IONIS PHARMACEUTICALS INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

1. Organization and Basis of Presentation

Organization and Business Activity

We incorporated in California on January 10, 1989. In conjunction with our initial public offering, we reorganized as a Delaware corporation in April 1991. We are a leader in the discovery and development of RNA-targeted therapeutics.

Basis of Presentation

We prepared the unaudited interim condensed consolidated financial statements for the three months ended March 31, 2025 and 2024 on the same basis as the audited financial statements for the year ended December 31, 2024. We included all normal recurring adjustments in the financial statements, which we considered necessary for a fair presentation of our financial position at such dates and our operating results and cash flows for those periods. Our operating results for the interim periods may not be indicative of what our operating results will be for the entire year. For more complete financial information, these financial statements, and notes thereto, should be read in conjunction with the audited financial statements for the year ended December 31, 2024 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC.

In our condensed consolidated financial statements, we included the accounts of Ionis Pharmaceuticals, Inc. and the consolidated results of our wholly owned subsidiary, Akcea Therapeutics, Inc. and its wholly owned subsidiaries (“we”, “us” or “our”).

We operate as asingle segment, Ionis operations, because our chief operating decision maker, or CODM, reviews operating results on an aggregate basis and manages our operations as asingle operating segment. Refer to Note 14, Segment Information, for further details on our segment information.

Use of Estimates

We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States, or U.S., that require us to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Actual results could differ from our estimates.

2. Significant Accounting Policies

Below, we have included our accounting policies for revenue recognition related to product sales, net and cost of sales as a result of our launch of TRYNGOLZA in the U.S. Our other significant accounting policies have not changed substantially from those included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Revenue Recognition

Product Sales, Net

We recognize revenue from product sales when the customer obtains control of our product in the amount of the transaction price, which is the amount that reflects the consideration which we expect to receive. We estimate reserves for variable consideration related to applicable discounts, rebates, chargebacks and other allowances included in our agreements with customers, payors and other third parties. We include the amount of variable consideration in the transaction price to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. If actual results vary significantly from our estimates, we adjust our estimates in the period that we become aware of such variances.

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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.

Cost of sales for a newly launched product, such as TRYNGOLZA, does not include the full cost of manufacturing until we manufacture and sell additional inventory after exhausting pre-launch inventory, which we previously recorded as research and development, or R&D, expense.

Recent Accounting Standards

In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, 2023-07, which provides updated guidance on segment reporting. The guidance requires public companies to disclose significant expenses that are regularly provided to the CODM, other segment items for each reportable segment and measures of segment profit or loss used by the CODM for allocating resources. In addition, the updated guidance requires public companies with a single reportable segment to provide all disclosures required under Accounting Standards Codification, or ASC, Topic 280, Segment Reporting, and public companies to include in interim reports all disclosures related to a reportable segment’s profit or loss and assets that are currently required in annual reports. We adopted the reporting requirements in our 2024 Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q for the first quarter of 2025. Refer to Note 14, Segment Information, for further details on our segment information.

We do not expect any recently issued accounting standards other than those included in our Annual Report on Form 10-K for the year ended December 31, 2024 to have a material impact to our financial results.

3. Supplemental Financial Data

Inventories

Our inventories consisted of the following (in thousands):

Accrued Liabilities

Our accrued liabilities consisted of the following (in thousands):

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4. Revenues

During the three months ended March 31, 2025 and 2024, our revenues were comprised of the following (in thousands):

Revenue Sources

The following are sources of revenue and when we typically recognize revenue.

Commercial Revenue

In December 2024, the U.S. Food and Drug Administration, or FDA, approved TRYNGOLZA (olezarsen) for the treatment of familial chylomicronemia syndrome, or FCS. Following the approval, we launched TRYNGOLZA and began earning revenue from TRYNGOLZA sales. We recognize product sales, net of variable considerations related to applicable discounts and allowances, when the customer obtains control of our product.

