicines;
●
Our ability to successfully develop and obtain marketing approvals for our medicines;
●
Our ability to secure and maintain effective corporate partnerships;
●
Our ability to sustain cash flows and achieve consistent profitability;
●
Our ability to protect our intellectual property;
●
Our ability to maintain the effectiveness of our personnel; and
●
The impacts of the COVID-19 pandemic.
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.
CORPORATE INFORMATION
We incorporated in California in 1989 and in January 1991 we changed our state of incorporation to Delaware. In December 2015, we changed
our name to Ionis Pharmaceuticals, Inc. from Isis Pharmaceuticals, Inc. Our principal offices are in Carlsbad, California. In December 2014, we formed Akcea Therapeutics, Inc., as a Delaware corporation, with its principal office in Boston,
Massachusetts. Prior to Akcea’s initial public offering, or IPO, in July 2017, we owned 100 percent of Akcea’s stock. In October 2020, we completed a merger transaction with Akcea such that following the completion of the merger, Akcea became our
wholly owned subsidiary.
We make available, free of charge, on our website, www.ionispharma.com, our reports on Forms 10-K, 10-Q, 8-K and amendments thereto, as soon as reasonably practical after we file such materials with the Securities and Exchange Commission, or SEC. Periodically, we provide
updates about the company in the Newsroom section of the Investors & Media page of our website. Any information that we include on or link to our website is not a part of this report or any registration statement that incorporates this report by
reference. The SEC maintains an internet site, www.sec.gov, that contains reports, proxy and information statements that we file electronically
with the SEC.
We were founded over 30 years ago to deliver innovative medicines for diseases with great medical need. Today, we are building on our
advancements in RNA-targeted therapeutics to move us closer to achieving our vision to be the leader in genetic medicines. We believe our medicines have the potential to pioneer new markets, change standards of care and transform the lives of people
with devastating diseases.
We currently have three marketed medicines: SPINRAZA, TEGSEDI and WAYLIVRA. Additionally, we have two medicines that will add to our
commercial portfolio this year, assuming positive regulatory outcomes. These medicines are eplontersen to treat patients with polyneuropathy caused by hereditary transthyretin amyloidosis, or ATTRv-PN, and tofersen to treat patients with superoxide
dismutase 1 amyotrophic lateral sclerosis, or SOD1-ALS. We submitted the eplontersen New Drug Application, or NDA, to the U.S. Food and Drug Administration, or FDA, in December 2022. Tofersen is currently under regulatory review in the United States,
or U.S., and European Union, or EU. In the U.S., tofersen has a Prescription Drug User Fee Act, or PDUFA, date of April 25, 2023. We also have a rich innovative late- and mid-stage pipeline primarily focused on our leading cardiovascular and neurology
franchises. We currently have seven medicines in Phase 3 development. Additionally, based on recent positive data from the Phase 2 study of IONIS-FB-LRx in patients with immunoglobulin A nephropathy, or IgAN, Roche plans to advance
IONIS-FB-LRx into Phase 3 development, which would further expand our late-stage pipeline.
Over the past year, we made important progress advancing our strategic priorities: to deliver an abundance of new medicines to the market,
establish an integrated commercial organization and expand and diversify our technology platform. Last year, we delivered nine positive data readouts from our mid- and late-stage pipeline, positioning us to add to our commercial portfolio and our
late-stage pipeline. We advanced our go-to-market plans for our near-term commercial opportunities, eplontersen, olezarsen and donidalorsen. We also expanded and diversified our technology when we advanced new medicines targeting muscle and using our
MsPA backbone into preclinical development. Additionally, in late 2022, we entered into a collaboration with Metagenomi to add next generation gene editing capabilities to our technologies.
We accomplished all of this while earning revenues of $587 million for 2022 and ending the year with a cash and short-term investment
balance of $2.0 billion. We strengthened our balance sheet with our recent sale and leaseback and royalty monetization transactions in late 2022 and January 2023, respectively. Under the sale and leaseback transaction, we received net proceeds of
approximately $200 million, with the potential to receive additional payments of up to $40 million plus funding to expand our research and development, or R&D campus. Under our agreement with Royalty Pharma Investments, or Royalty Pharma, we
received an upfront payment of $500 million in January 2023 when Royalty Pharma acquired a minority interest in our future SPINRAZA and pelacarsen royalties. Additionally, we have the potential to earn up to $625 million in pelacarsen milestone
payments from Royalty Pharma.
Our multiple sources of revenue and strong balance sheet enable us to continue investing in our commercial readiness efforts for multiple
late-stage programs and our innovative pipeline. By continuing to focus on these priorities, we believe we are well positioned to drive future growth and to deliver increasing value for patients and shareholders.
Marketed Medicines
SPINRAZA is the global market leader for the treatment of patients with spinal muscular atrophy, or SMA, a progressive, debilitating and
often fatal genetic disease. Biogen is our partner responsible for commercializing SPINRAZA worldwide. From inception through December 31, 2022, we have earned more than $1.8 billion in revenues from our SPINRAZA collaboration, including more than
$1.4 billion in royalties on sales of SPINRAZA.
TEGSEDI is a once weekly, self-administered subcutaneous medicine approved in the U.S., Europe, Canada and Brazil for the treatment of
patients with ATTRv-PN. We launched TEGSEDI in the U.S. and the EU, in late 2018. In 2021, we began selling TEGSEDI in Europe through our distribution agreement with Swedish Orphan Biovitrum AB, or Sobi, and in the second quarter of 2021, Sobi began
distributing TEGSEDI in the U.S. and Canada. In Latin America, PTC Therapeutics International Limited, or PTC, is commercializing TEGSEDI in Brazil and is pursuing access in additional Latin American countries through its exclusive license agreement
with us.
4
WAYLIVRA is a once weekly, self-administered, subcutaneous medicine that received conditional marketing authorization in May 2019 from
the European Commission, or EC, as an adjunct to diet in adult patients with genetically confirmed familial chylomicronemia syndrome, or FCS, and at high risk for pancreatitis. We launched WAYLIVRA in the EU in the third quarter of 2019. In 2021, we
began selling WAYLIVRA in Europe through our distribution agreement with Sobi. In Latin America, PTC is commercializing WAYLIVRA in Brazil for two indications, FCS and familial partial lipodystrophy, or FPL, and is pursuing access in additional Latin
American countries through its exclusive license agreement with us.
Medicines in Phase 3 Studies and Registration
We currently have seven medicines in Phase 3 studies for nine indications, which are:
●
Eplontersen: our medicine in development for transthyretin amyloidosis, or ATTR
o
We are currently conducting the Phase 3 NEURO-TTRansform study in patients with ATTRv-PN, the Phase 3 CARDIO-TTRansform study in patients with ATTR cardiomyopathy, or
ATTR-CM, and additional studies supporting our ATTR development program
●
In December 2022, we submitted the NDA for eplontersen in the U.S. for patients with ATTRv-PN based on the positive results from an interim analysis of the Phase 3 NEURO-TTRansform study of eplontersen in patients with ATTRv-PN we first reported in June 2022
●
Olezarsen: our medicine in development for FCS and severe hypertriglyceridemia, or SHTG
o
We are currently conducting a broad Phase 3 development program for olezarsen that includes the Phase 3 BALANCE study in patients with FCS and three Phase 3 studies
supporting development for the treatment of SHTG: CORE, CORE2 and ESSENCE
●
In July 2022, we achieved full enrollment in the BALANCE Phase 3 study in patients with FCS
with data expected in the second half of 2023
●
In the second half of 2022, we expanded our Phase 3 program for SHTG when we initiated CORE2,
a confirmatory Phase 3 study of olezarsen in patients with SHTG and ESSENCE, a supporting Phase 3 study of olezarsen in patients with SHTG or hypertriglyceridemia and atherosclerotic cardiovascular disease
●
The FDA granted olezarsen fast track designation for the treatment of patients with FCS
●
Donidalorsen: our medicine in development for hereditary angioedema, or HAE
o
We are currently conducting the Phase 3 OASIS-HAE study in patients with HAE and the Phase 3 OASIS-Plus supportive study for HAE patients previously treated with other
prophylactic therapies
●
We reported positive data from the Phase 2 study and Phase 2 open-label extension, or OLE, study throughout 2022 and early 2023
●
ION363: our medicine in development for amyotrophic lateral sclerosis, or ALS, with mutations in the fused in sarcoma gene, or FUS
o
We are currently conducting a Phase 3 study of ION363 in juvenile and adult patients with FUS-ALS
●
Tofersen: our medicine in development for SOD1-ALS
o
Biogen is developing tofersen, including conducting the ongoing Phase 3 VALOR OLE study in patients with SOD1-ALS and the ongoing Phase 3 ATLAS study in presymptomatic
SOD1 patients
●
Tofersen is currently under regulatory review in the U.S. with a PDUFA date of April 25, 2023 and in the EU
●
In June 2022, Biogen presented new positive data from the ongoing VALOR OLE study at the European Network to Cure ALS, or ENCALS, meeting. These data were included in the
NDA filing and Marketing Authorization Application, or MAA, filing
●
Pelacarsen: our medicine in development to treat patients with elevated lipoprotein(a), or Lp(a) and cardiovascular disease
o
Novartis is developing pelacarsen, including conducting the ongoing Lp(a) HORIZON Phase 3 cardiovascular outcome study in patients with established cardiovascular disease
and elevated Lp(a)
●
In July 2022, Novartis achieved full enrollment in the Lp(a) HORIZON study
●
Bepirovirsen: our medicine in development for chronic hepatitis B virus, or HBV
o
GSK is developing bepirovirsen, including conducting the ongoing B-Well Phase 3 program in patients with HBV
●
In 2022, GSK presented positive data from the Phase 2b B-Clear study of bepirovirsen demonstrating potential for functional cures in patients with chronic HBV
5
COVID-19
As a company focused on improving the health of people around the world, our priority during the COVID-19 pandemic has been the
safety of our employees, their families, the healthcare workers who work with us and the patients who rely on our medicines. We have also been focused on maintaining the quality of our studies and minimizing the impact to timelines. While the
COVID-19 pandemic has impacted some areas of our business, we believe our mitigation efforts and financial strength have enabled us to continue to manage through the pandemic and execute on our strategic initiatives. Because the situation is fluid,
we continue to monitor the impact COVID-19 could have on our business, including the impact on our commercial products and the medicines in our pipeline.
Our Marketed Medicines – Potentially Transformational Medicines Bringing Value to Patients Today
SPINRAZA – SPINRAZA (nusinersen)
injection for intrathecal use is a survival motor neuron-2, or SMN2, directed antisense medicine indicated for the treatment of spinal muscular atrophy, or SMA, in
pediatric and adult patients.
SPINRAZA is the global market leader for the treatment of
patients with SMA, a progressive, debilitating and often fatal genetic disease. Our partner, Biogen, is responsible for commercializing SPINRAZA worldwide.
SMA is characterized by loss of motor neurons in the spinal
cord and lower brain stem. People with SMA have a deletion or defect in their SMN1 gene and rely on their SMN2 gene to
produce functional SMN protein, which motor neurons need to maintain motor function and muscle strength. However, the SMN2 gene can only produce approximately 10 percent of the SMN protein critical for motor neurons, resulting in severe and progressive loss of motor function and strength.
The rate and severity of degeneration varies depending on the amount of functional SMN protein a patient can produce. Type 1, or
infantile-onset, SMA is the most severe form of the disease. Type 1 SMA patients produce very little SMN protein and often progress to death or permanent ventilation by the age of 2. Patients with Type 2 or Type 3, or later-onset, SMA produce more SMN
protein, but also suffer from a progressive loss of muscle strength and function and a reduced life expectancy.
Biogen continues to expand the body of evidence supporting SPINRAZA’s durable efficacy and well-established safety profile to address
the remaining needs of SMA patients of all ages. This includes the following ongoing studies:
•
DEVOTE: In the Phase 2/3 DEVOTE study, Biogen is evaluating the safety and potential to achieve increased efficacy with a higher dose of SPINRAZA
compared to the currently approved dose. In 2022, Biogen reported final data from Part A of the ongoing, three-part DEVOTE study. Results from Part A, an open-label safety evaluation period in children and teens with later-onset SMA, suggest
that the higher dosing regimen of SPINRAZA leads to higher levels of the drug in the cerebrospinal fluid, supporting further development of a higher dose of SPINRAZA. Additionally, the results indicated that SPINRAZA was generally
well-tolerated.
•
RESPOND: In the Phase 4 RESPOND study, Biogen is evaluating the benefit of SPINRAZA in infants and children with a suboptimal clinical response to
the gene therapy, onasemnogene abeparvovec. In 2022, Biogen reported that increasing enrollment in the RESPOND study indicates there are residual unmet clinical needs in infants and toddlers with SMA who have unmet needs following gene
therapy treatment.
•
ASCEND: In the Phase 3b ASCEND study, Biogen is evaluating the clinical outcomes and assessing the safety of a higher dose of SPINRAZA in children,
teens and adults with later-onset SMA following treatment of risdiplam. The first patient was treated in the ASCEND study in the first quarter of 2022.
Additionally, Biogen continues to conduct the Phase 2 NURTURE study, an open-label study investigating the benefit of SPINRAZA when
administered before symptom onset in patients genetically diagnosed with SMA, and likely to develop Type 1 or Type 2 SMA. NURTURE was the first study to investigate the potential to slow or stop SMA disease progression in presymptomatic SMA patients.
In 2022, Biogen reported new NURTURE study data, showing that early and sustained treatment with SPINRAZA helped participants to maintain and/or make progressive gains in motor function. These data showed that after 11 months of additional follow-up
since the 2020 interim analysis, all children who were able to walk alone maintained this ability and one child gained the ability to walk alone, increasing the total percentage of study participants able to walk from 92% to 96%. Further, most children
achieved motor milestones within age-appropriate timelines and no major motor milestones were lost. The safety of SPINRAZA over this extended follow-up period was consistent with previously reported findings.
6
The approval of SPINRAZA was based on efficacy and safety data from multiple clinical studies, including two randomized,
placebo-controlled Phase 3 studies, ENDEAR, in patients with infantile-onset SMA, and CHERISH, in patients with later-onset SMA as well as from SHINE, an open-label extension, or OLE, study for patients with SMA who participated in prior SPINRAZA
studies.
TEGSEDI – TEGSEDI (inotersen)
injection is an antisense medicine indicated for the treatment of ATTRv-PN in adults. TEGSEDI prevents the production of TTR protein, reducing the amount of amyloid buildup
that damages organs and tissues.
ATTRv-PN is caused by the accumulation of misfolded
mutated TTR protein in the peripheral nerves. Patients with ATTRv-PN experience ongoing debilitating nerve damage throughout their body resulting in the progressive loss of motor functions, such as walking. These patients also accumulate TTR in other
major organs, which progressively compromises their function and eventually leads to death within five to fifteen years of disease onset. There are an estimated 40,000 addressable patients, which includes those with ATTRv-PN and those with ATTRv-mixed
phenotype worldwide.
TEGSEDI is commercially available in numerous countries, including the U.S., many European countries, Canada, and Latin America. We
launched TEGSEDI in the U.S. and EU in late 2018. In 2021, we began selling TEGSEDI in the U.S., Canada and Europe through our distribution agreement with Sobi. In Latin
America, PTC is commercializing TEGSEDI in Brazil and is pursuing access in additional Latin American countries through its exclusive license agreement with us.
The approvals of TEGSEDI were based on efficacy and safety data from the Phase 3 NEURO-TTR study in patients with ATTRv-PN.
WAYLIVRA – WAYLIVRA (volanesorsen)
is an antisense medicine indicated as an adjunct to diet in adult patients with genetically confirmed FCS and at high risk for acute, potentially fatal pancreatitis, in whom response to diet and triglyceride lowering therapy has been inadequate. WAYLIVRA reduces triglyceride levels by inhibiting the production of apolipoprotein C-III, or ApoC-III, a protein that is a key regulator of triglyceride levels.
FCS is a rare, genetic disease estimated to affect one to two individuals per million and characterized by extremely elevated
triglyceride levels, typically greater than 1,000 mg/dl. FCS can lead to many chronic health issues including severe, recurrent abdominal pain, fatigue, high risk of life-threatening pancreatitis and abnormal enlargement of the liver or spleen. In
addition, people with FCS are often unable to work, adding to their disease burden. In severe cases, patients can have bleeding into the pancreas, serious tissue damage, infection, and cyst formation, as well as damage to other vital organs such as the
heart, lungs, and kidneys.
WAYLIVRA received conditional marketing authorization in May 2019 from the European Commission, or EC. WAYLIVRA is commercially available
in multiple European countries and in Latin America. We launched WAYLIVRA in the EU in the third quarter of 2019. In 2021, we began selling WAYLIVRA in Europe through our
distribution agreement with Sobi. In Latin America, WAYLIVRA is approved for two indications, FCS and FPL. PTC is commercializing WAYLIVRA in Brazil and is pursuing access in additional Latin American countries through its exclusive license agreement
with us. In the fourth quarter of 2022, WAYLIVRA was approved in Brazil for a second indication, FPL.
WAYLIVRA’s conditional marketing authorization in the EU for FCS and approval in Brazil for FCS were based on efficacy and safety data from the Phase 3 APPROACH study and
supported by results from the Phase 3 COMPASS study. WAYLIVRA’s approval in Brazil for FPL was based on efficacy and safety data
from the Phase 3 BROADEN study in patients with FPL.
Our Innovative Pipeline of Genetic Medicines
Today, we are a leader in the discovery and development of RNA-targeted therapeutics. We are focused on pioneering new markets and
changing standards of care with a focus on cardiovascular and neurological diseases. We also have an emerging specialty rare disease pipeline comprised of medicines that we believe represent compelling opportunities for us. We are building on our
capabilities in RNA-targeted therapeutics to achieve our vision to be the leader in genetic medicines.
7
The table below lists the medicines in our clinical pipeline. We categorize patient studies to establish a medicine’s safety profile as
Phase 1/2 and those studies in healthy volunteers as Phase 1. The table includes the disease indication, the partner (if the medicine is partnered), and the development status of each medicine. We have included descriptions for each of our medicines in
Phase 2 and Phase 3 development below.
Our Late-Stage Pipeline
We currently have seven medicines in our late-stage pipeline: eplontersen, olezarsen, donidalorsen, ION363, tofersen, pelacarsen and
bepirovirsen.
8
Eplontersen (TTR) – Eplontersen (TTR) – Eplontersen
(formerlyIONIS-TTR-LRx) is an investigational LIgand-Conjugated Antisense, or LICA, medicine we designed to inhibit the production of TTR protein. We are developing eplontersen as a monthly self-administered
subcutaneous injection to treat all types of ATTR. ATTR amyloidosis is a systemic, progressive and fatal disease in which patients experience multiple overlapping clinical manifestations caused by the inappropriate formation and aggregation of TTR
amyloid deposits in various tissues and organs, including peripheral nerves, heart, intestinal tract, eyes, kidneys, central nervous system, thyroid and bone marrow. The progressive accumulation of TTR amyloid deposits in these tissues and organs leads
to organ failure and eventually death.
ATTRv-PN is caused by the accumulation of misfolded mutated TTR protein in the peripheral nerves. Patients with
ATTRv-PN experience ongoing debilitating nerve damage throughout their body resulting in the progressive loss of motor functions, such as walking. These patients also accumulate TTR in other major organs, which progressively compromises their
function and eventually leads to death within five to fifteen years of disease onset. There are an estimated 40,000 addressable patients, which includes those with ATTRv-PN and those with ATTRv- mixed phenotype worldwide.
ATTR-CM is caused by the accumulation of misfolded TTR protein in the cardiac muscle. Patients experience ongoing
debilitating heart damage resulting in progressive heart failure, which results in death within three to five years from disease onset. ATTR-CM includes both the genetic and wild-type form of the disease. There are an estimated 300,000 to 500,000
patients with ATTR-CM worldwide.
Often, patients with ATTRv-PN will have TTR build up in the heart and experience cardiomyopathy symptoms.
Similarly, patients with ATTR-CM may often have TTR build up in their peripheral nerves and experience nerve damage and progressive difficulty with motor functions.
In December 2022, we submitted the eplontersen NDA to the FDA for patients with ATTRv-PN. The eplontersen NDA
included results from the interim analysis of the Phase 3 NEURO-TTRansform study in patients with ATTRv-PN. NEURO-TTRansform is a global, multi-center, randomized,
open-label study designed to evaluate the efficacy, safety and tolerability of eplontersen. The current study compares to the historical placebo arm from the TEGSEDI (inotersen) NEURO-TTR Phase 3 study. In June 2022, we reported positive interim
analysis data from the NEURO-TTRansform study. In the interim analysis, eplontersen demonstrated a statistically significant and clinically meaningful change from baseline for the co-primary and secondary endpoints at 35 weeks compared to
the external placebo group. In the study, eplontersen achieved an 81.2% (p<0.0001) mean reduction in the co-primary endpoint of serum TTR concentration compared to baseline, demonstrating reduced TTR protein production. Eplontersen also
demonstrated a significant treatment effect on the co-primary endpoint of modified Neuropathy Impairment Score +7, or mNIS+7, a measure of neuropathic disease progression, with a statistically significant difference in mean change from baseline
versus the external placebo group (p<0.0001). The study also met its key secondary endpoint of change from baseline in the Norfolk Quality of Life Questionnaire-Diabetic Neuropathy, or Norfolk QoL-DN, showing that treatment with eplontersen
significantly improved patient-reported quality of life compared to the external placebo group (p<0.0001). Eplontersen had a favorable safety and tolerability profile supportive of continued development.
In January 2020, we initiated the CARDIO-TTRansform Phase 3 cardiovascular outcome study of eplontersen in patients with ATTR-CM.
CARDIO-TTRansform is a global, multi-center, randomized, double-blind, placebo-controlled study in approximately 1,400 patients with ATTR-CM. We designed the study to
evaluate the efficacy, safety and tolerability of eplontersen in patients with ATTR-CM. The CARDIO-TTRansform study includes co-primary outcome measures of
cardiovascular death and frequency of cardiovascular clinical events.
In January 2022, the FDA granted an Orphan Medicine Designation for eplontersen.
In December 2021, we entered into an agreement with AstraZeneca to jointly develop and commercialize eplontersen in the U.S. We granted
AstraZeneca exclusive rights to commercialize eplontersen outside the U.S, except for certain Latin American countries.
Olezarsen (ApoC-III)– Olezarsen (formerly IONIS-APOCIII-LRx) is an investigational LICA medicine we designed to inhibit
the production of apoC-III for patients who are at risk of disease due to elevated triglyceride levels. ApoC-III is a protein produced in the liver that regulates triglyceride metabolism in the blood. People with severely elevated triglycerides, such
as people with FCS, are at high risk for acute pancreatitis and an increased risk of cardiovascular disease, or CVD. It is estimated that FCS affects one to two individuals per million worldwide and more than three million patients have SHTG in the
U.S.
We are currently conducting a broad development program for olezarsen that includes the Phase 3 BALANCE study in patients with FCS
and three Phase 3 studies supporting development for the treatment of SHTG: CORE, CORE2 and ESSENCE.
9
BALANCE is a global, multi-center, randomized, double-blind, placebo-controlled study in approximately 65 patients designed to assess
the efficacy, safety and tolerability of olezarsen in patients with FCS. Patients will be treated with 50 mg or 80 mg of olezarsen monthly by subcutaneous injection. The primary endpoint is the percent change from baseline in fasting triglyceride
levels at six months compared to placebo.
CORE and CORE2 are global, multi-center, randomized, double-blind, placebo-controlled studies enrolling approximately 540 and 390
patients, respectively, designed to assess the efficacy, safety and tolerability of olezarsen in patients with SHTG. The CORE and CORE2 studies compare olezarsen to placebo in patients with triglyceride levels equal to or greater than 500 mg/dL who are
on currently available therapies for elevated triglycerides. The primary endpoint of the studies is the percent change in fasting triglycerides from baseline at month six. Additionally, in November 2022, we initiated ESSENCE, a global, multi-center,
randomized, double-blind, placebo-controlled study enrolling approximately 1,300 patients to provide a robust safety database. The primary endpoint of the study is the percent change in fasting triglycerides from baseline at week six.
In January 2020, we reported positive results from a Phase
2 clinical study in patients with hypertriglyceridemia and at high risk of or with established CVD. Olezarsen achieved statistically significant, dose-dependent reductions in fasting triglycerides compared to placebo at all dose levels.
Additionally, at the highest monthly dose, 91 percent of patients achieved serum triglycerides of ≤ 150 mg/dL, the recognized threshold for cardiovascular risk, compared to less than five percent of patients in the placebo group. Olezarsen also
achieved statistical significance in numerous key secondary endpoints, including significant reductions in apoC-III, very low-density lipoprotein cholesterol, or VLDL-C, and remnant cholesterol, and a statistically significant increase in high-density
lipoprotein cholesterol, or HDL-C. Olezarsen had a favorable safety and tolerability profile supportive of continued development.
In January 2023, the FDA granted olezarsen fast track designation for the treatment of patients with FCS.
Donidalorsen (PKK)– Donidalorsen (formerly IONIS-PKK-LRx) is an investigational LICA medicine we designed to target the prekallikrein, or PKK, pathway. HAE is
a rare genetic disease that is characterized by severe and potentially fatal swelling of the arms, legs, face and throat. PKK plays an important role in the activation of inflammatory mediators associated with acute attacks of HAE. By inhibiting the
production of PKK, donidalorsen could be an effective prophylactic approach to preventing HAE attacks. It is estimated that there are more than 20,000 patients with HAE in the U.S. and Europe.
In November 2021, we initiated the Phase 3 study of donidalorsen, OASIS-HAE, in patients with HAE. OASIS-HAE is a multi-center,
randomized, double-blind placebo-controlled study in approximately 80 patients designed to assess the efficacy, safety and tolerability of donidalorsen. Patients will be
treated with an 80 mg dose of donidalorsen either every four weeks or every eight weeks by subcutaneous injection. The primary endpoint is the time-normalized number of investigator-confirmed HAE attacks per month from week one to week 25. In
May 2022, we initiated OASIS-Plus, a multi-center, open-label, global study in approximately 110 patients who were either previously treated with other prophylactic therapies or who have completed OASIS-HAE.
In 2021 and 2022, we reported positive results from a Phase
2 clinical study of donidalorsen in patients with HAE. Patients received either donidalorsen 80 mg or placebo subcutaneously once monthly for 17 weeks. The Phase 2 study met its primary and secondary endpoints, achieving significant reductions in the
number of attacks suffered by patients with HAE compared to placebo. The study demonstrated a mean reduction of 90 percent in the number of monthly HAE attacks in weeks one to 17 of the study (p <0.001) and a mean reduction of 97 percent in the
number of monthly HAE attacks in weeks five to 17 (p=0.003). In weeks five to 17, 92 percent of patients treated with donidalorsen were attack-free compared to 0 percent in the placebo group (p <0.001). Additionally, donidalorsen demonstrated an
overall reduction in moderate to severe attacks starting with the second dose in the study. For the final month of the study, all donidalorsen treated patients were attack-free. Further, patients reported higher overall health-related quality of
life, or HRQoL, over 17 weeks with donidalorsen, with a mean change in total score of the AE-QoL of -26.85, compared with -6.15 in the placebo group (P=0.002) where reduction in the score indicates better quality of life. There were improvements
observed across all individual domains of the AE-QoL compared with placebo we published. The Phase 3 data were published in the New England Journal of Medicine. Donidalorsen had a favorable safety and tolerability profile supportive of continued
development.
In 2022 and in early 2023, we reported positive results from the Phase 2 OLE study of donidalorsen in patients with HAE. Interim data
after all patients completed one year of treatment in the study showed a sustained reduction in HAE attacks. Patients completing the Phase 2 study were eligible for enrollment in the OLE study. There were 20 Type 1 or Type 2 HAE patients in the Phase 2
study, and 17 (85%) entered the OLE. Following a 13-week fixed-dose period where participants received subcutaneous donidalorsen 80 mg every four weeks, eight patients switched to subcutaneous donidalorsen 80 mg every eight weeks. Patients receiving
donidalorsen 80 mg every eight weeks experienced a mean reduction in attack rate of 75.6% from baseline and the mean monthly attack rate was 0.28. Six of these patients remained attack free over the one year duration of this analysis, and two of these
patients returned to 80 mg every four weeks. For patients treated with donidalorsen, 99.6% of study days were HAE attack-free. Additionally, patients treated for one year with donidalorsen reported a mean improvement of 24 points in their AE-QoL total
score across all domains relative to baseline. Donidalorsen had a favorable safety and tolerability profile supportive of continued development.
10
ION363 (FUS) – ION363 is an
investigational antisense medicine we designed to reduce the production of the FUS protein to treat people with ALS caused by mutations in the FUS
gene. Because antisense-mediated reduction of mutant FUS protein in a FUS-ALS mouse model demonstrated the ability to prevent motor neuron loss, it is hypothesized that reduction of FUS protein will reverse or prevent disease progression in FUS-ALS
patients. It is estimated that there are approximately 350 patients with FUS-ALS in G7 countries (comprised of Canada, France, Germany, Italy, Japan, the United Kingdom and the U.S.).
In April 2021, we initiated a Phase 3 study of ION363 in patients with FUS-ALS. The Phase 3 trial of ION363 is a global, multi-center,
randomized, double-blind, placebo-controlled study in approximately 75 patients designed to assess the efficacy, safety and tolerability of ION363. Part 1 of the trial consists of patients randomized to receive a loading regimen of ION363 or placebo
for weeks one and four followed by one dose every four to 12 weeks for 61 weeks, followed by Part 2, which will be an open-label period in which all patients in the trial will receive ION363 or placebo loading regimen at week four followed by one dose
every 12 weeks for 85 weeks. The primary endpoint is the change from baseline as measured by the Revised Amyotrophic Lateral Sclerosis Functional Rating Scale, or ALSFRS-R, Total Score, time of rescue or discontinuation from Part 1 and entering Part 2
due to a deterioration in function, and Ventilation Assistance-free survival, or VAFS.
Tofersen (SOD1) (BIIB067) – Tofersen (formerly IONIS-SOD1Rx) is an investigational antisense medicine we designed to inhibit the production of superoxide dismutase
1, or SOD1, which is a well understood genetic cause of ALS. SOD1-ALS is a rare, fatal, neurodegenerative disorder caused by a mutation in the SOD1 gene leading to a progressive loss of motor neurons. As a result,
people with SOD1-ALS experience increasing muscle weakness, loss of movement, difficulty breathing and swallowing and eventually succumb to the disease. Current treatment options for people with SOD1-ALS are extremely limited, with no medicines
that significantly slow disease progression. Tofersen is one of three medicines we have in development to treat ALS. It is estimated that there are approximately 1,400 patients with SOD1-ALS in the G7 countries. Biogen is evaluating
tofersen for treatment of patients with SOD1-ALS and in presymptomatic individuals.
Tofersen is currently under regulatory review in the U.S. and EU. In July 2022, Biogen announced that the FDA had accepted tofersen’s NDA
and granted priority review of tofersen for SOD1-ALS. Tofersen has an FDA Advisory Committee meeting planned for March 22, 2023 and a PDUFA date of April 25, 2023. In December 2022, Biogen announced that the EMA accepted the MAA for tofersen for
SOD1-ALS.
The tofersen NDA and MAA included results from a Phase 1 study in healthy volunteers, a Phase 1/2 study evaluating ascending dose
levels, the Phase 3 VALOR study, and the Phase 3 OLE study, as well as 12-month integrated results from VALOR and the Phase 3 OLE study. The 12-month integrated data show that earlier initiation of tofersen, compared to delayed initiation, slowed
declines in clinical function, respiratory function, muscle strength and quality of life and build on the results previously observed in the initial readout. The 12-month data compare patients with early initiation of tofersen (at the start of VALOR)
to those who had a delayed initiation of tofersen (six months later, in the OLE).
At the time of the 12-month analysis, because the majority of participants survived without permanent ventilation, or PV, the median time
to death or PV and median time to death, could not be estimated. However, early survival data suggest a lower risk of death or PV and death with earlier initiation of tofersen. Additionally, the latest 12-month results showed that reductions in total
SOD1 protein (a marker of target engagement) and neurofilament (a marker of axonal injury and neurodegeneration) were sustained over time. Tofersen reduced total cerebrospinal fluid, or CSF, SOD1 protein and plasma neurofilament levels in both early-
and delayed-start groups as follows:
•
33% and 21% reduction in SOD1 protein, the intended target for tofersen, respectively
•
51% and 41% reduction in plasma neurofilament, a marker of neuron injury, respectively
Tofersen had a favorable safety and tolerability profile supportive of continued development.
In April 2021, Biogen initiated a second Phase 3 study of tofersen, called ATLAS, in presymptomatic individuals with a SOD1
genetic mutation. ATLAS is a multi-center, randomized, double-blind, placebo-controlled study enrolling approximately 150 subjects designed to assess the efficacy, safety and tolerability of tofersen. Patients are only given tofersen if they meet a
defined biomarker threshold or progress to develop clinically manifest SOD1-ALS.
In December 2018, Biogen exercised its option to license tofersen. As a result, Biogen is responsible for global development, regulatory
and commercialization activities, and costs for tofersen.
11
Pelacarsen (Apo(a)) (TQJ230) – Pelacarsen (formerly IONIS-APO(a)-LRx)is an investigational LICA antisense medicine we designed to inhibit the
production of apolipoprotein(a), or Apo(a), in the liver to offer a direct approach for reducing Lp(a). Elevated Lp(a) is recognized as an independent, genetic cause of CVD. Lp(a) levels are determined at birth and lifestyle modification, including
diet and exercise, do not impact Lp(a) levels. Inhibiting the production of Apo(a) in the liver reduces the level of Lp(a) in blood, potentially slowing down or reversing CVD in people with hyperlipoproteinemia(a), a condition in which individuals
have levels of Lp(a) greater than 50 mg/dL, the recognized threshold for risk of CVD. We believe antisense technology is well suited to address hyperlipoproteinemia(a) because it specifically targets the RNA that codes for all forms of the Apo(a)
molecule. It is estimated that there are more than eight million people living with CVD and elevated levels of Lp(a).
In December 2019,Novartis initiated the Phase 3 study
of pelacarsen, Lp(a) HORIZON, in patients with elevated Lp(a) levels and a prior cardiovascular event. Lp(a) HORIZON is a global, multi-center, randomized, double-blind, placebo-controlled cardiovascular outcomes study in more than 8,000 patients designed to assess the efficacy, safety and tolerability of pelacarsen. Patients are treated with 80 mg of pelacarsen administered monthly by subcutaneous injection. The
primary endpoint in Lp(a) HORIZON is the time to occurrence of first major adverse cardiovascular event, or MACE. In July 2022, we announced that the Lp(a) HORIZON study had completed enrollment.
In November 2018, at the American Heart Association, or AHA, annual meeting, we reported results of the Phase 2 study of pelacarsen in
patients with hyperlipoproteinemia(a). In the Phase 2 study, we observed statistically significant and dose dependent reductions from baseline in Lp(a) levels. Approximately 98 percent of patients who received the highest dose in the study demonstrated
a reduction in Lp(a) levels to below the recommended threshold for CVD events (<50 mg/dL). Pelacarsen had a favorable safety and tolerability profile supportive of continued development.
In February 2019, Novartis exercised its option to license pelacarsen. As a result, Novartis is responsible for global development,
regulatory and commercialization activities, and costs for pelacarsen.
In April 2020, the FDA granted pelacarsen fast track designation for the treatment of patients with elevated Lp(a) and CVD. In December
2020, the Center for Drug Evaluation, or CDE, of China National Medical Products Administration granted breakthrough therapy designation to pelacarsen.
Bepirovirsen (HBV) (GSK3228836) – Bepirovirsen (formerly IONIS-HBVRx) is an investigational antisense medicine we designed to inhibit the production of viral proteins
associated with hepatitis B virus, or HBV. These include proteins associated with infection and replication, including the hepatitis B surface antigen, or HBsAg, which is present in both acute and chronic infections and is associated with a poor
prognosis in people with chronic HBV infection.
HBV infection is a serious health problem that can lead to significant and potentially fatal health conditions, including cirrhosis,
liver failure and liver cancer. Chronic HBV infection is one of the most common persistent viral infections in the world, affecting nearly 300 million people and resulting in approximately 900,000 deaths annually. Currently available therapies,
although effective in reducing circulating HBV in the blood, do not effectively inhibit HBV antigen production and secretion, which are associated with poor prognosis and increased risk of liver cancer.
In January 2023, GSK initiated the Phase 3 program of bepirovirsen, B-Well, in patients with chronic HBV. B-Well 1 and B-Well 2 are global, multi-center, randomized, double-blind, placebo-controlled studies enrolling more
than 500 patients each. GSK designed these studies to assess the efficacy, safety and tolerability of bepirovirsen. The studies will have four stages: (1) a double-blind treatment period of 24 weeks with bepirovirsen or placebo, (2) Nucleoside
Analogue, or NA, treatment for 24 weeks, (3) NA cessation with 24 week follow up or (4) continue on NA for 24 weeks, with follow up for a further 24 weeks for patients who stopped NA treatment at week 48. The arms will be stratified based on HBsAg
levels with the first group including those with HBsAg levels ≥ 100 IU/mL to ≤ 1,000 IU/mL and the second group for those with HBsAg levels >1,000 IU/mL to ≤ 3,000 IU/mL at screening. The primary endpoint is the number of patients achieving functional cure with baseline HBsAg ≤ 1,000 IU/mL. Functional cure is defined as a sustained suppression (24 weeks or longer) of HBV DNA (< Lower Limit of
Quantification, or LLOQ) while off all HBV treatments with HBsAg loss (<0.05 IU/mL) with or without HBsAg after a finite duration of therapy.
12
In June 2022, GSK presented end of treatment results from the Phase 2b B-CLEAR study of bepirovirsenin patients with chronic HBV infection at the European Association for the Study of the Liver’s, or EASL, International Liver Congress. Additionally, in November 2022, GSK
presented positive end of study data from the Phase 2b B-CLEAR study at the American Association for the Study of Liver Diseases, or AASLD. The end of study results showed that treatment with bepirovirsen resulted in sustained clearance of HBsAg and
HBV DNA for 24 weeks after end of bepirovirsen treatment in people with chronic HBV infection. Treatment with bepirovirsen, with a loading dose at day four and 11, and at a dose of 300 mg per week for 24 weeks (treatment arm 1), resulted in 9% of
patients on NA treatment and 10% of patients not on NA treatment achieving the primary outcome of HBsAg levels below the LLOQ and HBV DNA levels, both below the LLOQ, respectively. This is defined as a sustained response and was observed for 24 weeks
post last dose. In the study, sustained response rates were higher in subjects with low baseline HBsAg (< 1000 IU/mL) than in those with high baseline HBsAg (>1000 IU/mL). Patients with low baseline HBsAg levels responded best to treatment with
bepirovirsen with 16% and 25% of patients achieving the primary outcome in treatment arm one of the on NA and not on NA cohorts, respectively. Bepirovirsen had a favorable
safety and tolerability profile supportive of continued development.
In August 2019, GSK exercised its option to license our HBV program following the positive results of the Phase 2a study of bepirovirsen
in patients with chronic HBV infection. As a result, GSK is responsible for global development, regulatory and commercialization activities, and costs for the HBV program.
Our Neurological Medicines in Development
According to the National Institute of Neurological Disorders and Stroke, or NINDS, at the National Institutes of Health, or NIH, a
third of the 7,000 known rare diseases are neurological disorders or thought to include a neurological component. We are currently investigating potential disease-modifying treatments for a broad range of neurological diseases affecting major regions
of the brain and in the central nervous system cell types, including ATTRv-PN, ALS and Alzheimer’s disease.
