IONIS PHARMACEUTICALS INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

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 fully integrated commercial-stage biotechnology company and 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 and six months ended June 30, 2026 and 2025 on the same basis as the audited financial statements for the year ended December 31, 2025. 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, 2025 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 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 13, 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

Our significant accounting policies have not changed substantially from those included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Recent Accounting Standards

In July 2025, the FASB issued ASU 2025-05, which amended the guidance in ASC 326 to simplify the estimation of credit losses on accounts receivable and contract assets from revenue transactions. The amended guidance allows companies to elect a practical expedient to assume that conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when estimating the expected credit losses of the asset. This update is effective for annual periods beginning after December 15, 2025 and interim periods within those annual periods. Companies that elect the practical expedient are required to apply the amendments prospectively. We adopted this update in the first quarter of 2026 on a prospective basis and elected the practical expedient. The updated guidance did not have a material impact on our condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, which amended and simplified the existing guidance for software costs. The amended guidance removes references to software development stages and allows companies to begin capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed with the software performing the intended function. This update is effective for annual periods beginning after December 15, 2027 and interim periods within those annual periods. Early adoption of this guidance is permitted at the beginning of an annual reporting period. The guidance may be applied on a prospective or retrospective basis. We early adopted this update in the first quarter of 2026 on a prospective basis. The updated guidance did not have a material impact on our condensed consolidated financial statements.

We do not expect any recently issued accounting standards other than the standards mentioned above and those included in our Annual Report on Form 10-K for the year ended December 31, 2025 to have a material impact to our financial results.

3. Supplemental Financial Data

Inventories

Our inventories consisted of the following (in thousands):

We classify inventories as non-current assets when we expect the inventories to remain on hand beyond one year. We include non-current inventories in deposits and other assets in our condensed consolidated balance sheets. As a result of the FDA approval of TRYNGOLZA for the treatment ofsevere hypertriglyceridemia, orsHTG, in June 2026, we expect to utilize inventories on hand as of June 30, 2026 within one year. The amounts reported as deposits and other assets as of December 31, 2025 consisted of work in process inventory.

Accrued Liabilities

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

4. Revenues

During the three and six months ended June 30, 2026 and 2025, our revenues consisted of the following (in thousands):

Revenue Sources

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

Commercial Revenue

In June 2026, the U.S. Food and Drug Administration, or FDA, approved TRYNGOLZA for the treatment of sHTG. Following the approval, we launched TRYNGOLZA for the treatment of sHTG and began earning revenue from TRYNGOLZA sales for the sHTG indication. TRYNGOLZA is also approved in the U.S. forthe treatment of familial chylomicronemia syndrome, or FCS. In April 2026, we lowered the Wholesale Acquisition Cost, or WAC, of TRYNGOLZA to address the sHTG population prior to receiving FDA approval. This allowed us to proactively align with annual payer contracting cycles for 2027 and accelerate access following the approval.

In August 2025, the FDA approved DAWNZERA for prophylaxis to prevent attacks of hereditary angioedema, or HAE, in adult and pediatric patients 12 years of age and older. Following the approval, we launched DAWNZERA and began earning revenue from DAWNZERA sales.

We earn royalty payments primarily on net sales of SPINRAZA, WAINUA and QALSODY. We include QALSODY royalties within other royalties in the table above.

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, 2025 for details on our commercialization partnerships with Sobi and PTC.

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. 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.

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.

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 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 include variable 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 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, 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 collaboration agreement with AstraZeneca to develop and commercialize WAINUA for the treatment of transthyretin amyloidosis, or ATTR, with the parties sharing responsibility for development, and AstraZeneca having responsibility for commercializing WAINUA. Under the terms of the agreement, we received a $200 million upfront payment in 2021.

At inception of the agreement, 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 shared development activities that we and AstraZeneca were to perform, (iii) the shared commercialization activities that we and AstraZeneca were to perform and (iv) the shared medical affairs activities that we and AstraZeneca were to perform.

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.

We also concluded that the shared development, commercialization and 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. From inception through December 31, 2025, AstraZeneca was responsible for 55 percent of the costs associated with the ongoing global Phase 3 development program. During the six months ended June 30, 2026, AstraZeneca was responsible for 75 percent of costs for development activities intended solely to support U.S. regulatory approvals and 87.5 percent of costs for development activities intended to support global regulatory approvals. 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.

5. Collaborative Arrangements and Licensing Agreements

Below, we have included our Biogen, GSK, Ono, Otsuka, Recordati and Roche collaborations, which were the only collaborations that had either substantive changes or were 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, 2025.