We earn royalty payments primarily on net sales of SPINRAZA, WAINUA and QALSODY.

We earn commercial revenue from TEGSEDI and WAYLIVRA sales under our distribution agreements with Swedish Orphan Biovitrum AB, or Sobi. In addition, we receive royalties from PTC Therapeutics International Limited, or PTC, for TEGSEDI and WAYLIVRA sales. Refer to Part IV, Item 15, Note 4, Collaborative Arrangements and Licensing Agreements, of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 for details on our commercialization partnerships with Sobi and PTC.

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.

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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 that may involve 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.

Upfront payments: When we enter into a collaboration agreement and receive an upfront payment, we 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. If part or all of the upfront payment is a license fee, we recognize as revenue the portion related to the license when we deliver the license to our partner because our partner has full use of the license and we do not have any additional performance obligations related to the license after delivery.

Milestone payments: We consider milestone payments to be variable consideration and include them 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 there is considerable uncertainty in the research and development processes that trigger these payments. Similarly, we include regulatory 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 payment 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 remaining performance obligation.

License fees: We 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 because our partner has full use of the license and we do not have any additional performance obligations related to the license after delivery.

WAINUA (Eplontersen) Collaboration with AstraZeneca

In 2021, we entered into a joint development and commercialization agreement with AstraZeneca to develop and commercialize WAINUA for the treatment of transthyretin amyloidosis, or ATTR. Under the terms of the agreement, we received a $200 million upfront payment in 2021.

We evaluated our WAINUA collaboration under ASC Topic 808, Collaborative Arrangements, or ASC 808, and identified four material components: (i) the license we granted to AstraZeneca in 2021, (ii) the co-development activities that we and AstraZeneca are performing, (iii) the co-commercialization activities that we and AstraZeneca are performing and (iv) the co-medical affairs activities that we and AstraZeneca are performing.

We determined that we had a vendor-customer relationship within the scope of ASC Topic 606, Revenue from Contracts with Customers, or ASC 606, for the license we granted to AstraZeneca and as a result we hadone performance obligation. For our sole performance obligation, we determined the transaction price was the $200 million upfront payment we received. We recognized the upfront payment in full in 2021 because we did not have any remaining performance obligations after we delivered the license to AstraZeneca.

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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 55 percent of the costs associated with the ongoing global Phase 3 development program. Because we are leading the Phase 3 development program, we made an accounting policy election to recognize as non-customer revenue the cost-share funding from AstraZeneca, net of our share of AstraZeneca’s development expenses, in the same period we incur the related development expenses. As AstraZeneca is responsible for the majority of the commercial and medical affairs costs in the U.S. and all costs associated with bringing WAINUA 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 selling, general and administrative, or SG&A, expense and R&D expense, respectively.

Swedish Orphan Biovitrum AB (Sobi)

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.

5. Collaborative Arrangements and Licensing Agreements

Below, we have included our Ono collaboration, which is the only collaboration that had either substantive changes or was new from those included in Part IV, Item 15, Note 4, Collaborative Arrangements and Licensing Agreements, of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Ono

In March 2025, we entered into an agreement with Ono Pharmaceutical, Ltd, or Ono, to develop and commercialize sapablursen, an investigational RNA-targeted medicine for the potential treatment of polycythemia vera, or PV, a rare and potentially life-threatening hematologic disease. We are responsible for completing the ongoing Phase 2 IMPRSSION study, while Ono will be solely responsible for subsequent development, regulatory filings and commercialization of sapablursen.

Over the term of our sapablursen collaboration, we are eligible to receive up to $940 million, which is comprised of a $280 million upfront payment and up to $660 million in development, regulatory and sales milestone payments. In addition, we are eligible to receive royalties in the mid-teen percentage range on net sales.

In April 2025, we achieved a $280 million upfront payment when this transaction received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR Act.

6. Basic and Diluted Net Loss Per Share

Basic net loss per share

We calculated our basic net loss per share for the three months ended March 31, 2025 and 2024 by dividing our net loss by our weighted-average number of common shares outstanding during the period.