Eplontersen – See the medicine
description under “Our Late-Stage Pipeline” section above.
ION363 – See the medicine
description under “Our Late-Stage Pipeline” section above.
Tofersen – See the medicine
description under “Our Late-Stage Pipeline” section above.
Zilganersen – Zilganersen
(formerly ION373) is an investigational antisense medicine targeting glial fibrillary acidic protein, or GFAP, mRNA we designed to inhibit the production of GFAP. We are developing zilganersen as a potential therapy for Alexander disease, or AxD. AxD
is a rare, progressive and fatal neurological disease that affects the myelin sheath which protects nerve fibers. AxD is caused by a gain-of-function mutation in the GFAP gene and is characterized by progressive deterioration, including loss of skills and independence, generally leading to death in childhood or early adulthood.
13
Two major types of AxD have been defined. Type I onset typically occurs before four years of age and patients can experience head
enlargement, seizures, limb stiffness, delayed or declining cognition, and lack of growth. Type II onset typically occurs after the age of four and symptoms can include difficulty speaking, swallowing, and making coordinated movements. AxD is most
often fatal. There are treatments that can relieve symptoms, but there is no disease modifying therapy yet available to patients.
In April 2021, we initiated a pivotal study of zilganersen in patients with AxD. The Phase 2/3 study of zilganersen is a multi-center,
double-blind, placebo-controlled, multiple-ascending dose study in approximately 55 patients with AxD designed to assess the efficacy, safety and tolerability of zilganersen. Patients will receive zilganersen or placebo for a 60-week period, after
which all patients in the study will receive zilganersen for a 60-week open-label treatment period. The primary endpoint is the change from baseline in the 10-Meter Walk Test, or 10MWT.
IONIS-MAPTRx (BIIB080) – IONIS-MAPTRx is an investigational antisense medicine we designed to selectively inhibit production of the microtubule-associated protein tau, or tau protein in the brain. We are developing
IONIS-MAPTRx to treat people with Alzheimer’s disease, or AD, and potentially other neurodegenerative disorders characterized by the deposition of abnormal tau protein in the brain, such as certain forms of frontotemporal degeneration, or
FTD, and progressive supranuclear palsy, or PSP.
AD and FTD are characterized predominantly by memory impairment and behavioral changes, resulting in a person’s inability to independently
perform daily activities. PSP is characterized by problems with walking and control of movement, sleep disorder and loss of memory and ability to reason. AD generally occurs late in life and may progress to death in five to 20 years after the onset of
the disease. FTD and PSP have a more rapid disease progression.
In December 2022, Biogen initiated a Phase 2 clinical study of IONIS-MAPTRx in patients with mild cognitive impairment or
mild dementia due to AD. The study is a randomized, double-blinded, placebo-controlled, dose-escalation study in approximately 735 patients designed to assess the efficacy, safety and tolerability of IONIS-MAPTRx administeredintrathecally.
The primary endpoint is the change from baseline to week 76 on the Clinical Dementia Rating scale Sum of Boxes, or CDR-SB.
In July 2021, we and Biogen reported positive topline data from our Phase 1/2 study of IONIS-MAPTRx in patients with mild
Alzheimer’s disease at the Alzheimer’s Association International Conference, or AAIC. The Phase 1/2 study was a blinded, randomized, placebo-controlled, dose-escalation study of IONIS-MAPTRx to evaluate the safety and activity of
once-monthly intrathecal injections of IONIS-MAPTRx in patients with mild AD. The study showed that IONIS-MAPTRx met its primary objective of safety and tolerability in patients with mild Alzheimer’s disease. The study
demonstrated robust time and dose dependent lowering of tau protein in cerebrospinal fluid over the three-month treatment period and sustained reductions during the six-month post-treatment period. IONIS-MAPTRx had a favorable safety and
tolerability profile supportive of continued development.
In December 2019, Biogen exercised its option to license IONIS-MAPTRx. Biogen has responsibility for global development,
regulatory and commercialization activities, and costs for IONIS-MAPTRx.
ION859 (LRRK2) (BIIB094) –
ION859 is an investigational antisense medicine we designed to inhibit the production of the Leucine Rich Repeat Kinase 2, or LRRK2, protein as a potential therapy for Parkinson’s disease, or PD. The most common genetic mutations in PD are found in the
LRRK2 protein. It is believed that increased LRRK2 protein activity could be one of the key drivers for developing PD. PD is a progressive neurodegenerative disease characterized by loss of neurons in the motor system. Patients with PD can experience
tremors, loss of balance and coordination, stiffness, slowing of movement, changes in speech and in some cases cognitive decline. PD is ultimately fatal. There are treatments that can relieve symptoms, but there are no approved disease modifying
therapies.
In August 2019, Biogen initiated a Phase 1/2 study evaluating ION859 in patients with PD. The Phase 1/2 study is a global, multi-center,
randomized, double-blinded, placebo-controlled study in approximately 80 patients designed to assess the safety, tolerability and activity of multiple ascending doses of ION859 administered intrathecally.
ION859 is being developed under our 2013 Strategic Neurology collaboration with Biogen.
ION464 (SNCA) (BIIB101) – ION464
is an investigational antisense medicine we designed to inhibit the production of the alpha-synuclein protein as a potential therapy for PD, Multiple System Atrophy, or MSA, and related synucleinopathies. Alpha-synuclein protein abnormally accumulates
in the brains of PD and MSA patients and is thought to be one of the key drivers of these diseases. It is believed that decreasing the production of the alpha-synuclein protein will reduce the toxic effects of gain-of-function mutations.
14
In July 2020, we initiated a Phase 1/2 study evaluating ION464 in patients with MSA. The current study is a multi-center, randomized,
double-blinded, placebo-controlled study in approximately 40 patients designed to assess the safety and tolerability of multiple ascending doses of ION464 administered intrathecally.
ION464 is being developed under our 2013 Strategic Neurology collaboration with Biogen.
ION541 (ATXN2) (BIIB105) – ION541
is an investigational antisense medicine we designed to reduce the production of the ataxin-2, or ATXN2, protein for the potential treatment of ALS. The reduction of ATXN2 has been shown to decrease aggregation of TDP-43, a toxic RNA binding protein
found in most patients with ALS, including the approximately 90 percent of the ALS population with no known family history of ALS.
In October 2020, Biogen initiated a Phase 1/2 clinical study evaluating ION541 in patients with ALS. The current study is a randomized,
blinded, placebo-controlled study in approximately 110 patients designed to assess the safety, tolerability, and pharmacokinetics of multiple ascending doses of ION541 administered intrathecally.
ION541 is being developed under our 2013 Strategic Neurology collaboration with Biogen.
ION582 (UBE3A) (BIIB121) – ION582
is an investigational antisense medicine we designed to inhibit the expression of the UBE3A transcript, or UBE3A-ATS for the potential treatment of Angelman Syndrome, or AS. AS is a rare, genetic neurological disease caused by the loss of function of
the maternally inherited UBE3A gene. AS typically presents in infancy and is characterized by intellectual disability, balance issues, motor
impairment, and debilitating seizures. Some patients are unable to walk or speak. Some symptoms can be managed with existing drugs; however, there are no approved disease modifying therapies.
In December 2021, we initiated the Phase 1/2 study, HALOS, of ION582 in patients with AS. The study is an open label dose-escalation
study enrolling approximately 40 patients designed to assess the safety, tolerability and activity of multiple ascending doses of ION582.
ION582 is being developed under our 2012 Neurology collaboration with Biogen.
Tominersen (HTT) (RG6042) – Tominersen (formerly IONIS-HTTRx) is an
investigational antisense medicine we designed to target the underlying cause of Huntington’s disease, or HD, by reducing the production of all forms of the huntingtin protein, or HTT, including its mutated variant, or mHTT. HD is an inherited genetic
brain disorder that results in the progressive loss of both mental faculties and physical control. It is caused by the expansion of the cytosine-adenine-guanine, or CAG, trinucleotide sequence in the HTT gene. The resulting mutant HTT protein is toxic and gradually destroys neurons. Symptoms usually appear between the ages of 30 and 50 and worsen over a 10 to 25-year period. Ultimately, the
weakened individual succumbs to pneumonia, heart failure or other complications. Presently, there is no effective treatment or cure for the disease, and currently available medicines only mask the patient’s symptoms but do not slow down the underlying
loss of neurons.
In January 2023, Roche initiated the Phase 2, GENERATION HD2, study of tominersen in patients aged 25 to 50 years old with prodromal and
early manifest HD. The Phase 2 study of tominersen is a multi-center, double-blind, placebo-controlled study in approximately 360 patients designed to assess the efficacy, safety and tolerability of tominersen. Patients will receive tominersen or
placebo every 16 weeks for 16 months, after which patients may receive tominersen in an open-label study. The primary endpoint is the change from baseline in the composite Unified Huntington’s Disease Ratings Scale, or cUHDRS, (non-U.S.) and overall
functional capacity, or TFC, (U.S.) at 16 months.
Roche conducted the Phase 3 study, GENERATION HD1, of tominersen in patients with HD. The Phase 3 study was a randomized, multicenter,
double-blind, placebo-controlled study that recruited 791 participants. In March 2021, Roche announced that dosing would be stopped in the study following a recommendation from the independent data monitoring committee, or iDMC, based on an overall
benefit/risk assessment. In January 2022, Roche announced findings from a post-hoc analysis of the GENERATION HD1 study that suggested tominersen may benefit younger adult patients with lower disease burden.
In December 2017, Roche exercised its option to license tominersen. As a result, Roche is responsible for global development, regulatory
and commercialization activities, and costs for tominersen.
15
Our Cardiovascular Medicines in Development
According to the World Health Organization, or WHO, CVD remains the number one cause of death globally. An estimated 17.9 million people
died from CVD in 2019, representing approximately 30 percent of all deaths globally. Our cardiovascular medicines target the major risk factors of cardiovascular disease, including cholesterol, triglycerides, and hypertension.
Eplontersen – See the medicine
description under “Our Late-Stage Pipeline” section above.
Olezarsen – See the medicine
description under “Our Late-Stage Pipeline” section above.
Pelacarsen – See the medicine
description under “Our Late-Stage Pipeline” section above.
Fesomersen (FXI) – Fesomersen
(formerly IONIS-FXI-LRx) is an investigational LICA medicine we designed to inhibit the production of Factor XI. Factor XI is a clotting factor produced in the liver that is important in the growth of blood clots. Thrombosis, characterized
by the formation of a blood clot inside blood vessels, can cause heart attacks and strokes. People who are deficient in Factor XI have a lower incidence of thromboembolic events with minimal increase in bleeding risk. Although currently available
anticoagulants reduce the risk of thrombosis, physicians associate these anticoagulants with increased bleeding, which can be fatal. By inhibiting Factor XI production, we believe that fesomersen can be used for the treatment of a number of non-acute
forms of thrombosis where additional safe and well tolerated anti-thrombotic medicines are needed.
In November 2022, Bayer presented positive results from the RE-THINc Phase 2b study of fesomersen in patients with end-stage renal
disease, or ESRD, on hemodialysis at the American Society of Nephrology’s, or ASN, Kidney Week. In the study, fesomersen achieved its primary endpoint, demonstrating no increase in the incidence of the composite of major bleeding and clinically
relevant non-major bleeding with 24 weeks of treatment. Fesomersen also achieved dose-dependent and sustained median reductions in steady-state FXI levels of 53.1%, 72.2% and 86.6% in the 40 mg, 80 mg, and 120 mg doses of fesomersen, respectively,
administered once every four weeks. Incidences of dialysis circuit clotting and arteriovenous access, or AV-access, thrombosis diminished significantly with decreasing FXI levels, both of which were exploratory efficacy endpoints. Fesomersen had a
favorable safety and tolerability profile supportive of continued development.
In November 2022, we regained all rights to fesomersen, which we had previously licensed to Bayer in February 2017.
IONIS-AGT-LRx– IONIS-AGT-LRx is an investigational LICA medicine we designed to inhibit the production of
angiotensinogen to decrease blood pressure in people with uncontrolled hypertension. Treatment resistant hypertension, or TRH, is defined as failure to achieve a blood pressure goal of 140/90 (systolic/diastolic) despite the use of three or more
antihypertensive medications. People with TRH have been found to have a three-fold higher chance of having fatal and non-fatal cardiovascular events relative to those with controlled hypertension.
We are also studying IONIS-AGT-LRx in patients with chronic heart failure with reduced ejection fraction. Heart failure, or
HF, is a chronic, progressive condition in which the heart muscle is unable to pump enough blood to meet the body’s needs for blood and oxygen. HF with reduced ejection fraction is a clinical syndrome of shortness of breath, exercise intolerance and/or
fluid retention resulting from an impairment of ejection of blood, usually documented by a left ventricular ejection fraction of 40 percent or less on echocardiography.
16
In January 2021, we initiated a Phase 2b clinical study of IONIS-AGT-LRx in patients with TRH. The study is a randomized,
double-blinded, placebo-controlled study in approximately 150 patients designed to assess the efficacy, safety and tolerability of IONIS-AGT-LRx. The primary endpoint is the change in systolic blood pressure, or SBP, from baseline.
In September 2021, we initiated a Phase 2 clinical study of IONIS-AGT-LRx in patients with chronic HF with reduced ejection
fraction. The study is a randomized, double-blind, placebo-controlled study in approximately 75 patients designed to assess the safety, tolerability, and efficacy of IONIS-AGT-LRx. The primary endpoint is the percent change in plasma AGT
concentration from baseline.
We evaluated IONIS-AGT-LRx in two randomized, double-blinded, placebo-controlled Phase 2 studies. The first study was in
people with mild hypertension and the second was in people with uncontrolled hypertension who were on two or three antihypertensive medications, including ACE inhibitors or ARBs. IONIS-AGT-LRx significantly reduced AGT levels compared to placebo in both studies. IONIS-AGT-LRx had a favorable safety and tolerability profile supportive of continued development.
ION904– ION904 is an investigational next-generation LICA medicine designed to inhibit the production of angiotensinogen to decrease blood pressure in people with uncontrolled
hypertension. ION904 is a follow-on medicine targeting AGT, designed to enable less frequent dosing compared to IONIS-AGT-LRx.
In April 2022, we initiated a Phase 2 clinical study of ION904 in patients with mild to moderate uncontrolled hypertension on one or
more anti-hypertensive medications for at least one month. The study is a randomized, double-blind, placebo-controlled study in approximately 45 patients designed to assess the safety, tolerability, and efficacy of ION904. The primary endpoint is the
percent change in plasma AGT concentration from baseline.
We conducted a Phase 1, blinded, randomized, placebo-controlled, dose-escalation study of ION904 in healthy volunteers that was
supportive of continued development.
Specialty Rare Medicines in Development
Our emerging specialty rare disease pipeline is comprised of medicines that are outside of our cardiovascular and neurological
franchises, but we believe could represent a compelling opportunity for us.
Donidalorsen – See the medicine
description under “Our Late-Stage Pipeline” section above.
Sapablursen
(TMPRSS6) – Sapablursen (formerly IONIS-TMPRSS6-LRx) is an investigational LICA medicine we designed to target the TMPRSS6 gene
to modulate the production of hepcidin, which is the key regulator of iron homeostasis. By modulating hepcidin expression, sapablursen has the potential to positively impact diseases characterized by iron deficiency, such as polycythemia vera, or PV.
PV is a rare, non-genetic and potentially fatal disease caused by overproduction of red blood cells. This overproduction leads to a
thickening of the blood, which increases patients’ risk of life-threatening blood clots, including in the lungs, heart and brain. Patients with PV also experience severe iron deficiency due to hepcidin overexpression. There are no approved
disease-modifying treatments for PV.
In January 2022, we initiated a Phase 2 study evaluating sapablursen in patients with phlebotomy dependent PV, or PD-PV. The Phase 2
study is a multi-center, randomized, open-label study in approximately 40 patients designed to assess the efficacy, safety and tolerability of sapablursen. The primary endpoint is the change in the frequency of phlebotomy comparing baseline with the
last 20 weeks of the 37-week treatment period.
In December 2018, we presented positive data from our Phase 1 study of sapablursen in healthy volunteers at the American Society of
Hematology Annual Meeting. The Phase 1 study demonstrated dose-dependent reductions of serum iron and serum transferrin saturation with sapablursen. Additionally, we observed an increase in serum hepcidin and predicted changes in hemoglobin.
Sapablursen had a favorable safety and tolerability profile supportive of continued development.
17
Other Medicines in Development
We also have four medicines in development, outside of our core franchises, of which half are partnered.
Bepirovirsen – See the medicine description under “Our Late-Stage Pipeline” section above.
IONIS-FB-LRx – IONIS-FB-LRx (RG6299) is an
investigational LICA medicine we designed to inhibit the production of complement factor B, or FB, and the alternative complement pathway. Genetic association studies have shown that overaction of the alternative complement pathway has been
associated with the development of several complement-mediated diseases, including immunoglobulin A, or IgA, nephropathy, or IgAN, and geographic atrophy, or GA, secondary to age-related macular degeneration, or AMD.
IgAN is one of the most common causes of inflammation that impairs the filtering ability of kidneys and is an important cause of chronic
kidney disease and kidney failure. Also known as Berger’s disease, IgAN is characterized by deposits of IgA in the kidneys, resulting in inflammation and tissue damage. AMD is the leading cause of central vision loss in developed countries. GA is an
advanced form of AMD.
In November 2022, we presented positive results from the Phase 2 study of IONIS-FB-LRx in patients with IgAN at the American
Society of Nephrology’s, or ASN, Kidney Week. In the Phase 2 study, which included results from the first 10 patients treated with IONIS-FB-LRx, IONIS-FB-LRx met its primary endpoint of change in 24-hour urinary protein,
demonstrating a 44% mean reduction in proteinuria from baseline to week 29. Kidney function, as measured by estimated glomerular filtration rate, or eGFR, was maintained in all patients in the study. The results from the Phase 2 study provided
proof-of-concept for the potential of IONIS-FB-LRx to treat patients with IgAN by inhibiting complement FB and the alternative complement pathway. IONIS-FB-LRx had a favorable safety and tolerability profile supportive of
continued development. The Phase 2 open-label study remains ongoing and will evaluate IONIS-FB-LRx in approximately 25 patients with IgAN.
In June 2019, we initiated a Phase 2 study evaluating
IONIS-FB-LRx in patients with GA secondary to age-related macular degeneration. The study is a randomized, masked, placebo-controlled study in
approximately 330 patients designed to assess the efficacy, safety and tolerability of multiple ascending doses of IONIS-FB-LRx administered subcutaneously
in adults with GA. The primary endpoint is the absolute change from baseline in GA area at week 49.
In July 2022, Roche exercised its option to license IONIS-FB-LRx following the positive Phase 2 results described above. As a result, Roche is responsible for global development, regulatory and commercialization activities, and costs for IONIS-FB-LRx, except for the open label Phase 2 study in patients with IgAN and the Phase 2 study in patients with GA, both of which we are conducting and funding.
Cimdelirsen (GHR) – Cimdelirsen
(formerly IONIS-GHR-LRx) is an investigational LICA medicine we designed to inhibit the production of growth hormone receptor, or GHr, to decrease the circulating level of insulin-like growth factor-1, or IGF-1. Elevated levels of IGF-1
results in acromegaly, a chronic, slowly progressing and potentially fatal disease. Patients with acromegaly experience multiple chronic conditions, such as type 2 diabetes, hypertension, respiratory complications and premature death. Current
treatments to block IGF-1 are often unsuccessful. Drug treatments to normalize IGF-1 levels are also available but are associated with potentially serious side effects.
In January 2021, we initiated a Phase 2 study evaluating
cimdelirsen as a monotherapy in patients with acromegaly. The Phase 2 study is a multi-center, randomized, open label study in approximately 40 patients designed to assess
the efficacy, safety and tolerability of cimdelirsen. The primary endpoint is the percent change from baseline in IGF-1 to week 27.
18
We completed a Phase 2 study evaluating cimdelirsen as an
add-on therapy in patients with uncontrolled acromegaly despite stable therapy with long-acting somatostatin receptor ligands, or SRL. Due to enrollment difficulties associated with the COVID-19 pandemic, the study closed early, resulting in smaller
cohort sizes than planned. While no longer powered to assess the primary endpoint (percentage of IGF- lowering at Day 141) in accordance with the protocol, the study did permit placebo-controlled evaluation of safety and efficacy. Cimdelirsen
had a favorable safety and tolerability profile supportive of continued development.
ION224(DGAT) –
ION224 is an investigational LICA medicine we designed to reduce the production of diacylglycerol acyltransferase 2, or DGAT2, to treat patients with nonalcoholic steatohepatitis, or NASH. NASH is a common liver disease characterized by liver
steatosis, inflammation and scarring and can lead to increased risk of cardiovascular disease, liver cancer, need for liver transplantation and early death. DGAT2 is an enzyme that catalyzes the final step in triglyceride synthesis in the liver.
Reducing the production of DGAT2 should therefore decrease triglyceride synthesis in the liver. In animal studies, antisense inhibition of DGAT2 significantly improved liver steatosis, lowered blood lipid levels and reversed diet-induced insulin
resistance.
Nonalcoholic fatty liver disease, or NAFLD, describes the full spectrum of liver disease progression from fatty liver to NASH to
cirrhosis to hepatocellular carcinoma. NASH epidemiology studies have estimated 13 to 32 percent of the global population has NAFLD, 1.5 to 6.5 percent have NASH, and approximately nine percent of NASH patients progress to advanced liver disease. There
are currently no commercially available medications to treat NASH.
NASH is sometimes considered a “silent” liver disease because people with early-stage NASH feel well, even though they are starting to
accumulate fat in their livers and may not be aware that they have the disease. However, NASH can develop into more severe diseases such as liver cirrhosis and liver failure. Currently, liver transplant is the only therapeutic option for patients with
liver cirrhosis. In addition, NASH has been shown to be a major risk factor for the development of liver cancer.
In June 2021, we initiated a Phase 2 study of ION224 in patients with confirmed non-alcoholic steatohepatitis. The Phase 2 study is a multi-center, randomized, double-blind, placebo-controlled clinical study in approximately 160 patients designed to assess the efficacy, safety and tolerability of multiple subcutaneous doses of ION224 on NASH histologic improvement.
Our Technology
For more than 30 years, we have advanced genetic medicines with the goal to change standards of care and transform the lives of people
with devastating diseases. Our recent technology advancements have enabled us to advance programs with the potential for extended dosing and delivery to new tissues, such as muscle. We also recently added capabilities to potentially utilize RNA
interference, or RNAi, or gene editing in addition to our novel antisense technology, which we believe, gives us the potential to deliver genetic medicines for a greater number of patients in need.
Overview of Antisense Technology
All of the medicines currently in our clinical pipeline use our antisense technology — an innovative platform for discovering
first-in-class and/or best-in-class medicines. Antisense medicines target RNA, the intermediary that conveys genetic information from a gene to the protein synthesis machinery in the cell. By targeting RNA instead of proteins, we can use antisense
technology to increase, decrease or alter the production of specific proteins. Most of our antisense medicines are designed to bind to mRNAs and inhibit the production of disease-causing proteins. Examples of these include eplontersen, olezarsen and
donidalorsen. SPINRAZA is an example of an antisense medicine that modulates RNA splicing to increase protein production of the SMN protein, which is critical to the health and survival of nerve cells in the spinal cord that are responsible for
neuro-muscular function. The SMN protein is deficient in people with SMA. Our antisense technology is also broadly applicable to many additional antisense mechanisms including decreasing toxic RNAs.
Our advanced LICA technology is a chemical technology we developed that involves attaching a molecule called a ligand that binds with
receptors on the surfaces of cells in a highly specific manner. Because these receptors are often found only on certain cell types, LICA allows us to increase effective delivery of our antisense medicines with higher specificity to certain cell types
that express these receptors relative to non-conjugated antisense medicines. We currently have an integrated assessment of data from multiple LICA medicines and clinical programs which demonstrates that our LICA technology for liver targets can
increase potency by 20-30-fold over our non-LICA antisense medicines. Our LICA medicines have also demonstrated consistently favorable safety and tolerability in clinical trials. In 2022, we reported positive interim analysis data from the
NEURO-TTRansform study of eplontersen in patients with ATTRv-PN. Eplontersen demonstrated a favorable safety and tolerability profile with no specific concerns.
19
Our generation 2.5 chemistry can enable up to 10-fold greater potency compared to our medicines using our Generation 2 chemistries. We can combine our Generation 2.5 chemistry with our LICA technology to further increase potency.
In addition, we are developing LICA conjugation technology that we can use to target tissues other than the liver, such as muscle, and
initial results in animals are promising. In the fourth quarter of 2022, we advanced our first program incorporating LICA technology for enhanced delivery to muscle into preclinical development.
Emerging Technology Advancements
Our recent technology advancements have enabled us to
create even more potent medicines amenable to more potential targets and tissue types. We have also diversified the approaches we can use in designing our medicines in order
to reach more patients with severe diseases. Today our medicines and those entering our pipeline utilize our key technology advances, including our LICA technology and mesyl phosphoramidate, or MsPA, backbone chemistry. We may also now be able to use RNAi in addition to antisense, in the development of new medicines, depending on which approach demonstrates the best potential product profile for
the indication we are pursuing. And through our Metagenomi collaboration, we added the potential to use gene editing, which modifies DNA.
Mesyl phosphoramidate Backbone Chemistry
We designed our MsPA backbone chemistry to improve both therapeutic index and durability. It does this by increasing metabolic stability
relative to the other backbone chemistries we utilize. We have also shown it can improve potency in certain circumstances and reduce non-specific interactions with proteins that can cause undesirable effects, such as proinflammatory effects. In the
fourth quarter of 2022, we advanced new programs using our MsPA backbone, designed to improve both efficacy and durability, into preclinical development.
Gene Editing and Metagenomi Collaboration
In November 2022, we entered into a collaboration with Metagenomi that leverages our extensive expertise in RNA-targeted therapeutics
and Metagenomi’s versatile next-generation gene editing systems to pursue a mix of validated and novel genetic targets with the goal of discovering and developing new drugs. These targets have the potential to expand therapeutic options for patients.
Gene editing utilizes specific RNA-guided nucleases known as Cas enzymes to precisely and permanently modify a DNA sequence. Because of
this, gene editing holds the promise of treatments that could provide long-term, potentially permanent, therapeutic benefits.
Gene editing is highly complementary and synergistic with RNA-targeted therapeutics. Both platforms rely on the same nucleic acid
hybridization principals to precisely target nucleases to either RNA, in the case of RNase H and siRNA drugs, or to DNA in the case of Clustered Regularly Interspaced Short Palindromic Repeats, or CRISPR-Cas systems. This enables us to leverage our
expertise in nucleic acids and modified nucleic acid chemistry with the goal to enhance gene editing’s ability to treat diseases for which there are limited treatment options.
Collaborative Arrangements
We have established alliances with a cadre of leading global pharmaceutical companies. Our partners include the following companies,
among others: AstraZeneca, Biogen, GSK, Novartis and Roche. Through our partnerships, we have earned both commercial revenue and a broad and sustaining base of R&D revenue in the form of license fees, upfront payments and milestone payments. In
2022, we recognized $587 million in revenue, the majority of which was from our partnered medicines and programs. We have the potential to earn more than $23 billion in future milestone payments, licensing fees and other payments from our current
partnerships. In addition, we are eligible to receive up to mid-20 percent royalties under our partnerships. Below, we include the significant terms of our collaboration agreements. For additional details, including other financial information, refer
to Part IV, Item 15, Note 7, Collaborative Arrangements and Licensing Agreements, in the Notes to the Consolidated Financial Statements.
20
Strategic Partnership
Biogen
We have several strategic collaborations with Biogen focused on using our technology to advance the treatment of neurological disorders.
These collaborations combine our expertise in creating antisense medicines with Biogen’s expertise in developing therapies for neurological disorders. We developed and licensed to Biogen SPINRAZA, our approved medicine to treat people with SMA. We and
Biogen are currently developing numerous investigational medicines to treat neurodegenerative diseases under our collaborations, including medicines in development to treat people with ALS, SMA, AS, Alzheimer’s diseaseand Parkinson’s
disease. In addition to these medicines, our collaborations with Biogen include a substantial pipeline that addresses a broad range of neurological diseases. From inception through December 31, 2022, we have generated more than $3.5 billion in payments
from our Biogen collaborations.
Spinal Muscular Atrophy Collaborations
SPINRAZA
In January 2012, we entered into a collaboration agreement
with Biogen to develop and commercialize SPINRAZA, an RNA-targeted therapy for the treatment of SMA.We are receiving tiered royalties ranging from 11 percent to 15
percent on sales of SPINRAZA. We have exclusively in-licensed patents related to SPINRAZA from Cold Spring Harbor Laboratory and the University of Massachusetts. We pay Cold Spring Harbor Laboratory and the University of Massachusetts a low single
digit royalty on net sales of SPINRAZA. Under our agreement, Biogen is responsible for global development, regulatory and commercialization activities and costs for SPINRAZA. From inception through December 31, 2022, we recognized more than $1.8 billion in total revenue under our SPINRAZA collaboration, including
nearly $1.4 billion in revenue from SPINRAZA royalties and more than $425 million in R&D revenue.
New antisense medicines for the treatment of SMA
In December 2017, we entered into a collaboration agreement with Biogen to identify new antisense medicines for the treatment of SMA.
Biogen has the option to license therapies arising out of this collaboration following the completion of preclinical studies. Upon licensing, Biogen will be responsible for global development, regulatory and commercialization activities and costs for
such therapies. Under the collaboration agreement, we received a $25 million upfront payment in December 2017. In December 2021, Biogen exercised its option to license ION306, for which we earned a $60 million license fee payment. Biogen is solely responsible for the costs and expenses related to the development, manufacturing and potential future commercialization of ION306 following the option exercise.
We will receive development and regulatory milestone payments from Biogen if new medicines, including ION306, advance towards marketing
approval.
Over the term of the collaboration, we are eligible to receive up to $1.2 billion, which is comprised of a $25 million upfront payment, up
to $110 million in license fees, up to $80 million in development milestone payments, up to $180 million in regulatory milestone payments and up to $800 million in sales milestone payments and other payments, including up to $555 million if Biogen
advances ION306. In addition, we are eligible to receive tiered royalties from the mid-teens to mid-20 percent range on net sales from any product that Biogen successfully commercializes under this collaboration. From inception through December 31,2022, we have generated $85 million in payments under this collaboration.
Neurology Collaborations
2018 Strategic Neurology
In April 2018, we and Biogen entered into a strategic collaboration agreement to develop novel antisense medicines for a broad range of
neurological diseases. We also entered into a Stock Purchase Agreement, or SPA. As part of the collaboration, Biogen gained exclusive rights to the use of our antisense technology to develop therapies for these diseases for 10 years. We are responsible
for the identification of antisense drug candidates based on selected targets. Biogen will usually be responsible for conducting IND-enabling toxicology studies for the selected medicine. Biogen has the option to license the selected medicine after it
completes the IND-enabling toxicology study. If Biogen exercises its option to license a medicine, it will assume global development, regulatory and commercialization responsibilities and costs for that medicine.
21
In June 2018, we received $1 billion from Biogen, comprised of $625 million to purchase our stock at an approximately 25 percent cash
premium and $375 million in an upfront payment.
Over the term of the collaboration, we are eligible to receive up to $270 million, which is comprised of a $15 million license fee, up to
$105 million in development milestone payments and up to $150 million in regulatory milestone payments for each medicine that achieves marketing approval. In addition, we are eligible to receive tiered royalties up to the 20 percent range on net sales
from any product that Biogen successfully commercializes under this collaboration. We are currently advancing multiple programs under this collaboration. From inception through December 31, 2022, we have generated nearly $1.1 billion in payments under
this collaboration.
2013 Strategic Neurology
In September 2013, we and Biogen entered into a long-term strategic relationship focused on applying antisense technology to advance the
treatment of neurodegenerative diseases. As part of the collaboration, Biogen gained exclusive rights to the use of our antisense technology to develop therapies for neurological diseases and has the option to license medicines resulting from this
collaboration. We will usually be responsible for drug discovery and early development of antisense medicines and Biogen will have the option to license antisense medicines after Phase 2 proof-of-concept. In October 2016, we expanded our collaboration
to include additional research activities we will perform. If Biogen exercises its option to license a medicine, it will assume global development, regulatory and commercialization responsibilities and costs for that medicine. We are currently
advancing five investigational medicines in development under this collaboration, including a medicine for Parkinson’s disease, two medicines for ALS, a medicine for multiple system atrophy and a medicine for an undisclosed target. In December 2018,
Biogen exercised its option to license our most advanced ALS medicine, tofersen, and as a result Biogen is responsible for global development, regulatory and commercialization activities and costs for tofersen.
Under the terms of the agreement, we received an upfront payment of $100 million and are eligible to receive milestone payments, license
fees and royalty payments for all medicines developed under this collaboration, with the specific amounts dependent upon the modality of the molecule advanced by Biogen.
Over the term of the collaboration for tofersen, we are eligible to receive nearly $110 million, which is comprised of a $35 million
license fee, up to $18 million in development milestone payments and $55 million in regulatory milestone payments. For each of the other antisense medicines that are chosen for drug discovery and development under this collaboration, we are eligible to
receive up to approximately $260 million, which is comprised of a $70 million license fee, up to $60 million in development milestone payments and up to $130 million in regulatory milestone payments. In addition, we are eligible to receive tiered
royalties up to the mid-teens on net sales from any product that Biogen successfully commercializes under this collaboration. From inception through December 31, 2022, we have generated more than $300 million under this collaboration, including more
than $25 million in milestone payments we received from Biogen in 2022 when Biogen advanced three programs under this collaboration.
2012 Neurology
In December 2012, we and Biogen entered into a collaboration agreement to develop and commercialize novel antisense medicines to treat
neurodegenerative diseases. We are responsible for the development of each of the medicines through the completion of the initial Phase 2 clinical study for such medicine. Biogen has the option to license a medicine from each of the programs through
the completion of the first Phase 2 study for each program. Under this collaboration, Biogen is conducting the IONIS-MAPTRx study for AD and we are currently advancing ION582 for AS. If Biogen exercises its option to license a medicine, it
will assume global development, regulatory and commercialization responsibilities and costs for that medicine. In December 2019, Biogen exercised its option to license IONIS-MAPTRx and as a result Biogen is responsible for global
development, regulatory and commercialization activities and costs for IONIS-MAPTRx.
Under the terms of the agreement, we received an upfront payment of $30 million. Over the term of the collaboration, we are eligible to
receive up to $210 million, which is comprised of a $70 million license fee, up to $10 million in development milestone payments per program and up to $130 million in regulatory milestone payments per program, plus a mark-up on the cost estimate of the
Phase 1 and 2 studies. In addition, we are eligible to receive tiered royalties up to the mid-teens on net sales from any product that Biogen successfully commercializes under this collaboration. From inception through December 31, 2022, we have
generated more than $190 million under this collaboration, including nearly $20 million in milestone payments we received from Biogen for advancing ION582 and a $10 million milestone payment we received from Biogen when Biogen advanced IONIS-MAPTRx
during 2022.
22
Joint Development and Commercialization Arrangement
AstraZeneca
Eplontersen Collaboration
In December 2021, we entered into a joint development and commercialization agreement with AstraZeneca to develop and commercialize
eplontersen for the treatment of 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.
The collaboration also includes territory-specific development, commercial and medical affairs cost-sharing provisions. AstraZeneca is
currently responsible for 55 percent of the costs associated with the ongoing global Phase 3 development program. 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.
Over the term of the collaboration, we are eligible to
receive up to $3.6 billion, which is comprised of a $200 million upfront payment, up to $485 million in development and approval milestone payments and up to $2.9 billion in sales milestone payments. In addition, we are eligible to receive up to
mid-20 percent royalties for sales in the U.S. and tiered royalties up to the high teens for sales outside the U.S. From inception through December 31, 2022, we have generated more than $275 million in payments under this collaboration, including
more than $75 million we earned from cost sharing provisions in 2022.
Research and Development Partners
AstraZeneca
In addition to our collaboration for eplontersen, we have a collaboration with AstraZeneca focused on discovering and developing
treatments for cardiovascular, renal and metabolic diseases. In July 2015, we and AstraZeneca formed a collaboration to discover and develop antisense therapies for treating cardiovascular, renal and metabolic diseases. Under our collaboration,
AstraZeneca has licensed multiple medicines from us. AstraZeneca is responsible for global development, regulatory and commercialization activities and costs for each of the medicines it has licensed from us.
Over the term of the collaboration, we are eligible to receive up to $5.8 billion, which is comprised of a $65 million upfront payment, up
to $290 million in license fees, up to $1.1 billion in development milestone payments, up to $2.9 billion in regulatory milestone payments and up to $1.5 billion in sales milestone payments. In addition, we are eligible to receive tiered royalties up
to the low teens on net sales from any product that AstraZeneca successfully commercializes under this collaboration agreement. From inception through December 31, 2022, we have generated $285 million in payments under this collaboration.
GSK
In March 2010, we entered into a collaboration with GSK using our antisense drug discovery platform to discover and develop new medicines
against targets for serious and rare diseases, including infectious diseases. Our collaboration with GSK covers bepirovirsen, an investigational antisense medicine we designed to reduce the production of viral proteins associated with HBV
infection. In 2019, following positive Phase 2 results, GSK licensed our HBV program. GSK is responsible for all global development, regulatory and commercialization activities and costs for the HBV program.
Over the term of the collaboration, we are eligible to receive nearly $260 million, which is comprised of a $25 million license fee, up to
$42.5 million in development milestone payments, up to $120 million in regulatory milestone payments and up to $70 million in sales milestone payments if GSK successfully develops bepirovirsen. In addition, we are eligible to receive tiered royalties
up to the low-teens on net sales of bepirovirsen. From inception through December 31, 2022, we have generated more than $50 million in payments under the HBV program collaboration. Subsequent to December 31, 2022, we earned a $15 million milestone
payment when GSK initiated a Phase 3 study of bepirovirsen in patients with chronic HBV in January 2023.
23
Novartis
In January 2017, we initiated a collaboration with Novartis
to develop and commercialize pelacarsen. Novartis is responsible for conducting and funding development and regulatory activities for pelacarsen, including a global Phase 3 cardiovascular outcomes study, which Novartis initiated in December
2019.In connection with Novartis’ license of pelacarsen, we and Novartis established a more definitive framework under which the companies would negotiate the
co-commercialization of pelacarsen in selected markets. Included in this framework is an option by which Novartis could solely commercialize pelacarsen in exchange for Novartis paying us increased sales milestone payments based on sales of pelacarsen.
Over the term of the collaboration, we are eligible to receive up to $900 million, which is comprised of a $75 million upfront payment, a
$150 million license fee, a $25 million development milestone payment, up to $290 million in regulatory milestone payments and up to $360 million in sales milestone payments. We are also eligible to receive tiered royalties in the mid-teens to low 20
percent range on net sales of pelacarsen. From inception through December 31, 2022, we have generated nearly $275 million in payments under this collaboration.
In conjunction with this collaboration, we entered into a SPA with Novartis. As part of the SPA, Novartis purchased 1.6 million shares of
our common stock for $100 million in the first quarter of 2017.
Roche
Huntington’s Disease
In April 2013, we entered into an agreement with Hoffmann-La Roche Inc and F. Hoffmann-La Roche Ltd, collectively Roche, to develop
treatments for HD based on our antisense technology. Under the agreement, we discovered and developed tominersen, an investigational medicine targeting HTT protein. We developed tominersen through completion of our Phase 1/2 clinical study in people
with early-stage HD. In December 2017, upon completion of the Phase 1/2 study, Roche exercised its option to license tominersenand is now responsible for the global development, regulatory and commercialization activities and costs for
tominersen.