Biogen

We have multiple collaborations with Biogen focused on using antisense technology to advance the treatment of neurological disorders, including our 2017 spinal muscular atrophy, or SMA, collaboration and 2018 neurology collaboration.

In 2017, we entered into a collaboration agreement with Biogen to identify new antisense medicines for the treatment of SMA. In 2021, Biogen exercised its option to license salanersen, a drug we discovered under this collaboration.

In the second quarter of 2026, we earned a $45 million milestone payment when Biogen initiated a Phase 3 trial of salanersen for SMA under this collaboration. We recognized this milestone payment as R&D revenue in full in the second quarter of 2026 because we did not have any remaining performance obligations related to the milestone payment. We will achieve the next payment of $55 million if Biogen achieves approval in a major market, which includes the U.S., Japan, the United Kingdom, Germany, France, Italy and Spain. From inception through June 30, 2026, we have received $130 million in payments under this collaboration.

Under our 2018 neurology collaboration, Biogen gained exclusive rights to the use of our antisense technology to develop therapies for certain neurological diseases and the option to license certain medicines resulting from this collaboration. 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 2026, we earned a $15 million license fee payment when Biogen exercised its option to licensean investigational candidate for the treatment of amyotrophic lateral sclerosis, or ALS, under this collaboration. We recognized this license fee payment as R&D revenue in full in the second quarter of 2026 because we did not have any remaining performance obligations related to this payment after we delivered the license to Biogen. We will achieve the next payment of $7.5 million if Biogen advances a medicine under this collaboration. From inception through June 30, 2026, we have received approximately $1.1 billion in payments under this collaboration, including payments to purchase our stock.

During the three and six months ended June 30, 2026 and 2025, we earned the following revenue from our relationship with Biogen (in thousands, except percentage amounts):

Our condensed consolidated balance sheets at June 30, 2026 and December 31, 2025 included deferred revenue of $120.1 million and $151.2 million, respectively, from our relationship with Biogen.

GSK

In 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. Under our collaboration, GSK is developing bepirovirsen for the treatment of chronic hepatitis B, or CHB, infection. In 2019, following positive Phase 2 results, GSK licensed our CHB program. GSK is responsible for all global development, regulatory and commercialization activities and costs for the CHB program.

In the second quarter of 2026, we amended our CHB collaboration agreement with GSK, resulting in increased milestone payments that we are eligible to receive under this collaboration and amended royalty terms that exclude net sales in China, Hong Kong and Macau. Under the amended agreement, we are eligible to receive more than $510 million, which is comprised of a $25 million license fee, up to $46.5 million in development milestone payments, up to $320 million in regulatory milestone payments and up to $120 million in sales milestone payments if GSK successfully develops and commercializes bepirovirsen. In addition, we are eligible to receive tiered royalties ranging from 10 to 12 percent on net sales of bepirovirsen worldwide, excluding China, Hong Kong and Macau. The amendments to the agreement did not change existing performance obligations or result in new performance obligations. Therefore, we did not record any adjustments to previously recognized revenue.

In the first quarter of 2026, we earned a $15 million milestone payment when the Japanese Ministry of Health, Labour and Welfare, or MHLW, accepted for review a New Drug Application, or NDA, filing for bepirovirsen. In addition, we earned a $15 million milestone payment when the European Medicines Agency, or EMA, accepted for review a Marketing Authorization Application, or MAA, filing for bepirovirsen. We recognized these milestone payments as R&D revenue in full in the first quarter of 2026 because we did not have any remaining performance obligations related to the milestone payments. We will achieve the next payment of $35 million if bepirovirsen is approved in a major country other than China. From inception through June 30, 2026, we have received more than $135 million in an upfront payment and other payments related to the CHB program.

During the three and six months ended June 30, 2026 and 2025, we earned the following revenue from our relationship with GSK (in thousands, except percentage amounts):

We didnot have any deferred revenue from our relationship with GSK at June 30, 2026 and December 31, 2025.

Ono

In March 2025, we entered into an agreement with Ono Pharmaceutical Co., 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 Phase 2 IMPRSSION study of sapablursen, including the ongoing extension period. Ono is solely responsible for subsequent development, regulatory filings and commercialization of sapablursen.

In the second quarter of 2026, we earned a $20 million milestone payment when Ono initiated a pivotal clinical trial for sapablursen under this collaboration. We recognized this milestone payment as R&D revenue in full in the second quarter of 2026 because we did not have any remaining performance obligations related to the milestone payment. We will achieve the next payment of $15 million if the FDA accepts a New Drug Application, or NDA, filing for sapablursen in the U.S. From inception through June 30, 2026, we have received more than $305 million in payments from Ono.

