Ionis Pharmaceuticals, Inc.
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See accompanying notes.
See accompanying notes.
See accompanying notes.
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See accompanying notes.
The following table summarizes the severance and retention reserve amounts related to the Akcea Merger that we included in accrued compensation for the period indicated (in millions):
| | Nine Months Ended September 30, 2021 | |
Beginning balance as of January 1, 2021 | | $ | 14.7 | |
Amounts expensed during the period | | | 13.5 | |
Reserve adjustments during the period | | | (1.8 | ) |
Net amount expensed during the period | | | 11.7 | |
Amounts paid during the period | | | (20.6 | ) |
Ending balance as of September 30, 2021 | | $ | 5.8 | |
The reserve adjustments during the period primarily related to forfeitures of severance and retention payments as a result of employee terminations before they earned the amounts.
Restructured European Operations
In December 2020, we entered into a distribution agreement with Sobi for TEGSEDI and WAYLIVRA in Europe. As a result, we restructured our European Operations, or Restructured European Operations. In the fourth quarter of 2020, we began recognizing severance and retention expenses related to our Restructured European Operations. The following table summarizes our total severance and retention expenses related to our Restructured European Operations (in millions):
| | Severance and Retention Expenses | |
Total estimated expenses | | $ | 14.2 | |
Expenses incurred from inception to September 30, 2021 | | | 14.0 | |
Remaining estimated expenses to be recognized through October 2021 | | $ | 0.2 | |
The following table summarizes the severance and retention expenses related to our Restructured European Operations that we recognized during the three and nine months ended September 30, 2021 (in millions):
| | Three Months Ended September 30, 2021 | | | Nine Months Ended September 30, 2021 | |
Research, development and patent expenses | | $ | 0.5 | | | $ | 0.6 | |
Selling, general and administrative expenses | | | 0.1 | | | | 1.1 | |
Total | | $ | 0.6 | | | $ | 1.7 | |
The following table summarizes the severance and retention reserve amounts related to our Restructured European Operations that we included in accrued compensation for the period indicated (in millions):
| | Nine Months Ended September 30, 2021 | |
Beginning balance as of January 1, 2021 | | $ | 12.4 | |
Amounts expensed during the period | | | 2.5 | |
Reserve adjustments during the period | | | (0.8 | ) |
Net amount expensed during the period | | | 1.7 | |
Amounts paid during the period | | | (13.4 | ) |
Ending balance as of September 30, 2021 | | $ | 0.7 | |
The reserve adjustments during the period primarily related to tax expense adjustments.
Restructured North American TEGSEDI Operations
In April 2021, we entered into a distribution agreement with Sobi for TEGSEDI in North America. Under the terms of the distribution agreement, we will retain the marketing authorizations for TEGSEDI in the U.S. and Canada. We will continue to supply commercial product to Sobi and manage regulatory and manufacturing processes, as well as relationships with key opinion leaders. We will also continue to lead the TEGSEDI global commercial strategy. Sobi will otherwise have responsibility for commercializing TEGSEDI in the U.S. and Canada.
In connection with restructuring our North American TEGSEDI operations, or Restructured North American TEGSEDI Operations, we enacted a plan to reorganize our Akcea workforce in North America to better align with the needs of our business and to focus on our wholly owned pipeline.
The following table summarizes the severance expenses related to our Restructured North American TEGSEDI Operations that we recognized during the second quarter of 2021 (in millions):
| | Three Months Ended June 30, 2021 | |
Research, development and patent expenses | | $ | 2.3 | |
Selling, general and administrative expenses | | | 7.1 | |
Total | | $ | 9.4 | |
We recognized all severance expenses related to our Restructured North American TEGSEDI Operations during the three months ended June 30, 2021.
The following table summarizes the severance reserve amounts related to our Restructured North American TEGSEDI Operations that we included in accrued compensation for the period indicated (in millions):
| | Nine Months Ended September 30, 2021 | |
Beginning balance as of January 1, 2021 | | $ | 0 | |
Amounts expensed during the period | | | 9.4 | |
Amounts paid during the period | | | (9.2 | ) |
Ending balance as of September 30, 2021 | | $ | 0.2 | |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 2MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this Report on Form 10-Q, unless the context requires otherwise, “Ionis,” “Company,” “we,” “our,” and “us,” means Ionis Pharmaceuticals, Inc. and its wholly owned subsidiary,affiliate, Akcea Therapeutics, Inc.
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 SPINRAZA (nusinersen), TEGSEDI (inotersen), WAYLIVRA (volanesorsen), eplontersen, olezarsen, donidalorsen, ION363, pelacarsen, tofersen and our technologies and products in development. Any statement describing our goals, expectations, financial or other projections, intentions or beliefs, is a forward-looking statement and should be considered an at-risk statement. Such statements are subject to certain risks and uncertainties, including those related to the impact COVID-19 could have on our business, and including 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, 2020,2021, 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. As a result, you are cautioned not to rely on these forward-looking statements.
We are a leader in RNA-targeted therapy andtherapeutics. We believe our medicines are pioneeringhave the potential to pioneer new markets, changingchange standards of care and transformingtransform the lives of people with devastating diseases. Our clinicalWe currently have three marketed medicines- SPINRAZA, TEGSEDI and WAYLIVRA. We also have a rich late-stage pipeline of potential first-in-class and/or best-in-class medicines, address a broad range of diseases. We are primarily focused on two core franchises:our cardiovascular and neurology and cardiometabolic.franchises. Our commercial products SPINRAZA, TEGSEDI and WAYLIVRA, are approved in major markets around the world. Within our late-stage pipeline we have sevenconsists of six medicines in Phase 3 programs ongoing with five medicines: tofersendevelopment for SOD1-ALS, eplontersen (IONIS-TTR-LRx) for transthyretin, or TTR, amyloidosis, olezarsen (IONIS-APOCIII-LRx) for familial chylomicronemia syndrome, or FCS, and severe hypertriglyceridemia, or sHTG, pelacarsen for lipoprotein(a), or Lp(a), driven cardiovascular disease and ION363 for amyotrophic lateral sclerosis, or ALS, with mutations in the fused in sarcoma gene, or FUS.eight indications.
Our multiple sources of revenue and strong balance sheet provide us with substantial financial strength. Our financial strength enablesenable us to execute oninvest in our capital allocation strategy, which is focused on internal investment in three key areas: our wholly owned pipeline, buildingstrategic priorities to build our commercial capabilitiespipeline, expand and broadeningdiversify our technology and deliver new medicines to the reach of our technology. Wemarket. By continuing to focus on these priorities, we believe investing in these areas moves us closerwe are well positioned to our goal of 12 or more marketed products in 2026drive future growth and will drive the greatestto deliver increasing value for patients and shareholders.