Over the term of the collaboration, we are eligible to receive up to $395 million, which is comprised of a $30 million upfront payment,
a $45 million license fee, up to $70 million in development milestone payments, up to $170 million in regulatory milestone payments and up to $80 million in sales milestone payments as tominersen advances. In addition, we are eligible to receive up
to $136.5 million in milestone payments for each additional medicine successfully developed. We are also eligible to receive tiered royalties up to the mid-teens on net sales from any product resulting from this collaboration. From inception through
December 31, 2022, we have generated more than $150 million in payments under this collaboration.
IONIS-FB-LRx for Complement-Mediated Diseases
In October 2018, we entered into a collaboration agreement with Roche to develop IONIS-FB-LRx for the treatment of
complement-mediated diseases. We are currently conducting Phase 2 studies in two disease indications for IONIS-FB-LRx, one for the treatment of patients with GA, the advanced stage of dry AMD, and a second for the treatment of patients with
IgA nephropathy. After receiving positive data from the Phase 2 clinical study of IONIS-FB-LRx in patients with IgAN, Roche licensed IONIS-FB-LRx in July 2022. As a result, Roche is responsible for global development, regulatory
and commercialization activities, and costs for IONIS-FB-LRx, except for the open label Phase 2 study in patients with IgAN and the Phase 2 study in patients with GA, both of which we are conducting and funding.
Over the term of the collaboration, we are eligible to receive more than $810 million, which is comprised of a $75 million upfront
payment, a $35 million license fee, up to $145 million in development milestone payments, up to $279 million in regulatory milestone payments and up to $280 million in sales milestone payments. In addition, we are also eligible to receive tiered
royalties from the high teens to 20 percent on net sales. From inception through December 31, 2022, we have generated more than $130 million under this collaboration, including $55 million in payments we earned in 2022 for advancing IONIS-FB-LRx.
24
Commercialization Partnerships
Swedish Orphan Biovitrum AB (Sobi)
We began commercializing TEGSEDI and WAYLIVRA in Europe in January 2021 and TEGSEDI in North America in April 2021 through distribution
agreements with Sobi. 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. In exchange, we earn a distribution fee on net sales from Sobi for each
medicine.
PTC Therapeutics
In August 2018, we entered into an exclusive license
agreement with PTC Therapeutics to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries. Under the license agreement, we are eligible to receive royalties from PTC in the mid-20 percent range on net sales for each medicine. In December 2021, we started receiving
royalties from PTC for TEGSEDI sales. We expect to receive royalties from PTC for WAYLIVRA sales starting in 2023.
Technology Enhancement Collaborations
Bicycle Therapeutics License Agreement
In December 2020, we entered into a collaboration agreement with Bicycle Therapeutics, or Bicycle, and obtained an option to license its
peptide technology to potentially increase the delivery capabilities of our LICA medicines. In July 2021, we paid $42 million when we exercised our option to license Bicycle’s technology, which included an equity investment in Bicycle. As part of our
stock purchase, we entered into a lockup agreement with Bicycle that restricted our ability to trade our Bicycle shares for one year. As a result, we recorded a $7 million equity investment for the shares we received in Bicycle in 2021. We recognized
the remaining $35 million as R&D expense in 2021. From inception through December 31, 2022, we have paid Bicycle $47 million under this collaboration agreement.
Metagenomi
In November 2022, we entered into a collaboration and license agreement with Metagenomi to research, develop and commercialize
investigational medicines for up to four initial genetic targets, and, upon the achievement of certain development milestones, four additional genetic targets using gene editing technologies. As a result, we paid $80 million to license Metagenomi’s
technologies. We will also pay Metagenomi certain fees for the selection of genetic targets, and contingent on the achievement of certain development, regulatory and sales events, milestone payments and royalties. In addition, we will reimburse
Metagenomi for certain of its costs in conducting its research and drug discovery activities under the collaboration.
Other Agreements
Alnylam Pharmaceuticals, Inc.
Under the terms of our agreement with Alnylam, we co-exclusively (with ourselves) licensed to Alnylam our patent estate relating to
antisense motifs and mechanisms and oligonucleotide chemistry for double-stranded RNAi therapeutics, with Alnylam having the exclusive right to grant platform sublicenses for double-stranded RNAi. In exchange for such rights, Alnylam gave us a
technology access fee, participation in fees from Alnylam’s partnering programs, as well as future milestone and royalty payments from Alnylam. We retained exclusive rights to our patents for single-stranded antisense therapeutics and for a limited
number of double-stranded RNAi therapeutic targets and all rights to single-stranded RNAi, or ssRNAi, therapeutics. In turn, Alnylam nonexclusively licensed to us its patent estate relating to antisense motifs and mechanisms and oligonucleotide
chemistry to research, develop and commercialize single-stranded antisense therapeutics, ssRNAi therapeutics, and to research double-stranded RNAi compounds. We also received a license to develop and commercialize double-stranded RNAi therapeutics
targeting a limited number of therapeutic targets on a nonexclusive basis. Additionally, in 2015, we and Alnylam entered into an alliance in which we cross-licensed intellectual property. Under this alliance, we and Alnylam each obtained exclusive
license rights to four therapeutic programs. Alnylam granted us an exclusive, royalty-bearing license to its chemistry, RNA targeting mechanism and target-specific intellectual property for oligonucleotides against four targets, including FXI and
Apo(a) and two other targets. In exchange, we granted Alnylam an exclusive, royalty-bearing license to our chemistry, RNA targeting mechanism and target-specific intellectual property for oligonucleotides against four other targets. Alnylam also
granted us a royalty-bearing, non-exclusive license to new platform technology arising from May 2014 through April 2019 for single-stranded antisense therapeutics. In turn, we granted Alnylam a royalty-bearing, non-exclusive license to new platform
technology arising from May 2014 through April 2019 for double-stranded RNAi therapeutics.
25
In the fourth quarter of 2020, we completed an arbitration process with Alnylam. The arbitration panel awarded us $41 million for
payments owed to us by Alnylam related to Alnylam’s agreement with Sanofi Genzyme. We recognized the $41 million payment from Alnylam as R&D revenue in the fourth quarter of 2020.
Manufacturing
We manufacture most of the active pharmaceutical ingredient, or API, we use for our research and development activities ourselves. We have
also manufactured API and commercial supply for our approved medicines. We have dedicated significant resources to develop ways to improve manufacturing efficiency and capacity. Since we can use variants of the same nucleotide building blocks and the
same type of equipment to produce our oligonucleotide medicines, we found that the same techniques we used to efficiently manufacture one oligonucleotide medicine could help improve the manufacturing processes for our other medicines. By developing
several proprietary chemical processes to scale up our manufacturing capabilities, we have greatly reduced the cost of producing oligonucleotide medicines. For example, we have significantly reduced the cost of raw materials through improved yield
efficiency, while at the same time increasing our capacity to make our medicines. Through both our internal research and development programs and collaborations with outside vendors, we may achieve even greater efficiency and further cost reductions.
Our manufacturing facility is located in a 26,800 square foot building in Carlsbad, California. We purchased this building in 2017. In
addition, we have a 25,800 square foot building that houses support functions for our manufacturing activities. We lease this facility under a lease that has a term ending in August 2026 with an option to extend the lease for an additional five-year
period. Our manufacturing facility is subject to periodic inspections by the FDA and foreign equivalents to ensure that it is operating in compliance with current Good Manufacturing Practices, or cGMP, requirements. We have begun work on a new
manufacturing facility in Oceanside, California that will expand our manufacturing capacity to support our advancing pipeline. Refer to Part I, Item 2, Properties,
for further discussion of this lease facility.
As part of our collaborations, we may agree to manufacture clinical trial material and/or commercial drug supply for our partners. For
example, in the past we have manufactured clinical trial material for AstraZeneca, Biogen, GSK and Novartis and commercial drug supply for Biogen.
We believe we have sufficient manufacturing capacity at our own facility or at contract manufacturing organizations, or CMOs, to meet our
current internal research, development and potential commercial needs, as well as our obligations under existing agreements with our partners for research, development and commercial material. We manufacture process performance qualification batches
and pre-approval inspection batches of our Phase 3 medicines that may be used for regulatory submissions and, pending regulatory approval, commercial sale. We believe our current network of CMO partners are capable of providing sufficient quantities to
meet anticipated commercial demands. Additionally, we continue to evaluate relationships with additional suppliers to increase overall capacity and diversify our supply chain. While we believe that there are alternate sources of supply that can satisfy
our commercial requirements, it is possible that identifying and establishing relationships with such sources, if necessary, could result in significant delay or material additional costs. We also could experience a disruption in supply from our
current CMO partners.
CMOs are subject to the FDA’s cGMP requirements and other rules and regulations prescribed by foreign regulatory authorities. We depend on
our CMO partners for continued compliance with cGMP requirements and applicable foreign standards.
Specifically, we have the following in place for our approved medicines, SPINRAZA, TEGSEDI and WAYLIVRA and our medicines in Phase 3
development.
SPINRAZA
Biogen is responsible for SPINRAZA drug supply.
TEGSEDI and WAYLIVRA
For TEGSEDI’s commercial drug supply, we are using CMOs to produce custom raw materials, API and finished goods. For WAYLIVRA’s commercial
drug supply, we have manufactured custom raw materials and API. We are using CMOs to produce the finished goods for WAYLIVRA. Our CMO partners have extensive technical expertise and cGMP experience. We believe we and our current network of CMO partners
are capable of manufacturing sufficient quantities to meet anticipated commercial demands.
Eplontersen
Our CMO partner supplied the API and the finished drug product for eplontersen’s Phase 3 program. Pursuant to our collaboration with
AstraZeneca, we will manufacture and supply eplontersen through a CMO for the ongoing clinical trials, process performance qualification batches and pre-approval inspection batches. AstraZeneca is responsible for commercial drug supply.
26
Olezarsen, Donidalorsen, ION363
We and/or the CMOs have supplied the API and the finished
drug product for olezarsen, donidalorsen and ION363 that we believe will be sufficient through the completion of the Phase 3 programs for each medicine, including
process performance qualification batches and pre-approval inspection batches. We plan to leverage our relationships with CMOs to procure long-term raw material and drug supply at competitive prices in the future.
Tofersen
Biogen is responsible for tofersen drug supply, including launch supplies.
Pelacarsen
We supplied the API and the finished drug product for pelacarsen’s Phase 3 program. Pursuant to our collaboration with Novartis, Novartis
is responsible for any further pelacarsen drug supply.
Patents and Proprietary Rights
Our success depends, in part, on our ability to obtain patent protection for our products in the U.S. and other countries. We own or have
exclusively licensed a substantial patent estate with numerous issued patents worldwide protecting our products and, more generally, our platform for development and commercialization of RNA-targeting therapeutics. We focus our resources on patents and
new patent applications that drive value for our company.
We own or control patents that provide exclusivity for products in our pipeline and patents that provide exclusivity for our core
technology in the field of oligonucleotides and RNA-targeting therapeutics more generally. Our core technology patents include claims to chemically modified oligonucleotides as well as medicine designs utilizing these chemical modifications. These core
claims are independent of specific therapeutic target, nucleic acid sequence, or clinical indication. We also own a large number of patents claiming oligonucleotide compounds having nucleic acid sequences complementary to therapeutic target nucleic
acids, independent of the particular chemical modifications incorporated into the oligonucleotide compound. Importantly, we seek and obtain issued patent claims to specifically protect each of our medicines. For example, we file and seek to obtain
claims covering each drug’s nucleic acid sequence and precise drug design. In sum, we maintain our competitive advantage in the field of oligonucleotide therapeutics technology by protecting our core platform technology and by creating multiple layers
of patent protection for each of our specific medicines in development.
Type of Patent Claim
(Broadly Applicable to Specific)
●Chemically Modified Nucleosides and Oligonucleotides (target and sequence independent)
●Drug Design Motifs (target and sequence independent)
●LIgand-Conjugated Antisense (LICA) Technology
●Therapeutic Methods (sequence and chemistry independent)
●Oligonucleotide Sequence (chemistry independent)
●Drug Composition
27
Chemically Modified Nucleosides and Oligonucleotides
The most broadly applicable of our patents are those that claim modified nucleosides and oligonucleotides comprising the modified
nucleosides that we incorporate into our medicines to increase their therapeutic efficacy. Nucleosides and chemically modified nucleosides are the basic building blocks of our medicines. Therefore, claims that cover any oligonucleotide incorporating
one of our proprietary modified nucleosides can apply to a wide array of therapeutic mechanisms of action as well as several therapeutic targets. The following are some of our patents in this category in key jurisdictions (U.S., Europe and Japan):
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
7,399,845
6-MODIFIED BICYCLIC NUCLEIC ACID ANALOGS
2027
cEt nucleosides and oligonucleotides containing these nucleoside analogs
United States
7,741,457
6-MODIFIED BICYCLIC NUCLEIC ACID ANALOGS
2027
cEt nucleosides and oligonucleotides containing these nucleoside analogs
United States
8,022,193
6-MODIFIED BICYCLIC NUCLEIC ACID ANALOGS
2027
Oligonucleotides containing cEt nucleoside analogs
Europe
1984381
6-MODIFIED BICYCLIC NUCLEIC ACID ANALOGS
2027
cEt nucleosides and oligonucleotides containing these nucleoside analogs
Europe
2314594
6-MODIFIED BICYCLIC NUCLEIC ACID ANALOGS
2027
Oligonucleotides containing cEt nucleoside analogs and methods of use
Japan
5342881
6-MODIFIED BICYCLIC NUCLEIC ACID ANALOGS
2027
cEt nucleosides and oligonucleotides containing these nucleoside analogs
United States
7,569,686
COMPOUNDS AND METHODS FOR SYNTHESIS OF BICYCLIC NUCLEIC ACID ANALOGS
2027
Methods of synthesizing cEt nucleosides
Drug Design Motifs
We also have patents that claim oligonucleotides comprising drug design motifs, or patterns of nucleoside modifications at specified
positions in an oligonucleotide. Patent claims covering drug design motifs are independent of nucleic acid sequence, so they cover oligonucleotides having the recited motif, regardless of cellular target or clinical indication. The claimed motifs
generally confer properties that optimize oligonucleotides for a particular mechanism of action, such as ribonuclease H (RNase H), RNAi, or splicing. We have designed oligonucleotides incorporating motifs, which we refer to as chimeric compounds or
gapmers, to exploit the RNase H mechanism to achieve target RNA reduction. We have patent claims to such antisense drug design motifs incorporating bicyclic nucleosides, which include both locked nucleic acids, or “LNA” and cEt. The following patents
are some examples of our issued patents in this category in key jurisdictions (U.S., Europe and Japan):
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
7,750,131
5’-MODIFIED BICYCLIC NUCLEIC ACID ANALOGS
2027
Oligonucleotides having 5’-methyl BNA nucleosides
Europe
2092065
ANTISENSE COMPOUNDS
2027
Gapmer oligonucleotides having 2’-modifed and LNA nucleosides
Europe
2410053
ANTISENSE COMPOUNDS
2027
Gapmer oligonucleotides having wings comprised of 2’-MOE and bicyclic nucleosides
Europe
2410054
ANTISENSE COMPOUNDS
2027
Gapmer oligonucleotides having a 2’-modifed nucleoside in the 5’-wing and a bicyclic nucleoside in the 3’-wing
Japan
5665317
ANTISENSE COMPOUNDS
2027
Gapmer oligonucleotides having wings comprised of 2’-MOE and bicyclic nucleosides
United States
9,550,988
ANTISENSE COMPOUNDS
2028
Gapmer oligonucleotides having BNA nucleosides and 2’-MOE nucleosides
United States
10,493,092
ANTISENSE COMPOUNDS
2028
Gapmer oligonucleotides having BNA nucleosides and 2’-MOE nucleosides and/or 2’-OMe nucleosides
Europe
3067421
OLIGOMERIC COMPOUNDS COMPRISING BICYCLIC NUCLEOTIDES AND USES THEREOF
2032
Gapmer oligonucleotides having at least one bicyclic, one 2’-modified nucleoside and one 2’-deoxynucleoside
28
LIgand-Conjugated Antisense (LICA) Technology
We also have patent claims to new chemistries created to enhance targeting of antisense medicines to specific tissues and cells to improve
a drug’s properties. We designed our GalNAc LICA medicines to provide an increase in potency for targets in the liver. We have successfully obtained issued patent claims covering our LICA technology conjugated to any modified oligonucleotide, including
gapmers, double-stranded siRNA compounds, and fully modified oligonucleotides. The following patents are some examples of our issued patents in this category:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
9,127,276
CONJUGATED ANTISENSE COMPOUNDS AND THEIR USE
2034
Preferred THA LICA conjugated to any group of nucleosides, including gapmers, double-stranded siRNA compounds, and fully modified oligonucleotides
United States
9,181,549
CONJUGATED ANTISENSE COMPOUNDS AND THEIR USE
2034
Preferred THA conjugate having our preferred linker and cleavable moiety conjugated to any oligomeric compound or any nucleoside having a 2’-MOE
modification or a cEt modification
Europe
2991661
CONJUGATED ANTISENSE COMPOUNDS AND THEIR USE
2034
Preferred THA LICA conjugated to any group of nucleosides, including gapmers, double-stranded siRNA compounds, and fully modified oligonucleotides
Therapeutic Methods of Treatment and Oligonucleotide Drug Sequences
In addition to our broad core patents, we also own hundreds of patents, worldwide, with claims to antisense compounds having particular
sequences and compounds directed to particular therapeutically important targets or methods of achieving cellular or clinical endpoints using these antisense compounds. These “Target” patents also include claims reciting the specific nucleic acid
sequences utilized by our products, independent of chemical modifications and motifs. In addition, our product-specific patents typically include claims combining specific nucleic acid sequences with nucleoside modifications and motifs. In this way, we
seek patent claims narrowly tailored to protect our products specifically, in addition to the broader core antisense patents described above.
29
SPINRAZA and Survival Motor Neuron
We believe SPINRAZA is protected from generic competition in the U.S. until at least 2035 and in Europe until at least 2030 by a suite of
patents. These issued patents include: (i) patents licensed from the University of Massachusetts drawn to antisense compounds having the sequence of SPINRAZA, independent of chemical modification and uses of such compounds for treating SMA, and (ii)
joint patents with Cold Spring Harbor Laboratory claiming fully modified 2’MOE compositions targeting SMN2, including the precise composition of matter of SPINRAZA and methods of using such compositions. We have filed for patent term extension, to
potentially extend the term beyond 2030. With Biogen’s license of SPINRAZA, we assigned our interest in these patents to Biogen. The table below lists some key issued patents protecting SPINRAZA in the U.S. and Europe:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
10,266,822
SPINAL MUSCULAR ATROPHY (SMA) TREATMENT VIA TARGETING OF SMN2 SPLICE SITE INHIBITORY SEQUENCES
2025
Methods of increasing exon-7 containing SMN2 mRNA in a cell using an oligonucleotide having the sequence of SPINRAZA
United States
8,110,560
SPINAL MUSCULAR ATROPHY (SMA) TREATMENT VIA TARGETING OF SMN2 SPLICE SITE INHIBITORY SEQUENCES
2025
Methods of using antisense oligonucleotides having sequence of SPINRAZA to alter splicing of SMN2 and/or to treat SMA
Europe
1910395
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING
2026
Sequence and chemistry (full 2’-MOE) of SPINRAZA
Europe
3308788
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING
2026
Pharmaceutical compositions that include SPINRAZA
United States
7,838,657
SPINAL MUSCULAR ATROPHY (SMA) TREATMENT VIA TARGETING OF SMN2 SPLICE SITE INHIBITORY SEQUENCES
2027
Oligonucleotides having sequence of SPINRAZA
United States
8,361,977
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING
2030
Sequence and chemistry (full 2’-MOE) of SPINRAZA
United States
8,980,853
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING IN A SUBJECT
2030
Methods of administering SPINRAZA
United States
9,717,750
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING IN A SUBJECT
2030
Methods of administering SPINRAZA to a patient
Europe
3449926
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING IN A SUBJECT
2030
Pharmaceutical compositions that include SPINRAZA for treating SMA
Europe
3305302
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING IN A SUBJECT
2030
Antisense compounds including SPINRAZA for treating SMA
United States
9,926,559
COMPOSITIONS AND METHODS FOR MODULATION OF SMN2 SPLICING IN A SUBJECT
2034
SPINRAZA doses for treating SMA
United States
10,436,802
METHODS FOR TREATING SPINAL MUSCULAR ATROPHY
2035
SPINRAZA dosing regimen for treating SMA
30
TEGSEDI and Transthyretin
We believe TEGSEDI is protected from generic competition in the U.S. and Europe until at least 2031. Additional patent applications
designed to protect TEGSEDI in other foreign jurisdictions are being pursued. The table below lists some key issued patents protecting TEGSEDIin the U.S. and Europe:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
8,101,743
MODULATION OF TRANSTHYRETIN EXPRESSION
2025
Antisense sequence and chemistry of TEGSEDI
United States
8,697,860
DIAGNOSIS AND TREATMENT OF DISEASE
2031
Composition of TEGSEDI
United States
9,061,044
MODULATION OF TRANSTHYRETIN EXPRESSION
2031
Sodium salt composition of TEGSEDI
United States
9,399,774
MODULATION OF TRANSTHYRETIN EXPRESSION
2031
Methods of treating transthyretin amyloidosis by administering TEGSEDI
Europe
2563920
MODULATION OF TRANSTHYRETIN EXPRESSION
2031
Composition of TEGSEDI
WAYLIVRA and Apolipoprotein C-III
We have obtained patent claims in the U.S. and Europe drawn to the use of antisense compounds complementary to a broad active region of
human ApoC-III, including the site targeted by WAYLIVRA. We have also obtained issued patents claiming the specific sequence and chemical composition of WAYLIVRA in the U.S. and Europe. We believe the issued claims protect WAYLIVRA from generic
competition in the U.S. and Europe until at least 2023 and 2024, respectively. The table below lists some key issued patents protecting WAYLIVRA in the U.S. and Europe:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
9,624,496
MODULATION OF APOLIPOPROTEIN C-III EXPRESSION
2023
Antisense compounds specifically hybridizable within the nucleotide region of ApoCIII targeted by WAYLIVRA
United States
7,598,227
MODULATION OF APOLIPOPROTEIN C-III EXPRESSION
2023
Methods of treating hyperlipidemia, lowering cholesterol levels or lowering triglyceride levels with WAYLIVRA
United States
7,750,141
MODULATION OF APOLIPOPROTEIN C-III EXPRESSION
2023
Antisense sequence and chemistry of WAYLIVRA
Europe
1622597
MODULATION OF APOLIPOPROTEIN C-III EXPRESSION
2024
Antisense sequence and chemistry of WAYLIVRA
Europe
2441449
MODULATION OF APOLIPOPROTEIN C-III EXPRESSION
2024
Antisense compounds specifically hybridizable within the nucleotide region of ApoCIII targeted by WAYLIVRA
Europe
3002007
MODULATION OF APOLIPOPROTEIN C-III EXPRESSION
2024
Compounds complementary to an ApoCIII nucleic acid for use in therapy
United States
9,157,082
MODULATION OF APOLIPOPROTEIN C-III (APOCIII) EXPRESSION
2032
Methods of using ApoCIII antisense oligonucleotides for reducing pancreatitis and chylomicronemia and increasing HDL
United States
9,593,333
MODULATION OF APOLIPOPROTEIN C-III (APOCIII) EXPRESSION IN LIPOPROTEIN LIPASE DEFICIENT (LPLD) POPULATIONS
2034
Methods of treating lipoprotein lipase deficiency with an ApoCIII specific inhibitor wherein triglyceride levels are reduced
Europe
2956176
MODULATION OF APOLIPOPROTEIN C-III (APOCIII) EXPRESSION IN LIPOPROTEIN LIPASE DEFICIENT (LPLD) POPULATIONS
2034
ApoCIII specific inhibitors including WAYLIVRA for treating lipoprotein lipase deficiency or FCS
31
Eplontersen and
Transthyretin
We believe eplontersen is protected from generic competition
in the U.S. and Europe until at least 2034. Additional patent applications to protect eplontersen in other foreign jurisdictions are being pursued. The table below lists some key issued patents protecting eplontersen in the U.S. and Europe:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
10,683,499
COMPOSITIONS AND METHODS FOR MODULATING TTR EXPRESSION
2034
Composition of eplontersen
Europe
3524680
COMPOSITIONS AND METHODS FOR MODULATING TTR EXPRESSION
2034
Composition of eplontersen
Olezarsen and ApoC-III
We believe olezarsen is protected from generic competition in the U.S. and Europe until at least 2034. Additional patent applications to
protect olezarsen in other foreign jurisdictions are being pursued. The table below lists some key issued patents protecting olezarsen in the U.S. and Europe.
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
9,163,239
COMPOSITIONS AND METHODS FOR MODULATING APOLIPOPROTEIN C-III EXPRESSION
2034
Composition of olezarsen
Europe
2991656
COMPOSITIONS AND METHODS FOR MODULATING APOLIPOPROTEIN C-III EXPRESSION
2034
Composition of olezarsen
Donidalorsen and PKK
We believe donidalorsen is protected from generic competition in the U.S. and Europe until at least 2035. Additional patent applications
to protect donidalorsen in other foreign jurisdictions are being pursued. The table below lists some key issued patents protecting donidalorsen in the U.S. and Europe.
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
9,315,811
METHODS FOR MODULATING KALLIKREIN (KLKB1) EXPRESSION
2032
Methods of treating HAE
Europe
2717923
METHODS FOR MODULATING KALLIKREIN (KLKB1) EXPRESSION
2032
Compounds for use in treating an inflammatory condition, including HAE
United States
10,294,477
COMPOSITIONS AND METHODS FOR MODULATING PKK EXPRESSION
2035
Composition of donidalorsen
Europe
3137091
COMPOSITIONS AND METHODS FOR MODULATING PKK EXPRESSION
2035
Composition of donidalorsen
ION363 and FUS
Patent applications designed to protect ION363 from generic competition are being pursued in the U.S. and Europe. Patents issued from
these applications would have terms until at least 2040. The table below lists some key pending patent applications designed to protect ION363 in the U.S. and Europe:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
17/613,183
COMPOUNDS AND METHODS FOR REDUCING FUS EXPRESSION
2040
Composition of ION363
Europe
20815459.1
COMPOUNDS AND METHODS FOR REDUCING FUS EXPRESSION
2040
Composition of ION363
32
Tofersen and SOD-1
We believe tofersen is protected from generic competition in the U.S. and Europe until at least 2035. Additional patent applications
designed to protect tofersen in other foreign jurisdictions are being pursued. With Biogen’s license of tofersen, we assigned our interest in these patents to Biogen. The
table below lists some key issued patents protecting tofersen in the U.S. and Europe:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
10,385,341
COMPOSITIONS FOR MODULATING SOD-1 EXPRESSION
2035
Composition of tofersen
United States
10,669,546
COMPOSITIONS FOR MODULATING SOD-1 EXPRESSION
2035
Methods of treating a SOD-1 associated neurodegenerative disorder by administering tofersen
United States
10,968,453
COMPOSITIONS FOR MODULATING SOD-1 EXPRESSION
2035
Methods of treating a SOD-1 associated neurodegenerative disorder by administering a pharmaceutical composition of tofersen
Europe
3126499
COMPOSITIONS FOR MODULATING SOD-1 EXPRESSION
2035
Composition of tofersen
Pelacarsen and Apo(a)
We believe pelacarsen is protected from generic competition
in the U.S. and Europe until at least 2034. Additional patent protection designed to protect pelacarsen in other foreign jurisdictions are being pursued. The table below lists some key issued patents protecting pelacarsen in the U.S. and Europe:
Jurisdiction
Patent No.
Title
Expiration
Description of Claims
United States
9,574,193
METHODS AND COMPOSITIONS FOR MODULATING APOLIPOPROTEIN (A) EXPRESSION
2033
Methods of lowering Apo(a) and/or Lp(a) levels with an oligonucleotide
complementary within the nucleotide region of Apo(a) targeted by pelacarsen
United States
10,478,448
METHODS AND COMPOSITIONS FOR MODULATING APOLIPOPROTEIN (A) EXPRESSION
2033
Methods of treating hyperlipidemia with an oligonucleotide complementary
within the nucleotide region of Apo(a) targeted by pelacarsen
United States
9,884,072
METHODS AND COMPOSITIONS FOR MODULATING APOLIPOPROTEIN (A) EXPRESSION
2033
Oligonucleotides complementary within the nucleotide region of Apo(a) targeted by pelacarsen
Europe
2855500
METHODS AND COMPOSITIONS FOR MODULATING APOLIPOPROTEIN (A) EXPRESSION
2033
Oligonucleotides complementary within the nucleotide region of Apo(a) targeted by pelacarsen for decreasing Apo(a) expression
United States
9,181,550
COMPOSITIONS AND METHODS FOR MODULATING APOLIPOPROTEIN (a) EXPRESSION
2034
Composition of pelacarsen
Europe
2992009
COMPOSITIONS AND METHODS FOR MODULATING APOLIPOPROTEIN (a) EXPRESSION
2034
Composition of pelacarsen
We seek patent protection in significant markets and/or countries for each medicine in development. We also seek to maximize patent term.
In some cases, the patent term can be extended to recapture a portion of the term lost during FDA regulatory review. The patent exclusivity period for a medicine will prevent generic medicines from entering the market. Patent exclusivity depends on a
number of factors including initial patent term and available patent term extensions based upon delays caused by the regulatory approval process.
33
Manufacturing Patents
We also own patents claiming methods of manufacturing and purifying oligonucleotides. These patents claim methods for improving
oligonucleotide drug manufacturing, including processes for large-scale oligonucleotide synthesis and purification. These methods allow us to manufacture oligonucleotides at lower cost by, for example, eliminating expensive manufacturing steps.
We also rely on trade secrets, proprietary know-how and continuing technological innovation to develop and maintain a competitive position
in antisense therapeutics.
Government Regulation
Regulation by government authorities in the U.S. and other countries is a significant component in the development, manufacture and
commercialization of pharmaceutical products and services. In addition to regulations enforced by the FDA and relevant foreign regulatory authorities, we are also subject to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state and local regulations.
Extensive regulation by the U.S. and foreign governmental authorities governs the development, manufacture and sale of our medicines. In
particular, our medicines are subject to a number of approval requirements by the FDA in the U.S. under the Federal Food, Drug and Cosmetic Act, or FDCA, and other laws and by comparable agencies in those foreign countries in which we conduct business.
The FDCA and other various federal, state and foreign statutes govern or influence the research, testing, manufacture, safety, labeling, storage, recordkeeping, approval, promotion, marketing, distribution, post-approval monitoring and reporting,
sampling, quality, and import and export of our medicines. State, local, and other authorities also regulate pharmaceutical manufacturing facilities and procedures.
Our manufacturing facility and our CMOs are subject to periodic inspection by the FDA and other foreign equivalents to ensure that they
are operating in compliance with cGMP requirements. In addition, marketing authorization for each new medicine may require a rigorous manufacturing pre-approval inspection by regulatory authorities. Post approval, there are strict regulations regarding
changes to the manufacturing process, and, depending on the significance of the change, changes may require prior FDA approval. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation
requirements upon us and any third-party manufacturers that we may decide to use.
The FDA must approve any new medicine before a manufacturer can market it in the U.S. In order to obtain approval, we and our partners
must complete clinical studies and prepare and submit an NDA to the FDA. If the FDA approves a medicine, it will issue an approval letter authorizing commercial marketing of the medicine and may require a risk evaluation and mitigation strategy, or
REMS, to help ensure the benefits of the medicine outweigh the potential risks. For example, TEGSEDI has a REMS program. The requirements for REMS can materially affect the potential market and profitability of our medicines. In foreign jurisdictions,
the drug approval process is similarly demanding.
For any approved medicine, domestic and foreign sales of the medicine depend, in part, on the availability and amount of coverage and
adequate reimbursement by third-party payers, including governments and private health plans. The process for determining whether a payer will provide coverage for a product may be separate from the process for setting the reimbursement rate that the
payer will pay for the product, or procedures which utilize such product. Private health plans may seek to manage cost and use of our medicines by implementing coverage and reimbursement limitations. For example, third-party payers may limit coverage
to specific products on an approved list, or formulary, which might not include all U.S. FDA-approved products for a particular indication. In certain jurisdictions, governments may also regulate or influence coverage, reimbursement and/or pricing of
our medicines to control cost or affect use. Within the EU a variety of payers pay for medicines, with governments being the primary source of payment. Negotiating pricing with governmental authorities can delay commercialization. Such pricing and
reimbursement factors could impact our ability and that of our commercial partners to successfully commercialize approved medicines. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
34
Both the federal and state governments in the U.S. and foreign governments continue to propose and pass new legislation and regulations
designed to contain or reduce the cost of healthcare. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to
Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential
legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. Congress is also
considering additional health reform measures that may result in decreased reimbursement, which may further exacerbate industry-wide pressure to reduce the prices charged for medical products.
There has also been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which
has resulted in efforts to bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for medicines. For example, in August 2022,
President Biden signed the Inflation Reduction Act of 2022, or the IRA, into law, which includes key actions aimed at reducing the costs of prescription drugs and allows HHS to negotiate the price of certain single-source drugs covered under Medicare
and establish a price cap on such drugs, known as the Maximum Fair Price. It is currently unclear how the IRA will be effectuated but it is likely to have a significant impact on the pharmaceutical industry. There are important exemptions to the
Maximum Fair Price, including for medications that are orphan drug designated and approved for only one rare disease, and drugs with low Medicare spend as defined by the Centers for Medicare & Medicaid Services. In an effort to curb Medicare
patients’ out-of-pocket costs for prescription drugs, the Part D redesign legislation requires manufacturers to contribute to the catastrophic coverage phase for Part D drugs as discounts through a manufacturer discount program. Furthermore, any
reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payers. Our future product sales may be subject to additional discounts from list price in the form of rebates and
discounts provided to 340B covered entities. Changes to the 340B program or to Medicare or Medicaid programs at the federal or state level, including outcomes of ongoing litigation in our industry, may impact our product prices and rebate liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Drug Supply Chain Security Act, or DSCA, which
regulates the distribution and tracing of prescription drugs and prescription drug samples at the federal level and sets minimum standards for the regulation of drug distributors by the states. The DSCA imposes requirements to ensure accountability in
distribution and to identify and remove counterfeit and other illegitimate products from the market.
Other healthcare laws that may affect our ability to operate include, for example, the following:
●
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act,
which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information;
●
Foreign and state laws governing the privacy and security of health information, such as the General Data Protection Regulation, or GDPR, in the EU; and the California
Consumer Privacy Act, or CCPA, in California, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect; and
●
The Physician Payments Sunshine Act, which requires manufacturers of medicines, devices, biologics, and medical supplies to report annually to the HHS information related
to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare providers (such as physician assistants and nurse practitioners), and teaching
hospitals, and ownership and investment interests held by physicians and their immediate family members.
Sales and Marketing
Numerous regulatory authorities in addition to the FDA, including, in the U.S., the Centers for Medicare and Medicaid Services, other
divisions of the HHS, the U.S. Department of Justice, and similar foreign, state and local government authorities, regulate sales, promotion and other activities following drug approval. As described above, the FDA regulates all advertising and
promotion activities for drugs under its jurisdiction both prior to and after approval. Only those claims relating to safety and efficacy that the FDA has approved may be used in labeling. Physicians may prescribe legally available drugs for uses that
are not described in the drug’s labeling and that differ from those we tested and the FDA approved. Such off-label uses are common across medical specialties and often reflect a physician’s belief that the off-label use is the best treatment for the
patients. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers’ communications regarding off-label uses. If we do not comply with applicable FDA
requirements, we may face adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the FDA. Promotion of off-label uses of drugs can also implicate the
false claims laws described below.
35
In the U.S. sales, marketing and scientific/educational programs must also comply with various federal and state laws pertaining to
healthcare “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of
business, including the purchase or prescription of a particular drug. Due to the breadth of the statutory provisions, limited statutory exceptions and regulatory safe harbors, and the absence of guidance in the form of regulations and very few court
decisions addressing industry practices, it is possible that our practices might be challenged under anti-kickback or similar laws. Moreover, recent healthcare reform legislation has strengthened these laws. For example, the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes to clarify that a
person or entity does not need to have actual knowledge of this statute or specific intent to violate it. In addition, the Affordable Care Act clarifies that the government may assert that a claim that includes items or services resulting from a
violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment, to
third-party payers (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities
relating to the sale and marketing of our drugs may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of
exclusion from federal healthcare programs (including Medicare and Medicaid) and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties also can
be imposed upon executive officers and employees, including criminal sanctions against executive officers under the so-called “responsible corporate officer” doctrine, even in situations where the executive officer did not intend to violate the law and
was unaware of any wrongdoing.
Given the significant penalties and fines that can be imposed on companies and individuals if convicted, allegations of such violations
often result in settlements even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and corporate integrity agreements. If the
government were to allege or convict us or our executive officers of violating these laws, our business could be harmed. In addition, private individuals can bring similar actions. Our activities could be subject to challenge for the reasons discussed
above and due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities. Other healthcare laws that may affect our ability to operate include HIPAA, which prohibits, among other things, executing
or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, also governs the conduct
of certain electronic healthcare transactions and protects the security and privacy of protected health information; analogous state laws governing the privacy and security of health information, some of which are more stringent than HIPAA and many of
which differ from each other in significant ways and may not have the same effect, and the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics, and medical supplies to report annually to the HHS information
related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members. Further, there are an increasing number of
state laws that require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. Given the lack of clarity in laws and their implementation, our
reporting actions could be subject to the penalty provisions of the pertinent state authorities.
Similar rigid restrictions are imposed on the promotion and marketing of drugs in the E.U. and other countries. Even in those countries
where we may not be directly responsible for the promotion and marketing of our medicines, if our potential international distribution partners engage in inappropriate activity, it can have adverse implications for us.
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits certain individuals and entities, including us, from promising, paying,
offering to pay, or authorizing the payment of anything of value to any foreign government official, directly or indirectly, to obtain or retain business or an improper advantage. If we violate the FCPA, it could result in large civil and criminal
penalties as well as an adverse effect on our reputation, operations, and financial condition. We could also face collateral consequences such as debarment and the loss of export privileges.
Competition
Our Business in General
Some of our medicines may compete with existing therapies for market share and some of our medicines in development may compete for
patients in clinical trials. In addition, there are a number of companies pursuing the development of genetic medicines and the development of pharmaceuticals utilizing these technologies. These companies include biopharmaceutical companies and large
pharmaceutical companies acting either independently or together. Our medicines are differentiated from traditional small molecule medicines by their chemistry, how they move in the body, how they act in the body, delivery technology, and formulations.
36
Our approved medicines and our medicines under development address numerous markets. The diseases our medicines target for which we have
or may receive marketing authorization will determine our competition. For some of our medicines, an important factor may be the timing of market introduction of competitive products. Accordingly, the relative speed with which we can develop medicines,
complete the clinical trials and marketing authorization processes and supply commercial quantities of the medicines to the market are important competitive factors. We expect to compete with products approved for sale based on a variety of factors,
including, among other things, product efficacy, safety, mechanism of action, dosing administration, marketing and sales strategy and tactics, availability, price, and reimbursement.
Below we have included what we believe to be medicines that compete or may compete directly with our marketed medicines and the medicines
we currently have in Phase 3 trials. We included competitors, potential competitors that are past Phase 1 development or potential competitors that plan to start a pivotal study this year. We do not believe that any medicines meet these criteria to compete with ION363.