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Diluted net loss per share

For the three months ended March 31, 2025 and 2024, we incurred a net loss; therefore, we did not include dilutive common equivalent shares in the computation of diluted net loss per share because the effect would have been anti-dilutive. Common stock from the following would have had an anti-dilutive effect on net loss per share:

For the three months ended March 31, 2024, common stock underlying the 0.125 percent convertible senior notes, or 0.125% Notes, and note hedges related to the 0.125% Notes would also have had an anti-dilutive effect on net loss per share.

Additionally, as of March 31, 2025 and 2024, we had warrants related to our 0% and 0.125% Notes outstanding. We will include the shares issuable under these warrants in our calculation of diluted earnings per share when the average market price per share of our common stock for the reporting period exceeds the strike price of the warrants.

7. Investments

The following table summarizes the contract maturity of the available-for-sale securities we held as of March 31, 2025:

As illustrated above, at March 31, 2025,94 percent of our available-for-sale securities had a maturity of less thantwo years.

All of our available-for-sale debt 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.

We invest in debt securities with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Standard & Poor’s, Moody’s or Fitch, respectively.

At March 31, 2025, we had an equity ownership interest of less than 20 percent inseven private companies andthree public companies with which we conduct business.

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The following is a summary of our investments (in thousands):

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The following is a summary of our investments we consider to be temporarily impaired at March 31, 2025 (in thousands, except for number of investments):

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 rather than underlying credit deterioration for any of the issuers. We believe it is more likely than not that we will be able to hold our debt securities with declines in value to maturity. Therefore, we intend to hold these securities to maturity and anticipate full recovery of our debt securities’ amortized cost basis at maturity.

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8. Fair Value Measurements

The following tables present the major security types we held at March 31, 2025 and December 31, 2024 that we regularly measure and carry at fair value. 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 security’s fair value (in thousands):

The following footnotes reference lines in our condensed consolidated balance sheets:

Convertible Notes

Our 1.75% Notes and 0% Notes had a fair value of $559.0 million and $623.0 million at March 31, 2025, respectively. Our 1.75% Notes and 0% Notes had a fair value of $569.3 million and $612.8 million at December 31, 2024, 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.

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9. Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three months ended March 31, 2025 and 2024 (in thousands):

As of March 31, 2025, total unrecognized estimated stock-based compensation expense related to non-vested stock options, RSUs and PRSUs was $51.9 million, $117.1 million and $17.8 million, respectively. Our actual expenses may differ from these estimates because we will adjust our unrecognized stock-based compensation expense for future forfeitures, including any PRSUs that do not vest. We expect to recognize the cost of stock-based compensation expense related to our non-vested stock options, RSUs and PRSUs over a weighted average amortization period of 1.3 years,1.8 years and 1.9 years, respectively.

Refer to Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 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 three months ended March 31, 2025 and 2024, we used the following weighted-average assumptions in our Black-Scholes calculations:

Employee Stock Options:

ESPP:

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RSUs:

The weighted-average grant date fair value of RSUs granted to employees for the three months ended March 31, 2025 and 2024 was $33.21 and $53.54 per share, respectively.

PRSUs:

Under the terms of the PRSUs we granted in 2025 and 2024,100 percent of the PRSUs may vest at the end of thethree-year performance period based on our relative total shareholder return, or TSR, as compared to a peer group of companies and as measured at the end of the performance period. Under the terms of the grants, no 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 zero to 200 percent of the target number depending on our relative TSR.

The weighted-average grant date fair value of PRSUs we granted to our executive officers for the three months ended March 31, 2025 and 2024 was $48.81 and $78.41 per share, respectively.

10. Income Taxes

We recorded income tax expense of $0.1 million for the three months ended March 31, 2025 compared to $0.1 million for the same period in 2024.