During the three and six months ended June 30, 2026 and 2025, we earned the following revenue from our relationship with Ono (in thousands, except percentage amounts):

We didnot have any deferred revenue from our relationship with Ono at June 30, 2026. Our consolidated balance sheet at December 31, 2025 included deferred revenue of $2.9 million from our relationship with Ono.

Otsuka

In 2023, we entered into an agreement with Otsuka Pharmaceutical Co., Ltd., or Otsuka, to commercialize DAWNZERA in Europe. In the second quarter of 2024, we expanded the agreement to include commercialization rights for DAWNZERA in the Asia-Pacific region. We are responsible for the ongoing development of DAWNZERA. We retained the rights to commercialize DAWNZERA in the U.S. and in the rest of the world, assuming regulatory approval. In November 2024, we entered into an agreement with Otsuka to commercialize ulefnersen, an investigational medicine for the treatment of ALS, caused by mutations in theFUS gene, worldwide. We are responsible for the ongoing development of ulefnersen.

In the first quarter of 2026, we achieved a $15 million milestone payment when the European Commission approved DAWNZERA in the EU. We recognized this milestone payment as R&D revenue in full in the first quarter of 2026 because we did not have any remaining performance obligations related to the milestone payment. We will achieve the next payment of $20 million if Otsuka receives reimbursement approval inthree of thefive major European countries, which include the United Kingdom, France, Germany, Italy and Spain. From inception through June 30, 2026, we have received more than $125 million in payments from Otsuka.

During thethree and six months ended June 30, 2026 and 2025, we earned the following revenue from our relationship with Otsuka (in thousands, except percentage amounts):

Our condensed consolidated balance sheets at June 30, 2026 and December 31, 2025 included deferred revenue of $2.5 million and $4.3 million, respectively, from our relationship with Otsuka.

Recordati

In June 2026, we entered into an agreement with Recordati AG., or Recordati, to commercialize zilganersen for the treatment of Alexander disease, or AxD, in countries outside of the U.S. We are responsible for the ongoing development of zilganersen globally. We retained the rights to commercialize zilganersen in the U.S., assuming regulatory approval. Recordati is responsible for regulatory filings and commercialization outside the U.S., including country-specific support for early access pathways based on local regulations and access dynamics.

Over the term of this collaboration, we are eligible to receive up to $75 million, which is comprised of a $30 million upfront payment, up to $15 million in regulatory milestone payments and up to $30 million in sales milestone payments. In addition, we are eligible to receive tiered royalties of up to themid-20 percent range on net sales. We are also eligible to receive reimbursements for clinical development costs that we incur outside the U.S. after March 2028. We received the $30 million upfront payment in July 2026. We will achieve the next payment of up to $10 million if zilganersen is approved in a country outside of the U.S.

At inception, we identifiedtwo performance obligations under this agreement, comprised of our license of zilganersen to Recordati and R&D services for zilganersen. We determined the transaction price to be the $30 million upfront payment. We allocated the transaction price based on the estimated stand-alone selling price of each performance obligation as follows:

● $21.0 million for the license of zilganersen; and

● $9.0 million for the R&D services for zilganersen.

We recognized $21.0 million of R&D revenue for the license of zilganersen in the second quarter of 2026 because we completed the performance obligation when we delivered the license to Recordati. We are recognizing revenue for our R&D services performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy our performance obligation in the second quarter of 2031. In addition, we will recognize reimbursements for clinical development costs as R&D revenue in the period that we incur the costs.

During thethree and six months ended June 30, 2026 and 2025, we earned the following revenue from our relationship with Recordati (in thousands, except percentage amounts):

Our condensed consolidated balance sheet at June 30, 2026 included deferred revenue of $8.9 million from our relationship with Recordati.

Roche

We havetwo collaborations with Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd, collectively Roche: one to develop sefaxersen for the treatment of immunoglobulin A, or IgA, nephropathy, or IgAN, andone to develop RNA-targeted programs for Alzheimer’s disease, or AD, and Huntington’s disease, or HD.

In the first quarter of 2026, we earned a $50 million milestone payment when Roche initiated a Phase 1 trial for an investigational medicine for the treatment of AD. We recognized this milestone payment as R&D revenue in full in the first quarter of 2026 because we did not have any remaining performance obligations related to the milestone payment. We will achieve the next payment of $10 million if Roche initiates a Phase 2 trial for an investigational medicine for the treatment of AD under our collaboration for RNA-targeted programs for AD and HD. From inception through June 30, 2026, we have received more than $405 million in payments from our Roche collaborations.