SPINRAZA
We consider the following medicines as competitors to SPINRAZA for the indication of SMA:
Medicine
Company
Medicine Description (1)
Phase (1)
Route of Administration (1)
Zolgensma
(Onasemnogene abeparvovec)
Novartis
Gene therapy targeting the genetic root cause of SMA by replacing the missing or nonworking SMN1 gene
Approved for pediatric SMA patients less than 2 years of age
Intravenous infusion
Evrysdi
(Risdiplam)
Roche
A small molecule medicine that modulates splicing of the SMN2 gene
Approved for SMA in pediatric and adult patients
Oral
(1)
Taken from public documents including respective company press releases, company presentations, and scientific presentations.
TEGSEDI and Eplontersen
We consider the following medicines as competitors and potential future competitors to TEGSEDI and eplontersen for the indication of hATTR
amyloidosis and/or ATTR cardiomyopathy:
Medicine
Company
Medicine Description (1)
Phase (1)
Route of Administration (1)
Onpattro
(Patisiran)
Alnylam
An RNAi medicine formulated with lipid nanoparticles to inhibit TTR mRNA
Approved ATTRv-PN/
Submitted in the U.S. for ATTR-CM
Intravenous infusion
Vyndaqel/Vyndamax
(Tafamidis and tafamidis meglumine)
Pfizer
A small molecule medicine to stabilize TTR protein
Approved in EU, Japan and select other markets for ATTRv-PN;
Approved in U.S., EU, Japan and select other markets for ATTR-CM; indications vary by region
Oral
Amvuttra
(Vutrisiran)
Alnylam
An RNAi medicine conjugated with GalNAc to inhibit TTR mRNA
Approved for ATTRv-PN in the U.S., Submitted in the EU for ATTRv-PN, Phase 3 for ATTR-CM
Subcutaneous Injection
Acoramidis
BridgeBio
Small molecule that binds and stabilizes TTR in the blood
Phase 3 ATTR-CM
Oral
(1)
Taken from public documents including respective company press releases, company presentations, and scientific presentations.
37
WAYLIVRA and Olezarsen
We believe that the following medicines could compete with WAYLIVRA and olezarsen in FCS and SHTG:
Medicine
Company
Medicine Description (1)
Phase (1)
Route of Administration (1)
ARO-APOC3
Arrowhead Pharmaceuticals
Targets APOCIII by utilizing Targeted RNAi Molecule Platform
Phase 3 FCS,
Phase 2 SHTG
Subcutaneous Injection
Lomitapide
Amryt Pharma
Microsomal triglyceride transfer protein (MTP) inhibitor
Phase 2 FCS (investigator led)
Oral
Pegozafermin
89bio
FGF21 analog
Phase 2 SHTG
Subcutaneous Injection
(1)
Taken from public documents including respective company press releases, company presentations, and scientific presentations.
Donidalorsen
We believe that the following medicines could compete with donidalorsen as a prophylactic treatment for patients with HAE:
Medicine
Company
Medicine Description (1)
Phase (1)
Route of Administration (1)
Takhzyro
(lanadelumab-flyo)
Takeda
A monoclonal antibody that inhibits plasma kallikrein activity
Approved for HAE patients 12 years and older
Subcutaneous Infusion
Cinryze
(C1 esterase inhibitor)
Takeda
A human plasma protein that mediates inflammation and coagulation
Approved for HAE patients six years and older
Intravenous Infusion
Orladeyo
(berotralstat)
BioCryst
Oral plasma kallikrein inhibitor
Approved for HAE patients 12 years and older
Oral
Haegarda
(C1 esterase inhibitor)
CSL Behring
C1 esterase inhibitor
Approved for HAE patients six years and older
Subcutaneous Injection
garadacimab
CSL Behring
An anti-factor XIIa monoclonal antibody
Phase 3
Subcutaneous Injection
NTLA-2002
Intellia
CRISPR therapeutic candidate designed to inactivate the kallikrein B1 gene
Phase 1/2
Intravenous Infusion
(1)
Taken from public documents including respective company press releases, company presentations, and scientific presentations.
Pelacarsen
We believe that the following medicines could compete with pelacarsen in CVD in patients with elevated LP(a):
Medicine
Company
Medicine Description (1)
Phase (1)
Route of Administration (1)
Olpasiran
Amgen/ Arrowhead Pharmaceuticals
RNAi therapeutic designed to lower Lp(a)
Phase 3
Subcutaneous Injection
SLN360
Silence Therapeutics
RNAi therapeutic designed to lower Lp(a)
Phase 2
Subcutaneous Injection
(1)
Taken from public documents including respective company press releases, company presentations, and scientific presentations.
38
Tofersen
We believe that the following medicine could compete with tofersen in SOD1-ALS:
Medicine
Company
Medicine Description (1)
Phase (1)
Route of Administration (1)
NI-204
Neurimmune
A human derived antibody targeting misfolded SOD1
Phase 2
Intravenous Infusion
(1)
Taken from public documents including respective company press releases, company presentations, and scientific presentations.
ION363
We believe there is no medicine in clinical development for FUS-ALS.
Environmental, Social and Governance Initiatives
We recognize the importance of Environmental, Social and Governance, or ESG, initiatives as it relates to our business strategy and risk
assessment. During 2021 and 2022, we took steps to formalize our corporate responsibility program and capture and report on the impact of our ESG efforts. In December 2022, we issued our latest corporate responsibility report. As part of our ongoing
work, we identified the following corporate responsibility initiatives that we believe are most important to our business:
●
Safety of patients in clinical trials;
●
Product quality and safety and supply chain management;
●
Access to medicines and tackling untreatable diseases;
●
Environmental sustainability;
●
Human resource management;
●
Diversity, equity and inclusion;
●
Employee health and safety; and
●
Governance and business ethics
We continue to build our corporate responsibility program and ESG framework to support our ongoing commitment to operate our business
responsibly and sustainably. In 2022, we established a formal Corporate Responsibility Steering Committee, or Committee, to ensure we develop the right programs and policies to continue to integrate ESG across our organization. Our corporate
responsibility initiatives, policies and programs are reviewed on a regular basis by the Committee and its recommendations are key to driving efforts to advance our corporate responsibility strategy to support our growth.
The Committee reports to our Chief Executive Officer and consists of senior leaders in key functions across the company, including legal,
finance, human resources and corporate affairs. The Committee is now part of our governance framework, which defines responsibilities and ensures we have the right systems and controls to oversee ethical and sustainable operations across our business.
The Committee periodically updates our executive leadership and the appropriate committees of our Board of Directors on our ongoing ESG efforts.
We look to our stakeholders and third-party frameworks such as the Sustainability Accounting Standards Board Health Care – Biotechnology
and Pharmaceuticals Standard and the Task Force on Climate-Related Financial Disclosures to inform our approach and our disclosures.
We encourage you to view our 2022
Corporate Responsibility Report published on our website for more detailed information regarding our ESG initiatives. Nothing in the report or on our website shall be deemed incorporated by reference into this Annual Report on Form 10-K.
39
Employees & Human Capital
As of February 16, 2023, we
employed 796 people, the vast majority of whom reside in the U.S. A significant number of our management and professional employees have had prior experience with pharmaceutical, biotechnology or medical product companies. Our average employee turnover
rate in 2022 was 13 percent, while the turnover for life sciences and medical device companies over this period was 23 percent according to a survey published by Radford – an Aon Hewitt Company. Given the uniqueness and complexity of our technology, it
is critical to retain the knowledge and experience of outstanding long service employees. The experience and seniority of our employees is as critical to our future success as it has been to the success we have enjoyed to date.
Collective bargaining agreements do not cover any of our employees, and management considers relations with our employees to be good. We
believe that the future will be defined by outstanding people and we are committed to recruiting, developing, motivating, and rewarding them.
We encourage you to visit our website for more detailed information regarding our Human Capital programs and initiatives. Nothing on our
website shall be deemed incorporated by reference into this Annual Report on Form 10-K.
Benefits
We reward our employees individually on the basis of their responsibilities and accomplishments. We offer competitive compensation and
benefits to our employees. In addition to salary and bonus programs, we also offer:
●
Comprehensive medical, dental and vision insurance;
●
401(k) matching;
●
Stock options, RSUs and an Employee Stock Purchase Plan, or ESPP;
●
Vacation, holiday, sick time and paid time off for volunteering;
●
Wellness programs;
●
Flexible spending accounts for health and dependent day care needs;
●
Life, AD&D insurance and long-term disability insurance coverage options; and
●
Employee Assistance Program, or EAP.
We recognize achievements with salary increases, equity awards, promotions, and bonus opportunities.
Pay Equity
We are committed to paying our employees fairly, regardless of their gender, race, or other personal characteristics. To ensure we are
achieving our commitment, we benchmark and evaluate pay based on market data and consider factors such as an employee’s role and experience, an employee’s performance and internal equity. We also regularly review our compensation practices, in terms of
our overall workforce and individual employees, to ensure our pay is fair and equitable.
In 2021, we engaged an independent third-party expert to perform a pay equity analysis that reviewed pay equity by gender, race and age.
The results of this analysis did not reveal any pay gaps based on gender, race or age. We plan to continue to engage a third-party expert to review pay equity and report on this analysis as required by future reporting requirements. In 2022, we
performed an internal analysis, leveraging our biostatistics team. The analysis showed similar results to the analysis performed in 2021. In addition, we are implementing a comprehensive plan to comply with the new California pay transparency law that
went into effect on January 1, 2023.
Diversity, Equity and Inclusion
At Ionis, we encourage diversity in our workforce. Prejudicial barriers to human potential and productivity are foreign to our values.
We recognize that for the full potential of our workforce to be realized, we must cultivate an inclusive culture where all employees feel empowered to contribute fully in an environment that values different perspectives, leading to better
ideas and increased innovation. We have several employee-led resource groups dedicated to different aspects of diversity and a diverse management team and board of directors.
Training and Development
We designed our training and development programs to help employees gain important Ionis knowledge and develop the skills to be successful
at Ionis. All of our trainings from new hire through senior leader, are focused on the Ionis culture and core principles and learning what we mean when we say: “Working the Ionis Way.”
40
We empower our employees to build rewarding careers at Ionis, driven by a culture of having a bias to act that encourages personal and
professional employee growth. Ionis offers robust training opportunities with course offerings and events available to every employee regardless of level or function. In addition, employees also have access to Ionis’ learning and development library
that houses important information on career growth and planning. By supporting our employees, we know that each professional development milestone enables our continued success.
Information about our Executive Officers
The following sets forth certain information regarding our executive officers as of February 16, 2023:
Dr. Monia was promoted to Chief Executive Officer in January 2020. From January 2018 to December 2019, Dr. Monia served as Chief
Operating Officer. From January 2012 to January 2018, Dr. Monia served as Senior Vice President. From February 2009 to January 2012, Dr. Monia served as our Vice President, Drug Discovery and Corporate Development and from October 2000 to February
2009, he served as our Vice President, Preclinical Drug Discovery. From October 1989 to October 2000 he held various positions within our Molecular Pharmacology department.
JOSEPH T. BAROLDI
Executive Vice President, Chief Business Officer
Mr. Baroldi has served as Ionis’ Executive Vice President, Chief Business Officer since January 2022. Prior to Ionis, Mr. Baroldi was the
chief operating officer at Avidity Biosciences, a biotechnology company focused on oligonucleotide-based therapies. Prior to Avidity, Mr. Baroldi was Vice President, Business Development at Ionis, where he held several roles of increasing
responsibility from 2009 to 2020. Mr. Baroldi has also held positions in strategic planning and scientific research for Gen-Probe Inc.
Dr. Bennett has served as Ionis’ Executive Vice President, Chief Scientific Officer since April 2020. In January 2020, Dr. Bennett was
promoted to Chief Scientific Officer. From January 2006 to December 2019, Dr. Bennett served as Senior Vice President, Antisense Research. From June 1995 to January 2006, Dr. Bennett served as our Vice President, Research. From March 1993 to June 1995,
he was Director, Molecular Pharmacology, and from May 1992 to March 1993, he was an Associate Director in our Molecular and Cellular Biology department. Prior to joining Ionis in 1989, Dr. Bennett was employed by SmithKline and French Laboratories in
various research positions. He is a member of the Board of Directors for Flamingo Therapeutics and an external member of the Hereditary Disease Foundation.
ONAIZA CADORET-MANIER
Executive Vice President, Chief Global Product Strategy and Operations Officer
Ms. Cadoret-Manier has served as Ionis’ Executive Vice
President, Chief Product Strategy and Operations Officer since February 2022. From April 2020 to February 2022, Ms. Cadoret-Manier served as our Executive Vice President, Chief Corporate Development and Commercial Officer. Ms. Cadoret-Manier joined Ionis as Chief Corporate Development and Commercial Officer in January 2020. Prior to joining Ionis, from 2018 to 2019 Ms. Cadoret-Manier was the chief
commercial officer for Grail Biosciences, an early detection genomics company. Prior to Grail, Ms. Cadoret-Manier was vice president of the Respiratory Franchise at Genentech where she worked from 2011 to 2018. Ms. Cadoret-Manier also has held
multiple senior management positions overseeing corporate strategy, alliances, and marketing and sales for numerous disease areas for Genentech, Pfizer and Amylin Pharmaceuticals.
41
RICHARD S. GEARY, Ph.D.
Executive Vice President, Chief Development Officer
Dr. Geary has served as Ionis’ Executive Vice President, Chief Development Officer since January 2021. From April 2020 to December 2020,
Dr. Geary served as our Executive Vice President, Development and from August 2008 to March 2020, was our Senior Vice President, Development. From August 2003 to August 2008, Dr. Geary served as our Vice President, Preclinical Development. From
November 1995 to August 2003, he held various positions within the Preclinical Development department. Prior to joining Ionis in 1995, Dr. Geary was Senior Research Scientist and Group Leader for the bioanalytical and preclinical pharmacokinetics group
in the Applied Chemistry Department at Southwest Research Institute.
Executive Vice President, Finance and Chief Financial Officer
Ms. Hougen has served as Ionis’ Executive Vice President and Chief Financial Officer since April 2020. From January 2013 to March 2020,
Ms. Hougen served as our Senior Vice President, Finance and Chief Financial Officer. From January 2007 to December 2012, Ms. Hougen served as our Vice President, Finance and Chief Accounting Officer and from May 2000 to January 2007, she served as our
Vice President, Finance. Prior to joining Ionis in 2000, Ms. Hougen was Executive Director, Finance and Chief Financial Officer for Molecular Biosystems, Inc., a public biotechnology company.
PATRICK R. O’NEIL, Esq.
Chief Legal Officer, General Counsel and Corporate Secretary
Mr. O’Neil has served as Ionis’ Chief Legal Officer and General Counsel since September 2021. Mr. O’Neil also serves as our Corporate
Secretary. From March 2020 to September 2021, Mr. O’Neil served as our Executive Vice President, Legal & General Counsel and Chief Compliance Officer. From January 2013 to March 2020, Mr. O’Neil served as our Senior Vice President, Legal and
General Counsel. From September 2010 to January 2013, Mr. O’Neil served as our Vice President, Legal and General Counsel and from January 2009 to September 2010, he served as our Vice President, Legal and Senior Transactions Counsel. From October 2001
to January 2009 he held various positions within our Legal department. Prior to joining Ionis, Mr. O’Neil was an associate at Cooley LLP.
EUGENE SCHNEIDER, M.D.
Executive Vice President, Chief Clinical Development Officer
Dr. Schneider was promoted to Executive Vice President and Chief Clinical Development Officer of Ionis in January 2021. From August 2018
to December 2020, Dr. Schneider served as our Senior Vice President, Head of Clinical Development. From April 2015 to July 2018, Dr. Schneider was our Vice President, Clinical Development, Severe and Rare Diseases. Dr. Schneider joined Ionis in
December 2013 as Executive Director, Clinical Development. Dr. Schneider has two decades of experience in clinical development primarily in the rare diseases space. Prior to joining Ionis, Dr. Schneider was senior medical director at both Synageva
BioPharma and Biovail Technologies Ltd.
ERIC E. SWAYZE, Ph.D.
Executive Vice President, Research
Dr. Swayze has served as Ionis’ Executive Vice President, Research since April 2020 and is responsible for leading preclinical antisense
drug discovery and antisense technology research. In January 2020, Dr. Swayze was promoted to Senior Vice President of Research. Previously, Dr. Swayze was Vice President of Chemistry and Neuroscience Drug Discovery at Ionis, overseeing the
advancement of multiple programs to clinical development. He joined Ionis in 1994 and has contributed to key technology advancements, including Ionis’ Generation 2.5 chemistry and LICA technology.
42
Item 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the following information
about the risks described below, together with the other information contained in this report and in our other public filings in evaluating our business. If any of the following risks actually occur, our business could be materially harmed, and our
financial condition and results of operations could be materially and adversely affected. As a result, the trading price of our securities could decline, and you might lose all or part of your investment.
Risks Related to the Commercialization of our Medicines
We have limited experience as a company in commercializing medicines and we will have to invest significant resources to develop our
capabilities. If we are unable to establish effective marketing, sales, market access, distribution, and related functions, or enter into agreements with third parties to commercialize our medicines, we may not be able to generate revenue from our
medicines.
We currently rely on third parties for the commercialization of our marketed medicines, have limited experience as a company in
commercializing medicines and we will have to invest significant financial and management resources to develop the infrastructure required to successfully commercialize our medicines. There are significant risks involved in building and managing a
sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and
marketing team. We will also need to scale-up existing internal support functions to aid our commercialization efforts, in particular, regulatory affairs and medical affairs. Any failure to effectively build or maintain the infrastructure required to
successfully commercialize our medicines, including our sales, marketing, market access, distribution, and related capabilities, or scale-up our existing support functions, could adversely impact the revenue we generate from our medicines. In
addition, if we choose to rely on third parties to assist us in commercializing our medicines, we may not be able to enter into collaborations or hire consultants or external service providers on acceptable financial terms, or at all. If we continue
to engage third parties to assist us in the commercialization of our medicines, our product revenues and profitability may be lower than if we commercialized such medicines ourselves.
If the market does not accept our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our medicines in
development, we are not likely to generate substantial revenues or become consistently profitable.
Even if our medicines are authorized for marketing, our success will depend upon the medical community, patients and third-party payers
accepting our medicines as medically useful, cost-effective, safe and convenient. Even when the FDA or foreign regulatory authorities authorize our or our partners’ medicines for commercialization, doctors may not prescribe our medicines to treat
patients. Furthermore, we and our partners may not successfully commercialize additional medicines.
Additionally, in many of the markets where we or our partners
may sell our medicines in the future, if we or our partners cannot agree with the government or other third-party payers regarding the price we can charge for our medicines, we may not be able to sell our medicines in that market. Similarly, cost
control initiatives by governments or third-party payers could decrease the price received for our medicines or increase patient coinsurance to a level that makes our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our
medicines in development, economically unviable. If the pricing of any of our medicines decreases for any reason, it will reduce our revenue for such medicine. For example, Biogen has disclosed that SPINRAZA revenue has decreased in part due
to lower pricing in the U.S. and certain rest of world markets.
The degree of market acceptance for our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our medicines in
development, depends upon a number of factors, including the:
●
receipt and scope of marketing authorizations;
●
establishment and demonstration in the medical and patient community of the efficacy and safety of our medicines and their potential advantages over competing products;
●
cost and effectiveness of our medicines compared to other available therapies;
●
patient convenience of the dosing regimen for our medicines; and
●
reimbursement policies of government and third-party payers.
Based on the profile of our medicines, physicians, patients, patient advocates, payers or the medical community in general may not accept
or use any of the medicines that we may develop.
43
For example, TEGSEDI requires periodic blood and urine monitoring, is available in the U.S. only through a REMS program, and the product
label in the U.S. has a boxed warning for thrombocytopenia and glomerulonephritis. Our main competitors in the U.S. market for TEGSEDI are patisiran and vutrisiran, both marketed by Alnylam Pharmaceuticals, Inc. Neither patisiran nor vutrisiran has a
boxed warning nor does either require use of a REMS program. Additionally, the product label for WAYLIVRA in the European Union, or EU, requires regular blood monitoring. In each case, these label requirements have negatively affected our ability to
attract and retain patients for these medicines. If we or our partner cannot effectively maintain patients on TEGSEDI or WAYLIVRA, including due to limitations or restrictions on the ability to conduct periodic blood and urine monitoring of our
patients as a result of the COVID-19 pandemic, we may not be able to generate substantial revenue from TEGSEDI or WAYLIVRA sales.
If government or other third-party payers fail to provide adequate coverage and payment rates for our medicines, including SPINRAZA, TEGSEDI,
WAYLIVRA, eplontersen and tofersen, and our medicines in development, our revenue will be limited.
In both domestic and foreign markets, sales of our current and future products will depend in part upon the availability of coverage and
reimbursement from third-party payers. The majority of patients in the U.S. who would fit within our target patient populations for our medicines have their healthcare supported by a combination of Medicare coverage, other government health programs
such as Medicaid, managed care providers, private health insurers and other organizations. Coverage decisions may depend upon clinical and economic standards that disfavor new medicines when more established or lower cost therapeutic alternatives are
already available or subsequently become available. Assuming coverage is approved, the resulting reimbursement payment rates might not be enough to make our medicines affordable. Even if favorable coverage status and adequate reimbursement rates are
attained, less favorable coverage policies and reimbursement rates may be implemented in the future. Accordingly, SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our medicines in development, will face competition from other therapies and
medicines for limited financial resources. We or our partners may need to conduct post-marketing studies to demonstrate the cost-effectiveness of any future products to satisfy third-party payers. These studies might require us to commit a significant
amount of management time and financial and other resources. Third-party payers may never consider our future products as cost-effective. Adequate third-party coverage and reimbursement might not be available to enable us to maintain price levels
sufficient to realize an appropriate return on investment in product development.
Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of
controlling healthcare costs. In addition, in the U.S., no uniform policy of coverage and reimbursement for medicines exists among third-party payers. Therefore, coverage and reimbursement for medicines can differ significantly from payer to payer. For
example, the Affordable Care Act, or ACA, was passed in March 2010, and substantially changed the way healthcare is financed by both governmental and private insurers and continues to significantly impact the U.S. pharmaceutical industry. There have
been judicial and Congressional challenges to certain aspects of the ACA, as well as efforts to repeal or replace certain aspects of the ACA. It is unclear how future litigation and healthcare reform measures will impact the ACA and our business.
Further, we believe that future coverage, reimbursement and pricing will likely be subject to increased restrictions both in the U.S. and
in international markets. In the U.S., recent health reform measures have resulted in reductions in Medicare and other healthcare funding, and there have been several recent U.S. Congressional inquiries, legislation and executive orders designed to,
among other things, reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and foster scientific innovation to promote better health care and improved health. In addition, the IRA, among other things, allows HHS to
negotiate the price of certain single-source drugs covered under Medicare and imposes rebates under Medicare Part B and Medicare Part D. In an effort to curb Medicare patients’ out-of-pocket costs for prescription drugs, the Part D redesign legislation
requires manufacturers to contribute to the catastrophic coverage phase for Part D drugs as discounts through a manufacturer discount program. Furthermore, any reduction in reimbursement from Medicare and other government programs may result in a
similar reduction in payments from private payers. Our future product sales may be subject to additional discounts from list price in the form of rebates and discounts provided to 340B covered entities. Changes to the 340B program or to Medicare or
Medicaid programs at the federal or state level, including outcomes of ongoing litigation in our industry, may impact our product prices and rebate liability. Further, the Biden administration released an executive order on October 14, 2022, directing
HHS to submit a report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. It is unclear whether or how this executive order or similar
policy initiatives will be implemented in the future.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from
other countries and bulk purchasing. Third-party coverage and reimbursement for medicines may not be available or adequate in either the U.S. or international markets, which would negatively affect the potential commercial success of our products, our
revenue and our profits.
44
If we or our partners fail to compete effectively, our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our
medicines in development, will not generate significant revenues.
Our competitors engage in drug discovery throughout the world, are numerous, and include, among others, major pharmaceutical companies and
specialized biopharmaceutical firms. In addition, other companies are engaged in developing RNA-targeted technology. Our competitors may succeed in developing medicines that are:
●
priced lower than our medicines;
●
reimbursed more favorably by government and other third-party payers than our medicines;
●
safer than our medicines;
●
more effective than our medicines; or
●
more convenient to use than our medicines.
These competitive developments could make our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our
medicines in development, obsolete or non-competitive.
Certain of our partners are pursuing other technologies or developing other medicines either on their own or in collaboration with others,
including our competitors, to treat some of the same diseases our own collaborative programs target. Competition may negatively impact a partner’s focus on and commitment to our medicines and, as a result, could delay or otherwise negatively affect the
commercialization of our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen.
Many of our competitors have substantially greater financial, technical and human resources than we do. In addition, many of these
competitors have significantly greater experience than we do in conducting preclinical testing and human clinical studies of new pharmaceutical products, in obtaining FDA and other regulatory authorizations of such products and in commercializing such
products. Accordingly, our competitors may succeed in obtaining regulatory authorization for products earlier than we do or more successfully commercialize their products.
There are several pharmaceutical and biotechnology companies engaged in the development or commercialization in certain geographic markets
of products against targets that are also targets of products in our development pipeline. For example:
●
Onasemnogene abeparvovec and risdiplam compete with SPINRAZA;
●
Patisiran, tafamidis, tafamidis meglumine and vutrisiran compete with TEGSEDI and could compete with eplontersen;
●
Acoramidis could compete with TEGSEDI and eplontersen;
●
ARO-APOC3, lomitapide and pegozafermin could compete with WAYLIVRA and olezarsen;
●
Lanadelumab-flyo, C1 esterase inhibitor, berotralstat, C1 esterase inhibitor subcutaneous, garadacimab, and NTLA-2002 could compete with donidalorsen;
●
Olpasiran and SLN360 could compete with pelacarsen; and
●
NI-204 could compete with tofersen.
SPINRAZA injection for intrathecal use is an antisense medicine indicated for the treatment of SMA patients of all ages approved in over
50 countries. Specifically, SPINRAZA faces competition from onasemnogene abeparvovec, a gene therapy product that was approved in the U.S. in May 2019 and in the EU in May 2020 for the treatment of SMA, as well as risdiplam, an oral product for the
treatment of SMA that was approved in the U.S. in August 2020 and in the EU in March 2021. Biogen has disclosed that SPINRAZA revenue has decreased primarily due to a reduction in demand as a result of increased competition and that future sales of
SPINRAZA may be adversely affected by competing products.
Additionally, companies that are developing medicines that target the same patient populations as our medicines in development may compete
with us to enroll participants in the clinical trials for such medicines, which could make it more difficult for us to complete enrollment for these clinical trials.
Our medicines could be subject to regulatory limitations following approval.
Following approval of a medicine, we and our partners must comply with comprehensive government regulations regarding the manufacture,
marketing and distribution of medicines. Promotional communications regarding prescription medicines must be consistent with the information in the product’s approved labeling. We or our partners may not obtain the labeling claims necessary or
desirable to successfully commercialize our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our medicines in development.
45
The FDA and foreign regulatory bodies have the authority to impose significant restrictions on an approved medicine through the product
label and on advertising, promotional and distribution activities. For example:
●
in the U.S., TEGSEDI’s label contains a boxed warning for thrombocytopenia and glomerulonephritis;
●
TEGSEDI requires periodic blood and urine monitoring; and
●
in the U.S., TEGSEDI is available only through a REMS program.
Prescription medicines may be promoted only for the approved indication(s) in accordance with the approved label. The FDA and other
agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
In addition, when approved, the FDA or a foreign regulatory authority may condition approval on the performance of post-approval
clinical studies or patient monitoring, which could be time consuming and expensive. For example, in connection with the conditional marketing approval for WAYLIVRA in the EU, we are required to conduct a post-authorization safety study to evaluate the
safety of WAYLIVRA on thrombocytopenia and bleeding in FCS patients taking WAYLIVRA. If the results of such post-marketing studies are not satisfactory, the FDA, EC or other foreign regulatory authorities may withdraw marketing authorization or may
condition continued marketing on commitments from us or our partners that may be expensive and time consuming to fulfill.
If we or others identify side effects after any of our medicines are on the market, or if manufacturing problems occur subsequent to
regulatory approval, or if we, our manufacturers or our partners fail to comply with regulatory requirements, we or our partners may, among other things, lose regulatory approval and be forced to withdraw products from the market, need to conduct
additional clinical studies, incur restrictions on the marketing, distribution or manufacturing of the product, and/or change the labeling of our medicines.
We depend on our collaboration with Biogen for the development and commercialization of SPINRAZA.
We have entered into a collaborative arrangement with Biogen to develop and commercialize SPINRAZA. We entered into this collaboration
primarily to:
●
fund our development activities for SPINRAZA;
●
seek and obtain regulatory approvals for SPINRAZA; and
●
successfully commercialize SPINRAZA.
We are relying on Biogen to obtain additional regulatory approvals for SPINRAZA, generate additional clinical data for SPINRAZA,
manufacture, and continue to successfully commercialize SPINRAZA. In general, we cannot control the amount and timing of resources that Biogen devotes to our collaboration. If Biogen fails to further develop SPINRAZA, obtain additional regulatory
approvals for SPINRAZA, manufacture or continue to successfully commercialize SPINRAZA, or if Biogen’s efforts in any of these respects are ineffective, revenues for SPINRAZA would be negatively affected.
In addition, our collaboration with Biogen may not continue for various reasons. Biogen can terminate our collaboration at any time. If
Biogen stops developing or commercializing SPINRAZA, we would have to seek or spend additional funding, and SPINRAZA’s commercialization may be harmed or delayed.
We depend on our collaboration with AstraZeneca for the joint development and commercialization of eplontersen.
We have entered into a collaborative arrangement with AstraZeneca to develop and commercialize eplontersen. Under the terms of the
collaboration agreement, we and AstraZeneca will co-develop and co-commercialize eplontersen in the U.S. and AstraZeneca will have the sole right to commercialize eplontersen in all other countries, except for certain Latin American countries. Prior to
co-commercializing eplontersen in the U.S., we will need to negotiate a co-commercialization agreement with AstraZeneca to govern the parties’ performance of co-commercialization, which agreement will include a commercial plan and budget. As a company
we do not have experience with co-commercialization arrangements. We also do not have control over the amount and timing of resources that AstraZeneca devotes to our collaboration, particularly outside of the U.S. If the co-commercialization
arrangement for eplontersen is not successful for any reason, eplontersen may not meet our commercial objectives and our revenues for eplontersen may be limited.
In addition, a Joint Steering Committee, or JSC, having equal membership from us and AstraZeneca, and various subcommittees oversee and
coordinate the development, manufacturing, commercialization and other exploitation activities for eplontersen in the U.S. by mutual agreement. If any subcommittee cannot reach unanimous agreement on any matter within its respective scope of authority,
such matter may be referred to the JSC for resolution. If the JSC cannot come to a mutual agreement on any particular matter, this could delay our ability to develop or commercialize eplontersen.
46
If we are not successful in expanding our manufacturing capabilities or cannot manufacture our medicines or contract with a third party to
manufacture our medicines at costs that allow us to charge competitive prices to buyers, we cannot market our products profitably.
To successfully commercialize any of our medicines, we need to optimize and manage large-scale commercial manufacturing capabilities
either on a standalone basis or through a third-party manufacturer. As our drug development and commercial pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity. To that end, we have begun
work on a new manufacturing facility in Oceanside, California that will expand our manufacturing infrastructure. We will incur substantial expenditures to build our new manufacturing facility and, following its completion, will likely need to hire and
train additional staff to operate the facility. If we are not successful in executing this expansion, it could limit our ability to meet our manufacturing requirements and commercial objectives in the future.
In addition, we have limited experience manufacturing pharmaceutical products of the chemical class represented by our medicines, called
oligonucleotides, on a commercial scale for the systemic administration of a medicine. There are a small number of suppliers for certain capital equipment and raw materials that we use to manufacture our medicines, and some of these suppliers will need
to increase their scale of production to meet our projected needs for commercial manufacturing. Further, we must continue to improve our manufacturing processes to allow us to reduce our drug costs. We or our partners may not be able to manufacture our
medicines at a cost or in quantities necessary to make commercially successful products.
Manufacturers, including us, must adhere to the FDA’s cGMP regulations and similar regulations in foreign countries, which the applicable
regulatory authorities enforce through facilities inspection programs. We, our partners and our contract manufacturers may not comply or maintain compliance with cGMP, or similar foreign regulations. Non-compliance could significantly delay or prevent
receipt of marketing authorizations for our medicines, including authorizations for SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our medicines in development, or could result in enforcement action after authorization that might limit the
commercial success of our medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, and our medicines in development.
We rely on third-party manufacturers to supply the drug substance and drug product for TEGSEDI and drug product for WAYLIVRA. Any delays
or disruption to our own or third-party commercial manufacturing capabilities, including any interruption to our supply chain as a result of the COVID-19 pandemic or the ongoing war between Russia and Ukraine, could limit the commercial success of our
medicines.
We are relying on third parties to market, sell and distribute TEGSEDI and WAYLIVRA.
We have entered into agreements with third parties to commercialize TEGSEDI and WAYLIVRA as follows:
●
In April 2021, we entered into a distribution agreement with Sobi to commercialize TEGSEDI in the U.S. and Canada;
●
In December 2020, we entered into a distribution agreement with Sobi to commercialize TEGSEDI and WAYLIVRA in Europe; and
●
In August 2018, we granted PTC the exclusive right to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries.
We are relying on Sobi and PTC to effectively market, sell and distribute TEGSEDI and WAYLIVRA and have less control over sales efforts
and may receive less revenue than if we commercialized TEGSEDI or WAYLIVRA by ourselves. If Sobi or PTC does not successfully commercialize TEGSEDI or WAYLIVRA, including as a result of delays or disruption caused by the COVID-19 pandemic, we may
receive limited revenue for TEGSEDI or WAYLIVRA in the U.S., Canada, Europe, Latin America or certain Caribbean countries, which could adversely affect our business, prospects, financial condition and results of operations.
Risks Related to the Development and Regulatory Approval of our Medicines
If we or our partners fail to obtain regulatory approval for our medicines and additional approvals for SPINRAZA, TEGSEDI and WAYLIVRA, we
or our partners cannot sell them in the applicable markets.
We cannot guarantee that any of our medicines will be considered safe and effective or will be approved for commercialization. In
addition, it is possible that SPINRAZA, TEGSEDI and WAYLIVRA may not be approved in additional markets or for additional indications. We and our partners must conduct time-consuming, extensive and costly clinical studies to demonstrate the safety and
efficacy of each of our medicines before they can be approved or receive additional approvals for sale. We and our partners must conduct these studies in compliance with FDA regulations and with comparable regulations in other countries.
47
We and our partners may not obtain necessary regulatory approvals on a timely basis, if at all, for our medicines. It is possible that
regulatory agencies will not approve our medicines for marketing or SPINRAZA, TEGSEDI or WAYLIVRA in additional markets or for additional indications. If the FDA or another regulatory agency believes that we or our partners have not sufficiently
demonstrated the safety or efficacy of any of our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, or our medicines in development, the agency will not approve the specific medicine or will require additional studies, which could be time consuming
and expensive and delay or harm commercialization of the medicine. For example, in August 2018 we received a complete response letter from the FDA regarding the new drug application for WAYLIVRA in which the FDA determined that the safety concerns
identified with WAYLIVRA in our clinical development program outweighed the expected benefits of triglyceride lowering in patients with FCS. We also received a Non-W from Health Canada for WAYLIVRA in November 2018.
The FDA or other comparable foreign regulatory authorities can delay, limit or deny approval of a medicine for many reasons, including:
●
such authorities may disagree with the design or implementation of our clinical studies;
●
we or our partners may be unable to demonstrate to the satisfaction of the FDA or other regulatory authorities that a medicine is safe and effective for any indication;
●
such authorities may not accept clinical data from studies conducted at clinical facilities that have deficient clinical practices or that are in countries where the
standard of care is potentially different from the U.S.;
●
we or our partners may be unable to demonstrate that our medicine’s clinical and other benefits outweigh its safety risks to support approval;
●
such authorities may disagree with the interpretation of data from preclinical or clinical studies;
●
such authorities may find deficiencies in the manufacturing processes or facilities of third-party manufacturers who manufacture clinical and commercial supplies for our
medicines, or may delay the inspection of such facilities due to restrictions related to the COVID-19 pandemic; and
●
the approval policies or regulations of such authorities or their prior guidance to us or our partners during clinical development may significantly change in a manner
rendering our clinical data insufficient for approval.
Failure to receive marketing authorization for our medicines, or failure to receive additional marketing authorizations for SPINRAZA,
TEGSEDI or WAYLIVRA, or delays in these authorizations, could prevent or delay commercial introduction of the medicine, and, as a result, could negatively impact our ability to generate revenue from product sales.
If the results of clinical testing indicate that any of our medicines are not suitable for commercial use, we may need to abandon one or
more of our drug development programs.
Drug discovery and drug development have inherent risks and the historical failure rate for drugs is high. Antisense medicines are a
relatively new approach to therapeutics. If we cannot demonstrate that our medicines are safe and effective for human use in the intended indication(s), we may need to abandon one or more of our drug development programs.
Even if our medicines are successful in preclinical and human clinical studies, the medicines may not be successful in late-stage clinical
studies.
Successful results in preclinical or initial human clinical
studies, including the Phase 2 results for some of our medicines in development, may not predict the results of subsequent clinical studies. If any of our medicines in Phase 3 clinical studies, including the studies of donidalorsen, eplontersen, ION363, olezarsen, pelacarsen and tofersen, do not show sufficient efficacy in patients with the targeted indication, or if such studies are discontinued for any other reason,
it could negatively impact our development and commercialization goals for these medicines and our stock price could decline.
In the past, we have invested in clinical studies of
medicines that have not met the primary clinical endpoints in their Phase 3 studies or have been discontinued for other reasons. For example, in October 2021, Biogen reported that tofersen did not meet the primary clinical endpoint in the Phase 3
VALOR study; however, trends favoring tofersen were seen across multiple secondary and exploratory measures of disease activity and clinical function. In addition, in March 2021, Roche decided to discontinue dosing in the Phase 3 GENERATION HD1 study
of tominersen in patients with manifest Huntington’s disease based on the results of a pre-planned review of data from the Phase 3 study conducted by an unblinded Independent Data Monitoring Committee. Similar results could occur in clinical studies
for our other medicines, including the studies of donidalorsen, eplontersen, ION363, olezarsen, pelacarsen and tofersen.
48
There are a number of factors that could cause a clinical study to fail or be delayed, including:
●
the clinical study may produce negative or inconclusive results;
●
regulators may require that we hold, suspend or terminate clinical research for noncompliance with regulatory requirements;
●
we, our partners, the FDA or foreign regulatory authorities could suspend or terminate a clinical study due to adverse side effects of a medicine on subjects or lack of
efficacy in the trial;
●
we or our partners may decide, or regulators may require us, to conduct additional preclinical testing or clinical studies;
●
enrollment in our clinical studies may be slower than we anticipate;
●
we or our partners, including our independent clinical investigators, contract research organizations and other third-party service providers on which we rely, may not
identify, recruit and train suitable clinical investigators at a sufficient number of study sites or timely enroll a sufficient number of study subjects in the clinical study;
●
the institutional review board for a prospective site might withhold or delay its approval for the study;
●
people who enroll in the clinical study may later drop out due to adverse events, a perception they are not benefiting from participating in the study, fatigue with the
clinical study process or personal issues;
●
a clinical study site may deviate from the protocol for the study;
●
the cost of our clinical studies may be greater than we anticipate;
●
our partners may decide not to exercise any existing options to license and conduct additional clinical studies for our medicines; and
●
the supply or quality of our medicines or other materials necessary to conduct our clinical studies may be insufficient, inadequate or delayed.