CommercialMarketed Medicines
SPINRAZA is the global market leader for the treatment of patients of all ages with spinal muscular atrophy, or SMA, a progressive, debilitating and often fatal genetic disease. Biogen, our partner responsible for commercializing SPINRAZA worldwide, reported that as of September 30, 2021, more than 11,000 patients were on SPINRAZA therapyMarch 31, 2022, new patient starts in markets around the world.U.S. reached a two-year high and initial uptake in China was strong as this was the first full quarter since receiving national reimbursement in China. Through September 30, 2021,March 31, 2022, we have earned more than $1.5$1.6 billion in revenues from our SPINRAZA collaboration, including more than $1.1$1.2 billion in royalties on sales of SPINRAZA.
TEGSEDI is a once weekly, self-administered subcutaneous medicine approved in the U.S., Europe, Canada and Brazil for the treatment of patients with polyneuropathy caused by hereditary TTR amyloidosis,polyneuropathy, or hATTR,ATTRv-PN, a debilitating, progressive, and fatal disease. We launched TEGSEDI in the U.S. and the European Union, or EU, in late 2018. In 2021, we began selling TEGSEDI in Europe through our distribution agreement with Sobi. Additionally, in the second quarter of 2021, Sobi also began distributing TEGSEDI in the U.S. and Canada. In Latin America, PTC throughTherapeutics International Limited, or PTC, is commercializing TEGSEDI in Brazil. PTC is pursuing access in additional Latin American countries under its exclusive license agreement with us, is commercializing TEGSEDIus. In the first quarter of 2022, we continued to progress into new and existing markets in BrazilEurope and is working towards access in additional Latin American countries.America through Sobi and PTC, respectively.
WAYLIVRA is a once weekly, self-administered, subcutaneous medicine that received conditional marketing authorization in May 2019 from the European Commission, or EC, as an adjunct to diet in adult patients with genetically confirmed familial chylomicronemia syndrome, or FCS, and at high risk for pancreatitis. We launched WAYLIVRA in the EU in the third quarter of 2019. In 2021, we began selling WAYLIVRA in Europe through our distribution agreement with Sobi. ThroughUnder our exclusive license agreement with PTC, we arePTC is working to expandprovide access to WAYLIVRA across Latin America, beginning in Brazil. In the third quarter of 2021, the National Health Surveillance Agency (Agência Nacional de Vigilância Sanitária), or ANVISA, approved WAYLIVRA in Brazil. As a resultIn December 2021, PTC submitted an application to ANVISA for approval of WAYLIVRA for the approval, we earned a $4 million milestone payment from PTC.treatment of familial partial lipodystrophy, or FPL, in Brazil. If approved, Waylivra will be the first approved treatment for patients with FPL in Brazil.
Under our distribution agreements with Sobi, we retained the marketing authorizations for TEGSEDI and WAYLIVRA.WAYLIVRA in major markets. We will continue to supply commercial product to Sobi and manage regulatory and manufacturing processes, as well as relationships with key opinion leaders. We will also continue to lead the TEGSEDI and WAYLIVRA global commercial strategy. In connection with the agreements, we restructured our European operations in the first quarter of 2021, and we restructured our North American TEGSEDI operations in the second quarter of 2021.
Medicines in Phase 3 Studies
We currently have sevensix medicines in Phase 3 programs,studies for eight indications, which include:
| ● | Tofersen: In October 2021, Biogen reported that tofersen did not meet the primary clinical endpointEplontersen: our medicine in the Phase 3 VALOR study; however, trends favoring tofersen were seen across multiple secondary and exploratory measures of disease activity and clinical functiondevelopment for ATTR |
| o | GivenIn the high unmet medical need, second quarter of 2022, wBiogen will expand its ongoing early access program,e achieved our original enrollment goal and increased the study size and duration in the Phase 3 CARDIO-TTRansform study in patients with ATTR cardiomyopathy, or EAP,ATTR-CM, with the aim to ensure a highly positive outcome and generate an even more robust data set to successfully compete in this growing and dynamic market. We expect data from this study in the broader SOD1-ALS populationfirst half of 2025
|
| o | BiogenEnrollment is actively engaging with regulators, the medical community, patient advocacy groups and other key stakeholders around the world to determine potential next steps |
| o | The Phase 3 ATLAS study in patients with presymptomatic SOD1-ALS is ongoing |
| ● | Eplontersen: We achieved full enrollmentcomplete in the NEURO-TTRansform Phase 3 study in patients with ATTRv-PN. We expect data expectedfrom this study in mid-2022 and enrollment is ongoing in the CARDIO-TTRansform Phase 3 study |
| ●o | Pelacarsen: In August 2021, Novartis achieved 50 percent enrollment in Novartis’ Lp(a) HORIZON Phase 3 cardiovascular outcome study |
| ● | ION363: In April 2021, we initiated a Phase 3 study inthe first quarter of 2022, the U.S. FDA granted orphan drug designation to eplontersen for the treatment of patients with FUS-ALS, the most common cause of juvenile-onset ALSATTR |
| ● | Olezarsen: our medicine in development for familial chylomicronemia syndrome, or FCS, and severe hypertriglyceridemia, or SHTG |
| o | Enrollment is ongoing in the BALANCE Phase 3 study in patients with FCS and in October 2021, we initiated the CORE Phase 3 CORE study in patients with sHTGSHTG |
| o | We published positive data from the Phase 2 study of olezarsen in patients with hypertriglyceridemia and either at high risk for or with established cardiovascular disease in the European Heart Journal |
| o | We initiated a study of olezarsen in patients with hypertriglyceridemia to support the broad Phase 3 program |
| ● | Donidalorsen: our medicine in development for hereditary angioedema, or HAE |
oEnrollment is ongoing in the Phase 3 OASIS-HAE study
| o | We published positive data from the Phase 2 study of donidalorsen in patients with HAE in the New England Journal of Medicine |
| o | We presented positive data from the Phase 2 study of donidalorsen in patients with HAE at the American Academy of Allergy, Asthma and Immunology annual meeting |
| ● | ION363: our medicine in development for amyotrophic lateral sclerosis, or ALS, with mutations in the fused in sarcoma gene, or FUS. FUS-ALS is the most common cause of juvenile-onset ALS |
| o | Enrollment is ongoing in the Phase 3 study in patients with FUS-ALS |
| ● | Pelacarsen: our medicine in development for lipoprotein(a), or Lp(a), driven cardiovascular disease |
| o | Enrollment is ongoing in Novartis’ Lp(a) HORIZON Phase 3 cardiovascular outcome study in patients with established cardiovascular disease and elevated lipoprotein(a), or Lp(a) |
| ● | Tofersen: our medicine in development for superoxide dismutase 1 ALS, or SOD1-ALS |
| o | Biogen plans to present new data from the ongoing VALOR open-label extension, or OLE, study at the European Network to Cure ALS meeting in June 2022 |
| o | Biogen remains engaged with regulators to identify a potential path forward for tofersen |
COVID-19
As a company focused on improving the health of people around the world, our priority during the COVID-19 pandemic is the safety of our employees, their families, the healthcare workers who work with us and the patients who rely on our medicines. We are also focused on maintaining the quality of our studies and minimizing the impact to timelines. While the COVID-19 pandemic has impacted some areas of our business, we believe our mitigation efforts and financial strength will enable us to continue to manage through the pandemic and execute on our strategic initiatives. Because the situation is extremely fluid, we are continuing to evaluatemonitor the impact COVID-19 could have on our business, including the impact on our commercial products and the medicines in our pipeline.