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

11. Liability Related to Sale of Future Royalties

In 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 arrangements with Biogen and Novartis, respectively. As a result, we received an upfront payment of $500 million and we are eligible to receive up to $625 million in additional milestone payments. Under the terms of the agreement, Royalty Pharma will receive 25 percent of our SPINRAZA royalty payments from 2023 through 2027, increasing to 45 percent of royalty payments in 2028, on up to $1.5 billion in annual sales. In addition, Royalty Pharma will receive 25 percent of any future royalty payments on pelacarsen, our medicine in development to treat patients with elevated lipoprotein(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 $475 million or $550 million, depending on the timing and occurrence of FDA approval of pelacarsen.

We recorded the upfront payment of $500 million as a liability related to the sale of future royalties, net of transaction costs of $10.4 million, which we are amortizing over the estimated life of the arrangement using the effective interest rate method. We recognize royalty revenue in the period in which the counterparty sells the related product and recognizes the related revenue. We record royalty payments made to Royalty Pharma as a reduction of the liability.

We determine the effective interest rate used to record interest expense under this agreement based on an estimate of future royalty payments to Royalty Pharma. As of March 31, 2025 and 2024, the estimated effective interest rate under the agreement was 13.5 percent.

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The following table sets forth information on our liability related to sale of future royalties (in thousands):

There are numerous factors, most of which are not within our control, that could materially impact the amount and timing of royalty payments from Biogen and Novartis, and result in changes to our estimate of future royalty payments to Royalty Pharma. Such factors include, but are not limited to, the commercial sales of SPINRAZA, the regulatory approval and commercial sales of pelacarsen, competing products or other significant events.

12. Convertible Debt

1.75 Percent Convertible Senior Notes

In 2023, we completed a $575.0 million offering of our 1.75% Notes. We used $532.7 million of the net proceeds from the issuance of our 1.75% Notes to repurchase and settle our 0.125% Notes, which matured in December 2024.

At March 31, 2025, we had the following 1.75% Notes outstanding (in millions except interest rate and price per share data):

0 Percent Convertible Senior Notes and Call Spread

In 2021, we completed a $632.5 million offering of our 0% Notes. We used $319.0 million of the net proceeds from the issuance of our 0% Notes to pay the remaining $309.9 million principal balance of our 1 percent convertible senior notes, or 1% Notes, in 2021.

At March 31, 2025, we had the following 0% Notes outstanding (in millions except interest rate and price per share data):

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In conjunction with the 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 0% Notes by increasing the effective conversion price on our 0% Notes. We increased our effective conversion price to $76.39 with the same number of underlying shares as our 0%Notes. The call spread cost us $46.9 million, of which $136.7 million was for the note hedge purchase, offset by $89.8 million we received for selling the warrants. Similar to our 0% Notes, our note hedges are subject to adjustment. Additionally, our note hedges are exercisable upon conversion of the 0% Notes. The note hedges will expire upon maturity of the 0% Notes, or April 2026. The warrants will expire in July 2026. The note hedges and warrants are separate transactions and are not part of the terms of our 0% Notes. The holders of the 0% 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 condensed consolidated balance sheets. Refer to Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 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.

Other Terms of Convertible Senior Notes

The 1.75% and 0% 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 100 percent of the principal amount of the notes to be purchased, plus any accrued and unpaid interest.

13. 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.

There are no pending material legal proceedings to which we are a party or of which our property is the subject.

14. Segment Information

We operate as asingle operating segment, Ionis operations, focused on the research, development and commercialization of our RNA-targeted medicines to bring better futures to people with serious diseases. As the CODM, our Chief Executive Officer manages our company, reviews operating results, assesses performance and allocates resources on an aggregate basis using consolidated net income or loss as the key measure of segment profit or loss. As such, results of our operations are reported on a consolidated basis for purposes of management and segment reporting.

Ionis operations derives its revenues from commercial and R&D revenue sources. Refer to Note 4, Revenues, for further details on our sources of revenue.

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The following table sets forth information on segment profit or loss, including significant segment expenses (in thousands):

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