The COVID-19 pandemic could make some of these factors more likely to occur.
In addition, our current medicines, including SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen are chemically similar to each other.
As a result, a safety observation we encounter with one of our medicines could have, or be perceived by a regulatory authority to have, an impact on a different medicine we are developing. This could cause the FDA or other regulators to ask questions
or take actions that could harm or delay our ability to develop and commercialize our medicines or increase our costs. For example, the FDA or other regulatory agencies could request, among other things, additional information or commitments before we
can start or continue a clinical study, protocol amendments, increased safety monitoring, additional product labeling information, and post-approval commitments. This happened in connection with the conditional marketing approval for WAYLIVRA in the
EU, as the EC is requiring us to conduct a post-authorization safety study to evaluate the safety of WAYLIVRA on thrombocytopenia and bleeding in FCS patients taking WAYLIVRA. We have ongoing post-marketing studies for WAYLIVRA and TEGSEDI and an EAP
for WAYLIVRA. Adverse events or results from these studies or the EAPs could negatively impact our pending or future marketing approval applications for WAYLIVRA and TEGSEDI in patients with FCS or ATTRv-PN, respectively, or the commercial opportunity
for WAYLIVRA or TEGSEDI.
Any failure or delay in our clinical studies, including the studies of donidalorsen, eplontersen, ION363, olezarsen, pelacarsen and
tofersen, could reduce the commercial potential or viability of our medicines.
We depend on third parties to conduct clinical studies for our medicines and any failure of those parties to fulfill their obligations
could adversely affect our development and commercialization plans.
We depend on independent clinical investigators, contract research organizations and other third-party service providers to conduct our
clinical studies for our medicines and expect to continue to do so in the future. For example, we use clinical research organizations, such as Icon Clinical Research Limited, Medpace, Inc., Parexel International Corporation, Syneos Health, Inc. and
Thermo Fisher Scientific Inc. for the clinical studies for our medicines, including donidalorsen, eplontersen, ION363, olezarsen, pelacarsen and tofersen. We rely heavily on these parties for successful execution of our clinical studies, but do not
control many aspects of their activities. For example, the investigators are not our employees, but we are responsible for ensuring that such investigators conduct each of our clinical studies in accordance with the general investigational plan and
approved protocols for the study. Third parties may not complete activities on schedule or may not conduct our clinical studies in accordance with regulatory requirements or our stated protocols. For example, some of our key vendors are experiencing
labor shortages, which could impact their ability to perform services for us for certain of our clinical trials. The failure of these third parties to carry out their obligations, including as a result of delays or disruptions caused by the COVID-19
pandemic, or a termination of our relationship with such third parties, could delay or prevent the development, marketing authorization and commercialization of our medicines or additional marketing authorizations for TEGSEDI and WAYLIVRA.
49
In addition, while we do not have any clinical trial sites in Ukraine, we do have a limited number of clinical trial sites in Russia and
surrounding countries that may be impacted by the ongoing war between Russia and Ukraine and could result in difficulties enrolling or completing our clinical trials in such areas on schedule. Furthermore, the U.S. and its European allies have imposed
significant sanctions against Russia, including regional embargoes, full blocking sanctions, and other restrictions targeting major Russian financial institutions. The U.S. government has also indicated it will consider imposing additional sanctions
and other similar measures in the future. Our ability to conduct clinical trials in Russia may become restricted under applicable sanctions laws, which would require us to identify alternative trial sites, and could increase our costs and delay the
clinical development of certain of our medicines.
Since corporate partnering is a significant part of our strategy to fund the advancement and commercialization of our development
programs, if any of our collaborative partners fail to fund our collaborative programs, or if we cannot obtain additional partners, we may have to delay or stop progress on our drug development programs.
To date, corporate partnering has played a significant role in our strategy to fund our development programs and to add key development
resources. We plan to continue to rely on additional collaborative arrangements to develop and commercialize some of our unpartnered medicines. However, we may not be able to negotiate favorable collaborative arrangements for these drug programs. If we
cannot continue to secure additional collaborative partners, our revenues could decrease and the development of our medicines could suffer.
Our corporate partners are developing and funding many of the medicines in our development pipeline. For example, we are relying on:
●
AstraZeneca for the joint development and funding of eplontersen;
●
Novartis for development and funding of pelacarsen;
●
Biogen for development and funding of tofersen;
●
Biogen for additional studies of SPINRAZA; and
●
GSK for development and funding of bepirovirsen.
If any of these pharmaceutical companies stops developing and funding these medicines, our business could suffer and we may not have, or
be willing to dedicate, the resources available to develop these medicines on our own. Our collaborators can terminate their relationships with us under certain circumstances, many of which are outside of our control. For example, in 2022, Pfizer and
Bayer decided to discontinue the clinical development programs for vupanorsen and fesomersen, respectively.
Even with funding from corporate partners, if our partners do not effectively perform their obligations under our agreements with them, it
would delay or stop the progress of our drug development and commercial programs.
In addition to receiving funding, we enter into collaborative arrangements with third parties to:
●
conduct clinical studies;
●
seek and obtain marketing authorizations; and
●
manufacture and commercialize our medicines.
Once we have secured a collaborative arrangement to further develop and commercialize one of our drug development programs, such as our
collaborations with AstraZeneca, Biogen, GSK, Novartis, and Roche, these collaborations may not continue or result in commercialized medicines, or may not progress as quickly as we anticipated.
For example, a collaborator such as AstraZeneca, Biogen, GSK, Novartis, or Roche, could determine that it is in its financial interest to:
●
pursue alternative technologies or develop alternative products that may be competitive with the medicine that is part of the collaboration with us;
●
pursue higher-priority programs or change the focus of its own development programs; or
●
choose to devote fewer resources to our medicines than it does to its own medicines.
If any of these occur, it could affect our partner’s
commitment to the collaboration with us and could delay or otherwise negatively affect the commercialization of our medicines, including SPINRAZA, eplontersen, pelacarsen and tofersen.
50
We may not be able to benefit from orphan drug designation for our medicines.
In the U.S., under the Orphan Drug Act, the FDA may designate a medicine as an orphan drug if it is intended to treat
a rare disease or condition affecting fewer than 200,000 individuals in the U.S. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process, but it can provide financial incentives,
such as tax advantages and user-fee waivers, as well as longer regulatory exclusivity periods. The FDA has granted orphan drug designation to eplontersen for the treatment of patients with transthyretin-mediated amyloidosis and to ION582 for the
treatment of patients with Angelman syndrome. The FDA and EMA have granted orphan drug designation to TEGSEDI for the treatment of patients with ATTRv-PN, to WAYLIVRA for the treatment of patients with FCS, and to tominersen for the treatment of
patients with HD. In addition, the EMA has granted orphan drug designation to WAYLIVRA for the treatment of patients with FPL. Even if approval is obtained on a medicine that has been designated as an orphan drug, we may lose orphan drug exclusivity if
the FDA or EMA determines that the request for designation was materially defective or if we cannot assure sufficient quantity of the applicable medicine to meet the needs of patients with the rare disease or condition, or if a competitor is able to
gain approval for the same medicine in a safer or more effective form or that makes a major contribution to patient care. If we lose orphan drug exclusivity on any of our medicines, we may face increased competition and lose market share for such
medicine.
Risks Associated with our Businesses as a Whole
Risks related to our financial condition
If we fail to obtain timely funding, we may need to curtail or abandon some of our programs.
Many of our medicines are undergoing clinical studies or are in the early stages of research and development. Most of our programs will
require significant additional research, development, manufacturing, preclinical and clinical testing, marketing authorizations, preclinical activities and commitment of significant additional resources prior to their successful commercialization. In
addition, as we commercialize more medicines on our own, we will need to invest significant financial resources to continue developing the infrastructure required to successfully commercialize our medicines, including the build-out of a new
manufacturing facility. All of these activities will require significant cash. As of December 31, 2022, we had cash, cash equivalents and
short-term investments equal to $2.0 billion. If we or our partners do not meet our goals to successfully commercialize our medicines,
including SPINRAZA, TEGSEDI and WAYLIVRA, or to license certain medicines and proprietary technologies, we will need additional funding in the future. Our future capital requirements will depend on many factors such as:
●
successful commercialization of SPINRAZA, TEGSEDI and WAYLIVRA;
●
the profile and launch timing of our medicines, including donidalorsen, eplontersen, ION363, olezarsen, pelacarsen and tofersen;
●
changes in existing collaborative relationships and our ability to establish and maintain additional collaborative arrangements;
●
continued scientific progress in our research, drug discovery and development programs;
●
the size of our programs and progress with preclinical and clinical studies;
●
the time and costs involved in obtaining marketing authorizations;
●
competing technological and market developments, including the introduction by others of new therapies that address our markets; and
●
our manufacturing requirements and capacity to fulfill such requirements.
If we need additional funds, we may need to raise them through public or private financing. Additional financing may not be available on
acceptable terms or at all. If we raise additional funds by issuing equity securities, the shares of existing stockholders will be diluted and the price, as well as the price of our other securities, may decline. If adequate funds are not available or
not available on acceptable terms, we may have to cut back on one or more of our research, drug discovery or development programs. Alternatively, we may obtain funds through arrangements with collaborative partners or others, which could require us to
give up rights to certain of our technologies or medicines.
51
We have incurred losses, and our business will suffer if we fail to consistently achieve profitability in the future.
Because drug discovery and development require substantial lead-time and money prior to commercialization, our expenses have generally
exceeded our revenue since we were founded in January 1989. As of December 31, 2022, we had an accumulated deficit of approximately $1.4 billion and stockholders’ equity of approximately $0.6
billion. Most of our historical losses resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. Most of our income has historically come
from collaborative arrangements, including commercial revenue from royalties and R&D revenue, with additional income from research grants and the sale or licensing of our patents, as well as interest income. We will now and continuing into the
foreseeable future need to invest significant financial resources to develop capabilities to commercialize medicines on our own and expect that our income in the future will be driven primarily by commercial sales. If we do not earn substantial revenue
from commercial sales, we may incur additional operating losses in the future, which could restrict our ability to successfully develop additional medicines or sustain future profitability.
We may not be entitled to obtain additional milestone payments under our royalty monetization agreement with Royalty Pharma.
In January 2023, we entered into a Royalty Purchase Agreement with Royalty Pharma Investments. In addition to the $500 million we received
at closing, this agreement makes available to us up to an additional $625 million in milestone payments. However, these additional milestone payments are subject to satisfaction of certain conditions related to the regulatory approval or commercial
sales of pelacarsen, in certain cases by specific deadlines. Should we not satisfy such conditions by the applicable deadlines, or if we fail to meet our obligations or default under this agreement, the actual amount of additional payments to us could
be substantially less than the maximum amounts available thereunder.
Risks related to our intellectual property
If we cannot protect our patent rights or our other proprietary rights, others may compete more effectively against us.
Our success depends to a significant degree upon whether we can continue to develop, secure and maintain intellectual property rights to
proprietary products and services. However, we may not receive issued patents on any of our pending patent applications in the U.S. or in other countries and we may not be able to obtain, maintain or enforce our patents and other intellectual property
rights, any of which could impact our ability to compete effectively. In addition, the scope of any of our issued patents may not be sufficiently broad to provide us with a competitive advantage. Furthermore, other parties may successfully challenge,
invalidate or circumvent our issued patents or patents licensed to us so that our patent rights do not create an effective competitive barrier or revenue source.
We cannot be certain that the U.S. Patent and Trademark Office, or U.S. PTO, and courts in the U.S. or the patent offices and courts in
foreign countries will consider the claims in our patents and applications covering SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, or any of our medicines in development as patentable. Method-of-use patents protect the use of a product for the
specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively
promote their product for our targeted indications, physicians may prescribe these products off-label. Although off-label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such
infringement is difficult to prevent, even through legal action.
If we or any licensor partner loses or cannot obtain patent protection for SPINRAZA, TEGSEDI, WAYLIVRA, eplontersen and tofersen, or any
of our medicines in development, it could have a material adverse impact on our business.
Intellectual property litigation could be expensive and prevent us from pursuing our programs.
From time to time, we have to defend our intellectual property rights. If we are involved in an intellectual property dispute, we may need
to litigate to defend our rights or assert them against others. Disputes can involve arbitration, litigation or proceedings declared by the U.S. PTO or the International Trade Commission or foreign patent authorities. Even if resolved in our favor,
litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
52
If a third party claims that our medicines or technology infringe its patents or other intellectual property rights, we may have to
discontinue an important product or product line, alter our products and processes, pay license fees or cease certain activities. We may not be able to obtain a license to needed intellectual property on favorable terms, if at all. There are many
patents issued or applied for in the biotechnology industry, and we may not be aware of patents or patent applications held by others that relate to our business. This is especially true since patent applications in the U.S. are filed confidentially
for the first 18 months. Moreover, the validity and breadth of biotechnology patents involve complex legal and factual questions for which important legal issues remain.
Risks related to product liability
We are exposed to potential product liability claims, and insurance against these claims may not be available to us at a reasonable rate
in the future or at all.
Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing, marketing and sale of
therapeutic products, including potential product liability claims related to SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development. We have clinical study insurance coverage and commercial product liability insurance coverage. However, this
insurance coverage may not be adequate to cover claims against us, or be available to us at an acceptable cost, if at all. Regardless of their merit or eventual outcome, product liability claims may result in decreased demand for our medicines, injury
to our reputation, withdrawal of clinical study volunteers and loss of revenues. Thus, whether or not we are insured, a product liability claim or product recall may result in losses that could be material.
Risks related to our personnel
The loss of key personnel, or the inability to attract and retain highly skilled personnel, could make it more difficult to run our
business and reduce our likelihood of success.
We are dependent on the principal members of our management
and scientific staff, and as we move towards commercializing medicines on our own, we will become increasingly dependent on the principal members of our commercial team. We do not have employment agreements with any of our employees that would
prevent them from leaving us. The loss of our management, key scientific or commercial employees might slow the achievement of important research and development or commercial goals. It is also critical to our success that we recruit and retain
qualified scientific personnel to perform research and development work. We may not be able to attract and retain skilled and experienced scientific personnel on acceptable terms because of intense competition for experienced scientists among many
pharmaceutical and health care companies, universities and non-profit research institutions. In addition, failure to succeed in clinical studies may make it more challenging to recruit and retain qualified scientific personnel.
Risks related to the COVID-19 pandemic and other events
Our business may be adversely affected by pandemics, climate change, extreme weather events, earthquakes, war, civil or political unrest,
terrorism or other catastrophic events.
Our business could be adversely affected by health
epidemics in regions where we or our partners are commercializing our medicines, have concentrations of clinical trial sites or other business operations, and could cause disruption in the operations of third-party manufacturers and contract research
organizations upon whom we rely. For example, some physician and hospital policies that were put in place as a result of the COVID-19 pandemic restricted in-person access by third parties, which in some cases impacted our commercialization efforts
for TEGSEDI and WAYLIVRA. In addition, in December 2021, Novartis announced that enrollment for the Phase 3 HORIZON study had been delayed due to the COVID-19 pandemic.The COVID-19 pandemic continues to evolve, and while we believe we have not experienced material adverse effects to our business as a result of the COVID-19 pandemic, the ultimate impact of the COVID-19 pandemic or a similar health epidemic
is highly uncertain.
53
In recent years, extreme weather events and changing weather patterns have become more common. As a result, we are potentially exposed to
varying natural disaster or extreme weather risks such as hurricanes, tornadoes, fires, droughts, floods, or other events that may result from the impact of climate change on the environment. The potential impacts of climate change may also include
increased operating costs associated with additional regulatory requirements and investments in reducing energy, water use and greenhouse gas emissions. In addition, we currently manufacture most of our research and clinical supplies in a manufacturing
facility located in Carlsbad, California and will move such manufacturing to our new facility in Oceanside, California once it is built. We manufacture the finished drug product for TEGSEDI and WAYLIVRA at third-party contract manufacturers. Biogen
manufactures the finished drug product for SPINRAZA. The facilities and the equipment we, our partners and our contract manufacturers use to research, develop and manufacture our medicines would be costly to replace and could require substantial lead
time to repair or replace. Our facilities or those of our partners or contract manufacturers may be harmed by natural disasters or other events outside our control, such as earthquakes, war, civil or political unrest, deliberate acts of sabotage,
terrorism or industrial accidents such as fire and explosion, whether due to human or equipment error, and if such facilities are affected by a disaster or other event, our development and commercialization efforts would be delayed. Although we possess
property damage and business interruption insurance coverage, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. In addition, our development and
commercialization activities could be harmed or delayed by a shutdown of the U.S. government, including the FDA.
Risks related to cybersecurity
We are dependent on information technology systems, infrastructure and data, which exposes us to data security risks.
We are dependent upon our own and third-party information technology systems, infrastructure and data, including mobile technologies, to
operate our business. The multitude and complexity of our computer systems may make them vulnerable to service interruption or destruction, disruption of data integrity, malicious intrusion, or random attacks. Likewise, data privacy or security
incidents or breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, customers or other business partners may be exposed to unauthorized
persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity, with third-party phishing and social engineering attacks in particular increasing during the COVID-19 pandemic. In addition, the number and
frequency of cybersecurity events globally may be heightened during times of geopolitical tension or instability between countries, including, for example, the ongoing war between Russia and Ukraine, as a result of which several companies (not
including us) have reported recent cybersecurity events.
Cyber-attacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service
reliability and threaten data confidentiality, integrity and availability. Our business partners face similar risks and any security breach of their systems could adversely affect our security posture. A security breach or privacy violation that leads
to disclosure or modification of or prevents access to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and state breach notification laws
and foreign law equivalents, subject us to financial penalties and mandatory and costly corrective action, require us to verify the correctness of database contents and otherwise subject us to litigation or other liability under laws and regulations
that protect personal data, any of which could disrupt our business and result in increased costs or loss of revenue. Moreover, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which
could lead to the loss of confidential information, trade secrets or other intellectual property. While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, our efforts may not prevent
service interruptions or identify breaches in our systems that could adversely affect our business and operations and result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us.
Risks related to our securities and the global credit markets
If we do not progress in our programs as anticipated, the price of our securities could decrease.
For planning purposes, we estimate and may disclose the timing of a variety of clinical, regulatory and other milestones, such as when we
anticipate a certain medicine will enter clinical trials, when we anticipate completing a clinical study, or when we anticipate filing an application for, or obtaining, marketing authorization, or when we or our partners plan to commercially launch a
medicine. We base our estimates on present facts and a variety of assumptions, many of which are outside of our control, including the impacts of the COVID-19 pandemic. If we do not achieve milestones in accordance with our or our investors’ or
securities analysts’ expectations, including milestones related to SPINRAZA, TEGSEDI, WAYLIVRA, donidalorsen, eplontersen, ION363, olezarsen, pelacarsen and tofersen, the price of our securities could decrease.
54
If the price of our securities continues to be highly volatile, this could make it harder to liquidate your investment and could increase
your risk of suffering a loss.
The market price of our common stock, like that of the securities of many other biopharmaceutical companies, has been and is likely to
continue to be highly volatile. These fluctuations in our common stock price may significantly affect the trading price of our securities. During the 12 months preceding December 31, 2022, the market price of our common stock ranged from $48.82 to $28.25 per share. Many factors can affect the market price of our securities, including, for example, fluctuations in our operating results, announcements
of collaborations, clinical study results, technological innovations or new products being developed by us or our competitors, the commercial success of our approved medicines, governmental regulation, marketing authorizations, changes in payers’
reimbursement policies, developments in patent or other proprietary rights and public concern regarding the safety of our medicines.
Broad market factors may materially harm the market price of our common stock irrespective of our operating performance. For example, the
COVID-19 pandemic caused a significant disruption of global financial markets and resulted in increased volatility in the trading price of our common stock. The global credit and financial markets may also be adversely affected by the ongoing war
between Russia and Ukraine and measures taken in response thereto. In addition, industry factors may materially harm the market price of our common stock. Nasdaq, and the market for biotechnology companies in particular, have historically experienced
extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of ours, may not be predictable. A loss
of investor confidence in the market for biotechnology or pharmaceutical stocks or the stocks of other companies that investors perceive to be similar to us, the opportunities in the biotechnology and pharmaceutical market or the stock market in
general, could depress our stock price regardless of our business, prospects, financial conditions or results of operations.
Provisions in our certificate of incorporation, convertible notes documents, call spread hedge transaction documents and Delaware law may
prevent stockholders from receiving a premium for their shares.
Our certificate of incorporation provides for classified terms for the members of our board of directors. Our certificate also includes a
provision that requires at least 66 2/3 percent of our voting stockholders to approve a merger or certain other business transactions with, or proposed by, any holder of 15 percent or more of our voting stock, except in cases where certain directors
approve the transaction or certain minimum price criteria and other procedural requirements are met.
Our certificate of incorporation also requires that any action required or permitted to be taken by our stockholders must be taken at a
duly called annual or special meeting of stockholders and may not be taken by written consent. In addition, only our board of directors, chairman of the board or chief executive officer can call special meetings of our stockholders. We have in the
past, and may in the future, implement a stockholders’ rights plan, also called a poison pill, which could make it uneconomical for a third party to acquire our company on a hostile basis. In addition, our board of directors has the authority to fix
the rights and preferences of, and issue shares of preferred stock, which may have the effect of delaying or preventing a change in control of our company without action by our stockholders.
The provisions of our convertible senior notes could make it more difficult or more expensive for a third party to acquire us. Upon the
occurrence of certain transactions constituting a fundamental change, holders of the notes will have the right, at their option, to require us to repurchase all of their notes or a portion of their notes, which may discourage certain types of
transactions in which our stockholders might otherwise receive a premium for their shares over the then-current market prices.
In April 2021, we completed a $632.5 million offering of 0%
Notes and used a portion of the net proceeds from the issuance of the 0% Notes to repurchase $247.9 million of our 1% Notes for $257.0 million. In December 2019, we entered into privately negotiated exchange and/or subscription agreements with
certain new investors and certain holders of our existing 1% Notes to exchange $375.6 million of our 1% Notes for $439.3 million of our 0.125% Notes, and to issue $109.5 million of our 0.125% Notes. Additionally, in connection with the pricing of our
0% Notes and 0.125% Notes, we entered into call spread transactions in which we purchased note hedges and sold warrants. Terminating or unwinding the call spread transactions could require us to make substantial payments to the counterparties under
those agreements or may increase our stock price. The costs or any increase in stock price that may arise from terminating or unwinding such agreements could make an acquisition of our company significantly more expensive to the purchaser.
These provisions, as well as Delaware law, including Section 203 of the Delaware General Corporation Law, and other of our agreements, may
discourage certain types of transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices, and may limit the ability of our stockholders to approve transactions that they think may be in their
best interests.
55
Future sales of our common stock in the public market could adversely affect the trading price of our securities.
Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could
adversely affect trading prices of our securities. For example, we may issue approximately 17.5 million shares of our common stock upon conversion of our 0% Notes and 0.125% Notes, up to 10.9 million shares in connection with the warrant transactions
we entered into in connection with the issuance of our 0% Notes, and up to 6.6 million shares in connection with the warrant transactions we entered into in connection with the issuance of our 0.125% Notes, in each case subject to customary
anti-dilution adjustments. The addition of any of these shares into the public market may have an adverse effect on the price of our securities.
In addition, pursuant to the call spread transactions we entered into in connection with the pricing of our 0% Notes and 0.125% Notes, the
counterparties are likely to modify their hedge positions from time to time at or prior to the conversion or maturity of the notes by purchasing and selling shares of our common stock, other of our securities, or other instruments, including
over-the-counter derivative instruments, that they may wish to use in connection with such hedging, which may have a negative effect on the conversion value of those notes and an adverse impact on the trading price of our common stock. The call spread
transactions are expected generally to reduce potential dilution to holders of our common stock upon any conversion of our 0% Notes or 0.125% Notes or offset any cash payments we are required to make in excess of the principal amount of the converted
0% Notes or 0.125% Notes, as the case may be. However, the warrant transactions could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the applicable strike price of the warrants.
Negative conditions in the global credit markets and financial services and other industries may adversely affect our business.
The global credit markets, the financial services industry, the U.S. capital markets, and the U.S. economy as a whole have recently
experienced substantial turmoil and uncertainty characterized by unprecedented intervention by the U.S. federal government in response to the COVID-19 pandemic. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic
may be difficult to assess or predict, it could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market
correction resulting from the spread of COVID-19 could materially affect our business and has and could continue to affect the value of our securities. In addition, the global credit and financial markets may be adversely affected by the ongoing war
between Russia and Ukraine and measures taken in response thereto. In the past, the failure, bankruptcy, or sale of various financial and other institutions created similar turmoil and uncertainty in such markets and industries. It is possible that a
similar crisis in the global credit markets, the U.S. capital markets, the financial services industry or the U.S. economy may adversely affect our business, vendors and prospects, as well as our liquidity and financial condition. Additionally, our
insurance carriers and insurance policies covering all aspects of our business may become financially unstable or may not be sufficient to cover any or all of our losses and may not continue to be available to us on acceptable terms, or at all. In
addition, due to the rapidly rising inflation rate, we may experience significantly increased costs of goods and services for our business.
A variety of risks associated with operating our business and marketing our medicines internationally could adversely affect our business. In
addition to our U.S. operations, we are commercializing TEGSEDI in the EU, Canada, Latin America and certain Caribbean countries, and WAYLIVRA in the EU, Latin America and certain Caribbean countries. We face risks associated with our international
operations, including possible unfavorable regulatory, pricing and reimbursement, political, tax and labor conditions, which could harm our business. Because we have international operations, we are subject to numerous risks associated with
international business activities, including:
●
compliance with differing or unexpected regulatory requirements for our medicines and foreign employees;
●
complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems;
●
difficulties in staffing and managing foreign operations;
●
in certain circumstances, increased dependence on the commercialization efforts and regulatory compliance of third-party distributors or strategic partners;
●
foreign government taxes, regulations and permit requirements;
●
U.S. and foreign government tariffs, trade restrictions, price and exchange controls and other regulatory requirements;
●
anti-corruption laws, including the Foreign Corrupt Practices Act, or the FCPA, and its equivalent in foreign jurisdictions;
●
economic weakness, including inflation, natural disasters, war, events of terrorism, political instability or public health issues or pandemics, such as the COVID-19
pandemic, in particular foreign countries or globally;
●
fluctuations in currency exchange rates, which could result in increased operating expenses and reduced revenue, and other obligations related to doing business in
another country;
●
compliance with tax, employment, privacy, immigration and labor laws, regulations and restrictions for employees living or traveling abroad;
●
workforce uncertainty in countries where labor unrest is more common than in the U.S.; and
●
changes in diplomatic and trade relationships.
56
Our business activities outside of the U.S. are subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules
of other countries in which we operate, including the United Kingdom’s Bribery Act 2010. In many other countries, the healthcare providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are
government entities; therefore, any dealings with these prescribers and purchasers may be subject to regulation under the FCPA. There is no certainty that all employees and third-party business partners (including our distributors, wholesalers, agents,
contractors and other partners) will comply with anti-bribery laws. In particular, we do not control the actions of manufacturers and other third-party agents, although we may be liable for their actions. Violation of these laws may result in civil or
criminal sanctions, which could include monetary fines, criminal penalties, and disgorgement of past profits, which could have an adverse impact on our business and financial condition.
Risks related to compliance with laws
Our operations are subject to additional healthcare laws.
Our operations are subject to additional healthcare laws, including federal and state anti-kickback laws, false claims laws, transparency
laws, such as the federal Sunshine Act, and health information privacy and security laws, which are subject to change at any time. It is possible that governmental authorities will conclude that our business practices may not comply with current or
future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. Penalties for violations of applicable healthcare laws and regulations may include significant civil, criminal and administrative
penalties, damages, disgorgement, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and additional reporting requirements and oversight if we enter into a corporate integrity agreement
or similar agreement to resolve allegations of non-compliance with these laws. In addition, violations may also result in reputational harm, diminished profits and future earnings.
Because we use biological materials, hazardous materials, chemicals and radioactive compounds, if we do not comply with laws regulating
the protection of the environment and health and human safety, our business could be adversely affected.
Our research, development and manufacturing activities involve the use of potentially harmful biological materials as well as materials,
chemicals and various radioactive compounds that could be hazardous to human health and safety or the environment. We store most of these materials and various wastes resulting from their use at our facilities in Carlsbad, California pending ultimate
use and disposal. We cannot completely eliminate the risk of contamination, which could cause:
●
interruption of our research, development and manufacturing efforts;
●
injury to our employees and others;
●
environmental damage resulting in costly clean up; and
●
liabilities under federal, state and local laws and regulations governing health and human safety, as well as the use, storage, handling and disposal of these materials
and resultant waste products.
In such an event, we may be held liable for any resulting damages, and any liability could exceed our resources. Although we carry
insurance for pollution liability in amounts and types that we consider commercially reasonable, the coverage or coverage limits of our insurance policies may not be adequate. If our losses exceed our insurance coverage, our financial condition would
be adversely affected.
Our business is subject to changing regulations for corporate governance and public disclosure that has increased both our costs and the
risk of noncompliance.
Each year we are required to evaluate our internal control systems to allow management to report on and our Independent Registered Public
Accounting Firm to attest to, our internal controls as required by Section 404 of the Sarbanes-Oxley Act. As a result, we continue to incur additional expenses and divert our management’s time to comply with these regulations. In addition, if we cannot
continue to comply with the requirements of Section 404 in a timely manner, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC, the Public Company Accounting Oversight Board, or PCAOB, or The Nasdaq Global
Select Market. Any such action could adversely affect our financial results and the market price of our common stock.
The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that
require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, was enacted, and in August 2022, the SEC adopted additional rules and regulations under the Dodd-Frank Act related to “say on pay” and
proxy access. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which has and may in the future lead
to additional compliance costs and impact the manner in which we operate our business.
57
Risks related to taxes
Our ability to use our net operating loss carryovers and certain other tax attributes may be limited.
Under the Internal Revenue Code of 1986, as amended, or the Code, a corporation is generally allowed a deduction for net operating losses,
or NOLs, carried over from a prior taxable year. Under the Code, we can carryforward our NOLs to offset our future taxable income, if any, until such NOLs are used or expire. The same is true of other unused tax attributes, such as tax credits.
Under the current U.S. federal income tax law, U.S. federal NOLs generated in taxable years beginning after December 31, 2017 may be
carried forward indefinitely, but the deductibility of such U.S. federal NOLs is limited to 80 percent of taxable income. It is uncertain if and to what extent various states will conform to current U.S. federal income tax law, and there may be periods
during which states suspend or otherwise limit the use of NOLs for state income tax purposes.
In addition, under Sections 382 and 383 of the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership
change,” which is generally defined as a greater than 50 percentage-point cumulative change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax
attributes to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs
and our ability to use our NOL carryforwards or other tax attributes is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. As a result of the Akcea Merger, we are subject to the separate
return limitation year, or SRLY, rules. Under the SRLY rules, our utilization of Akcea’s pre-merger NOL and tax credit carryforwards is limited to the amount of income that Akcea contributes to our consolidated taxable income. The Akcea pre-merger tax
attributes cannot be used to offset any of the income that Ionis contributes to our consolidated taxable income. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which
could accelerate or permanently increase state taxes owed.
Our future taxable income could be impacted by changes in tax laws, regulations and treaties.
A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could materially affect us.
We could be subject to additional tax liabilities.
We are subject to U.S. federal, state, local and foreign income taxes, sales taxes in the U.S., withholding taxes and transaction taxes in
foreign jurisdictions. Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination
is uncertain. In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including those relating to income tax nexus, by
recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by changes in foreign currency exchange rates, or
by changes in the valuation of our deferred tax assets and liabilities. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes, sales taxes and value-added taxes against us. Although we believe our tax estimates
are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our operating results or cash flows in the period for
which a determination is made.
Item 1B. Unresolved Staff Comments
Not applicable.
58
Item 2. Properties
As of February 16, 2023, the
following are the primary facilities in which we operate:
Property Description
Location
Square
Footage
Owned
or Leased
Initial Lease
Term End Date
Lease
Extension Options
Laboratory and office space facility
Carlsbad, CA
176,300
Leased
2037
Two, five-year options to extend
Office and meeting space facility
Carlsbad, CA
74,000
Leased
2037
Two, five-year options to extend
Manufacturing facility
Carlsbad, CA
26,800
Owned
Manufacturing support facility
Carlsbad, CA
25,800
Leased
2026
One, five-year option to extend
Office and storage space facility
Carlsbad, CA
18,700
Leased
2023
None
Office space facility
Boston, MA
14,300
Leased
2029
One, five-year option to extend
Office space facility
Carlsbad, CA
5,800
Leased
2027
None
341,700
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
net proceeds of approximately $200 million, with the potential to receive additional payments of up to $40 million plus funding to expand our R&D campus. We used a
portion of the sale proceeds to extinguish our mortgage debt on our headquarters facilities of $51 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 to lease a new R&D facility. The lessor will develop and construct a new building composed of research
and development space and office space. We will design and construct tenant improvements to customize the facility’s interior space. Once this new facility is completed, our lease will commence.
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 217,000-square-foot 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 begin constructing tenant improvements.
We believe that our current and future facilities will be adequate for the foreseeable future.
Item 3. Legal Proceedings
For details of legal proceedings, refer to Part IV, Item 15, Note 9, Legal Proceedings, in the Notes to the Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.
59
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Dividends
Our common stock is traded publicly through The Nasdaq Global Select Market under the symbol “IONS.” As of February 16, 2023, there were approximately 483 stockholders of record of our common stock. Because many of our shares are held by brokers and other
institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
We have never paid dividends and do not anticipate paying any dividends in the foreseeable future.
Performance Graph (1)
Set forth below is a table and chart comparing the total return on an indexed basis of $100 invested on December 31, 2017 in our common
stock, the Nasdaq Composite Index (total return) and the Nasdaq Biotechnology Index. The total return assumes reinvestment of dividends.
* $100 invested on December 31, 2017 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
60
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Ionis Pharmaceuticals, Inc., the Nasdaq Composite Index,
and the Nasdaq Biotechnology Index
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Ionis Pharmaceuticals, Inc.
$
100.00
$
107.48
$
120.10
$
112.41
$
60.50
$
75.09
Nasdaq Composite Index
$
100.00
$
97.16
$
132.81
$
192.47
$
235.15
$
158.65
Nasdaq Biotechnology Index
$
100.00
$
91.14
$
114.02
$
144.15
$
144.18
$
129.59
________________
(1)
This section is not “soliciting material,” is not deemed “filed” with the SEC, is not subject to the liabilities of Section 18 of the Exchange Act and is not to be
incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Item 6. Selected Financial Data
Refer to our financial data contained within Part II, Item 7, Management’s Discussion and Analysis, our financial statements and within other parts of this document.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This financial review presents our operating results for each of the two years in the period ended December 31, 2022, and our financial condition as of December 31, 2022.
Refer to our 2021 Form 10-K for our results of operations for 2021 compared to 2020. Except for the historical information contained herein, the following discussion contains forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically
under Item 1A of Part I of this report, “Risk Factors.” In addition, the following review should be read in conjunction with the information presented in our consolidated financial statements and the related notes to our consolidated financial
statements included in Item 8 of Part II of this report.
Overview
As noted in our Business Overview in Part I of this report, we were founded over 30 years ago to deliver innovative new medicines for
diseases with great medical need. Today, we are building on our advancements in RNA-targeted therapeutics with a vision to be the leader in genetic medicines. We believe our genetic medicines have the potential to pioneer new markets, change standards
of care and transform the lives of people with devastating diseases. We currently have three marketed medicines: SPINRAZA, TEGSEDI and WAYLIVRA. We also have two medicines, eplontersen and tofersen, that will add to our commercial portfolio this year,
assuming positive regulatory outcomes. In addition to our commercial medicines and medicines under regulatory review, we have a rich innovative late- and mid-stage pipeline primarily focused on our leading cardiovascular and neurology franchises. We
currently have seven medicines in Phase 3 development. Refer to Part I, Item 1, Business, for further details on our business and key developments
in our medicines.
Results of Operations
Below we have included our results of operations for 2022 compared to 2021. Refer to our 2021 Form 10-K for our results of operations for
2021 compared to 2020. The following table provides selected summary information from our consolidated statements of operations for 2022 and 2021 (in millions):
Our 2022 revenue continued to be derived from diverse sources, with just over half coming from commercial products and the balance from
numerous partnered programs. SPINRAZA royalties, the largest contributor to our commercial revenue, increased each quarter in 2022. Total SPINRAZA product sales increased six percent in the fourth quarter of 2022 compared to the third quarter of 2022
and also increased four percent compared to the same quarter in 2021. The increases were driven by stabilization in the U.S. and growth in Asian markets, partially offset by competition in Europe. Total SPINRAZA product sales decreased six percent
year-over-year driven by foreign currency exchange and competition in Europe, partially offset stabilization in the U.S. and growth in Asian markets. Our TEGSEDI and WAYLIVRA revenue was also lower year-over-year due to the shift to distribution fees
in 2021.
Our R&D revenue for 2022 included $112 million from Biogen for advancing several neurology disease programs, $77 million from
AstraZeneca for its share of the global Phase 3 development costs for eplontersen and $64 million from Roche for licensing and advancing IONIS-FB-LRx, among other partnered payments. R&D revenue was higher in 2021 compared to 2022 driven
primarily by the $200 million we earned in the fourth quarter of 2021 from AstraZeneca to jointly develop and commercialize eplontersen.
Eplontersen Collaboration with AstraZeneca
Our financial results for the year ended December 31, 2022 reflected the cost-sharing provisions related to our collaboration with
AstraZeneca to develop and commercialize eplontersen for the treatment of ATTR. Under the terms of the collaboration agreement, AstraZeneca is currently paying 55 percent of the costs associated with the ongoing global Phase 3 development program.
Because we are leading and conducting the Phase 3 development program, we are recognizing as R&D revenue the 55 percent of cost-share funding AstraZeneca is responsible for, net of our share of AstraZeneca’s development expenses, in the same period
we incur the related development expenses. In the year ended December 31, 2022, we earned $77 million in joint development revenue and recorded $147M of R&D expenses related to Phase 3 development expenses under this collaboration.
As AstraZeneca is responsible for the majority of the medical affairs and commercial costs in the U.S. and all costs associated with
bringing eplontersen to market outside the U.S., we are recognizing cost-share funding we receive from AstraZeneca related to these activities as a reduction of our medical affairs and commercialization expenses, which we classify as R&D and
selling, general and administrative, or SG&A, expenses, respectively. In the year ended December 31, 2022, we recognized $2.0 million and $2.6 million of medical affairs expenses and commercialization expenses for eplontersen, respectively, net of
cost-share funding from AstraZeneca. We expect our medical affairs and commercialization expenses to increase as eplontersen advances toward the market under our collaboration with AstraZeneca.
