IONIS PHARMACEUTICALS INC

The following is a summary of our financial results (in millions):

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Revenue

Total revenue for the three andnine months ended September 30, 2024 were $133.8 million and $478.6 million, respectively, compared to $144.2 million and $463.1 million for the same periods in 2023 and were comprised of the following (in millions):

Commercial revenue in the three and nine months ended September 30, 2024 included a new source of royalty revenue with the launch of WAINUA in the U.S. in late January 2024. Our commercial revenue in the three and nine months ended September 30, 2024 and 2023 also included royalties from the net sales of QALSODY, which Biogen launched in the U.S. in the second quarter of 2023 and in the EU in the second quarter of 2024. SPINRAZA product sales for the three months ended September 30, 2024 compared to the same period in 2023 increased slightly in the U.S. and decreased outside of the U.S. primarily due to an annual order from a single country that did not recur in 2024.

R&D revenue was relatively consistent in the three months ended September 30, 2024 compared to the same period in 2023, and increased in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to the amortization of upfront payments from the new collaborations with Roche and Novartis that we entered into during the second half of 2023. In addition, license fees increased year over year as a result of new collaborations we entered into during the second quarter of 2024, including the expanded donidalorsen licensing agreement with Otsuka, which now includes the Asia-Pacific region in addition to Europe. These increases were partially offset by the decrease in WAINUA joint development revenue, which decreased as development activities relating to ATTRv-PN wound down with the launch of WAINUA for this indication.

WAINUA (Eplontersen) Collaboration with AstraZeneca

Our financial results for the three and nine months ended September 30, 2024 and 2023 reflected the cost-sharing provisions related to our collaboration with AstraZeneca to develop and commercialize WAINUA 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.

As AstraZeneca is responsible for the majority of the medical affairs and commercial costs in the U.S. and all costs associated with bringing WAINUA 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. We expect our medical affairs and commercialization expenses to increase with the launch of WAINUA for ATTRv-PN in the U.S. and as WAINUA advances toward the market for ATTR-CM under our collaboration with AstraZeneca.

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The following table sets forth information on revenue and expenses under this collaboration (in millions):

Operating Expenses

The following table sets forth information on operating expenses (in millions):

Operating expenses, excluding non-cash compensation expense related to equity awards, decreased in the three months ended September 30, 2024 compared to the same period in 2023, and increased in the nine months ended September 30, 2024 compared to the same period in 2023. Our SG&A expenses decreased in the three months ended September 30, 2024 compared to the same period in 2023 due to a one-time expense of $18 million related to a lease agreement termination in the third quarter of 2023, and increased in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to the launch of WAINUA in the U.S. and launch preparation activities for olezarsen and donidalorsen, including establishing the field team for olezarsen. Our R&D expenses were relatively consistent in the three and nine months ended September 30, 2024 compared to the same periods in 2023 as several late-stage studies have ended. We expect our operating expenses, excluding non-cash compensation expense related to equity awards, to continue to increase during the remainder of 2024 as we advance our commercialization activities.

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 TEGSEDI and WAYLIVRA 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.

The following table sets forth information on cost of sales (in millions):

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Research, Development and Patent Expenses

Our research, development and patent expenses consist of expenses for drug discovery, drug development, medical affairs, manufacturing and development chemistry and R&D support expenses.

The following table sets forth information on research, development and patent expenses (in millions):

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.

The following table sets forth information on drug discovery expenses (in millions):

Drug discovery expenses, excluding non-cash compensation expense related to equity awards, were relatively consistent in the three and nine months ended September 30, 2024 compared to the same periods in 2023.

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):

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Our drug development expenses, excluding non-cash compensation expense related to equity awards, were relatively consistent in the three and nine months ended September 30, 2024 compared to the same periods in 2023. We expect our development expenses will continue to be stable as several late-stage studies end and we reallocate resources toward earlier stage programs.

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. 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 funding and coordinating investigator-sponsored trials, communicating scientific and clinical information to healthcare providers, medical professionals and patients, and managing publications.

The following table sets forth information on medical affairs expenses (in millions):

Medical affairs expenses, excluding non-cash compensation expense related to equity awards, increased in the three and nine months ended September 30, 2024 compared to the same periods in 2023 as we continued advancing 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, validation batches to support regulatory approvals, 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.

The following table sets forth information on manufacturing and development chemistry expenses (in millions):

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Manufacturing and development chemistry expenses, excluding non-cash compensation expense related to equity awards, were relatively consistent in the three months ended September 30, 2024 compared to the same period in 2023, and decreased in the nine months ended September 30, 2024 compared to the same period in 2023 due to the timing of manufacturing performed by our contract manufacturing organizations for drug product related to several late-stage programs.