During thethree and six months ended June 30, 2026 and 2025, we earned the following revenue from our relationship with Roche (in thousands, except percentage amounts):

We didnot have any deferred revenue from our relationship with Roche at June 30, 2026 and December 31, 2025.

6. Basic and Diluted Net Income (Loss) Per Share

Basic net income (loss) per share

We calculated our basic net income (loss) per share for the three and six months ended June 30, 2026 and 2025 by dividing our net income (loss) by our weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per share

For the three and six months ended June 30, 2026 and the six months ended June 30, 2025, 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:

●1.75 percent convertible senior notes due 2028, or 1.75% Notes due 2028;

●0 percent convertible senior notes due 2026, or 0% Notes due 2026;

● Note hedges related to the 0% Notes due 2026;

● Warrants related to the 0% Notes due 2026;

● Dilutive stock options;

● Unvested restricted stock units, or RSUs;

● Unvested performance restricted stock units, or PRSUs; and

● Employee Stock Purchase Plan, or ESPP.

For the three and six months ended June 30, 2026, common stock underlying the 0 percent convertible senior notes due 2030, or 0% Notes due 2030, would also have had an anti-dilutive effect on net loss per share.

For the three months ended June 30, 2025, we recorded net income. 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. We calculated our diluted net income per share as follows (in thousands, except per share amounts):

7. Investments

The following table summarizes the contract maturity of the available-for-sale securities we held as of June 30, 2026:

As illustrated above, at June 30, 2026,93 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 June 30, 2026, we had an equity ownership interest of less than 20 percent infour private companies andfour public companies with which we conduct business.

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

(1)Includes investments classified as cash equivalents in our condensed consolidated balance sheets.

(2)Our publicly traded equity securities are included in other current assets. We recognize publicly traded equity securities at fair value. In the first quarter of 2026, one of our privately held investees became a publicly traded entity after completing an initial public offering. As a result, we recorded a $23.4 million unrealized gain in our condensed consolidated statements of operations in the first quarter of 2026, which reflected the difference between the carrying value of this investment as of December 31, 2025 and its fair value of $55.8 million as of March 31, 2026. In the second quarter of 2026, we recorded an unrealized loss of $10.2 million, which reflected the difference between the carrying value of this investment as of March 31, 2026 and its fair value of $45.7 million as of June 30, 2026. This investment is subject to a 12-month contractual sale restriction that ends in January 2027. In the six months ended June 30, 2026, we recorded a $0.9 million net unrealized loss in our condensed consolidated statements of operations related to changes in the fair value of our other investments in publicly traded companies.

(3)Our privately held equity securities are included in deposits and other assets. We recognize our privately held 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, which are Level 3 inputs. In the six months ended June 30, 2026, there were no changes to the carrying value of our privately held equity securities.

The following is a summary of our investments we consider to be temporarily impaired at June 30, 2026 (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.

8. Fair Value Measurements

The following tables present the major security types we held at June 30, 2026 and December 31, 2025 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:

(1)Included in cash and cash equivalents.

(2)$57.6 million was included in cash and cash equivalents, with the difference included in short-term investments.

(3)Included in short-term investments.

(4)$21.0 million was included in cash and cash equivalents, with the difference included in short-term investments.

(5)Included in other current assets.

(6)$47.8 million was included in cash and cash equivalents, with the difference included in short-term investments.

Convertible Notes

Our 0% Notes due 2030 and 1.75% Notes due 2028 had a fair value of$828.3 million and $893.1 million at June 30, 2026, respectively. Our 0% Notes due 2030,1.75% Notes due 2028 and 0% Notes due 2026 had a fair value of $830.3 million, $918.1 million and $594.6 million at December 31, 2025, 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.

9. Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three and six months ended June 30, 2026 and 2025 (in thousands):

As of June 30, 2026, total unrecognized estimated stock-based compensation expense related to non-vested stock options, RSUs and PRSUs was $58.4 million, $166.6 million and $23.9 million, respectively. Our actual expenses will likely 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,1.6 years and 1.6 years, respectively.

Stock Options:

The weighted-average grant date fair value of stock options granted to employees for thesix months ended June 30, 2026 and 2025 was $38.07 and $16.51 per share, respectively.

In the second quarter of 2026, two new members were appointed to the Board of Directors following the retirement oftwo Board members. In June 2026, we issued stock options to thetwo new Board members. The weighted-average grant date fair value of stock options granted to non-employee members of the Board of Directors for thesix months ended June 30, 2026 was $39.04 per share. There wereno stock options granted to non-employee members of the Board of Directors for the six months ended June 30, 2025 becauseno new members were appointed during the period.