The following is a summary of the financial impacts on our statement of operations for the year ended December 31, 2022 of the joint
development activities under our eplontersen collaboration with AstraZeneca:
62
Operating Expenses
Our operating expenses were as follows (in millions):
Operating expenses, excluding non-cash compensation expense related to equity awards
$
897.3
$
696.0
Restructuring expenses
—
23.9
Total operating expenses, excluding non-cash compensation expense related to equity awards
897.3
719.9
Non-cash compensation expense related to equity awards
100.3
120.7
Total operating expenses
$
997.6
$
840.6
Our operating expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021. Our R&D
expenses increased in 2022 compared to 2021 due to our investments in advancing our late-stage pipeline, including the expanded number of Phase 3 studies we are conducting, which doubled from three to six studies in 2021. Our R&D expenses also
increased in 2022 compared to 2021 due to $80 million that we recognized in 2022 for licensing Metagenomi’s gene editing technologies. Our SG&A expenses decreased in 2022 compared to 2021 as a result of savings we realized from integrating Akcea
and restructuring our commercial operations for TEGSEDI and WAYLIVRA, partially offset by the increase in expenses related to our go-to-market activities for eplontersen, donidalorsen and olezarsen.
Our non-cash compensation expense related to equity awards decreased in 2022 compared to 2021 as a result of the decrease in our stock
price in 2022 compared to 2021 and reduced headcount due to restructuring our commercial operations in 2021. We anticipate our non-cash compensation expense related to equity awards to increase in 2023 due to increased headcount and an increase in our
stock price when we granted annual equity awards to our employees in January 2023 compared to January 2022.
To analyze and compare our results of operations to other similar companies, we believe it is important to exclude non-cash compensation
expense related to equity awards from our operating expenses. We believe non-cash compensation expense related to equity awards is not indicative of our operating results or cash flows from our operations. Further, we internally evaluate the
performance of our operations excluding it.
Cost of Sales
Our cost of sales is comprised of costs related to our commercial revenue, which consisted of manufacturing costs, including certain
fixed costs, transportation and freight, indirect overhead costs associated with the manufacturing and distribution of TEGSEDI and WAYLIVRA and certain associated period costs.
Cost of sales, excluding non-cash compensation expense related to equity awards
$
13.4
$
10.4
Non-cash compensation expense related to equity awards
0.7
0.4
Total cost of sales
$
14.1
$
10.8
63
Research, Development and Patent Expenses
Our research, development and patent expenses consist of expenses for drug discovery, drug development, manufacturing and development
chemistry and R&D support expenses.
The following table sets forth information on research, development and patent expenses (in millions):
Research, development and patent expenses, excluding non-cash compensation expense related to equity awards
$
759.4
$
547.4
Restructuring expenses
—
8.5
Total research, development and patent expenses, excluding non-cash compensation expense related to equity awards
759.4
555.9
Non-cash compensation expense related to equity awards
73.7
87.6
Total research, development and patent expenses
$
833.1
$
643.5
Drug Discovery
We use our proprietary technologies to generate information about the function of genes and to determine the value of genes as drug
discovery targets. We use this information to direct our own drug discovery research, and that of our partners. Drug discovery is also the function that is responsible for advancing our core technology. This function is also responsible for making
investments in complementary technologies to expand the reach of our technologies.
Our drug discovery expenses were as follows (in millions):
Drug discovery expenses, excluding non-cash compensation expense related to equity awards
$
181.3
$
136.6
Non-cash compensation expense related to equity awards
16.2
21.4
Total drug discovery expenses
$
197.5
$
158.0
Drug discovery expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021 primarily
due to $80 million that we recognized in 2022 for licensing Metagenomi’s gene editing technologies. In 2021, we incurred certain licensing expenses, including $35 million for licensing Bicycle Therapeutics’ peptide technology.
Drug Development
The following table sets forth drug development expenses, including expenses for our marketed medicines and those in Phase 3 development
for which we have incurred significant costs (in millions):
Total drug development, excluding non-cash compensation expense related to equity awards
426.2
311.2
Non-cash compensation expense related to equity awards
31.5
37.8
Total drug development expenses
$
457.7
$
349.0
64
Our development expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021 primarily
due to our advancing late-stage pipeline, including the expanded number of Phase 3 studies we are conducting, which doubled over the course of 2021 from three to six studies.
We may conduct multiple clinical trials on a drug candidate, including multiple clinical trials for the various indications we may be
studying. Furthermore, as we obtain results from trials, we may elect to discontinue clinical trials for certain drug candidates in certain indications in order to focus our resources on more promising drug candidates or indications. Our Phase 1 and
Phase 2 programs are clinical research programs that fuel our Phase 3 pipeline. When our medicines are in Phase 1 or Phase 2 clinical trials, they are in a dynamic state in which we may adjust the development strategy for each medicine. Although we may
characterize a medicine as “in Phase 1” or “in Phase 2,” it does not mean that we are conducting a single, well-defined study with dedicated resources. Instead, we allocate our internal resources on a shared basis across numerous medicines based on
each medicine’s particular needs at that time. This means we are constantly shifting resources among medicines. Therefore, what we spend on each medicine during a particular period is usually a function of what is required to keep the medicines
progressing in clinical development, not what medicines we think are most important. For example, the number of people required to start a new study is large, the number of people required to keep a study going is modest and the number of people
required to finish a study is large. However, such fluctuations are not indicative of a shift in our emphasis from one medicine to another and cannot be used to accurately predict future costs for each medicine. And, because we always have numerous
medicines in preclinical and varying stages of clinical research, the fluctuations in expenses from medicine to medicine, in large part, offset one another. If we partner a medicine, it may affect the size of a trial, its timing, its total cost and the
timing of the related costs.
Medical Affairs
Our medical affairs function is responsible for managing
publications planning, funding and coordinating investigator-sponsored trials and communicating scientific and clinical information to healthcare providers, medical professionals and patients.
Our medical affairs expenses were as follows (in millions):
Medical affairs expenses, excluding non-cash compensation expense related to equity awards
$
15.9
$
11.6
Non-cash compensation expense related to equity awards
2.0
1.4
Total medical affairs expenses
$
17.9
$
13.0
Medical affairs expenses, excluding non-cash compensation
expense related to equity awards, increased in 2022 compared to 2021 due to increased costs we incurred as we built our medical affairs function to support our late-stage pipeline.
Manufacturing and Development Chemistry
Expenditures in our manufacturing and development chemistry function consist primarily of personnel costs, specialized chemicals for
oligonucleotide manufacturing, laboratory supplies and outside services. Our manufacturing and development chemistry function is responsible for providing drug supplies to drug development and our collaboration partners. Our manufacturing procedures
include testing to satisfy good laboratory and good manufacturing practice requirements.
Our manufacturing and development chemistry expenses were as follows (in millions):
Manufacturing and development chemistry expenses, excluding non-cash compensation expense related to equity awards
$
76.2
$
47.2
Restructuring expenses
—
0.8
Total manufacturing and development chemistry expenses, excluding non-cash compensation expense related to equity
awards
76.2
48.0
Non-cash compensation expense related to equity awards
9.9
11.5
Total manufacturing and development chemistry expenses
$
86.1
$
59.5
65
Manufacturing and development chemistry expenses, excluding
non-cash compensation expense related to equity awards, increased in 2022 compared to 2021 due to increased R&D-related manufacturing costs we incurred in preparation for our near-term commercial launches of eplontersen, olezarsen and
donidalorsen. Refer to the section titled, Manufacturing, in
Part I, Item 1, Business, for further details on the
activities and types of costs we incur in our manufacturing process.
R&D Support
In our research, development and patent expenses, we include support costs such as rent, repair and maintenance for buildings and
equipment, utilities, depreciation of laboratory equipment and facilities, amortization of our intellectual property, informatics costs, procurement costs and waste disposal costs. We call these costs R&D support expenses.
The following table sets forth information on R&D support expenses (in millions):
Total R&D support expenses, excluding non-cash compensation expense related to equity awards
59.8
48.5
Non-cash compensation expense related to equity awards
14.1
15.5
Total R&D support expenses
$
73.9
$
64.0
R&D support expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021. The
increase was primarily related to increased occupancy and personnel costs to support advancing our pipeline and our technology. In October 2022, we executed a sale and leaseback transaction for our headquarters in Carlsbad, California. As a result,
beginning in the fourth quarter of 2022, our occupancy costs increased because we began incurring rent expense for these facilities.
Selling, General and Administrative Expenses
Selling, general and administrative, or SG&A, expenses include personnel and outside costs associated with the pre-commercialization
and commercialization activities for our medicines and costs to support our company, our employees and our stockholders including, legal, human resources, investor relations and finance. Additionally, we include in selling, general and administrative
expenses such costs as rent, repair and maintenance of buildings and equipment, depreciation and utilities costs that we need to support the corporate functions listed above. We also include fees we owe under our in-licensing agreements related to
SPINRAZA.
The following table sets forth information on SG&A expenses (in millions):
Selling, general and administrative expenses, excluding non-cash compensation expense related to equity awards
$
124.4
$
138.1
Restructuring expenses
—
15.4
Total selling, general and administrative expenses, excluding non-cash compensation related to equity awards
124.4
153.5
Non-cash compensation expense related to equity awards
25.9
32.8
Total selling, general and administrative expenses
$
150.3
$
186.3
SG&A expenses, excluding non-cash compensation expense related to equity awards, decreased in 2022 compared to 2021 due to operating
efficiencies achieved from restructuring our commercial operations for TEGSEDI and WAYLIVRA, partially offset by increased expenses for our go-to-market preparations for our near-term commercial opportunities. Non-cash compensation expense related to
equity awards decreased in 2022 compared to 2021 as a result of restructuring our commercial operations for TEGSEDI and WAYLIVRA in 2021.
66
Investment Income
Investment income for 2022
was $25.3 million compared to $10.0
million for 2021. The increase in investment income was primarily due to an increase in interest rates during 2022 compared to 2021.
Interest Expense
The following table sets forth information on interest expense (in millions):
Non-cash amortization of the debt discounts and debt issuance costs
$
5.3
$
4.9
Interest expense payable in cash
0.7
1.9
Interest on mortgage for primary R&D and manufacturing facilities
2.1
2.5
Total interest expense
$
8.1
$
9.3
Gain (Loss) on Investments
We recorded a $7.3 million loss
on investments for 2022 compared to a $10.1 million gain on investments for 2021. The period-over-period fluctuation in our gain (loss) on
investments was primarily driven by changes in fair value of our investments in publicly traded biotechnology companies.
Gain on Sale of Real Estate
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 recorded a gain of $150.1 million in the fourth quarter of 2022, resulting in income tax expense of $8.8 million.
Other Expense
In 2022, we recorded a $7.7 million net expense to settle a litigation claim.
In 2021, as a result of a debt offering and debt repurchase, we recorded an $8.6 million loss on early retirement of debt, reflecting the
early retirement of a portion of our 1% Notes. The loss on the early retirement of our debt is the difference between the amount we paid to retire our 1% Notes and the net carrying balance of the liability at the time that we retired the debt.
Income Tax Expense (Benefit)
We recorded an income tax expense of $11.7 million for 2022 compared to an income tax benefit of $0.6 million for 2021. Beginning in 2022,
the Tax Cuts and Jobs Act of 2017, or TCJA, requires taxpayers to capitalize and amortize research and development expenditures pursuant to Internal Revenue Code, or IRC, Section 174. Our 2022 tax expense relates primarily to the impact of this new law
and to federal and state tax on the gain from the sale of our headquarters facilities that closed in October 2022.
Net Loss and Net Loss per Share
We generated a net loss of $269.7
million for 2022 compared to $28.6
million for 2021. Our net loss increased for 2022 compared to 2021 primarily due to decreased revenue and increased expenses year-over-year,
as discussed in the revenue and expenses sections, respectively.
Basic and diluted net loss per share for 2022
were each $1.90. Basic and diluted net loss per share for 2021 were each $0.20.
67
Liquidity and Capital Resources
We have financed our operations primarily from research and
development collaborative agreements. We also finance our operations from commercial revenue from SPINRAZA royalties and TEGSEDI and WAYLIVRA commercial revenue. From
our inception through December 31, 2022, we have earned approximately $6.4 billion in revenue. We have also financed our operations through the sale of our equity securities and the
issuance of long-term debt. From the time we were founded through December 31, 2022, we have raised net proceeds of approximately $2.0 billion from the sale of our equity securities. Additionally, we borrowed approximately $2.1 billion under long-term debt arrangements to finance a portion of our operations over the same time period.
Our cash, cash equivalents and short-term investments, debt
obligations and working capital decreased from 2021 to 2022. In 2021, we issued $632.5 million of 0% Notes (due in April 2026) and we used a portion of the proceeds to repurchase $247.9 million of our 1% Notes in April 2021. We paid the remaining
principal balance of our 1% Notes with $62.0 million of cash at maturity in November 2021. In 2022, we sold the facilities and related land at our headquarters for a total purchase price of $263.4 million and used a portion of the proceeds to
extinguish our mortgage debt on these facilities of $51.3 million. At December 31, 2022, we had $2.0 billion of cash and short-term investments on hand. We believe our cash and short-term investment balance is sufficient to fund our operations in the short-term and in the longer-term. In 2022,
our working capital decreased because our cash and investments decreased as discussed above.
The following table summarizes our contractual obligations as of December 31, 2022. The table provides a breakdown of when obligations become due. We provide a more detailed description of the major components of our debt in Note 4, Long-Term Obligations and Commitments.
Contractual Obligations
Payments Due by Period
(in millions)
(selected balances described below)
Total
Less than 1 year
More than 1 year
0% Notes (principal payable)
$
632.5
$
—
$
632.5
0.125% Notes (principal and interest payable)
550.2
0.7
549.5
Building mortgage payments (principal and interest payable)
10.7
0.5
10.2
Operating leases
299.6
20.1
279.5
Other obligations (principal and interest payable)
0.9
0.1
0.8
Total
$
1,493.9
$
21.4
$
1,472.5
Our contractual obligations consist primarily of our convertible debt. In addition, we also have a facility mortgage, facility leases,
equipment financing arrangements and other obligations. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash
settlement with the respective taxing authorities. Therefore, we have excluded our gross unrecognized tax benefits from our contractual obligations table above. We have not entered into, nor do we currently have, any off-balance sheet arrangements (as
defined under SEC rules).
Convertible Debt and Call Spread
Refer to our Convertible Debt and Call Spread accounting
policies in Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, and Note 4, Long-Term Obligations and Commitments, in the Notes to our consolidated financial statements for the significant terms of each convertible debt instrument.
Operating Facilities
Refer to Part IV, Item 15, Note 4, Long-Term Obligations and Commitments, in the Notes to our consolidated financial statements for further details on our operating facilities.
Operating Leases
Refer to Part IV, Item 15, Note 4, Long-Term Obligations and Commitments, in the Notes to our consolidated financial statements for further details on our operating leases.
68
Royalty Revenue Monetization
In January 2023, we entered into a royalty purchase agreement with Royalty Pharma to monetize a portion of our future SPINRAZA and pelacarsen
royalties we are entitled to under our agreements with Biogen and Novartis, respectively. Refer to Part IV, Item 15, Note 4, Long-Term Obligations and Commitments, in the Notes to our consolidated financial statements for further details on this agreement.
Other Obligations
In addition to contractual obligations, we had outstanding purchase orders as of December 31, 2022 for the purchase of services, capital
equipment and materials as part of our normal course of business.
We may enter into additional collaborations with partners that could provide for additional revenue to us and we may incur additional cash
expenditures related to our obligations under any of the new agreements we may enter into. We currently intend to use our cash, cash equivalents and short-term investments to finance our activities. However, we may also pursue other financing
alternatives, like issuing additional shares of our common stock, issuing debt instruments, refinancing our existing debt, or securing lines of credit. Whether we use our existing capital resources or choose to obtain financing will depend on various
factors, including the future success of our business, the prevailing interest rate environment and the condition of financial markets generally.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. As such, we make
certain estimates, judgments and assumptions that we believe are reasonable, based upon the information available to us. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our
quarterly or annual results of operations and financial condition. Each quarter, our senior management reviews the development, selection and disclosure of such estimates with the audit committee of our board of directors. In the following paragraphs,
we describe the specific risks associated with these critical accounting estimates and we caution that future events rarely develop exactly as one may expect, and that best estimates may require adjustment. Our significant accounting policies are
outlined in Note 1, Organization and Significant Accounting Policies, in the Notes to the Consolidated Financial Statements.
The following are our significant accounting estimates, which we believe are the most critical to aid in fully understanding and
evaluating our reported financial results:
●
Assessing the propriety of revenue recognition and associated deferred revenue; and
●
Determining the appropriate cost estimates for unbilled preclinical studies and clinical development activities
The following are descriptions of our critical accounting estimates.
Revenue Recognition
We earn revenue from several sources. The judgements and estimates we make vary between each source of our revenue. 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. 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 are therefore 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.
The following is a summary of the critical accounting estimates we make with respect to our revenue.
69
Research and development revenue under collaborative agreements
We recognize R&D revenue from numerous collaboration agreements. Our collaboration agreements typically contain multiple elements, or
performance obligations, including technology licenses or options to obtain technology licenses, R&D services, and manufacturing services. Upon entering into a collaboration agreement, we are required to make the following judgements:
●
Identifying the performance obligations contained in the agreement
Our assessment of what constitutes a separate performance
obligation requires us to apply judgement. Specifically, we have to identify which goods and services we are required to provide under the contract are distinct.
●
Determining the transaction price, including any variable consideration
To determine the transaction price, we review the amount of consideration we are eligible to earn under the agreement. We do not typically
include any payments we may receive in the future in our initial transaction price since the payments are typically not probable because they are contingent upon 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 that have become probable.
●
Allocating the transaction price to each of our performance obligations
When we 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. The estimate of the relative stand-alone selling price requires us in some cases to make significant judgements. For example, when we
deliver a license at the start of an agreement, we use valuation methodologies, such as the relief from royalty method, to value the license. Under this method we are required to make estimates including: future sales, royalties on future product
sales, contractual milestones, expenses, income taxes and discount rates. Additionally, when we estimate the selling price for R&D services, we make estimates, including: the number of internal hours we will spend on the services, the cost of work
we and third parties will perform and the cost of clinical trial material we will use.
The R&D revenue we recognize each period is comprised of several types of revenue, including amortization from upfront payments,
milestone payments, license fees and other services that are recognized immediately or amortized over the period in which we satisfy our performance obligation. Each of these types of revenue require us to make various judgements and estimates.
R&D Services with Upfront Payments
We recognize revenue from the amortization of upfront payments as we perform R&D services. We use an input method to estimate the
amount of revenue to recognize each period. This method requires us to make estimates of the total costs we expect to incur to complete our R&D services performance obligation or the total length of time it will take us to complete our R&D
services performance obligation. If we change our estimates, we may have to adjust our revenue.
Milestone Payments
When recognizing revenue related to milestone payments we typically make the following judgements and estimates:
●
Whether the milestone payment is probable (discussed in detail above under “Determining the
transaction price, including any variable consideration”); and
●
Whether the milestone payment relates to services we are performing or if our partner is performing the services:
●
If we are performing services, we recognize revenue over our estimated period of performance in a similar manner to the amortization of upfront payments (discussed above
under “R&D Services with Upfront Payments”).
●
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.
License Fees
When we grant a license for a medicine in clinical
development, we generally recognize as R&D 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. Refer to Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, for our revenue
recognition policy. We discuss the estimates we make related to the relative stand-alone selling price of a license in detail above under “Allocating the transaction price to each of our performance obligations.”
70
Estimated Liability for Clinical Development Costs
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 costs 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 costs. These costs 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 costs 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.
As of December 31, 2022, a hypothetical 10 percent increase in our liability for preclinical and clinical development costs would have
resulted in an increase in our loss before income tax benefit and accrued liabilities of approximately $11.6 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to changes in interest rates primarily from
our investments in certain short-term investments. We primarily invest our excess cash in highly liquid short-term investments of the U.S. Treasury and reputable financial institutions, corporations, and U.S. government agencies with strong credit
ratings. We typically hold our investments for the duration of the term of the respective instrument. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or
transactions to manage exposure to interest rate changes. Accordingly, we believe that, while the securities we hold are subject to changes in the financial standing of the issuer of such securities, we were not subject to any material risks arising
from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments as of December 31, 2022 and will not be subject to any material risks arising from
these changes in the foreseeable future.
Item 8. Financial Statements and Supplementary Data
We filed our consolidated financial statements and supplementary data required by this item as exhibits hereto, and listed them under Item
15(a)(1) and (2), and incorporate them herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, or Exchange Act) that are designed to ensure that information we are required to disclose in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We designed and evaluated our disclosure controls
and procedures recognizing that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance and not absolute assurance of achieving the desired control objectives.
As of the end of the period covered by this report on Form 10-K, we carried out an evaluation of our disclosure controls and procedures
under the supervision of, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of December 31, 2022.
71
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange
Act Rules 13a-15(f). Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
As of December 31, 2022, we
assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting under the 2013 “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring
Organizations, or COSO, of the Treadway Commission, under the supervision of, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that assessment, our management concluded that we
maintained effective internal control over financial reporting as of December 31, 2022.
Ernst & Young LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over financial
reporting as of December 31, 2022, as stated in their attestation report, which is included elsewhere herein.
Changes in Internal Control over Financial Reporting
The above assessment did not identify any change in our internal control over financial reporting that occurred during our latest fiscal
quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
72
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Ionis Pharmaceuticals, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Ionis Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Ionis Pharmaceuticals, Inc. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022,
and the related notes and our report dated February 22, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We incorporate by reference the information required by this
Item with respect to directors and the Audit Committee from the information under the caption “ELECTION OF DIRECTORS,” including in particular the information under “Nominating, Governance and Review Committee” and “Audit Committee,” contained in our
definitive Proxy Statement, which we will file with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2022, or the Proxy Statement.
We include information concerning our executive officers in the section titled, Information about our Executive Officers, in this report on the Form 10-K in Item 1 titled “Business.”
We incorporate by reference the required information concerning our Code of Ethics from the information under the caption “Code of Ethics
and Business Conduct” contained in the Proxy Statement. Our Code of Ethics and Business Conduct is posted on our website at www.ionispharma.com(1). We intend to disclose future amendments to, or waivers from, our Code of Ethics and Business
Conduct on our website.
________________
(1)
Any information that is included on or linked to our website is not part of this Form 10-K.
Delinquent Section 16(a) Reports
Item 1, Part I of this Report contains information concerning our executive officers. We incorporate by reference the information required
by this Item concerning compliance with Section 16(a) of the Exchange Act from the information under the caption “Delinquent Section 16(a) Reports” contained in the Proxy Statement.
Item 11. Executive Compensation
We incorporate by reference the information required by this item to the information under the caption “EXECUTIVE COMPENSATION,”“Compensation Committee Interlocks and Insider Participation” and “COMPENSATION COMMITTEE REPORT” contained in the Proxy Statement.
74
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
We incorporate by reference the information required by this item to the information under the captions “SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT” contained in the Proxy Statement.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information regarding outstanding options and shares reserved for future issuance under our equity
compensation plans as of December 31, 2022.
Plan Category
Number of Shares to
be Issued Upon Exercise
of Outstanding Options
Weighted Average
Exercise Price of
Outstanding Options
Number of Shares
Remaining Available
for Future Issuance
Equity compensation plans approved by stockholders (a)
14,970,226
$
50.57
8,158,690
(b)
Total
14,970,266
$
50.57
8,158,690
________________
(a)
Consists of five Ionis plans: 1989 Stock Option Plan, Amended and Restated 2002 Non-Employee Directors’ Stock Option Plan, 2011 Equity Incentive Plan, 2020 Equity
Incentive Plan and Employee Stock Purchase Plan, or ESPP.
(b)
Of these shares, 492,176 were available for purchase under the ESPP as of December 31, 2022.
For additional details about our equity compensation plans, including a description of each plan, refer to Part IV, Item 15, Note 5, Stockholders’ Equity, in the Notes to the Consolidated Financial Statements.
Item 13. Certain Relationships and Related Transactions, and Director Independence
We incorporate by reference the information required by this item to the information under the captions “Independence of the Board of
Directors” and “Certain Relationships and Related Transactions” contained in the Proxy Statement.
Item 14. Principal Accountant Fees and Services
We incorporate by reference the information required by this item to the information under the caption “Ratification of Selection of
Independent Auditors” contained in the Proxy Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Index to Financial Statements
We submitted the consolidated financial statements required by this item in a separate section beginning on page F-1 of this Report.
(a)(2) Index to Financial Statement Schedules
We omitted these schedules because they are not required, or are not applicable, or the required information is shown in the consolidated
financial statements or notes thereto.
Form of Option Agreement for Options granted under the Ionis Pharmaceuticals, Inc. Amended and Restated 2002 Non-Employee Directors’ Stock Option
Plan.
Forms of Performance Based Restricted Stock Unit Grant Notice and Performance Based Restricted Stock Unit Agreement for Performance Based Restricted
Stock Units granted beginning January 1, 2023 under the 2011 Equity Incentive Plan.
Lease Agreement between the Registrant and Sudberry Development, Inc. dated October 6, 2022. Portions of this exhibit have been omitted because they
are both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Purchase and Sale Agreement between Ionis Gazelle, LLC and 2850 2855 & 2859 Gazelle Owner (DE) LLC dated as of October 20, 2022. Portions of this
exhibit have been omitted because they are both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Purchase and Sale Agreement between the Registrant and Oxford I Asset
Management USA Inc. dated as of October 20, 2022. Portions of this exhibit have been omitted because they are both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Lease Agreement dated October 20, 2022
between the Registrant and 2850 2855 & 2859 Gazelle Owner (DE) LLC. Portions of this exhibit have been omitted because they are both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Defeasance Pledge and Security Agreement dated as of October 20, 2022 by and among Ionis Gazelle, LLC, Wells Fargo Bank, National Association, as
Trustee for the Benefit of the Registered Holders of UBS Commercial Mortgage Trust 2017-C3, Commercial Mortgage Pass-Through Certificates, Series 2017-C3, and U.S. Bank Trust Company, National Association. Portions of this exhibit have been
omitted because they are both (i) not material and (ii) the type that the Registrant treats as private or confidential.
Defeasance Assignment, Assumption and Release Agreement dated as of October 20, 2022 by and among Ionis Gazelle, LLC, DHC UBSCM 17 C3 Successor
Borrower-R, LLC, Wells Fargo Bank, National Association, as Trustee for the Benefit of the Registered Holders of UBS Commercial Mortgage Trust 2017-C3, Commercial Mortgage Pass-Through Certificates, Series 2017-C3, Midland Loan Services, a
division of PNC Bank, National Association, and U.S. Bank Trust Company, National Association.
Defeasance Account Agreement dated as of October 20, 2022 by and among Ionis Gazelle, LLC, U.S. Bank Trust Company, National Association, U.S. Bank
National Association, as Trustee for the Benefit of the Registered Holders of UBS Commercial Mortgage Trust 2017-C3, Commercial Mortgage Pass-Through Certificates, Series 2017-C3, and Midland Loan Services, a division of PNC Bank, National
Association. Portions of this exhibit have been omitted because they are both (i) not material and (ii) the type that the Registrant treats as private or confidential.
Collaboration and License Agreement between the Registrant and Metagenomi, Inc. dated November 10, 2022. Portions of this exhibit have been omitted
because they are both (i) not material and (ii) the type that the Registrant treats as private or confidential.
Royalty Purchase Agreement by and between the Registrant, Akcea Therapeutics, Inc. and Royalty Pharma Investments 2019 ICAV dated as of January 9,2023. Portions of this exhibit have been omitted because they are both (i) not material and (ii) the type that the Registrant treats as private or confidential.
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
The following financial statements from the Ionis Pharmaceuticals, Inc. Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations,
(iii) consolidated statements of comprehensive income (loss), (iv) consolidated statements of stockholders’ equity (v) consolidated statements of cash flows, and (vi) notes to consolidated financial statements (detail tagged).
104
Cover Page Interactive Data File (formatted in iXBRL and included in exhibit 101).
*
Indicates management compensatory plans and arrangements as required to be filed as exhibits to this Report pursuant to Item 14(c).
+
This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that
section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 133, as amended, or the Securities Exchange Act of 1934, as amended.
81
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on the 22nd day of February, 2023.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brett P. Monia and Elizabeth L.
Hougen, or any of them, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report, and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Ionis Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ionis Pharmaceuticals, Inc. (the Company) as of December 31, 2022 and 2021, the related
consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal
control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
February 22, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required
to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical
audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Estimated Liability for Clinical Development Costs
Description of the Matter
As of December 31, 2022, the Company accrued $116.5 million for accrued clinical development costs. As discussed in Note 1 to the consolidated
financial statements, the Company estimates their liability for clinical development costs incurred and services received but not yet billed for, and maintains an accrual to cover these costs. These costs primarily relate to third-party
clinical management costs, laboratory and analysis costs, and investigator grants. The Company estimates their liability using assumptions about study and patient activities and the related expected expenses for those activities determined
based on the contracted fees with service providers.
Auditing the Company’s accruals for clinical development costs is especially complex as the information necessary to estimate the accruals is
accumulated from multiple sources. In addition, in certain circumstances, the determination of the nature and level of services that have been received during the reporting period requires judgment because the timing and pattern of vendor
invoicing does not correspond to the level of services provided and there may be delays in invoicing from vendors.
84
How We Addressed the Matter in Our Audit
We obtained an understanding and evaluated the design and tested the operating effectiveness of controls over the accounting for accrued clinical
development costs. This included controls over management’s assessment of the assumptions and accuracy of data underlying the accrued clinical development costs estimate.
To test the accuracy of the Company’s accrued clinical development costs, we performed audit procedures that included, among other procedures,
obtaining supporting evidence of the research and development activities performed for significant clinical trials. We corroborated the status of significant clinical development costs through meetings with accounting and clinical project
managers. We compared the costs for a sample of transactions against the related invoices and contracts, and examined a sample of subsequent payments to evaluate the accuracy of the accrued clinical development costs and compared the results to
the current year accrual.
Common stock, $ii0.001/
par value; ii300,000,000/ shares authorized, ii142,057,736/
and ii141,210,015/ shares issued and outstanding at December
31,2022 and December 31, 2021,
respectively
Repurchase of $i247.9
million principal amount of i1 percent convertible senior notes
i—
(i256,963
)
i—
Repayment of remaining principal amount of i1 percent convertible senior notes at maturity
i—
(i61,967
)
i—
Proceeds from issuance of warrants
i—
i89,752
i—
Purchase of note hedges
i—
(i136,620
)
i—
Repurchases and retirements of common stock
i—
i—
(i90,548
)
Principal payments on debt
(i50,686
)
i—
i—
Purchase of noncontrolling interest of Akcea Therapeutics, Inc., including cash payments for cancellation of Akcea Therapeutics, Inc. equity awards
i—
i—
(i544,686
)
Net cash provided by (used in) financing activities
(i55,295
)
i245,933
(i596,609
)
Effects of exchange rates on cash
(i418
)
(i111
)
i617
Net increase (decrease) in cash and cash equivalents
(i592,719
)
i471,527
(i285,623
)
Cash and cash equivalents at beginning of year
i869,191
i397,664
i683,287
Cash and cash equivalents at end of year
$
i276,472
$
i869,191
$
i397,664
Supplemental disclosures of cash flow information:
Interest paid
$
i2,898
$
i4,778
$
i6,247
Income taxes paid
$
i5,010
$
i38
$
i25,855
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for lease liabilities
$
i168,931
$
i6,641
$
i2,149
Amounts accrued for capital and patent expenditures
$
i4,767
$
i705
$
i4,059
See accompanying notes.
90
IONIS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i
1. Organization and Significant Accounting Policies
i
Basis of Presentation
In our consolidated financial statements we included the accounts of Ionis Pharmaceuticals, Inc. and the consolidated results of our
subsidiary, Akcea Therapeutics, Inc. and its wholly owned subsidiaries (“we”, “us” or “our”). We formed Akcea in December 2014. In July 2017, Akcea completed an initial public offering, or IPO, which reduced our ownership of Akcea’s common stock below
i100 percent. In October 2020, we completed a merger transaction with Akcea such that following the completion of the merger, Akcea became our
wholly owned subsidiary. We will refer to this transaction as the Akcea Merger throughout the remainder of this document. We reflected changes in our ownership percentage in our financial statements as an adjustment to noncontrolling interest in the
period the changes occurred.
Organization and Business Activity
We incorporated in California on January 10, 1989. In conjunction with our IPO, we reorganized as a Delaware corporation in April 1991. We
were organized principally to develop human therapeutic medicines using antisense technology. In December 2015, we changed our name from Isis Pharmaceuticals, Inc. to Ionis Pharmaceuticals, Inc.
i
Use of Estimates
We prepare our 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 consolidated financial statements and accompanying notes. Actual results could differ from our estimates.
i
Revenue Recognition
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 consolidated balance sheets.
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 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.
We evaluate the income statement classification for presentation of amounts due from or owed to other participants associated with
multiple activities in a collaboration arrangement based on the nature of each separate activity. For example, in our eplontersen collaboration with AstraZeneca, we recognize funding received from AstraZeneca for co-development activities as revenue;
while we recognize cost sharing payments to and from AstraZeneca associated with co-commercialization activities and co-medical affairs activities as SG&A expense and research and development expense, respectively.
91
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.
We frequently 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. Refer to the section titled, Eplontersen Collaboration with AstraZeneca, below for further discussion of a collaboration that included an upfront license payment.
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.
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.
92
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
●
A discount rate.
We typically estimate the selling price of research and development, or 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.
5.
Recognize revenue
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.
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-effect adjustment.
93
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.
Refer to Part IV, Item 15, Note 7, Collaborative
Arrangements and Licensing Agreements, for further discussion of our 2018 Strategic Neurology collaboration with Biogen that included multiple agreements which we negotiated concurrently and in contemplation of one another.
Our Revenue Sources
The following are sources of revenue and when we typically recognize revenue.
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 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
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.
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.
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 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.
94
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 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.
Research and development revenue under collaboration 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, R&D services and manufacturing services.
We provide details about our collaboration agreements in Note 7, Collaborative Arrangements and Licensing Agreements. For each collaboration, we discuss our specific revenue recognition conclusions, including our significant performance obligations under each collaboration.
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.
Milestone payments:We 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, when
we achieve a milestone payment from a partner for advancing a clinical study under a collaboration agreement, we add the milestone payment to the transaction price if the milestone relates to an ongoing R&D services performance obligation and
recognize revenue related to the milestone payment over our estimated period of performance. If we have partially completed our performance obligation, then we record a cumulative-effect adjustment in the period we add the milestone to the
transaction price.
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.
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.
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.
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 $i200 million upfront payment in 2021.
We evaluated our eplontersen collaboration under ASC 808 and identified ifour 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.
95
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 ione performance obligation. For our sole performance obligation, we determined the transaction price was the $i200
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 currently responsible for i55 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.
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 December 31, 2022,
approximately i82.5 percent of our contracts receivables were from ione
significant customer. As of December 31, 2021, approximately i93.8 percent of our contracts receivables were from itwo
significant customers.
i
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 in our consolidated balance sheets.
i
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 in our consolidated balance sheets. During the years ended December 31, 2022 and 2021, we recognized $i73.5 million and $i98.1
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.
i
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.
i
Research, Development and Patent Expenses
Our research, development and patent expenses include wages, benefits, facilities, supplies, external services, clinical trial and
manufacturing costs, patents 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 in our consolidated balance sheets and we expense them as the services are provided. A portion of the costs included in research and development expenses are costs associated with our
partner agreements. In 2022, 2021 and 2020, patent expenses were $i4.7 million, $i5.3 million and $i4.1
million, respectively.
i
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.
96
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.
i
Basic and Diluted Net Loss per Share
Basic net loss per share
We compute basic net loss per share by dividing the total net loss attributable to our common stockholders by our weighted-average number
of common shares outstanding during the period. For the years ended December 31, 2022 and 2021, we did not have to consider Akcea results separately in our calculation because we owned i100 percent of Akcea for the entire period. Our basic net loss per share for the years ended December 31, 2022 and 2021 was $i1.90
and $i0.20, respectively.
For the year ended December 31, 2020, we calculated total net loss attributable to our common stockholders using our net loss for Ionis on
a stand-alone basis plus our share of Akcea’s net loss for the period. To calculate the portion of Akcea’s net loss attributable to our ownership, we multiplied Akcea’s net loss per share by the weighted average shares we owned in Akcea. As a result of
this calculation, our total net loss available to Ionis common stockholders for the calculation of net loss per share was different than net loss attributable to Ionis Pharmaceuticals, Inc. common stockholders in our consolidated statements of
operations.
i
We calculated our basic net loss per share for the year ended December 31, 2020 as follows (in thousands, except
per share amounts):
Akcea’s net loss in the pre-merger period attributable to our ownership
i77,095
$
(i1.45
)
$
(i111,775
)
Akcea’s net loss in the post-merger period attributable to our ownership
(i85,987
)
Akcea’s total net loss attributable to our ownership
$
(i197,762
)
Ionis’ stand-alone net loss
(i246,702
)
Net loss available to Ionis common stockholders
$
(i444,464
)
Weighted average shares outstanding
i139,612
Basic net loss per share
$
(i3.18
)
97
Diluted net loss per share
For the years ended December 31, 2022, 2021 and 2020, 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 underlying the following would have had an anti-dilutive effect on net loss per share:
●
iii0.125//
percent convertible senior notes, or iii0.125//%
Notes;
●
Note hedges related to the iii0.125//%
Notes;
●
iii1//
percent convertible senior notes, or iii1//%
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 years ended December 31, 2022 and 2021, common stock underlying the following would also have had an anti-dilutive effect on net
loss per share:
●
ii0/
percent convertible senior notes, or ii0/%
Notes; and
●
Note hedges related to the ii0/%
Notes.
Additionally as of December 31, 2022 and 2021, we had warrants related to our ii0/
percent and ii0.125/
percent 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.
i
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 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 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.
Stock Options and Stock Purchase Rights:
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. The expected term of stock options granted represents the period of time that we expect them to be outstanding. Historically, we estimated the expected term of options granted
based on historical exercise patterns. In 2021, our Compensation Committee approved an amendment to the 2011 Equity Incentive Plan, or 2011 Plan, and the 2020 Equity Incentive Plan, or 2020 Plan, that increased the contractual term of stock options
granted under these plans from iseven years to iten
years for stock options granted on January 1, 2022 and thereafter. We determined that we are unable to rely on our historical exercise data as a basis for estimating the expected life of stock options granted to employees following this
change because the contractual term changed and we have no other means to reasonably estimate future exercise behavior. We therefore used the simplified method for determining the expected life of stock options granted to employees in the year ended
December 31, 2022. Under the simplified method, we calculate the expected term as the average of the time-to-vesting and the contractual life of the options. As we gain additional historical information, we will transition to calculating our expected
term based on our historical exercise patterns.
98
RSU’s:
The fair value of RSUs is based on the market price of our common stock on the date of grant. The RSUs we have granted to employees vest
annually over a ifour-year period. The RSUs we granted to our board of directors prior to June 2020 vest annually over a ifour-year
period. RSUs granted to our board of directors after June 2020 fully vest after ione year.
PRSU’s:
Beginning in 2020, we added PRSU awards to the compensation for our Chief Executive Officer, Dr. Brett Monia. Beginning in 2022, we added
PRSU awards to the compensation for our other Section 16 officers. Under the terms of the grants, one third of the PRSUs may vest at the end
of ithree separate performance periods spread over the ithree
years following the date of grant (i.e., the ione-year period commencing on the
date of grant and ending on the first anniversary of the date of grant; the itwo-year period commencing on the date of grant and ending on the
second anniversary of the date of grant; and the ithree-year period commencing on the date of grant and ending on the third anniversary of the
date of grant) based on our relative total shareholder return, or TSR, as compared to a peer group of companies, and as measured, in each case, at the end of the applicable performance period. Under the terms of the grants ino number of PRSUs is guaranteed to vest and the actual number of PRSUs that will vest at the end of each performance period may be anywhere from izero
to i150 percent of the target number
depending on our relative TSR.