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, information technology 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):

R&D support expenses, excluding non-cash compensation expense related to equity awards, were relatively consistent in the three and nine months ended September 30, 2024 compared to the same periods in 2023.

Selling, General and Administrative Expenses

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 SG&A 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 and QALSODY.

The following table sets forth information on SG&A expenses (in millions):

SG&A expenses, excluding non-cash compensation expense related to equity awards, decreased in the three months ended September 30, 2024 compared to the same period in 2023 due to a one-time expense of $18 million related to a lease agreement termination in the third quarter of 2023. SG&A expenses, excluding non-cash compensation expense related to equity awards, increased in the nine months ended September 30, 2024 compared to the same period in 2023 due to increased expenses related to our launch of WAINUA in the U.S. and launch preparation activities for olezarsen and donidalorsen, including establishing the field team for olezarsen.

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Investment Income

The following table sets forth information on investment income (in millions):

Our investment income increased primarily due to an increase in interest rates associated with our investments during a majority of the three and nine months ended September 30, 2024 compared to the same periods in 2023, partially offset by a decrease in interest rates in the second half of September 2024. In addition, our cash available for investing increased due to the $489 million net proceeds we received from our public common stock offering in September 2024. Refer to Note 13, Public Common Stock Offering, for further details on the public offering.

Interest Expense

The following table sets forth information on interest expense (in millions):

In 2023, we completed a $575.0 million offering of our 1.75% Notes and repurchased $504.4 million in principal of our 0.125% Notes. As a result, beginning in the second quarter of 2023, our interest expense related to our convertible notes increased because we began incurring interest expense for our 1.75% Notes.

Interest Expense Related to Sale of Future Royalties

We recorded $18.5 million and $54.8 million of interest expense related to the sale of future royalties in the three andnine months ended September 30, 2024, respectively, compared to $17.8 million and $50.9 million in the same periods in 2023, respectively. These amounts are related to the Royalty Pharma transaction, in which we sold a minority interest in our future SPINRAZA and pelacarsen royalties to Royalty Pharma for a $500 million upfront payment and $625 million of potential future payments. Refer to Part I, Item 1, Note 11, Liability Related to Sale of Future Royalties, in the Notes to Condensed Consolidated Financial Statements for further details.

Gain (Loss) on Investments

The following table sets forth information on gain (loss) on investments (in millions):

The period-over-period fluctuations in our gain (loss) on investments were driven by changes in the fair value of our investments in privately held and publicly traded biotechnology companies.

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Other Income

In 2023, we completed a $575.0 million offering of our 1.75% Notes and used $488.2 million of the net proceeds to repurchase $504.4 million in principal of our 0.125% Notes. As a result of these repurchases, we recorded a $13.4 million gain on early retirement of debt in the nine months ended September 30, 2023, which reflects the difference between the amount we paid to repurchase a portion of our 0.125% Notes and the net carrying balance of the liability at the time that we repurchased the debt. Refer to Part I, Item 1, Note 12, Convertible Debt, in the Notes to Condensed Consolidated Financial Statements for further details regarding our convertible debt.

Income Tax Benefit (Expense)

We recorded income tax benefit of $3.6 million and $3.5 million for the three and nine months ended September 30, 2024, respectively, compared to income tax expense of $6.6 million and $25.8 million for the same periods in 2023, respectively.

The benefit for the three and nine months ended September 30, 2024 primarily relates to the 2023 tax return position for the royalty purchase agreement with Royalty Pharma that we finalized during the third quarter of 2024. We reflected the Royalty Pharma transaction as a taxable sale, which required us to include the proceeds from the sale, net of currently deductible issuance costs, as taxable income in 2023.

The decrease in income tax expense for the three and nine months ended September 30, 2024 compared to the same periods in 2023 relates primarily to the impact of the Royalty Pharma transaction.

We continue to maintain a full valuation allowance on all our net deferred tax assets.

Net Loss and Net Loss per Share

We had a net loss of $140.5 million and $349.5 million for the three and nine months ended September 30, 2024, respectively. We had a net loss of $147.4 million and $357.0 million for the same periods in 2023. Theperiod-over-period fluctuations in our net loss were driven byfactors discussed in the sections above. Basic and diluted net loss per share for the three andnine months ended September 30, 2024 were $0.95 and $2.38, respectively, compared to $1.03 and $2.50 for the same periods in 2023. Theperiod-over-period fluctuations in our net loss per share were primarily driven by factors discussed in the sections above and partially driven by the increase in our weighted-average number of common shares outstanding due to the issuance of 11.5 million shares of common stock from our public offering in September 2024.