Financial Highlights
The following is a summary of our financial results (in millions):
| | Three Months Ended | | | Nine Months Ended | | |
| | September 30, | | | September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
| | | | | (as revised*) | | | | | | (as revised*) | | | | | | | |
Total revenue | | $ | 133.1 | | | $ | 160.1 | | | $ | 370.5 | | | $ | 439.0 | | | $ | 141.9 | | | $ | 111.6 | |
Total operating expenses | | $ | 218.9 | | | $ | 196.6 | | | $ | 621.2 | | | $ | 588.4 | | | $ | 199.4 | | | $ | 203.6 | |
Loss from operations | | $ | (85.8 | ) | | $ | (36.5 | ) | | $ | (250.8 | ) | | $ | (149.4 | ) | | $ | (57.5 | ) | | $ | (92.0 | ) |
Net loss | | $ | (82.5 | ) | | $ | (36.6 | ) | | $ | (253.2 | ) | | $ | (124.1 | ) | | $ | (65.2 | ) | | $ | (89.9 | ) |
Our financial results for the first quarter of 2022 reflected the cost-sharing provisions related to our eplontersen collaboration with AstraZeneca to develop and commercialize eplontersen for the treatment of ATTR. Under the terms of the collaboration agreement, AstraZeneca is paying 55 percent of the costs associated with the ongoing global Phase 3 development program. As we are leading the Phase 3 development program, we are recognizing as R&D revenue the 55 percent of cost-share funding AstraZeneca is responsible for in the same period we incur the related development expenses. As a result of the cost-sharing provisions in our collaboration, we will receive payments of $20 million from AstraZeneca related to development expenses incurred in the first quarter of 2022.
As AstraZeneca is responsible for the majority of the medical affairs and commercial costs in the U.S. and all costs associated with bringing eplontersen to market outside the U.S., we are recognizing cost-share funding we receive from AstraZeneca related to these activities as a reduction of our medical affairs and commercialization expenses, which we classify as R&D and SG&A expenses, respectively. In the first quarter of 2022, we recognized $0.4 million and $0.2 million of medical affairs expenses and commercialization expenses for eplontersen, respectively, net of cost-share funding from AstraZeneca. We expect our medical affairs and commercialization expenses to increase as our collaboration with AstraZeneca progresses.
The following is a summary of the financial impacts on our statement of operations of the joint development activities under our eplontersen collaboration with AstraZeneca:
*Collaboration Activities | | Financial Statement Line | | Impact of Cost-Sharing Provisions on our Statement of Operations |
Phase 3 Development: Ionis leads and conducts | | We revised our 2020 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted retrospectively. Refer to Note 2, Significant Accounting Policies, for further information.Eplontersen Joint Development Revenue
(R&D Revenue) | | $20M | | 55% of Ionis’ Phase 3 development expenses, including internal+external costs & CMC costs |
| | | | | |
| Development Expenses (R&D expenses) | | $36M | | 100% of Ionis’ Phase 3 development expenses |
Our commercial revenue forin the first nine monthsquarter of 2021 included SPINRAZA royalties, TEGSEDI and WAYLIVRA revenue and licensing and royalties. Our revenue from SPINRAZA royalties decreased during the first nine months of 20212022 increased more than 25 percent compared to the same period in 2020. As a resultlast year. The increase was driven by significant partner payments across multiple partnered programs, including $20 million from AstraZeneca for its share of our distribution agreementsthe global Phase 3 program costs for eplontersen and $40 million from Biogen for advancing several neurology disease programs, including investigational medicines to treat patients with Sobi for TEGSEDIspinocerebellar ataxia type 3 and WAYLIVRA, our commercial revenue from product sales shifted to revenue from distribution fees based on net sales generated by Sobi. Parkinson’s disease, among others.
We completed the transition to Sobi of our TEGSEDI and WAYLIVRA commercial operations in Europe and our TEGSEDI commercial operations in North America to Sobi in the first and second quarters of 2021, respectively.
We earn our R&D The decrease in TEGSEDI and WAYLIVRA revenue from multiple sources that can fluctuate depending on the timing of events. Our R&D revenue decreased in the first nine monthsquarter of 2022 compared to the same period last year was due to the shift from product sales to distribution fees based on net sales generated by Sobi. As part of the transition, we restructured our commercial operations in 2021, resulting in substantial cost savings.
Our operating expenses, excluding non-cash compensation expense related to equity awards, increased in the first quarter of 2022 compared to the same period in 2020 primarily because we earned more milestone payments in the first nine months of 2020 than in the same period in 2021. In the third quarter of 2021, we earned a $25 million milestone payment from Novartis when Novartis achieved 50 percent enrollment in the Lp(a) HORIZON Phase 3 study of pelacarsen. We expect ourOur R&D revenue to increase in the fourth quarter of 2021 compared to the first three quarters of 2021 as several of our partnered programs advance.
Our operating expenses increased in the first nine months of 2021 over the same period last year, principally due to our investments in advancing our late-stage wholly owned pipeline, including advancing theour expanding number of Phase 3 program for eplontersen and start-up costs associated withstudies, which doubled over the initiation of the Phase 3 study for a second indication for olezarsen. Additionally, we recognized $35 million in R&D expense in the third quartercourse of 2021 for licensing Bicycle’s technology. These increases were partially offset by a decrease in ourfrom three to six studies. Our SG&A expenses including non-cash compensation expense, primarily due to costincluded our investments in advancing our go-to-market activities for our near-term commercial opportunities. However, these expenses were offset by the savings we realized from the operating efficiencies we achieved from integrating Akcea and restructuring our commercial operations.
operations for TEGSEDI and WAYLIVRA. We expect our operating expenses, excluding non-cash compensation expense related to equity awards, to continue to increase during the fourth quarterrest of 2021 compared to the first three quarters of 20212022 as we continue to build our commercial pipeline, invest in expanding and diversifying our technology and advance our strategic priorities, including our wholly owned pipeline. For example, in the fourth quarter of 2021, we expect to incur additional R&D expenses related to the Phase 3 CORE study for olezarsen in patients with sHTG.go-to-market activities.