We determined the fair value of the PRSUs using a Monte Carlo model because the performance target is based on our relative TSR, which
represents a market condition. We are recognizing the grant date fair value of these awards as stock-based compensation expense using the accelerated multiple-option approach over the vesting period.
Refer to Part IV, Item 15, Note 5, Stockholders’
Equity, for additional information regarding our stock-based compensation plans.
i
Noncontrolling Interest in Akcea Therapeutics, Inc.
Since Akcea’s IPO in July 2017 and prior to the Akcea Merger
in October 2020, the shares of Akcea’s common stock third parties owned represented an interest in Akcea’s equity that we did not control. During this period our ownership ranged from i68 percent to i77
percent. However, as we maintained overall control of Akcea through our voting interest, we reflected the assets, liabilities and results of operations of
Akcea in our consolidated financial statements. Since Akcea’s IPO in July 2017 and through the closing of the Akcea Merger, we reflected the noncontrolling interest attributable to other owners of Akcea’s common stock on a separate line in our
statements of operations and a separate line within stockholders’ equity in our consolidated balance sheets. In addition, through the closing of the Akcea Merger, we recorded a noncontrolling interest adjustment to account for the stock options Akcea
granted, which if exercised, would have diluted our ownership in Akcea. This adjustment was a reclassification within stockholders’ equity from additional paid-in capital to noncontrolling interest in Akcea equal to the amount of stock-based
compensation expense Akcea had recognized. Additionally, we reflected changes in our ownership percentage in our financial statements as an adjustment to noncontrolling interest in the period the change occurred.
i
Accumulated Other Comprehensive Loss
i
Accumulated other
comprehensive loss is comprised of unrealized gains and losses on investments, net of taxes and currency translation adjustments. The following table summarizes changes in accumulated other comprehensive loss for the years ended December 31, 2022, 2021 and 2020 (in thousands):
Beginning balance accumulated other comprehensive loss
$
(i32,668
)
$
(i21,071
)
$
(i25,290
)
Unrealized gains (losses) on securities, net of tax (1)
(i24,395
)
(i11,486
)
i3,729
Currency translation adjustment
(i417
)
(i111
)
i617
Adjustments to other comprehensive loss from purchase of noncontrolling interest of Akcea Therapeutics, Inc.
i—
i—
(i127
)
Net other comprehensive income (losses) for the year
(i24,812
)
(i11,597
)
i4,219
Ending balance accumulated other comprehensive loss
$
(i57,480
)
$
(i32,668
)
$
(i21,071
)
________________
(1)
We did iiino//t
have tax expense included in our other comprehensive loss for the years ended December 31, 2022, 2021 and 2020.
99
i
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, short-term
investments and receivables. We place our cash equivalents and short-term investments with reputable financial institutions. We primarily invest our excess cash in commercial paper and debt instruments of the U.S. Treasury, financial institutions,
corporations, and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody’s, Standard & Poor’s, or S&P, or Fitch, respectively. We have established guidelines relative to
diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.
i
Fair Value Measurements
We have estimated the fair value of our financial instruments. The amounts reported for cash, accounts receivable, accounts payable and
accrued expenses approximate the fair value because of their short maturities. We report our investment securities at their estimated fair value based on quoted market prices for identical or similar instruments.
i
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 consolidated statements 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 December 31, 2022, we held equity investments in ithree publicly traded companies and ieight
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 consolidated
statements of operations. 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.
i
Inventories
We reflect our inventory in our consolidated balance sheets 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.
100
i
Our inventory consisted of the following (in thousands):
We carry our property, plant and equipment at cost and depreciate it on the straight-line method over its
estimated useful life, which consists of the following (in thousands):
Estimated Useful
December 31,
Lives (in years)
2022
2021
Computer software, laboratory, manufacturing and other equipment
i3 to i10
$
i74,351
$
i72,802
Building, building improvements and building systems
i15 to i40
i41,158
i144,046
Land improvements
i20
i-
i10,077
Leasehold improvements
i5 to i15
i28,357
i20,144
Furniture and fixtures
i5 to i10
i9,575
i10,591
i153,441
i257,660
Less accumulated depreciation
(i87,716
)
(i102,653
)
i65,725
i155,007
Land
i8,569
i23,062
Total
$
i74,294
$
i178,069
In October 2022, we sold the facilities and related land at our headquarters for net proceeds of $i202.6 million in connection with a sale and leaseback transaction. In connection with the sale of these real estate assets, we de-recognized the related land and improvements,
building and building improvements, which resulted in a net gain of $i150.1 million that we reported in other income (expense) in our consolidated
statements of operations.
We depreciate our leasehold improvements using the shorter of the estimated useful life or remaining lease term. We evaluate long-lived
assets, which include property, plant and equipment, 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.
Accrued Liabilities
i
Our accrued liabilities consisted of the following (in thousands):
Estimated Liability for Clinical Development Costs
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 costs 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 costs. These costs 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 costs 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.
i
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 815-15 and we did not issue our convertible debt instruments at a substantial premium. We record debt
issuance costs as contra-liabilities in our consolidated balance sheets at issuance and amortize them over the contractual term of the convertible debt instrument using the effective interest rate. The balances of our convertible senior notes presented in our consolidated balance sheets represent the principal balance of each convertible debt instrument less debt issuance costs.
As of December 31, 2022, we had itwo
outstanding convertible senior notes, our i0% Notes, which mature in April 2026, and our i0.125%
Notes, which mature in December 2024. Refer to Part IV, Item 15, Note 4, Long-Term
Obligations and Commitments, for further details on our convertible senior notes.
i
Call Spread
In conjunction with the issuance of our i0%
Notes and i0.125% 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 Topic 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 consolidated balance sheets. We reassess our ability to continue to classify the
note hedges and warrants in shareholders’ equity at each reporting period.
i
Leases
We determine if an arrangement contains a lease at inception. We currently only have operating leases. We recognize a right-of-use
operating lease asset and associated short- and long-term operating lease liability in our consolidated balance sheets 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 conclude we are reasonably certain to 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.
Our leases do not include material variable or contingent lease payments. We recognize period expenses, such as common area maintenance expenses, in the period we incur the expense.
102
i
Segment Information
In 2021, we began operating 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. Previously, we had operated as itwo operating segments, Ionis Core and Akcea Therapeutics. We completed the Akcea Merger in October 2020 and fully integrated Akcea’s operations into ours as of January 1, 2021.
i
Recently Adopted Accounting Standards
In June 2022, the Financial Accounting Standards Board, or FASB, issued clarifying guidance on fair value measurement of equity securities
subject to contractual trading restrictions. The guidance clarifies that contractual trading restrictions are not considered part of the unit of account of equity securities and therefore, are not considered when measuring the fair value of equity
securities. This update is effective for interim and annual periods beginning January 1, 2024 on a prospective basis. Early adoption of this guidance is permitted at an interim or annual period. We early adopted this new guidance in the third quarter
of 2022. This guidance did not have a material impact on our consolidated financial statements.
We do not expect any other recently issued accounting standards to have a material impact to our financial results.
i
2. Investments
i
The following table summarizes the contract maturity of the available-for-sale securities we held as of December 31, 2022:
iOne year
or less
i70
%
After ione year
but within itwo years
i28
%
After itwo years
but within three and a half years
i2
%
Total
i100
%
As illustrated above, at December 31, 2022,
i98 percent of our available-for-sale securities had a maturity of less than itwo years.
All of our available-for-sale securities are available to us for use in our current operations. As a result, we categorize all of these
securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.
At December 31, 2022, we had an ownership interest of less than 20 percent in ieight
privately held companies and ithree publicly held companies with which we conduct business.
103
i
The following is a summary of our investments (in thousands):
Debt securities issued by U.S. government agencies
i48,493
i19
(i18
)
i48,494
Debt securities issued by the U.S. Treasury (1)
i45,424
i—
(i64
)
i45,360
Debt securities issued by states of the U.S. and political subdivisions of the states
i134,770
i45
(i37
)
i134,778
Total securities with a maturity of one year or less
i612,557
i792
(i345
)
i613,004
Corporate debt securities
i382,000
i331
(i2,644
)
i379,687
Debt securities issued by U.S. government agencies
i72,935
i—
(i561
)
i72,374
Debt securities issued by the U.S. Treasury
i137,635
i139
(i500
)
i137,274
Debt securities issued by states of the U.S. and political subdivisions of the states
i39,909
i1
(i224
)
i39,686
Other municipal debt securities
i6,136
i—
(i37
)
i6,099
Total securities with a maturity of more than one year
i638,615
i471
(i3,966
)
i635,120
Total available-for-sale securities
$
i1,251,172
$
i1,263
$
(i4,311
)
$
i1,248,124
Equity securities:
Total equity securities included in other current assets (2)
$
i11,897
$
i7,145
$
(i837
)
$
i18,205
Total equity securities included in deposits and other assets (3)
i15,615
i16,707
i—
i32,322
Total equity securities
$
i27,512
$
i23,852
$
(i837
)
$
i50,527
Total available-for-sale and equity securities
$
i1,278,684
$
i25,115
$
(i5,148
)
$
i1,298,651
________________
(1)
Includes investments classified as cash
equivalents in our consolidated balance sheets.
(2)
Our equity securities included in other current
assets consisted of our investments in publicly traded companies. We recognize publicly traded equity securities at fair value. In the year ended December 31, 2022, we recognized a $i7.7 million unrealized
non-cash loss in our consolidated statements of operations related to a decrease in the fair value of our investments in publicly traded companies.
(3)
Our equity securities included in deposits and other assets consisted of our investments in privately held companies. We recognize our private company equity securities at 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 in our consolidated balance
sheets.
104
i
The following is a summary of our investments we considered to be
temporarily impaired at December 31, 2022 (in thousands).
All of these investments have less than 12 months of temporary impairment. We believe that the decline in value of these securities is temporary and is primarily related to the change in market interest rates since purchase. We believe it is more
likely than not that we will be able to hold our debt securities to maturity. Therefore, we anticipate full recovery of our debt securities’ amortized cost basis at maturity.
Less than 12 Months of
Temporary Impairment
More than 12 Months of
Temporary Impairment
Total Temporary
Impairment
Number of
Investments
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
Corporate debt securities
i384
$
i384,136
$
(i2,629
)
$
i305,367
$
(i11,879
)
$
i689,503
$
(i14,508
)
Debt securities issued by U.S. government agencies
i48
i93,862
(i538
)
i70,233
(i2,331
)
i164,095
(i2,869
)
Debt securities issued by the U.S. Treasury
i75
i616,826
(i6,082
)
i86,325
(i3,151
)
i703,151
(i9,233
)
Debt securities issued by states of the U.S. and political subdivisions of the states
i110
i18,117
(i225
)
i31,465
(i790
)
i49,582
(i1,015
)
Other municipal debt securities
i2
i—
i—
i5,993
(i14
)
i5,993
(i14
)
Total temporarily impaired securities
i619
$
i1,112,941
$
(i9,474
)
$
i499,383
$
(i18,165
)
$
i1,612,324
$
(i27,639
)
i
3. Fair Value Measurements
We use a three-tier fair value hierarchy to prioritize the inputs used in our fair value measurements. These tiers include: Level 1,
defined as observable inputs such as quoted prices in active markets for identical assets, which includes our money market funds and treasury securities classified as available-for-sale securities and our investment in equity securities in publicly
traded biotechnology companies; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, which includes our fixed income securities and commercial paper classified as available-for-sale
securities; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions. We classify most of our securities as Level 2. We obtain the fair value of our Level 2 investments
from our custodian bank or from a professional pricing service. We validate the fair value of our Level 2 investments by understanding the pricing model used by the custodian banks or professional pricing service provider and comparing that fair value
to the fair value based on observable market prices.
i
The following tables present the major security types we held at December 31, 2022 and 2021that we regularly measure and carry at fair value. As of December 31, 2022, we did inot have any investments that we valued using Level 3 inputs. The following tables segregate each security type
by the level within the fair value hierarchy
of the valuation techniques we utilized to determine the respective securities’ fair value (in thousands):
Debt securities issued by U.S. government agencies (2)
i120,868
i—
i120,868
i—
Debt securities issued by the U.S. Treasury (2)
i182,634
i182,634
i—
i—
Debt securities issued by states of the U.S. and political subdivisions of the states (5)
i174,464
i—
i174,464
i—
Other municipal debt securities (2)
i6,099
i—
i6,099
i—
Publicly traded equity securities included in other current assets (4)
i18,205
i3,875
i—
i14,330
Total
$
i1,807,528
$
i727,708
$
i1,065,490
$
i14,330
________________
(1)
Included in cash and cash equivalents in our
consolidated balance sheets.
(2)
Included in short-term investments.
(3)
$i11.0 million included in cash and cash equivalents in our consolidated balance sheets, with the difference included in short-term investments in our consolidated balance
sheets.
(4)
Included in other current assets in our
consolidated balance sheets.
(5)
$i2.3 million included in cash and cash equivalents in our consolidated balance sheets, with the difference included in short-term investments in our consolidated balance
sheets.
Convertible Notes
Our i0.125% Notes and i0% Notes had a fair value
of $i498.9 million and $i587.3
million at December 31, 2022,
respectively. We determine the fair value of our notes based on quoted market prices for these notes, which are Level 2 measurements because the notes do not trade regularly.
i
4. Long-Term Obligations and Commitments
i
The carrying value of our long-term obligations was as follows (in thousands):
i0 Percent
Convertible Senior Notes and Call Spread
In April 2021, we completed a $i632.5
million offering of convertible senior notes. We used a portion of the net proceeds from the issuance of the i0% Notes to repurchase $i247.9
million in principal of our i1% Notes for $i257.0 million.
i
At December 31, 2022,
we had the following i0% Notes outstanding (in millions except interest rate and price per share data):
/
i0% Notes
Outstanding principal balance
$
i632.5
Unamortized debt issuance costs
$
i10.3
Maturity date
April 2026
Interest rate
i0 percent
Effective interest rate
i0.5 percent
Conversion price per share
$
i57.84
Effective conversion price per share with call spread
$
i76.39
Total shares of common stock subject to conversion
i10.9
In conjunction with the April 2021 offering, we entered into a call spread transaction, which was comprised of purchasing note hedges and
selling warrants, to minimize the impact of potential economic dilution upon conversion of our i0% Notes by increasing the effective conversion
price on our i0% Notes. We increased our effective conversion price to $i76.39
with the same number of underlying shares as our i0% Notes. The call spread cost
us $i46.9 million, of which $i136.7
million was for the note hedge purchase, offset by $i89.8 million we received for selling the warrants. Similar to our i0%
Notes, our note hedges are subject to adjustment. Additionally, our note hedges are exercisable upon conversion of the i0% Notes. The note hedges will expire upon maturity of the i0%
Notes, or April 2026. The note hedges and warrants are separate transactions and are not part of the terms of our i0% Notes. The holders of the i0%
Notes do not have any rights with respect to the note hedges and warrants.
We recorded the amount we paid for the note hedges and the amount we received for the warrants in additional paid-in capital in our
consolidated balance sheets. Refer to Part IV, Item 15, Note 1, Organization andSignificant Accounting Policies, for our Call Spread accounting policy. We reassess our ability to continue to classify the note hedges and warrants in shareholders’ equity at each reporting period.
i0.125 Percent
Convertible Senior Notes and Call Spread
In December 2019, we entered into privately negotiated exchange and/or subscription agreements with certain new investors and certain
holders of our existing i1% Notes to exchange $i375.6
million of our i1% Notes for $i439.3
million of our i0.125% Notes, and to issue $i109.5
million of our i0.125% Notes.
i
At December 31, 2022,
we had the following i0.125% Notes outstanding with interest payable semi-annually (in millions except interest rate and price per share data):
/
i0.125% Notes
Outstanding principal balance
$
i548.8
Unamortized debt issuance costs
$
i4.3
Maturity date
December 2024
Interest rate
i0.125 percent
Effective interest rate
i0.5 percent
Conversion price per share
$
i83.28
Effective conversion price per share with call spread
$
i123.38
Total shares of common stock subject to conversion
i6.6
In conjunction with the issuance of our i0.125% Notes in December 2019, we entered into a call spread transaction, which
was comprised of purchasing note hedges and selling warrants, to minimize the impact of potential economic dilution upon conversion of our i0.125%
Notes by increasing the effective conversion price on our i0.125% Notes. We increased our effective conversion price to $i123.38
with the same number of underlying shares as our i0.125% Notes. The call spread cost us $i52.6
million, of
which $i108.7 million was for the note hedge purchase,
offset by $i56.1 million we received for selling the
warrants. Similar to our i0.125% Notes, our note hedges are
subject to adjustment. Additionally, our note hedges are exercisable upon conversion of the i0.125% Notes. The note hedges will expire upon maturity of the i0.125%
Notes, or December 2024. The note hedges and warrants are separate transactions and are not part of the terms of our i0.125% Notes. The holders of the i0.125%
Notes do not have any rights with respect to the note hedges and warrants.
107
We recorded the amount we paid for the note hedges and the amount we received for the warrants in additional paid-in capital in our
consolidated balance sheets. Refer to Part IV, Item 15, Note 1, Organization andSignificant Accounting Policies, for our Call Spread accounting policy. We reassess our ability to continue to classify the note hedges and warrants in shareholders’ equity at each reporting period.
i1 Percent
Convertible Senior Notes
In April 2021, we repurchased $i247.9
million in aggregate principal amount of our i1% Notes in privately negotiated transactions. As a result of the repurchase, we recognized an $i8.6
million loss on early retirement of debt in the second quarter of 2021, reflecting the early retirement of a significant portion of our i1% Notes. The loss on the early retirement of our debt is the difference between the amount paid to retire our i1%
Notes and the net carrying balance of the liability at the time that we retired the debt. We paid the remaining principal balance of our i1% Notes with $i62.0
million of cash at maturity in November 2021.
Other Terms of Convertible Senior Notes
The i0% and i0.125% Notes are convertible under
certain conditions, at the option of the note holders. We can settle conversions of the notes, at our election, in cash,
shares of our common stock or a combination of both. We may not redeem the notes prior to maturity, and we do not have to provide a sinking fund for them. Holders of the notes may require us to purchase some or all of their notes upon the occurrence of
certain fundamental changes, as set forth in the indentures governing the notes, at a purchase price equal to ii100/
percent of the principal
amount of the notes to be purchased, plus any accrued and unpaid interest. The i1% Notes were subject to similar terms.
Our total interest expense for our outstanding senior convertible notes for the years ended December 31, 2022, 2021 and 2020 included $i5.3 million, $i4.9
million and $i3.2 million, respectively, of
non-cash interest expense related to the amortization of debt issuance costs for our convertible notes.
Financing Arrangements
Operating Facilities
In July 2017, we purchased the building that houses our primary R&D facility for $i79.4 million and our manufacturing facility for $i14.0
million. We financed the purchase
of these itwo facilities with mortgage debt of $i60.4
million in total. Our primary R&D facility mortgage had an interest rate of i3.88 percent. Our manufacturing facility mortgage has an
interest rate of i4.20 percent. During the first iifive
years/ of both mortgages, we were only required to make interest payments. We began making principal payments in 2022. Our manufacturing facility mortgage matures in August 2027. We repaid
our primary R&D facility mortgage in October 2022 in conjunction with a sale and leaseback transaction.
In October 2022, we concurrently entered into itwo 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, itwo lots of undeveloped land adjacent to our headquarters. We sold the facilities at our
headquarters, which includes our primary R&D facility, for a total purchase price of $i263.4 million and we expect to receive total proceeds
of $i33.0 million upon the close of the sale of the itwo
lots. We used a portion of the sale proceeds to extinguish our outstanding mortgage debt on our primary R&D facility of $i51.3 million.
Debt Maturity Schedules
i
Annual convertible and mortgage debt maturities, including fixed and determinable interest, at December 31, 2022 are as follows (in thousands):
2023
$
i1,281
2024
i550,107
2025
i595
2026
i633,095
2027
i447
Thereafter
i8,708
Total debt and mortgage maturities
$
i1,194,233
Less: Current portion included in other current liabilities
(i151
)
Less: Fixed and determinable interest
(i3,526
)
Less: Debt issuance costs
(i14,831
)
Total long-term debt
$
i1,175,725
108
i
Operating Leases
Carlsbad Leases
We lease a facility adjacent to our manufacturing facility that has laboratory and office space that we use to support our manufacturing
facility. We lease this space under a non-cancelable operating lease. In May 2020, we exercised our option to extend our lease, extending our lease term from June 2021 to August 2026. We have ione remaining option to extend the lease for an additional ifive-year
period.
We also lease additional office spaces in Carlsbad. We lease these spaces under non-cancelable operating leases. In September 2022, we
exercised our option to extend ione of these leases, extending our term from January 2023 to May 2027. We have ino
remaining options to extend this lease. Our other office space lease in Carlsbad has an initial term ending in 2023.
As discussed above in the section titled, Financing Arrangements, we lease our headquarters, which includes our primary R&D facility, as part of a sale and leaseback transaction that closed in October 2022. The initial lease term for our headquarters facilities is i15 years with options to extend the lease for i2
additional terms of ifive years each. We determined at lease inception that it was not reasonably certain that we would exercise any of the
options to extend the lease. We expect our lease payments over the initial term to total approximately $i280 million. In connection with the sale
of our itwo 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.
Oceanside Lease
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 i20 years and 3 months with options to extend the lease for itwo
additional terms of i10 years each. The lease
will commence when the lessor’s construction is complete and we are able to begin constructing tenant improvements.
Boston Leases
We entered into an operating lease agreement for office space located in Boston, Massachusetts which commenced in August 2018. We are
leasing this space under a non-cancelable operating lease with an initial term ending after i123 months and an option to extend the lease for an
additional ifive-year term. Under the lease agreement, we received a ithree-month free rent period.
In January 2022, we entered into a sublease agreement for our office space located in Boston, Massachusetts. The sublease commencement
date was 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 i83 months following the sublease commencement date with no option to extend the sublease. Under the sublease agreement we provided a iseven-month
free rent period, which commenced on January 6, 2022. We will receive lease payments over the sublease term totaling $i9.6 million.
We entered into an operating lease agreement for another office space located in Boston, Massachusetts which commenced in November 2021.
We are leasing this space under a non-cancelable operating lease with an initial term ending i91 months following the lease commencement date and
an option to extend the lease for an additional ifive-year
term. Under the lease agreement, we received a iseven-month free rent period, which commenced on November 1, 2021. Our lease payments over the
initial term total $i6.8 million.
When we determined our lease term for our operating lease right-of-use assets and lease liabilities for these leases, we did not include
the extension options for these leases in the original lease term because it was not reasonably certain we would exercise those extension options.
i
Amounts related to our operating leases were as follows (dollar amounts in millions):
During the years ended December 31, 2022,
2021, and 2020 we paid $i4.0 million, $i3.3 million and $i3.8
million of lease payments, which were included in operating activities in our consolidated statements of cash flows.
i
As of December 31, 2022, the future payments for our operating lease liabilities are as follows (in thousands):
Less: Current portion (included in other current liabilities)
(i7,215
)
Total long-term lease liabilities
$
i178,941
Rent expense was $i8.3 million,
$i3.4 million and $i3.7 million for the
years ended December 31, 2022, 2021
and 2020, respectively.
Royalty Revenue Monetization
In January 2023, we entered into a royalty purchase agreement with Royalty Pharma Investments, or Royalty Pharma, to monetize a portion of
our future SPINRAZA and pelacarsen royalties we are entitled to under our agreements with Biogen and Novartis, respectively. As a result, we received an upfront payment of $i500 million and we are eligible to receive up to $i625
million in additional milestone
payments. Under the terms of the agreement, Royalty Pharma will receive i25 percent of our SPINRAZA royalty payments from 2023 through 2027,
increasing to i45 percent of royalty payments in 2028, on up to $i1.5
billion in annual sales. In addition, Royalty Pharma will receive i25 percent of
any future royalty payments on pelacarsen, our medicine in development for lipoprotein(a), or Lp(a), driven cardiovascular disease. Royalty Pharma’s royalty interest in SPINRAZA will revert to us after total SPINRAZA royalty payments to Royalty Pharma
reach either $i475 million or $i550
million, depending on the timing and occurrence of FDA approval of pelacarsen. We will begin accounting for the royalty monetization agreement in the first quarter of 2023.
i
5. Stockholders’ Equity
Preferred Stock
We are authorized to issue up to i15
million shares of “blank check” Preferred Stock. As of December 31, 2022, there were ino shares of Preferred Stock outstanding. We have designated Series C Junior Participating Preferred Stock but have iino/
issued or outstanding shares as of December 31, 2022.
Common Stock
At December 31, 2022 and 2021, we had ii300/
million shares of common
stock authorized, of which ii142.1/
million and ii141.2/ million were issued
and outstanding, respectively. As of December 31, 2022,
total common shares reserved for future issuance were i43.2 million.
During the years ended December 31, 2022,
2021 and 2020, we issued i1.2 million, i1.1
million and i1.7 million shares of common stock, respectively, for stock option exercises, vesting of restricted stock units, and ESPP purchases. We received net
proceeds from these transactions of $i6.4 million, $i11.6
million and $i52.0 million in 2022,
2021 and 2020, respectively.
Share Repurchase Program
In September 2019, our board of directors approved a share repurchase program of up to $i125 million of our common stock. In 2019, we repurchased i535,000 shares for $i34.4
million. In the first quarter of 2020, we repurchased an additional i1.5 million shares for $i90.5 million.
110
Stock Plans
1989 Stock Option Plan
In June 1989, our Board of Directors adopted, and the stockholders subsequently approved, a stock option plan that, as amended, provides
for the issuance of non-qualified and incentive stock options for the purchase of up to i20.0 million shares of common stock to our employees,
directors, and consultants. The plan expires in January 2024. The 1989 Plan does not allow us to grant stock bonuses or restricted stock awards and prohibits us from repricing any options outstanding under the plan unless our stockholders approve the
repricing. Options vest over a ifour-year period, with i25percent
exercisable at the end of ione year from the date of the grant and the
balance vesting ratably, on a monthly basis, thereafter and have a term of iseven years. At December 31, 2022, a total of i12
thousand options were outstanding, of which
options to purchase i12 thousand shares were exercisable, and i65
thousand shares were available for future grant under the 1989 Plan.
2011 Equity Incentive Plan
In March 2011, our Board of Directors adopted, and the stockholders subsequently approved, a stock option plan that provides for the
issuance of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and performance cash awards to our employees, directors, and consultants. In June 2015, May 2017 and June 2019, after receiving approval from
our stockholders, we amended our 2011 Equity Incentive Plan, or 2011 Plan, to increase the total number of shares reserved for issuance. We increased the shares
available under our 2011 Equity Incentive Plan from i5.5 million to i11.0
million in June 2015, from i11.0 million to i16.0
million in May 2017 and from i16.0 million to i23.0
million in June 2019. In the second quarter of 2021, after receiving approval from our stockholders, we amended our 2011 Plan. The amendment increased the total number of shares of common stock authorized for issuance under the 2011 Plan from i23.0 million to i29.7
million and added a fungible share counting ratio whereby the share reserve will be reduced by i1.7 shares for each share of common stock issued pursuant to a full value award (i.e., RSU or PRSU) and increased by
i1.7 shares for each share of common stock returning from a
full value award. The plan expires in June 2031. The 2011 Plan does not allow us to reduce the exercise price of any outstanding stock options or stock appreciation rights or cancel any outstanding stock options or stock appreciation rights
that have an exercise price or strike price greater than the current fair market value of the common stock in exchange for cash or other stock awards unless our stockholders approve such action. Currently we anticipate awarding only stock options, RSU
and PRSU awards to our employees, directors and consultants. Options vest over a ifour-year period, with i25
percent exercisable at the end of ione year from the date of the grant
and the balance vesting ratably, on a monthly basis, thereafter and have a term of iseven years. Options granted after December 31, 2021 have a
term of iten years. We have granted restricted stock unit awards to our employees under the 2011 Plan which vest annually over a ifour-year
period. At December 31, 2022, a
total of i13.7 million options were outstanding, of which i9.4
million were exercisable, i2.7 million restricted stock unit awards were
outstanding, and i5.8 million shares were available for future grant under the 2011 Plan.
Under the 2011 Plan, we may issue a stock award with additional acceleration of vesting and exercisability upon or after a change in
control. In the absence of such provisions, no such acceleration will occur. In addition, we implemented a change of control and severance benefit plan that provides for change of control and severance benefits to our executive officers, including our
chief executive officer and chief financial officer, and vice presidents. If ione of our executive officers or vice presidents is terminated or
resigns for good reason during the period that begins ithree months before and ends itwelve
months following a change in control of the company, the impacted employee’s stock options and RSUs vesting will accelerate for options and RSUs outstanding as of the termination date.
2020 Equity Incentive Plan
In connection with the Akcea Merger in October 2020, we
assumed the unallocated portion of the available share reserve under the Akcea 2015 Equity Incentive Plan. 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. The 2020 Plan provided for the issuance of up to i2.6 million shares of our Common Stock to our employees, directors and consultants who were employees of Akcea prior to the Akcea Merger. In the second quarter of 2021, our Compensation Committee approved an amendment
to the 2020 Plan. The amendment decreased the total number of shares of common stock authorized for issuance under the 2020 Plan from approximately i2.6 million to i1.6
million. We assumed the 2020 Plan in connection with Ionis’ reacquisition of all of the outstanding shares of Akcea Therapeutics, Inc. as part of the Akcea Merger.
111
The plan expires in December 2025. The 2020 Plan does not allow us to reduce the exercise price of any outstanding stock options or stock
appreciation rights or cancel any outstanding stock options or stock appreciation rights that have an exercise price or strike price greater than the current fair market value of the common stock in exchange for cash or other stock awards unless our
stockholders approve such action. Currently we anticipate awarding only stock options and RSU awards to our eligible employees, directors and consultants. Options vest over a ifour-year period, with i25
percent exercisable at the end of ione year from the date of the grant and the balance vesting ratably, on a monthly basis, thereafter and have a term of iseven
years. Options granted after December 31, 2021 have a term of iten years.
We have granted restricted stock unit awards to our employees under the 2020 Plan which vest annually over a ifour-year period. At December 31, 2022, a total of i0.3
million
options were outstanding, of which i61 thousand were exercisable, i0.1
million restricted stock unit awards were outstanding, and i1.2 million shares were
available for future grant under the 2020 Plan.
Under the 2020 Plan, we may issue a stock award with additional acceleration of vesting and exercisability upon or after a change in
control. In the absence of such provisions, no such acceleration will occur.
Corporate Transactions and Change in Control under 2011 and 2020 Plans
In the event of certain significant corporate transactions, our Board of Directors has the discretion to take one or more of the following
actions with respect to outstanding stock awards under the 2011 and 2020 Plans:
●
arrange for assumption, continuation, or substitution of a stock award by a surviving or acquiring entity (or its parent company);
●
arrange for the assignment of any reacquisition or repurchase rights applicable to any shares of our common stock issued pursuant to a stock award to the surviving or
acquiring corporation (or its parent company);
●
accelerate the vesting and exercisability of a stock award followed by the termination of the stock award;
●
arrange for the lapse of any reacquisition or repurchase rights applicable to any shares of our common stock issued pursuant to a stock award;
●
cancel or arrange for the cancellation of a stock award, to the extent not vested or not exercised prior to the effective date of the corporate transaction, in exchange
for cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
●
arrange for the surrender of a stock award in exchange for a payment equal to the excess of (a) the value of the property the holder of the stock award would have
received upon the exercise of the stock award, over (b) any exercise price payable by such holder in connection with such exercise.
2002 Non-Employee Directors’ Stock Option Plan
In September 2001, our Board of Directors adopted, and the stockholders subsequently approved, an amendment and restatement of the 1992
Non-Employee Directors’ Stock Option Plan, which provides for the issuance of non-qualified stock options and restricted stock units to our non-employee directors. The name of the resulting plan is the 2002 Non-Employee Directors’ Stock Option Plan, or
the 2002 Plan. In June 2015, after receiving approval from our stockholders, we amended our 2002 Plan to increase the total number of shares reserved for issuance from i1.2 million to i2.0
million. In June 2020, after receiving approval from our
stockholders, we further amended our 2002 Plan. The amendments included:
●
An increase to the total number of shares reserved for issuance under the plan from i2.0 million to i2.8
million shares;
●
A reduction to the amount of the automatic awards under the plan;
●
A revision to the vesting schedule of new awards granted; and
●
An extension of the term of the plan.
Options under this plan expire i10 years
from the date of grant. At December 31, 2022, a total of i0.9 million options were outstanding, of which i0.8
million were exercisable, i0.1 million restricted stock unit awards were outstanding, and i0.6
million shares were available for future grant under the 2002 Plan.
112
Employee Stock Purchase Plan
In June 2009, our Board of Directors adopted, and the stockholders subsequently approved, the amendment and restatement of the ESPP and we
reserved an additional i150,000 shares of common stock for issuance thereunder. In each of the subsequent years until 2019, we reserved an
additional i150,000 shares of common stock for the ESPP resulting in a total of i3.2
million shares authorized under the plan as of December 31, 2022. The ESPP
permits full-time employees to purchase common stock through payroll deductions (which cannot exceed i10percent of each employee’s compensation)
at the lower of i85percent of fair market value at the beginning of the purchase period or the end of each purchase period. Under the amended
and restated ESPP, employees must hold the stock they purchase for a minimum of isix months from the date of purchase. During 2022, employees purchased and we issued to employees i0.1
million shares under the ESPP at a weighted average price of $i28.57 per share. At December 31, 2022, there were i0.5
million shares available for purchase under the
ESPP.
Stock Option Activity
i
The following table summarizes the stock option activity under our stock plans for the year ended December 31, 2022 (in thousands, except per share and contractual life data):
The weighted-average estimated fair values of options granted were $i18.66, $i24.35
and $i29.43 for the years ended December 31, 2022, 2021 and 2020, respectively. The total intrinsic value of options
exercised during the years ended December 31, 2022, 2021 and 2020 were $i1.4 million, $i2.5
million and $i15.5 million, respectively, which we determined as of the date of exercise. The amount of cash received from the exercise of stock options was $i3.6
million, $i8.5 million and $i43.7 million for the years ended December 31, 2022,
2021 and 2020, respectively. For the year
ended December 31, 2022, the weighted-average fair value of options exercised was $i40.71. As of December 31, 2022, total unrecognized compensation cost related to
non-vested stock options was $i41.1 million. We expect to recognize this cost over a weighted average period of i1.1
years. We will adjust the total unrecognized compensation cost for future changes in estimated forfeitures.
Restricted Stock Unit Activity
i
The following table summarizes the RSU activity for the year ended December 31, 2022 (in thousands, except per share data):
For the years ended December 31, 2022,
2021 and 2020, the
weighted-average grant date fair value of RSUs granted was $i36.14, $i57.02
and $i60.57 per RSU, respectively. As of December 31, 2022, total unrecognized compensation cost related to RSUs was $i45.8
million. We expect to recognize this cost over a weighted average period of i1.2
years. We will adjust the total unrecognized compensation cost for future changes in estimated forfeitures.
113
Performance Restricted Stock Unit Activity
i
The following table summarizes the PRSU activity for the year ended December 31, 2022 (in thousands, except per share data):
For the years ended December 31, 2022,
2021 and 2020, the
weighted-average grant date fair value of PRSUs granted was $i42.28, $i77.17
and $i93.09 per PRSU, respectively. As of December 31, 2022, total unrecognized compensation cost related to PRSUs was $i2.4
million. We expect to recognize this cost over a weighted average period of i0.9
years. We will adjust the total unrecognized compensation cost for future changes in estimated forfeitures.
Stock-based Compensation Expense and Valuation Information
i
The following table summarizes stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020 (in thousands):
In October 2020, as part of the Akcea Merger, Akcea’s outstanding equity awards vested under Akcea’s Plan. As a result, in 2020, we
recognized all unrecognized stock-based compensation, which totaled $i59.3 million, under Akcea’s Plan.
Refer to Part IV, Item 15, Note 1, Organization
and Significant Accounting Policies, for further details on how we determine the fair value of stock options granted, RSUs, PRSUs and stock purchase rights under the ESPP.
For the years ended December 31, 2022,
2021 and 2020, we used the
following weighted-average assumptions in our Black-Scholes calculations:
Risk-Free Interest Rate. We base
the risk-free interest rate assumption on observed interest rates appropriate for the term of our stock option plans or ESPP.
Dividend Yield. We base the
dividend yield assumption on our history and expectation of dividend payouts. We have not paid dividends in the past and do not expect to in the future.
Volatility. We use an average of
the historical stock price volatility of our stock for the Black-Scholes model. We computed the historical stock volatility based on the expected term of the awards.
Expected Life. The expected term
of stock options we have granted represents the period of time that we expect them to be outstanding. Historically, we estimated the expected term of options we have granted based on actual and projected exercise patterns. In 2021, our Compensation
Committee approved an amendment to the 2011 Equity Incentive Plan, or 2011 Plan, and the 2020 Equity Incentive Plan, or 2020 Plan, that increased the contractual term of stock options granted under these plans from seven to iiten
years/ for stock options granted on January 1, 2022
and thereafter. We determined that we are unable to rely on our historical exercise data as a basis for estimating the expected life of stock options granted to employees following this change because the contractual term changed and we have no other
means to reasonably estimate future exercise behavior. We therefore used the simplified method for determining the expected life of stock options granted to employees in the year ended December 31, 2022. Under the simplified method, we calculate the
expected term as the average of the time-to-vesting and the contractual life of the options. As we gain additional historical information, we will transition to calculating our expected term based on our historical exercise patterns.
Forfeitures. We reduce stock-based
compensation expense for estimated forfeitures. We estimate forfeitures at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We estimate forfeitures based on historical experience.
i
6. Income Taxes
i
Income (loss) before income taxes is comprised of (in thousands):
Our expense (benefit) for income taxes differs from the amount computed by applying the U.S. federal statutory rate to income (loss) before taxes. The
sources and tax effects of the differences are as follows (in thousands):
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
i
Significant components of our deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows (in thousands):
We evaluate our deferred tax assets regularly to determine whether adjustments to the valuation allowance are appropriate due to changes in facts or
circumstances, such as changes in expected future pre-tax earnings, tax law, interactions with taxing authorities and developments in case law. In making this evaluation, we rely on our recent history of pre-tax earnings. Our material assumptions are
our forecasts of future pre-tax earnings and the nature and timing of future deductions and income represented by the deferred tax assets and liabilities, all of which involve the exercise of significant judgment. Although we believe our estimates are
reasonable, we are required to use significant judgment in determining the appropriate amount of valuation allowance recorded against our deferred tax assets.
Our valuation allowance increased by $i111
million from December 31, 2021 to December 31, 2022.
The increase was primarily related to increases in our deferred tax asset for capitalized research and development expenses.
At December 31, 2022, we had
federal and state, primarily California, tax net operating loss carryforwards of $i242.8 million and $i461.3 million, respectively.
Our federal tax loss carryforwards are available indefinitely. Our California tax loss carryforwards will begin to expire in 2031. At December 31, 2022, we also had federal and California research and development tax credit carryforwards of $i224.9 million and $i110.7
million, respectively. Our federal research and development
tax credit carryforwards will begin to expire in 2035. Our California research and development tax credit carryforwards are available indefinitely.
Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.