RSUs:

The weighted-average grant date fair value of RSUs granted to employees for thesix months ended June 30, 2026 and 2025 was $77.19 and $32.97 per share, respectively.

PRSUs:

Under the terms of the PRSUs we granted in 2026 and 2025, 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 thesix months ended June 30, 2026 and 2025 was $115.05 and $48.81 per share, respectively.

Black-Scholes Assumptions:

For the six months ended June 30, 2026 and 2025, we used the following weighted-average assumptions in our Black-Scholes calculations:

Employee Stock Options:

Board of Directors Stock Options:

ESPP:

10. 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 June 30, 2026 and 2025, the estimated effective interest rate under the agreement was 12.0 percent and 12.7 percent, respectively.

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

(1) Included in other current liabilities in our condensed consolidated balance sheet.

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.

11. Convertible Debt

0 Percent Convertible Senior Notes due 2030

In November 2025, we completed a $770.0 million offering of our 0% Notes due 2030.

At June 30, 2026, we had the following 0% Notes due 2030 outstanding (in millions except interest rate and price per share data):

1.75 Percent Convertible Senior Notes due 2028

In 2023, we completed a $575.0 million offering of our 1.75% Notes due 2028.

At June 30, 2026, we had the following 1.75% Notes due 2028 outstanding (in millions except interest rate and price per share data):

0 Percent Convertible Senior Notes due 2026 and Call Spread

In April 2026, we paid the remaining principal balance of our 0% Notes due 2026 with $432.5 million of cash at maturity. In addition, we settled the conversion obligation in excess of principal by issuing 1.8 million shares of common stock to the holders of the 0% Notes due 2026 who exercised their conversion option.

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 due 2026 by increasing the effective conversion price on these notes. We increased our effective conversion price to $76.39 with the same number of underlying shares as our 0%Notes due 2026. Our note hedges were exercisable upon conversion of the 0% Notes due 2026. In April 2026, we exercised the note hedges upon maturity of these notes. As a result, we received 2.6 million shares of common stock, which we retired upon receipt. The warrants began to expire in July 2026 and will fully expire in September 2026.

Upon the execution of the call spread transaction in 2021, 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, 2025 for our Call Spread accounting policy. We reassess our ability to continue to classify the warrants in shareholders’ equity at each reporting period.

Other Terms of Convertible Senior Notes

The 0% Notes due 2030 and 1.75% Notes due 2028 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. The 0% Notes due 2026 were subject to similar terms.

12. 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 September 11, 2025, we sued Arrowhead Pharmaceuticals, Inc., in the Central District of California asserting that Arrowhead's announced intention to commercialize plozasiran in November 2025 would infringe our patent US9,593,333. Arrowhead is now commercializing plozasiran and the lawsuit is ongoing. Arrowhead has filed its Answer to our Complaint and Counterclaims asserting that our patent US9,593,333 is invalid or not infringed by use of plozasiran.

On June 1, 2026, Biogen received notice that Somerset Therapeutics, LLC had filed an Abbreviated New Drug Application, or ANDA, seeking approval to commercialize a generic version of SPINRAZA intrathecal injection, 12 mg/5 ml. The ANDA alleged that certain patents that cover SPINRAZA and its use are invalid or would not be infringed by Somerset. On June 22, 2026, Biogen, Cold Springs Harbor Laboratory and Ionis filed a lawsuit together in the District Court of Delaware asserting patent infringement. This lawsuit is ongoing.

13. 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. 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.

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

(1)Other segment items include stock-based compensation expense, investment income, interest expense, gain or loss on investments, other income or expense and income tax expense or benefit.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Report on Form 10-Q, unless the context requires otherwise, “Ionis,” the “Company,” “we,” “our,” and “us,” means Ionis Pharmaceuticals, Inc. and its subsidiaries.

Forward-Looking Statements

In addition to historical information contained in this Report on Form 10-Q, the Report includes forward-looking statements regarding our business and the therapeutic and commercial potential of our commercial medicines, additional medicines in development, technologies and our expectations regarding development and regulatory milestones. 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 and described in additional detail in our annual report on Form 10-K for the year ended December 31, 2025, which is on file with the U.S. Securities and Exchange Commission and is available from us, and those identified within Part II Item 1A,Risk Factors, of this Report. 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. Except as required by law, we undertake no obligation to update any forward-looking statements for any reason. As a result, you are cautioned not to rely on these forward-looking statements.