We ended the third quarterAs of 2021, with $2.0March 31, 2022, we had $2.1 billion in cash and short-term investments. In April 2021,investments and remain well capitalized with the resources we issued $632.5 million of 0% senior convertible notes due in April 2026 and repurchased $247.9 million of our 1% senior convertible notes. In conjunction with these transactions, we also executed a call spread to increase the effective conversion price of the 0% senior convertible notes to $76.39. We intend to pay the remaining principal balance of our 1% senior convertible notes with $62 million of cash at maturity in November 2021. We believe our strong financial position should enable usneed to continue investing to execute on our corporate goals throughout this year and beyond, including developing and commercializing medicines within our wholly owned pipeline.
Recent Business Updates
ThirdFirst Quarter 20212022 Marketed Products Highlights
| ● | SPINRAZA®: the global market leader for the treatment of spinal muscular atrophy (SMA)SPINRAZA®: the global market leader for the treatment of SMA patients of all ages |
| o | $444 million in worldwide sales in the third quarter |
| o | More than 11,000 patients worldwide on therapy at the end of the third quarter across commercial, expanded access and clinical trial settings |
| o | Biogen plans to initiate the Phase 3b ASCEND study evaluating the potential benefit of an investigational higher dose of nusinersen in children, teens and adults with later-onset SMA previously treated with Evrysdi® (risdiplam) |
| ● | TEGSEDI®$473 million in worldwide SPINRAZA sales in the first quarter of 2022 |
| ● | Biogen provided updates from the ASCEND, RESPOND and WAYLIVRA®NURTURE studies of SPINRAZA at the Muscular Dystrophy Association (MDA) Clinical and Scientific conference and the American Academy of Neurology (AAN) annual meeting |
TEGSEDI® and WAYLIVRA®: important medicines approved for the treatment of patients with polyneuropathy caused by hereditary TTR amyloidosis and familial chylomicronemia syndrome, respectively
| ● | Continued to progress into new and existing markets in Europe and Latin America in the first quarter through Sobi and PTC, respectively |
First Quarter 2022 and Recent Events
Advancing our near-term commercial opportunities toward the market
| ● | Increased study size and duration in the Phase 3 CARDIO-TTRansform study of eplontersen in patients with ATTR-CM with the aim to generate even more robust data and ensure a highly positive study outcome to successfully compete in this growing and dynamic market. Data from this study are expected in the first half of 2025 |
| ● | The U.S. FDA granted orphan drug designation to eplontersen for the treatment of patients with severe rare diseasesATTR |
| o● | TEGSEDI achieved innovative drug pricingPublished positive data from the Phase 2 study of olezarsen in Brazil reflectingpatients with hypertriglyceridemia and either at high risk for or with established cardiovascular disease in the significant unmet medical need and prevalence of TTR polyneuropathy in BrazilEuropean Heart Journal |
| o● | WAYLIVRA was approvedInitiated a study of olezarsen in Brazil as the first and only treatment for patients with familial chylomicronemia syndromehypertriglyceridemia to support the broad Phase 3 program |
| ● | Published positive data from the Phase 2 study of donidalorsen in patients with HAE in the New England Journal of Medicine |
| ● | Presented additional positive data from the Phase 2 study of donidalorsen in patients with HAE at the American Academy of Allergy, Asthma and Immunology annual meeting |
Third Quarter 2021 and Recent Events
Advancing our leading cardiovascular disease franchise
| ● | Advancing Ionis’ leading cardiovascular and metabolic disease pipelineAstraZeneca presented positive data from the Phase 2b ETESIAN study of ION449 (AZD8233) targeting PCSK9 in statin treated patients with dyslipidemia at the American College of Cardiology (ACC) annual scientific session |
| o | Initiated the Phase 3 CORE study of olezarsen (IONIS-APOCIII-LRx) in patients with severe hypertriglyceridemia (sHTG)
|
| o | Reached 50 percent enrollment in the Phase 3 Lp(a) HORIZON outcome study of pelacarsen for patients with established cardiovascular disease and elevated Lp(a), resulting in a $25 million payment from Novartis |
| o● | Achieved full enrollment in the Bayer Phase 2b RE-THINc ESRD study of fesomersen (IONIS-FXI-LIONIS-AGT-LRx), for patients with treatment-resistant hypertension, with data expected in the firstsecond half of 2022 |
Advancing our leading neurological disease franchise
| o● | Achieved proof-of-mechanism,Roche plans to initiate a strong indication of proof-of-concept and good safety and tolerability in a Phase 2 study and a preliminary assessment from an open-label extension study of cimdelirsen (IONIS-GHR-LRx) in acromegaly patients uncontrolled on standard of care therapy, supporting continued development. Data from the ongoing open-label extension study and monotherapy study are expected in 2022. The results from thenew Phase 2 study of cimdelirsen are posted to Ionis’ website tominersen in patients with Huntington’s disease based on findings from a post-hoc analysis of the GENERATION-HD1 study |
| ● | Addressing substantial unmet medical needBiogen initiated the Phase 1/2 study for ION260 (BIIB132) targeting ataxin-3 (ATXN3) in patients with Ionis’ broad neurological disease pipelinespinocerebellar ataxia type 3 (SCA3), resulting in an $8 million milestone payment from Biogen |
| o● | The Biogen advanced the Phase 3 VALOR1/2 study of tofersenfor ION859 (BIIB094) targeting LRRK2 in patients with SOD1-ALS did not meet the primary endpoint of changeParkinson’s disease, resulting in a $10 million milestone payment from baseline to week 28 in the ALS Functional Rating Scale-Revised (ALSFRS-R); however, signs of reduced disease progression across multiple secondary and exploratory endpoints were observedBiogen |
| o● | Achieved full enrollmentAnnounced the discontinuation of IONIS-C9Rx (BIIB078) due to lack of patient benefit demonstrated in the Phase 3 NEURO-TTRansform1/2 study of eplontersen in patients with TTR polyneuropathy, with data expected in mid-2022 |
| o | Reported data from the Biogen Phase 1/2 study of IONIS-MAPTRx in patients with Alzheimer’s disease, demonstrating durable, time and dose-dependent reductions in CSF tau protein; IONIS-MAPTRx was generally well toleratedC9orf72-ALS
|
| ● | Investing in expanding the reach of Ionis’ technology |
| o | Entered a license agreement with Bicycle Therapeutics for exclusive rights to Bicycle’s peptide technology targeting transferrin receptor 1 to expand the capabilities of Ionis’ LICA technology |
| o | Entered a license agreement with Flamingo Therapeutics for the development and commercialization of programs from Ionis’ oncology pipeline |
Business Segment
In 2021, we began operatingWe operate as a single segment, Ionis operations, because our chief decision maker reviews operating results on an aggregate basis and manages our operations as a single operating segment. Previously, we had operated as two operating segments, Ionis Core and Akcea Therapeutics. We completed the Akcea Merger in October 2020 and fully integrated Akcea’s operations into ours as of January 1, 2021.