We analyze filing positions in all U.S. federal, state and foreign jurisdictions where we file income tax returns, and all open tax years
in these jurisdictions to determine if we have any uncertain tax positions on any of our income tax returns. We recognize the impact of an uncertain tax position on an income tax return at the largest amount that the relevant taxing authority is
more-likely-than not to sustain upon audit. We do not recognize uncertain income tax positions if they have less than 50 percent likelihood of the applicable tax authority sustaining our position.
i
The following table summarizes our gross unrecognized tax benefits (in
thousands):
Included in the balance of unrecognized tax benefits at December 31, 2022, 2021 and 2020 was $i6.2 million, $i6.2
million and $i6.4 million respectively, that if we recognized, could impact our
effective tax rate, subject to our remaining valuation allowance.
We estimate that it is reasonably possible that the balance of our gross unrecognized tax benefits may decrease by approximately $i15.0 million within the next 12 months due to the lapse of statute of limitations on underlying tax positions primarily related to tax credits.
We recognize interest and/or penalties related to income tax matters in income tax expense. During the years ended December 31, 2022, 2021 and 2020, we recognized $i0.8 million, $i0.5
million and $i0.3 million, respectively, of
accrued interest and penalties related to gross unrecognized tax benefits.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. The tax years 2018 through 2021 remain open to
examination by major taxing jurisdictions, primarily federal and California, although net operating loss and credit carryforwards generated prior to 2018 may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if
they have been used in an open period or are used in a future period.
We do not provide for a U.S. income tax liability and foreign
withholding taxes on undistributed foreign earnings of our foreign subsidiaries as we consider those earnings to be permanently reinvested. It is not practicable for us to calculate the amount of unrecognized deferred tax liabilities associated with
these earnings.
117
i
7. Collaborative Arrangements and Licensing Agreements
Strategic Partnership
Biogen
We have several strategic collaborations with Biogen focused on using antisense technology to advance the treatment of neurological
disorders. These collaborations combine our expertise in creating antisense medicines with Biogen’s expertise in developing therapies for neurological disorders. We developed and licensed to Biogen SPINRAZA, our approved medicine to treat people with
spinal muscular atrophy, or SMA. We and Biogen are currently developing numerous investigational medicines to treat neurodegenerative diseases under these collaborations, including medicines in development to treat people with ALS, SMA, AS, ADand
Parkinson’s disease. In addition to these medicines, our collaborations with Biogen include a substantial research pipeline that addresses a broad range of neurological diseases. From inception through December 31, 2022, we have received more than $i3.4 billion from our
Biogen collaborations.
Spinal Muscular Atrophy Collaborations
SPINRAZA
In January 2012, we entered into a collaboration agreement
with Biogen to develop and commercialize SPINRAZA.From inception through December 31, 2022, we earned more than $i1.8 billion in total revenue under our SPINRAZA collaboration, including more than $i1.4
billion in revenue from SPINRAZA royalties and more than $i425 million in R&D revenue. We are receiving tiered royalties ranging from
i11 percent to i15
percent on net sales of SPINRAZA. We have exclusively in-licensed patents related to SPINRAZA from
Cold Spring Harbor Laboratory and the University of Massachusetts. We pay Cold Spring Harbor Laboratory and the University of Massachusetts a low single digit royalty on net sales of SPINRAZA. Biogen is responsible for all global development,
regulatory and commercialization activities and costs for SPINRAZA. We completed our performance obligations under our collaboration in 2016.
In January 2023, we entered into a royalty purchase agreement with Royalty Pharma in which Royalty Pharma will receive i25 percent of our SPINRAZA royalty payments from 2023 through 2027, increasing to i45
percent of royalty payments in 2028, on up to $i1.5 billion in annual sales. Royalty
Pharma’s royalty interest in SPINRAZA will revert to us after total SPINRAZA royalty payments to Royalty Pharma reach either $i475 million or $i550
million, depending on the timing and occurrence of FDA approval of pelacarsen, which Novartis is developing. Refer to Part IV, Item 15, Note 4, Long-Term Obligations and Commitments, for further discussion of this agreement.
New antisense medicines for the treatment of SMA
In December 2017, we entered into a collaboration agreement
with Biogen to identify new antisense medicines for the treatment of SMA. Biogen has the option to license therapies arising out of this collaboration following the completion of
preclinical studies. Upon licensing, Biogen will be responsible for global development, regulatory and commercialization activities and costs for such therapies. Under the collaboration agreement, we received a $i25
million upfront payment in the fourth quarter of 2017. In December 2021, we earned a $i60 million license fee payment when Biogen exercised its option to license ION306. We will receive development and regulatory milestone payments from Biogen
if new medicines, including ION306, advance towards marketing approval.
Over the term of the collaboration, we are eligible to receive up to $i1.2 billion, which is comprised of a $i25
million upfront payment, up to $i110 million in license fees, up to $i80
million in
development milestone payments, up to $i180 million in regulatory milestone payments, up to $i800
million in sales milestone payments and other payments, including up to $i555
million if Biogen advances ION306, which includes up to $i45 million in development milestone payments, up to $i110
million in regulatory milestone payments and up to $i400
million in sales milestone payments. In addition, we are eligible to receive tiered royalties from the mid-teens to mid-i20 percent range on net sales. From
inception through December 31, 2022, we received $i85 million in payments under this collaboration. We will achieve the next payment of up to $i45
millionfor the initiation of a Phase 3 trial under this collaboration.
At the commencement of this collaboration, we identified ione performance obligation, which was to perform R&D services for Biogen. We determined the transaction price to be the $i25
million upfront payment we received when we entered into the collaboration. We allocated the transaction price to our single performance obligation. In the fourth quarter of 2019, we
completed our R&D services performance obligation under this collaboration.
118
In the fourth quarter of 2021, we identified another performance obligation upon Biogen’s license of ION306 because the license we granted
to Biogen is distinct from our other performance obligations. We recognized the $i60 million license fee for ION306 as revenue at that time
because Biogen had full use of the license without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the license after we delivered it to Biogen. Biogen is solely responsible for the costs
and expenses related to the development, manufacturing and potential future commercialization of ION306 following the option exercise. We do not have any remaining performance obligations under this collaboration.
Neurology Collaborations
2018 Strategic Neurology
In April 2018, we and Biogen entered into a strategic
collaboration to develop novel antisense medicines for a broad range of neurological diseases and entered into a Stock Purchase Agreement, or SPA. As part of the collaboration, Biogen gained exclusive rights to the use of our antisense technology to
develop therapies for these diseases for i10 years. We are
responsible for the identification of antisense drug candidates based on selected medicines. Biogen is responsible for conducting IND-enabling toxicology studies for the selected medicine. Biogen will have the option to license the selected medicine after it completes the IND-enabling toxicology study. If Biogen exercises its
option to license a medicine, it will assume global development, regulatory and commercialization responsibilities and costs for that medicine.
In the second quarter of 2018, we received $i1 billion from Biogen, comprised of $i625
million
to purchase our stock at an approximately i25 percent cash premium and $i375
million in an upfront payment.
Over the term of our collaboration, we are eligible to receive up to $i270 million, which is comprised of a $i15
million license fee, up to $i105 million in development milestone payments and up to $i150
million in regulatory milestone payments for each medicine that achieves marketing approval. In addition, we are eligible to receive tiered royalties up to the i20 percent range on net sales.We are currently advancing multiple programs under
this collaboration and from inception through December 31, 2022, we have received nearly $i1.1 billion in payments under this collaboration. We will achieve the next payment of $i7.5
million if Biogen designates or advances another programunder this collaboration.
At the commencement of this collaboration, we considered that
the collaboration agreement and SPA 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. We
identified ione performance obligation, which was to perform R&D services for Biogen. We determined our transaction price to be $i552
million, comprised of $i375 million from the
upfront payment and $i177 million for the premium paid by
Biogen for its purchase of our common stock. We determined the fair value of the premium we received by using the stated premium in the SPA and applying a lack of marketability discount. We included a lack of marketability discount in our
valuation of the premium because Biogen received restricted shares of our common stock. We allocated the transaction price to our single performance obligation.
From inception through December 31, 2022,
we have included $i616 million in payments in the transaction price
for our R&D services performance obligation under this collaboration, including $i23 million of milestone payments we achieved in 2021 and $i11
million of milestone payments we achieved in 2020. These milestone payments did not create new performance obligations because they are part of our original R&D services performance obligation. Therefore, we included
these amounts in our transaction price for our R&D services performance obligation in the period we achieved the milestone payment. We are recognizing revenue for our R&D services performance obligation as we perform services based on our
effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy our performance obligation at the end of the contractual term in June 2028.
2013 Strategic Neurology
In September 2013, we and Biogen entered into a long-term strategic relationship focused on applying antisense technology to advance the
treatment of neurodegenerative diseases. As part of the collaboration, Biogen gained exclusive rights to the use of our antisense technology to develop therapies for neurological diseases and has the option to license medicines resulting from this
collaboration. We will usually be responsible for drug discovery and early development of antisense medicines and Biogen has the option to license antisense medicines after Phase 2 proof-of-concept. In October 2016, we expanded our collaboration to
include additional research activities we will perform. If Biogen exercises its option to license a medicine, it will assume global development, regulatory and commercialization responsibilities and costs for that medicine. We are currently advancing ifive investigational medicines in development under this collaboration, including a medicine for Parkinson’s disease (ION859), itwo
medicines for ALS (tofersen and
ION541), a medicine for multiple system atrophy (ION464) and a medicine for an undisclosed target. In the fourth quarter of 2018, Biogen exercised its option to license our most advanced ALS medicine, tofersen, our medicine in registration for SOD1 ALS.
As a result, Biogen is responsible for global development, regulatory and commercialization activities and costs for tofersen.
119
Under the terms of the agreement, we received an upfront payment of $i100 million and are eligible to receive milestone payments, license fees and royalty payments for all medicines developed under this collaboration, with the specific amounts dependent upon the
modality of the molecule advanced by Biogen. Under this collaboration, we received a $i35 million license fee payment when Biogen licensed
tofersen from us in 2018.
Over the term of the collaboration for tofersen, we are eligible to receive nearly $i110 million, which is comprised of the $i35
million license fee received in 2018, up to
$i18 million in development milestone payments and up to $i55
million in regulatory milestone payments. For each of the other antisense molecules that are chosen for drug discovery and development under this collaboration, we are eligible to receive up
to approximately $i260 million, which is comprised of a $i70
million license fee, up to $i60 million in development milestone payments, including
amounts related to the cost of clinical trials, and up to $i130 million in regulatory milestone payments. In addition, we are eligible to receive
tiered royalties up to the mid-teens on net sales from any antisense medicines developed under this collaboration. From inception through December 31, 2022,
we have received more than $i300 million in payments under this collaboration. We will achieve the next payment of $i16 million
if the FDA approves Biogen’s NDA filing of tofersen.
At the commencement of our 2013 strategic neurology collaboration, we identified ione performance obligation, which was to perform R&D services for Biogen. At inception, we determined the transaction price to be the $i100
million upfront payment we received and allocated it to our single performance obligation. As we achieve milestone payments for our R&D services, we include these amounts in our
transaction price for our R&D services performance obligation. We recognized revenue for our R&D services performance obligation based on our effort to satisfy our performance obligation relative to our total effort expected to satisfy our
performance obligation. During 2020, we completed our remaining research and development
services and recognized the remaining revenue related to this performance obligation. From inception through the completion of our R&D services performance obligation in 2020, we included $i145 million in total payments in the transaction price for our R&D services performance obligation.
Under this collaboration, we have also generated additional
payments that we concluded were not part of our R&D services performance obligation. We recognized each of these payments in full in the respective quarter we generated the payment because we did not have any performance obligations for the
respective payment. For example, in the third quarter of 2022, we earned a $i9million milestone payment when the FDA accepted Biogen’s NDA filing of tofersen, which we recognized in full because we did not have any performance obligations related to this milestone payment.
2012 Neurology
In December 2012, we and Biogen entered into a collaboration agreement to develop and commercialize novel antisense medicines to treat
neurodegenerative diseases. We are responsible for the development of each of the medicines through the completion of the initial Phase 2 clinical study for such medicine. Biogen has the option to license a medicine from each of the programs through
the completion of the first Phase 2 study for each program. Under this collaboration, Biogen is conducting the IONIS-MAPTRx study for AD and we are currently advancing ION582 for AS. If Biogen exercises its option to license a medicine, it
will assume global development, regulatory and commercialization responsibilities and costs for that medicine.
Under the terms of the agreement, we received an upfront
payment of $i30 million. Over the term of the collaboration,
we are eligible to receive up to $i210 million, which is
comprised of a $i70 million license fee, up to $i10
million in development milestone payments per program and up to $i130 million in regulatory milestone payments per program, plus a mark-up on the
cost estimate of the Phase 1 and 2 studies. In addition, we are eligible to receive tiered royalties up to the mid-teens on net sales of any medicines resulting from each of the itwo programs. From inception through December 31, 2022, we have received nearly $i170
million in payments under this collaboration, including nearly $i20 million in milestone payments we received from Biogen for advancing ION582 and a $i10
million milestone payment we received from Biogen when Biogen advanced IONIS-MAPTRxduring 2022. We will achieve the next payment of up to $i25million if Biogen advances a medicine under this collaboration.
Under our collaboration, we determined we had a performance obligation to perform R&D services. We allocated $i40 million in total payments to the transaction price for our R&D services performance obligation. In the third quarter of 2019, we completed our
R&D services performance obligation when we designated a development candidate and Biogen accepted the development candidate. We recognized revenue as we performed services based on our effort to satisfy our performance obligation relative to the
total effort expected to satisfy our performance obligation.
When we commenced development for IONIS-MAPTRx we identified our development work as a separate performance obligation. In the
fourth quarter of 2022, we completed our R&D services performance obligation for IONIS-MAPTRx. We recognized revenue as we performed services based on our effort to satisfy our performance obligation relative to the total effort expected
to satisfy our performance obligation. From inception through December 31, 2022, we have included $i57 million in the transaction price for our IONIS-MAPTRx development performance obligation, including $i19.5
million of milestone payments we earned from Biogen in 2020 when we advanced IONIS-MAPTRx.
120
In the fourth quarter of 2019, we identified another performance obligation upon Biogen’s license of IONIS-MAPTRx because the
license we granted to Biogen is distinct from our other performance obligations. We recognized the $i45 million license fee for IONIS-MAPTRx
as revenue at that time because Biogen had full use of the license without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the license after we delivered it to Biogen. Biogen is
responsible for global development, regulatory and commercialization activities and costs for IONIS-MAPTRx.
In the fourth quarter of 2022, we achieved $i14.5 million in milestone payments when Biogen advanced ION582. We will
recognize revenue as we perform services based on our effort to satisfy our R&D services performance obligation relative to the total effort expected to satisfy our performance obligation for ION582.
i
During the years ended December 31, 2022, 2021 and 2020, we earned the following revenue from our relationship with Biogen (in millions, except percentage amounts):
Our consolidated balance sheets at December 31, 2022 and 2021 included deferred
revenue of $i351.2 million and $i407.5 million, respectively, related to our relationship
with Biogen.
Joint Development and Commercialization Arrangement
AstraZeneca
Eplontersen Collaboration
In December 2021, we entered into a joint development and commercialization agreement with AstraZeneca to develop and commercialize
eplontersen for the treatment of 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.
Over the term of the collaboration, we are eligible to receive up to $i3.6 billion, which is comprised of a $i200
million upfront payment, up to $i485 million in development and approval milestone payments and up to $i2.9
billion in sales milestone payments. The agreement also includes territory-specific development, commercial and medical affairs cost-sharing provisions. In addition, we are eligible to
receive up to mid-i20 percent royalties for sales in the U.S. and tiered royalties up to the high teens for sales outside the U.S.
We evaluated our eplontersen collaboration under ASC 808 and identified ifour material components: (i) the license we granted to AstraZeneca in 2021, (ii) the co-development activities that we and AstraZeneca will perform, (iii) the co-commercialization activities
that we and AstraZeneca will perform and (iv) the co-medical affairs activities that we and AstraZeneca will perform.
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 ione performance obligation. For our sole performance obligation, we determined the transaction price was the $i200
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. AstraZeneca is currently responsible for i55 percent of the costs associated with the ongoing global Phase 3 development program. Because we are leading the Phase 3 development program, we recognize as revenue the i55
percent of cost-share funding AstraZeneca is responsible for 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 recognize cost-share funding we receive from AstraZeneca related to these activities as a
reduction of our commercial and medical affairs expenses.
We will achieve the next payment of up to $i50
million upon the first regulatory approval under this collaboration. From inception through December 31, 2022, we have received nearly $i260 million in payments under this collaboration.
121
Research and Development Partners
AstraZeneca
In addition to our collaboration for eplontersen, we have a collaboration with AstraZeneca focused on the treatment of cardiovascular,
renal and metabolic diseases. In July 2015, we and AstraZeneca formed a collaboration to discover and develop antisense therapies for treating cardiovascular, renal and metabolic diseases. Under our collaboration, AstraZeneca has licensed multiple
medicines from us, including medicines in development to treat people with ATTR amyloidosis, a genetically associated form of kidney disease and NASH. AstraZeneca is
responsible for global development, regulatory and commercialization activities and costs for each of the medicines it has licensed from us.
Over the term of the collaboration, we are eligible to receive up to $i5.8 billion, which is comprised of a $i65
million upfront payment, up to $i290 million in license fees, up to $i1.1
billion
in development milestone payments, up to $i2.9 billion in regulatory milestone payments and up to $i1.5
billion in sales milestone payments. In addition, we are eligible to receive tiered royalties up to the low teens on net sales from any product that AstraZeneca successfully
commercializes under this collaboration agreement. We will achieve the next payment of $i10 million under this collaboration if AstraZeneca
advances a medicine under this collaboration. From inception through December 31, 2022, we have received more than $i280 million in payments under this collaboration.
At the commencement of this collaboration, we identified ione performance obligation, which was to perform R&D services for AstraZeneca. We determined the transaction price to be the $i65
million upfront payment we received and we allocated it to our single performance obligation. We recognized revenue for our R&D services performance obligation as we performed services
based on our effort to satisfy this performance obligation relative to our total effort expected to satisfy our performance obligation. We completed our performance obligation
in the fourth quarter of 2021. As we achieved milestone payments for our R&D services, we included these amounts in our transaction price for our R&D services performance obligation. From inception through the completion of our
performance obligation, we have included $i90 million in payments in the transaction price for our R&D services performance obligation.
Under this collaboration, we have also generated additional payments that we concluded were not part of our R&D services performance
obligation. We recognized each of these payments in full in the respective quarter we generated the payment because the payments were distinct and we did not have any performance obligations for the respective payment. For example, in the fourth
quarter of 2021, we earned a $i30 million license fee when AstraZeneca licensed a target for a metabolic disease. We recognized the license fee as
revenue at that time because AstraZeneca had full use of the license without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the license after we delivered it to AstraZeneca.
i
During the years ended December 31, 2022, 2021 and 2020, we earned the following revenue from our relationship with AstraZeneca (in millions, except percentage amounts):
We did iino/t
have any
deferred revenue from our relationship with AstraZeneca at December 31, 2022 and 2021.
GSK
In March 2010, we entered into a collaboration with GSK using our antisense drug discovery platform to discover and develop new medicines
against targets for serious and rare diseases, including infectious diseases and some conditions causing blindness. Our collaboration with GSK currently includes itwo medicines targeting hepatitis B virus, or HBV: bepirovirsen and IONIS-HBV-LRx. We designed these medicines to reduce the production of viral proteins associated with HBV
infection. In the third quarter of 2019, following positive Phase 2 results, GSK licensed our HBV program. GSK is responsible for all global development, regulatory and commercialization activities and costs for the HBV program.
Over the term of the collaboration, we are eligible to receive nearly $i260 million, which is comprised of a $i25
million license fee, up to $i42.5 million in development milestone payments, up to $i120
million in regulatory milestone payments and up to $i70 million in sales milestone payments if GSK successfully develops bepirovirsen. In
addition, we are eligible to receive tiered royalties up to the low-teens on net sales of bepirovirsen. From inception through December 31, 2022,
we have received more than $i50 million in payments under the HBV program collaboration.
122
We completed our R&D services performance obligations
under our collaboration in the first quarter of 2015. We identified a new performance obligation when we granted GSK the license of the HBV program and assigned related intellectual property rights in the third quarter of 2019 because the
license was distinct from our other performance obligations. We recognized the $i25 million license fee for the HBV program as revenue at that
time because GSK had full use of the license without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the license after we delivered it to GSK.
We do not have any remaining performance obligations under our collaboration with GSK; however, we can still earn additional payments and
royalties as GSK advances the HBV program. In January 2023, we earned a $i15 million milestone when GSK initiated a Phase 3 study of bepirovirsen. We will achieve the next payment of $i15
million if the FDA accepts an NDA filing of bepirovirsen for review.
i
During the years ended December 31, 2022, 2021 and 2020, we earned the following revenue from our relationship with GSK (in millions, except percentage amounts):
We did iino/t
have any
deferred revenue from our relationship with GSK at December 31, 2022 and 2021.
Novartis
In January 2017, we initiated a collaboration with Novartis
to develop and commercialize pelacarsen and olezarsen. Novartis is responsible for conducting and funding development and regulatory activities for pelacarsen, including a global Phase 3 cardiovascular outcomes study that Novartis initiated in
the fourth quarter 2019.In connection with Novartis’ license of pelacarsen, we and Novartis established a more definitive framework under which the companies would
negotiate the co-commercialization of pelacarsen in selected markets. Included in this framework is an option by which Novartis could solely commercialize pelacarsen in exchange for Novartis paying us increased sales milestone payments based on sales
of pelacarsen. When Novartis decided to not exercise its option for olezarsen, we retained rights to develop and commercialize olezarsen.
Over the term of the collaboration, we are eligible to receive up to $i900 million, which is comprised of a $i75
million upfront payment, a $i150 million license fee, a $i25
million
development milestone payment, up to $i290 million in regulatory milestone payments and up to $i360
million in sales milestone payments. From inception through December 31, 2022, we have received nearly $i275 million in payments under this collaboration. We are also eligible to receive tiered royalties in the
mid-teens to low i20 percent range on net sales of pelacarsen. In August 2021, we earned a $i25
million milestone payment from Novartis when Novartis achieved i50 percent
enrollment in the Lp(a) HORIZON Phase 3 cardiovascular outcome study of pelacarsen. We recognized the milestone payment in full in the third quarter of 2021 because we did not have any remaining performance obligations related to the milestone payment.
We will achieve the next payment of up to $i75 million if Novartis advances regulatory
activities for pelacarsen.
In conjunction with this collaboration, we entered into a SPA with Novartis. As part of the SPA, Novartis purchased i1.6 million shares of our common stock for $i100
million in the first quarter of 2017.
At the commencement of this collaboration, we identified ifour separate performance obligations:
●
R&D services for pelacarsen;
●
R&D services for olezarsen;
●
API for pelacarsen; and
●
API for olezarsen.
We determined that the R&D services for each medicine and the API for each medicine were distinct performance obligations.
We determined our transaction price to be $i108.4
million, comprised of the following:
●
$i75 million from the upfront payment;
●
$i28.4 million for the premium paid by Novartis for its purchase
of our common stock at a premium in the first quarter of 2017; and
●
$i5.0 million for the potential premium Novartis would have paid
if they purchased our common stock in the future.
123
We allocated the transaction price based on the estimated stand-alone selling price of each performance obligation as follows:
●
$i64.0 million for the R&D services for pelacarsen;
●
$i40.1 million for the R&D services for olezarsen;
●
$i1.5
million for the delivery of pelacarsen API; and
●
$i2.8
million for the delivery of olezarsen API.
We completed our R&D services performance obligations for olezarsen and pelacarsenin 2019. As such, we recognized all
revenue we allocated to the olezarsen and pelacarsenR&D services as of the end of 2019.
We recognized revenue related to the R&D services for
pelacarsen and olezarsen performance obligations as we performed services based on our effort to satisfy our performance obligations relative to our total effort expected to satisfy our performance obligations.
i
During the years ended December 31, 2022, 2021 and 2020, we earned the following revenue from our relationship with Novartis (in millions, except percentage amounts):
We did iino/t
have any
deferred revenue from our relationship with Novartis at December 31, 2022 and 2021.
As described in the Biogen SPINRAZA
section above, in January 2023, we entered into a royalty purchase agreement with Royalty Pharma. Under the agreement, in addition to a minority interest in SPINRAZA royalties, Royalty Pharma will receive i25 percent of any future royalty payments on pelacarsen. Refer to Part IV, Item 15, Note 4, Long-Term Obligations and Commitments, for further discussion of this agreement.
Roche
Huntington’s Disease
In April 2013, we formed an alliance with Hoffmann-La Roche Inc and F. Hoffmann-La Roche Ltd, collectively Roche, to develop treatments
for HD based on our antisense technology. Under the agreement, we discovered and developed tominersen, an investigational medicine targeting HTT protein. We developed tominersen through completion of our Phase 1/2 clinical study in people with
early-stage HD. In the fourth quarter of 2017, upon completion of the Phase 1/2 study, Roche exercised its option to license tominersen. Roche is responsible for all global development, regulatory and commercialization activities and costs for
tominersen.
Over the term of the collaboration, we are eligible to receive up to $i395 million, which is comprised of a $i30
million upfront payment, a $i45 million license fee, up to $i70
million in
development milestone payments, up to $i170 million in regulatory milestone payments and up to $i80
million in sales milestone payments as tominersen advances. In addition, we are eligible to receive up to $i136.5 million in milestone payments for each additional medicine successfully developed. We are also eligible to receive tiered royalties up to the mid-teens on net sales of any product
resulting from this alliance. From inception through December 31, 2022, we have received more than $i150 million in payments under this collaboration. We will achieve the next payment of $i17.5
million if Roche advances a medicine under this collaboration.
At the commencement of this collaboration, we identified ione performance obligation, which was to perform R&D services for Roche. We determined the transaction price to be the $i30
million upfront payment we received and allocated it to our single performance obligation. As we achieved milestone payments for our R&D services, we included these amounts in our
transaction price for our R&D services performance obligation. We recognized revenue for our R&D services performance obligation over our period of performance, which ended in the third quarter of 2017.
Under this collaboration, we have also generated additional payments that we concluded were not part of our R&D services performance
obligation. We recognized each of these payments in full in the respective quarter in which we generated the payment because the payments were distinct and we did not have any performance obligations for the respective payment. In 2019, we earned $i35 million in milestone payments when Roche advanced tominersen under this collaboration. In March 2021, Roche decided to discontinue dosing in the Phase 3
GENERATION HD1 study of tominersen in patients with manifest HD based on the results of a pre-planned review of data from the Phase 3 study conducted by an unblinded iDMC.
124
In January 2023, Roche initiated the Phase 2, GENERATION HD2, study of tominersen in patients with prodromal or early manifest HD. Roche
is focusing on early-stage and younger patients based on the post-hoc analyses from the GENERATION HD1 study that suggested tominersen may benefit these patient groups. We do not have any remaining performance obligations related to tominersen under
this collaboration with Roche; however, we can still earn additional payments and royalties as Roche advances tominersen.
IONIS-FB-LRx for Complement-Mediated Diseases
In October 2018, we entered into a collaboration agreement with Roche to develop IONIS-FB-LRx for the treatment of complement-mediated diseases. We are currently conducting Phase 2 studies in itwo disease indications for IONIS-FB-LRx, ione
for the treatment of patients with GA, the advanced stage of dry AMD, and a second for the treatment of patients with IgA nephropathy.
After positive data from a Phase 2 clinical study, Roche licensed IONIS-FB-LRx in July 2022for $i35 million. As a result, Roche is responsible for global development, regulatory and commercialization activities, and costs for IONIS-FB-LRx,
except for the open label Phase 2 study in patients with IgAN and the Phase 2 study in patients with GA, both of which we are conducting and funding. In July 2022, we amended our IONIS-FB-LRx collaboration agreement with Roche. The amendment changed future potential milestone payments we could receive under the collaboration. We determined there were no changes that
would require adjustments to revenue we previously recognized.
Over the term of the collaboration, we are eligible to
receive more than $i810 million, which is comprised of a $i75
million upfront payment, a $i35 million license fee, up to $i145
million in development milestones, up to $i279 million in regulatory milestones and up to $i280
million in sales milestone payments. In addition, we are also eligible to receive tiered royalties from the high
teens to i20 percent on net sales.From inception through December 31, 2022,
we have received more than $i130 million in payments under this collaboration. We will achieve the next payment of up to $i90
million if Roche advances IONIS-FB-LRx under this collaboration.
At the commencement of this collaboration, we identified ione performance obligation, which was to perform R&D services for Roche. We determined the transaction price to be the $i75
million upfront payment we received and allocated it to our single performance obligation. We are recognizing revenue for our R&D services performance obligation as we perform services
based on our effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation.We currently estimate we will satisfy our performance obligation in the third quarter of 2024.
i
During the years ended December 31, 2022, 2021 and 2020, we earned the following revenue from our relationship with Roche (in millions, except percentage amounts):
Our consolidated balance sheets at December 31, 2022 and 2021 included deferred
revenue of $i22.4 million and $i31.6 million related to our relationship with Roche, respectively.
Commercialization Partnerships
Swedish Orphan Biovitrum AB (Sobi)
We began commercializing TEGSEDI and WAYLIVRA in Europe in January 2021 and TEGSEDI in North America in April 2021 through distribution
agreements with Sobi. 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. In exchange, we earn a distribution fee on net sales from Sobi for each
medicine.
PTC Therapeutics
In August 2018, we entered into an exclusive license
agreement with PTC Therapeutics to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries. Under the license agreement, we are eligible to receive royalties from PTC in the mid-i20 percent range on net sales for each medicine. In December 2021, we started receiving
royalties from PTC for TEGSEDI sales.
125
Technology Enhancement Collaborations
Bicycle License Agreement
In December 2020, we entered into a collaboration agreement with Bicycle and obtained an option to license its peptide technology to
potentially increase the delivery capabilities of our LICA medicines. In July 2021, we paid $i42 million when we exercised our option to license
Bicycle’s technology, which included an equity investment in Bicycle. As part of our stock purchase, we entered into a lockup agreement with Bicycle that restricted our ability to trade our Bicycle shares for ione year. In 2021, we recorded a $i7.2
million equity investment for the
shares we received in Bicycle. We recognized the remaining $i34.8 million as R&D expense in 2021. From inception through December 31, 2022, we have paid Bicycle $i46.6
million under this collaboration agreement.
Metagenomi License Agreement
In November 2022, we entered into a collaboration and license agreement with Metagenomi to research, develop and commercialize
investigational medicines for up to ifour initial genetic targets, and, upon the achievement of certain development milestones, ifour
additional genetic targets using gene editing technologies. As a result, we paid $i80 million to license Metagenomi’s technologies. We recorded the $i80
million payment as
R&D expense in 2022 upon receiving a license from Metagenomi for intellectual property that is in research with no current alternate use. We will also pay Metagenomi certain fees for the selection of genetic targets, and contingent on the
achievement of certain development, regulatory and sales events, milestone payments and royalties. In addition, we will reimburse Metagenomi for certain of its costs in conducting its research and drug discovery activities under the collaboration.
Other Agreements
Alnylam Pharmaceuticals, Inc.
Under the terms of our agreement with Alnylam, we co-exclusively (with ourselves) licensed to Alnylam our patent estate relating to
antisense motifs and mechanisms and oligonucleotide chemistry for double-stranded RNAi therapeutics, with Alnylam having the exclusive right to grant platform sublicenses for double-stranded RNAi. In exchange for such rights, Alnylam gave us a
technology access fee, participation in fees from Alnylam’s partnering programs, as well as future milestone and royalty payments from Alnylam. We retained exclusive rights to our patents for single-stranded antisense therapeutics and for a limited
number of double-stranded RNAi therapeutic targets and all rights to single-stranded RNAi, or ssRNAi, therapeutics. In turn, Alnylam nonexclusively licensed to us its patent estate relating to antisense motifs and mechanisms and oligonucleotide
chemistry to research, develop and commercialize single-stranded antisense therapeutics, ssRNAi therapeutics, and to research double-stranded RNAi compounds. We also received a license to develop and commercialize double-stranded RNAi therapeutics
targeting a limited number of therapeutic targets on a nonexclusive basis. Additionally, in 2015, we and Alnylam entered into an alliance in which we cross-licensed intellectual property. Under this alliance, we and Alnylam each obtained exclusive
license rights to i4 therapeutic programs. Alnylam granted us an exclusive, royalty-bearing license to its chemistry, RNA targeting mechanism
and target-specific intellectual property for oligonucleotides against ifour targets, including FXI and Apo(a) and itwo
other targets. In exchange, we granted Alnylam an exclusive, royalty-bearing license to our chemistry, RNA targeting mechanism and target-specific
intellectual property for oligonucleotides against ifour other targets. Alnylam also granted us a royalty-bearing, non-exclusive license to new
platform technology arising from May 2014 through April 2019 for single-stranded antisense therapeutics. In turn, we granted Alnylam a royalty-bearing, non-exclusive license to new platform technology arising from May 2014 through April 2019 for
double-stranded RNAi therapeutics.
In the fourth quarter 2020, we completed an arbitration process with Alnylam. The arbitration panel awarded us $i41.2 million for payments owed to us by Alnylam related to Alnylam’s agreement with Sanofi Genzyme. We recognized the $i41.2
million payment from Alnylam as revenue in the fourth quarter of 2020 because we did not have any performance obligations for the respective payment.
i
During the years ended December 31, 2022, 2021 and 2020, we earned the following revenue from our relationship with Alnylam (in millions, except percentage amounts):
We did iino/t
have any
deferred revenue from our relationship with Alnylam at December 31, 2022 and 2021.
126
i
8. Employment Benefits
We have employee 401(k) salary deferral plans covering all employees. Employees could make contributions by withholding a percentage of
their salary up to the IRS annual limits of $i20,500 and $i27,000
in 2022 for employees under 50 years old and employees 50 years old or over,
respectively. We made approximately $i5.6 million, $i5.5
million and $i5.7 million in matching contributions for the years ended December 31, 2022, 2021 and 2020, respectively.
i
9. Legal Proceedings
From time to time, we are involved in legal proceedings arising in the ordinary course of our business. Periodically, we evaluate the
status of each legal matter and assess our potential financial exposure. If we consider the potential loss from any legal proceeding to be probable and we can reasonably estimate the amount, we accrue a liability for the estimated loss. The outcome of
any proceeding is not determinable in advance. Therefore, we are required to use significant judgment to determine the probability of a loss and whether the amount of the loss is reasonably estimable. Our assessment of a potential liability and the
amount of accruals we recorded are based only on the information available to us at the time. As additional information becomes available, we reassess the potential liability related to the legal proceeding and may revise our estimates.
On August 5, 2021, ifour purported former stockholders of Akcea filed an action in the Delaware
Court of Chancery captioned John Makris, et al. v. Ionis Pharmaceuticals, Inc., et al., C.A. No. 2021-0681, or the Delaware Action. The plaintiffs in the Delaware Action asserted claims against (i) former members of Akcea’s board of directors; and
(ii) Ionis, or collectively, the Defendants. The plaintiffs asserted putatively direct claims on behalf of a purported class of former Akcea stockholders. The plaintiffs in the Delaware Action asserted that the Defendants breached their fiduciary
duties in connection with the October 2020 take-private transaction that Ionis and Akcea entered into, in which Akcea became a wholly-owned subsidiary of Ionis. We believe this lawsuit is without merit. However, the outcome of this lawsuit or any
other lawsuit that may be filed challenging the October 2020 take-private transaction is uncertain. Accordingly, on June 3, 2022, the parties reached an agreement in principle to settle the Delaware Action for $i12.5 million. A Stipulation and Agreement of Compromise, Settlement and
Release, or the Stipulation and Settlement Agreement reflecting the terms of the proposed settlement was executed and filed with the Delaware Court of Chancery on July 5, 2022. On October 11, 2022, the Delaware Court of Chancery entered an Order and
Final Judgment, or the Order, approving the Stipulation and Settlement Agreement in full after determining that the Stipulation and Settlement Agreement was fair, reasonable, and adequate. The Order provides for the full settlement, satisfaction,
compromise and release of all claims that were asserted in the Delaware Action. The Order contains no admission of wrongdoing on the part of any of the Defendants. We recorded a net settlement expense of $i7.7 million within other expense in the accompanying consolidated statements of operations in 2022.
On January 19, 2022, a purported stockholder of Ionis filed a stockholder derivative complaint in the Delaware Court of Chancery captioned Leo Shumacher, et al. v. Joseph Loscalzo, et al., C.A. No. 2022-0059, or the Shumacher Action. The complaint names Ionis’ board of directors, or the
Board, as defendants and names Ionis as a nominal defendant. The Shumacher Action Plaintiff asserts a breach of fiduciary duty claim against the Board for awarding and receiving allegedly excessive compensation. The Shumacher Action Plaintiff also
asserts an unjust enrichment claim against the non-executive directors as a result of the compensation they received. The complaint seeks, among other things, damages, restitution, attorneys’ fees and costs, and such other relief as deemed just and
proper by the court. On March 18, 2022, Ionis and the Board moved to dismiss the complaint. On May 24, 2022, the parties entered into a Stipulation and Agreement of
Compromise, Settlement and Release.
On May 25, 2022, another purported stockholder of Ionis filed a stockholder derivative complaint also in the Delaware Court of Chancery captioned Robert S. Cohen, et al. v. Joseph Loscalzo, et al., C.A. No. 2022-0453, or the Cohen Action. The complaint names the Board as defendants and names Ionis
as a nominal defendant. The Cohen Action Plaintiff asserts claims for breach of fiduciary duty, unjust enrichment, aiding and abetting breaches of fiduciary duty, and waste against the Board for awarding and receiving allegedly excessive
non-executive director compensation for the years 2018, 2019, and 2020. On June2, 2022, the Cohen Action Plaintiff filed a motion to consolidate the related Cohen Action and Shumacher Action. On July 5, 2022, the Court denied the motion to consolidate in favor of the settlement pending in the Shumacher Action.
On July 18, 2022, Ionis filed a Form 8-K disclosing the pending settlement and attaching the Notice of Pendency of Settlement of
Action. On September 21, 2022, the Court held a hearing to consider whether the terms of the settlement should be approved, at which hearing the Cohen Action
plaintiff objected to the settlement. At the conclusion of the hearing, the Court declined to approve the settlement and directed the parties to meet and confer on the issue of the scope of the release. On February 7, 2023, the parties entered into
an Amended Stipulation and Agreement of Compromise, Settlement and Release. We and our Board have denied, and continue to deny, any and all allegations of wrongdoing or liability asserted in the Shumacher and Cohen Actions.
127
i
10. Fourth Quarter Financial Data (Unaudited)
i
The following financial information reflects all normal recurring adjustments, which are, in the opinion
of management, necessary for a fair statement of the results of the interim periods. Summarized fourth quarter data for 2022 and 2021 are as follows (in thousands, except per share data).
Revenue was lower in the three months ended
December 31, 2022 compared to the same period in 2021 due to the $i200 million we earned in the fourth quarter of 2021 from AstraZeneca to
jointly develop and commercialize eplontersen.
(2)
Operating expenses were higher in the three
months ended December 31, 2022 compared to the same period in 2021 primarily due to the $i80 million upfront payment we made for our
collaboration with Metagenomi in the fourth quarter of 2022.
(3)
Our net loss for the three months ended
December 31, 2022 includes the $i150.1 million gain we recognized from the sale and leaseback transaction for our headquarters in
Carlsbad, California.
(4)
We compute net income (loss) per share independently for each quarter during the year.
(5)
As discussed in Note 1, Organization and Significant Accounting Policies, we compute basic net income (loss) per share by dividing the total net income (loss) by our
weighted-average number of common shares outstanding during the period.
(6)
We had net income for the fourth quarter of
2021. As a result, we computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period as follows (in thousands except per share amounts):