Critical Accounting Estimates
We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. As such, we make certain estimates, judgments and assumptions that we believe are reasonable, based upon the information available to us. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our quarterly or annual results of operations and financial condition. Each quarter, our senior management reviews the development, selection and disclosure of such estimates with the audit committee of our board of directors. The following are our significant accounting estimates, which we believe are the most critical to aid in fully understanding and evaluating our reported financial results:
| ● | Assessing the propriety of revenue recognition and associated deferred revenue; and |
| ● | Determining the appropriate cost estimates for unbilled preclinical studies and clinical development activities |
In the first quarter of 2021, we determined the estimation of our income taxes was no longer a critical accounting estimate because we recorded a valuation allowance against the entirety of our net deferred tax assets in the fourth quarter of 2020. We recorded the expected impact from the valuation allowance on our tax provision for 2021.
There have been no other material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Revenue
Total revenuesrevenue for the three and nine months ended September 30, 2021 were $133.1March 31, 2022 was $141.9 million and $370.5 million, respectively, compared to $160.1 million and $439.0$111.6 million for the same periodsperiod in 20202021 and werewas comprised of the following (amounts in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Revenue: | | | | | | | | | | | | | | | | | | |
Commercial revenue: | | | | | | | | | | | | | | | | | | |
SPINRAZA royalties | | $ | 66.6 | | | $ | 74.2 | | | $ | 198.7 | | | $ | 211.9 | | | $ | 53.8 | | | $ | 60.0 | |
TEGSEDI and WAYLIVRA revenue, net | | | 15.5 | | | | 19.0 | | | | 46.9 | | | | 50.6 | | | | 6.2 | | | | 19.8 | |
Licensing and other royalty revenue | | | 2.7 | | | | 2.1 | | | | 9.5 | | | | 6.5 | | | | 12.3 | | | | 4.6 | |
Total commercial revenue | | | 84.8 | | | | 95.3 | | | | 255.1 | | | | 269.0 | | | | 72.3 | | | | 84.4 | |
R&D revenue: | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization from upfront payments | | | 16.7 | | | | 18.9 | | | | 56.8 | | | | 68.0 | | | | 17.4 | | | | 20.1 | |
Milestone payments | | | 28.4 | | | | 43.5 | | | | 48.5 | | | | 73.4 | | | | 27.2 | | | | 5.2 | |
License fees | | | — | | | | — | | | | — | | | | 14.7 | | | | 2.0 | | | | — | |
Other services | | | 3.2 | | | | 2.4 | | | | 10.1 | | | | 13.9 | | | | 3.1 | | | | 1.9 | |
Collaborative agreement revenue | | | | 49.7 | | | | 27.2 | |
Eplontersen joint development revenue | | | | 19.9 | | | | — | |
Total R&D revenue | | | 48.3 | | | | 64.8 | | | | 115.4 | | | | 170.0 | | | | 69.6 | | | | 27.2 | |
Total revenue | | $ | 133.1 | | | $ | 160.1 | | | $ | 370.5 | | | $ | 439.0 | | | $ | 141.9 | | | $ | 111.6 | |
Our revenue in the first quarter of 2022 increased more than 25 percent compared to the same period last year. The increase in our R&D revenue was driven by significant partner payments across multiple partnered programs, including $20 million from AstraZeneca for its share of the global Phase 3 program costs for eplontersen and $40 million from Biogen for advancing several neurology disease programs, including investigational medicines to treat patients with spinocerebellar ataxia type 3 and Parkinson’s disease, among others.
Our commercial revenue forin the first nine monthsquarter of 2021 included SPINRAZA royalties, TEGSEDI and WAYLIVRA revenue and licensing and royalties. Our revenue from SPINRAZA royalties2022 decreased during the first nine months of 2021 compared to the same period last year. We completed the transition to Sobi of our TEGSEDI and WAYLIVRA commercial operations in 2020.Europe and our TEGSEDI commercial operations in North America in the first and second quarters of 2021, respectively. As a result of our distribution agreements with Sobi for TEGSEDI and WAYLIVRA, our commercial revenue from product sales shifted to commercial revenue from distribution fees based on net sales generated by Sobi. We completedAs part of the transition, ofwe restructured our TEGSEDI and WAYLIVRA commercial operations in Europe and our TEGSEDI commercial operations2021, resulting in North America to Sobi in the first and second quarters of 2021, respectively. Additionally, in the third quarter of 2021, we earned a $4 million milestone payment from PTC when WAYLIVRA was approved in Brazil.substantial cost savings.
We earn our R&D revenue from multiple sources that can fluctuate depending on the timing of events. Our R&D revenue decreased in the first nine months of 2021 compared to the same period in 2020 primarily because we earned more milestone payments in the first nine months of 2020 than in the same period in 2021. In the third quarter of 2021, we earned a $25 million milestone payment from Novartis when Novartis achieved 50 percent enrollment in the Lp(a) HORIZON Phase 3 study of pelacarsen. We expect our R&D revenue to increase in the fourth quarter of 2021 compared to the first three quarters of 2021 as several of our partnered programs advance.
Operating Expenses
Our operating expenses were as follows (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Operating expenses, excluding non-cash compensation expense related to equity awards | | $ | 185.5 | | | $ | 150.8 | | | $ | 498.3 | | | $ | 453.3 | | | $ | 173.1 | | | $ | 159.0 | |
Restructuring expenses | | | 2.8 | | | | — | | | | 24.4 | | | | — | | | | — | | | | 6.7 | |
Total operating expenses, excluding non-cash compensation expense related to equity awards | | | 188.3 | | | | 150.8 | | | | 522.7 | | | | 453.3 | | | | 173.1 | | | | 165.7 | |
Non-cash compensation expense related to equity awards | | | 30.6 | | | | 45.8 | | | | 98.5 | | | | 135.1 | | | | 26.3 | | | | 37.9 | |
Total operating expenses | | $ | 218.9 | | | $ | 196.6 | | | $ | 621.2 | | | $ | 588.4 | | | $ | 199.4 | | | $ | 203.6 | |
Operating expenses, excluding non-cash compensation expense related to equity awards, for the first ninethree months of 2021ended March 31, 2022 increased compared to the same period in 2020. The increase was principally2021. Our R&D expenses increased due to our investments in advancing our late-stage wholly owned pipeline, including advancing theour expanding number of Phase 3 program for eplontersen and start-up costs associated withstudies, which doubled over the initiation of the Phase 3 study for a second indication for olezarsen. Additionally, in the third quartercourse of 2021 we recognized $35 million in R&D expense for licensing Bicycle’s technology as discussed above. We also incurred approximately $24 million in costs relatedfrom three to the Akcea Merger and restructuring our commercial operations, primarily comprised of severance and retention costs. These increases were partially offset by a decrease in oursix studies. Our SG&A expenses primarily dueincluded our investments to costprepare for the launches of eplontersen, olezarsen and donidalorsen. However, these expenses were offset by the savings we realized from integrating Akcea and restructuring our TEGSEDI and WAYLIVRA commercial operations.
We expect our operating expenses, excluding non-cash compensation expense related to equity awards, to continue to increase during the fourth quarterrest of 2021 compared to the first three quarters of 20212022 as we continue to advance our strategic priorities, includingmid- and late-stage medicines in development, invest in expanding and diversifying our wholly owned pipeline. For example, in the fourth quarter of 2021, we expect to incur additional R&D expenses related to the Phase 3 CORE studytechnology and prepare for olezarsenin patients with sHTG.commercialization.
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 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. Prior to the regulatory approval of TEGSEDI and WAYLIVRA, we expensed as R&D expense a significant portion of the cost of producing TEGSEDI and WAYLIVRA that we are using in the commercial launches. We expect cost of sales to increase as we deplete these inventories.
Our cost of sales were as follows (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Cost of sales, excluding non-cash compensation expense related to equity awards | | $ | 3.0 | | | $ | 2.8 | | | $ | 8.3 | | | $ | 7.7 | | | $ | 4.0 | | | $ | 2.4 | |
Non-cash compensation expense related to equity awards | | | 0.1 | | | | 0.3 | | | | 0.3 | | | | 0.9 | | | | 0.2 | | | | 0.2 | |
Total cost of sales | | $ | 3.1 | | | $ | 3.1 | | | $ | 8.6 | | | $ | 8.6 | | | $ | 4.2 | | | $ | 2.6 | |
Our cost of sales, excluding non-cash compensation expense related to equity awards, for increased slightly during the first ninethree months of 2021 were consistent withendedMarch 31, 2022 compared to the same period in 2020.2021.
Research, Development and Patent Expenses
Our research, development and patent expenses consist of expenses for antisense drug discovery, antisense drug development, manufacturing and development chemistry and R&D support expenses.
The following table sets forth information on research, development and patent expenses (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Research, development and patent expenses, excluding non-cash compensation expense related to equity awards | | $ | 159.6 | | | $ | 99.7 | | | $ | 383.9 | | | $ | 287.4 | | | $ | 142.0 | | | $ | 111.3 | |
Restructuring expenses | | | 1.8 | | | | — | | | | 8.0 | | | | — | | | | — | | | | 2.6 | |
Total research, development and patent expenses, excluding non-cash compensation expense related to equity awards | | | 161.4 | | | | 99.7 | | | | 391.9 | | | | 287.4 | | | | 142.0 | | | | 113.9 | |
Non-cash compensation expense related to equity awards | | | 23.4 | | | | 25.4 | | | | 72.0 | | | | 76.9 | | | | 19.1 | | | | 25.9 | |
Total research, development and patent expenses | | $ | 184.8 | | | $ | 125.1 | | | $ | 463.9 | | | $ | 364.3 | | | $ | 161.1 | | | $ | 139.8 | |
Antisense Drug Discovery
We use our proprietary antisense technology 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 antisense drug discovery research, and that of our partners. Antisense drug discovery is also the function that is responsible for advancing our antisense core technology. This function is also responsible for making investments in complementary technologies to expand the reach of ourantisense technology.
As we continue to advance our antisense technology, we are investing in our drug discovery programs to expand our pipeline.
Our antisense drug discovery expenses were as follows (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Antisense drug discovery expenses, excluding non-cash compensation expense related to equity awards | | $ | 55.9 | | | $ | 20.0 | | | $ | 105.7 | | | $ | 57.1 | | | $ | 19.1 | | | $ | 26.6 | |
Non-cash compensation expense related to equity awards | | | 5.9 | | | | 6.2 | | | | 17.5 | | | | 18.6 | | | | 4.1 | | | | 6.3 | |
Total antisense drug discovery expenses | | $ | 61.8 | | | $ | 26.2 | | | $ | 123.2 | | | $ | 75.7 | | | $ | 23.2 | | | $ | 32.9 | |
Antisense drug discovery expenses, excluding non-cash compensation expense related to equity awards, increased for decreased in the first ninethree months of 2021endedMarch 31, 2022 compared to the same period in 2020.2021. In the thirdfirst quarter of 2021, we recognized $35 millionincurred in-licensing expenses under our agreement with Genuity. We expect antisense drug discovery expenses to increase in R&D expense for licensing Bicycle’s technologythe remainder of 2022 as discussed above. This increase was also duewe continue to expenses we incurred related to advancing our research programs and investments we made to enhanceinvest in our antisense technology.
Antisense 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):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
TEGSEDI | | $ | 2.2 | | | $ | 3.5 | | | $ | 5.3 | | | $ | 11.4 | | |
WAYLIVRA | | | 1.3 | | | | 1.3 | | | | 2.1 | | | | 4.6 | | |
TEGSEDI and WAYLIVRA | | | $ | 2.1 | | | $ | 1.4 | |
Eplontersen | | | 23.0 | | | | 9.0 | | | | 52.2 | | | | 21.4 | | | | 27.0 | | | | 13.3 | |
Olezarsen | | | 4.9 | | | | 0.9 | | | | 10.4 | | | | 4.0 | | | | 8.7 | | | | 1.4 | |
Donidalorsen | | | | 1.7 | | | | 1.8 | |
ION363 | | | 2.0 | | | | 0.2 | | | | 5.7 | | | | 0.2 | | | | 1.7 | | | | 2.1 | |
Other antisense development projects | | | 26.9 | | | | 23.2 | | | | 75.3 | | | | 65.6 | | | | 29.5 | | | | 20.8 | |
Development overhead expenses | | | 20.9 | | | | 18.2 | | | | 61.3 | | | | 54.0 | | | | 19.3 | | | | 18.3 | |
Restructuring expenses | | | 1.5 | | | | — | | | | 7.2 | | | | — | | | | — | | | | 2.3 | |
Total antisense drug development, excluding non-cash compensation expense related to equity awards | | | 82.7 | | | | 56.3 | | | | 219.5 | | | | 161.2 | | | | 90.0 | | | | 61.4 | |
Non-cash compensation expense related to equity awards | | | 10.2 | | | | 12.4 | | | | 32.4 | | | | 38.2 | | | | 8.6 | | | | 12.4 | |
Total antisense drug development expenses | | $ | 92.9 | | | $ | 68.7 | | | $ | 251.9 | | | $ | 199.4 | | | $ | 98.6 | | | $ | 73.8 | |
Our development expenses, excluding non-cash compensation expense related to equity awards, increased for the first ninethree months of 2021endedMarch 31, 2022 compared to the same period in 20202021 primarily due to our broadadvancing late-stage pipeline, including our expanding number of Phase 3 program for eplontersen,studies, which we initiated in late 2019. Additionally, we advanced other medicines in our wholly owned pipeline, including olezarsen, for which we initiated a Phase 3 program in patients with FCS indoubled over the fourth quarter of 2020 and incurred start-up costs associated with the initiation of a Phase 3 program in patients with sHTG in the fourth quartercourse of 2021 and ION363, for which we initiated a Phase 3 program in patients with FUS-ALS in the second quarter of 2021. In addition, our development overhead expenses increased year-over-yearfrom three to support the growth of our Phase 3 programs and other mid-stage pipeline activities.six studies.
We may conduct multiple clinical trials on a drug candidate, including multiple clinical trials for the various indications we may be studying. Furthermore, as we obtain results from trials, we may elect to discontinue clinical trials for certain drug candidates in certain indications in order to focus our resources on more promising drug candidates or indications. Our Phase 1 and Phase 2 programs are clinical research programs that fuel our Phase 3 pipeline. When our medicines are in Phase 1 or Phase 2 clinical trials, they are in a dynamic state in which we may adjust the development strategy for each medicine. Although we may characterize a medicine as “in Phase 1” or “in Phase 2,” it does not mean that we are conducting a single, well-defined study with dedicated resources. Instead, we allocate our internal resources on a shared basis across numerous medicines based on each medicine’s particular needs at that time. This means we are constantly shifting resources among medicines. Therefore, what we spend on each medicine during a particular period is usually a function of what is required to keep the medicines progressing in clinical development, not what medicines we think are most important. For example, the number of people required to start a new study is large, the number of people required to keep a study going is modest and the number of people required to finish a study is large. However, such fluctuations are not indicative of a shift in our emphasis from one medicine to another and cannot be used to accurately predict future costs for each medicine. And, because we always have numerous medicines in preclinical and early stage 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 communicating scientific and clinical information to healthcare providers, medical professionals and patients.
Our medical affairs expenses were as follows (in millions):
| | Three Months Ended March 31, | |
| | 2022 | | | 2021 | |
Medical affairs expenses, excluding non-cash compensation expense related to equity awards | | $ | 2.8 | | | $ | 2.9 | |
Non-cash compensation expense related to equity awards | | | 0.3 | | | | — | |
Total medical affairs expenses | | $ | 3.1 | | | $ | 2.9 | |
Medical affairs expenses, excluding non-cash compensation expense related to equity awards, were essentially flat in the three months ended March 31, 2022 compared to the same period in 2021. We expect medical affairs expenses to increase throughout 2022 as we advance our late-stage pipeline.
Manufacturing and Development Chemistry
Expenditures in our manufacturing and development chemistry function consist primarily of personnel costs, specialized chemicals for oligonucleotide manufacturing, laboratory supplies and outside services. Our manufacturing and development chemistry function is responsible for providing drug supplies to antisense drug development and our collaboration partners. Our manufacturing procedures include testing to satisfy good laboratory and good manufacturing practice requirements.
Our manufacturing and development chemistry expenses were as follows (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Manufacturing and development chemistry expenses, excluding non-cash compensation expense related to equity awards | | $ | 10.9 | | | $ | 13.0 | | | $ | 31.3 | | | $ | 38.8 | | | $ | 16.3 | | | $ | 11.8 | |
Restructuring expenses | | | 0.2 | | | | — | | | | 0.8 | | | | — | | | | — | | | | 0.3 | |
Total manufacturing and development chemistry expenses, excluding non-cash compensation expense related to equity awards | | | 11.1 | | | | 13.0 | | | | 32.1 | | | | 38.8 | | | | 16.3 | | | | 12.1 | |
Non-cash compensation expense related to equity awards | | | 2.9 | | | | 2.5 | | | | 9.1 | | | | 8.2 | | | | 2.7 | | | | 3.1 | |
Total manufacturing and development chemistry expenses | | $ | 14.0 | | | $ | 15.5 | | | $ | 41.2 | | | $ | 47.0 | | | $ | 19.0 | | | $ | 15.2 | |
Manufacturing and development chemistry expenses, excluding non-cash compensation expense related to equity awards, decreased for increased in the first ninethree months of 2021endedMarch 31, 2022 compared to the same period in 2020. In the first nine months of 2020,2021 due to increased costs we manufactured APIincurred in preparation for olezarsenour near-term commercial launches, including manufacturing costs and eplontersen.activities for eplontersen and donidalorsen.
R&D Support
In our research, development and patent expenses, we include support costs such as rent, repair and maintenance for buildings and equipment, utilities, depreciation of laboratory equipment and facilities, amortization of our intellectual property, informatics costs, procurement costs and waste disposal costs. We call these costs R&D support expenses.
The following table sets forth information on R&D support expenses (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Personnel costs | | $ | 4.7 | | | $ | 3.4 | | | $ | 13.2 | | | $ | 10.8 | | | $ | 5.1 | | | $ | 4.3 | |
Occupancy | | | 3.2 | | | | 2.5 | | | | 9.6 | | | | 7.4 | | | | 4.0 | | | | 3.2 | |
Patent expenses | | | 1.0 | | | | 1.0 | | | | 3.1 | | | | 2.2 | | | | 0.7 | | | | 0.8 | |
Insurance | | | 0.8 | | | | 0.6 | | | | 2.4 | | | | 1.8 | | | | 0.9 | | | | 0.8 | |
Computer software and licenses | | | 0.3 | | | | 0.8 | | | | 1.4 | | | | 2.1 | | | | 0.6 | | | | 0.5 | |
Other | | | 1.6 | | | | 2.1 | | | | 4.8 | | | | 5.9 | | | | 2.5 | | | | 1.3 | |
Restructuring expenses | | | 0.1 | | | | — | | | | 0.1 | | | | — | | |
Total R&D support expenses, excluding non-cash compensation expense related to equity awards | | | 11.7 | | | | 10.4 | | | | 34.6 | | | | 30.2 | | | | 13.8 | | | | 10.9 | |
Non-cash compensation expense related to equity awards | | | 4.4 | | | | 4.3 | | | | 13.0 | | | | 12.0 | | | | 3.4 | | | | 4.1 | |
Total R&D support expenses | | $ | 16.1 | | | $ | 14.7 | | | $ | 47.6 | | | $ | 42.2 | | | $ | 17.2 | | | $ | 15.0 | |
R&D support expenses, excluding non-cash compensation expense related to equity awards, increased for the first ninethree months of 2021endedMarch 31, 2022 increased compared to the same period in 2020.2021. The increase was primarily related to increased personnel and occupancy costs to support investments in our technology and advancing our pipeline.pipeline and our technology.
Selling, General and Administrative Expenses
Selling, general and administrative, or SG&A, expenses include personnel and outside costs associated with the pre-commercialization and commercialization activities for our medicines and costs to support our company, our employees and our stockholders including, legal, human resources, investor relations, and finance. Additionally, we include in selling, general and administrative expenses such costs as rent, repair and maintenance of buildings and equipment, depreciation and utilities costs that we need to support the corporate functions listed above. We also include fees we owe under our in-licensing agreements related to SPINRAZA.
The following table sets forth information on SG&A expenses (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | | | 2022 | | | 2021 | |
Selling, general and administrative expenses, excluding non-cash compensation expense related to equity awards | | $ | 23.0 | | | $ | 48.2 | | | $ | 106.1 | | | $ | 158.3 | | | $ | 27.1 | | | $ | 45.3 | |
Restructuring expenses | | | 1.0 | | | | — | | | | 16.4 | | | | — | | | | — | | | | 4.1 | |
Total selling, general and administrative expenses, excluding non-cash compensation related to equity awards | | | 24.0 | | | | 48.2 | | | | 122.5 | | | | 158.3 | | | | 27.1 | | | | 49.4 | |
Non-cash compensation expense related to equity awards | | | 7.1 | | | | 20.2 | | | | 26.2 | | | | 57.2 | | | | 7.0 | | | | 11.8 | |
Total selling, general and administrative expenses | | $ | 31.1 | | | $ | 68.4 | | | $ | 148.7 | | | $ | 215.5 | | | $ | 34.1 | | | $ | 61.2 | |
SG&A expenses, excluding non-cash compensation expense related to equity awards, decreased forin the first ninethree months of 2021endedMarch 31, 2022 compared to the same period in 2020 2021due to operating efficiencies achieved from the Akcea integrationMerger and the restructuring of our commercial operations.operations, partially offset by increased pre-commercialization expenses resulting from our go-to-market preparations for our near-term commercial opportunities. Non-cash compensation expense related to equity awards decreased for the first nine months of 2021in 2022 compared to the same period in 20202021 due to reduced headcount as a result of the Akcea Merger and restructuring our restructured commercial operations.
Investment Income
Investment income for the three and nine months ended September 30, 2021March 31, 2022 was $0.9$2.0 million and $8.2 million, respectively, compared to $6.5 million and $25.9$4.6 million for the same periodsperiod in 2020. The decrease in2021. Our investment income was primarilydecreased because we earned a lower average return on our investments due to a decline in interest ratesmarket conditions during the three and nine months ended September 30, 2021March 31, 2022 compared to the same periodsperiod in 2020.2021.
Interest Expense
The following table sets forth information on interest expense (in millions):
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Convertible notes: | | | | | (as revised*) | | | | | | (as revised*) | |
Non-cash amortization of the debt discount and debt issuance costs | | $ | 1.4 | | | $ | 0.9 | | | $ | 3.5 | | | $ | 2.4 | |
Interest expense payable in cash | | | 0.3 | | | | 0.9 | | | | 1.7 | | | | 2.8 | |
Interest on mortgages for primary R&D and manufacturing facilities | | | 0.6 | | | | 0.6 | | | | 1.8 | | | | 1.8 | |
Other | | | — | | | | — | | | | 0.1 | | | | 0.1 | |
Total interest expense | | $ | 2.3 | | | $ | 2.4 | | | $ | 7.1 | | | $ | 7.1 | |
* | We revised our 2020 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted retrospectively. Refer to Note 2, Significant Accounting Policies, for further information.
|
| | Three Months Ended March 31, | |
| | 2022 | | | 2021 | |
Convertible notes: | | | | | | |
Non-cash amortization of debt issuance costs | | $ | 1.3 | | | $ | 0.9 | |
Interest expense payable in cash | | | 0.2 | | | | 0.9 | |
Interest on mortgage for primary R&D and manufacturing facilities | | | 0.6 | | | | 0.6 | |
Total interest expense | | $ | 2.1 | | | $ | 2.4 | |
Gain on InvestmentsIncome Tax Expense
WeBeginning in 2022, the Tax Cuts and Jobs Act of 2017, or TCJA, requires taxpayers to amortize research and development expenditures over five years pursuant to IRC Section 174. Although the U.S. Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified. As a result, we recorded a gain on investments of $4.9$1.1 million income tax expense for the ninethree months ended September 30, 2021March 31, 2022, compared to $10.7$0.1 million for the same period in 2020. During the nine months ended September 30, 2021, we revalued our investments in Bicycle and ProQR and recognized gains of $1.9 million and $2.0 million on our investments, respectively. During the nine months ended September 30, 2020, we revalued our investments in Dynacure and Suzhou-Ribo because the companies sold additional equity securities that were similar to those we own. These observable price changes resulted in us recognizing a $6.3 million gain on our investment in Dynacure and a $3 million gain on our investment in Suzhou-Ribo in our condensed consolidated statement of operations during the nine months ended September 30, 2020.
Early Retirement of Debt
As a result of the debt offering and debt repurchase completed in April 2021, we recorded an $8.6 million non-cash loss on early retirement of debt, reflecting the early retirement of a significant portion of our 1% Notes. The non-cash loss on the early retirement of our debt is the difference between the amount we paid to retire our 1% Notes and the net carrying balance of the liability at the time that we retired the debt.
Income Tax Expense (Benefit)
We recorded an income tax benefit of $1.3 million and $0.9 million for the three and nine months ended September 30, 2021, respectively. The income tax benefit recorded for the three months ended September 30, 2021 relates primarily to a reduction in our estimated state income tax liability. We recorded income tax expense of $5.1 million and $4.1 million for the three and nine months ended September 30, 2020, respectively. The income tax expense recorded for the first nine months of 2020 relates primarily to Ionis’ standalone income for the period.2021.
Net Loss and Net Loss per Share
We had a net loss of $82.5 million and $253.2$65.2 million for the three and nine months ended September 30, 2021, respectively,March 31, 2022 compared to $36.6 million and $124.1net loss of $89.9 million for the same periods in 2020. Our net loss increased for the nine months ended September 30, 2021, compared to the same period in 2020 primarily due to decreased revenue and increased expenses year-over-year, as2021, which reflects the fluctuations discussed above in the revenue and expenses sections, respectively.
Net Loss Attributable to Noncontrolling Interest in Akcea Therapeutics, Inc.
During the first nine months of 2020, we owned approximately 76 percent of Akcea. The shares of Akcea third parties owned represented an interest in Akcea’s equity that we did not control. However, because we maintained overall control of Akcea through our voting interest, we reflected Akcea’s results of operations in our condensed consolidated financial statements. We reflected the noncontrolling interest attributable to other owners of Akcea’s common stock in a separate line called “Net loss attributable to noncontrolling interest in Akcea” on our statement of operations.above. Our noncontrolling interest in Akcea on our statement of operations for the three and nine months ended September 30, 2020, was a loss of $12.1 million and $34.3 million, respectively. After we completed the Akcea Merger in October 2020, we no longer recorded any adjustment related to noncontrolling interest for Akcea’s net loss.
Net Loss Attributable to Our Common Stockholdersb and Net Loss per Share
We had a net loss attributable to our common stockholders of $82.5 million and $253.2 million for the three and nine months ended September 30, 2021, respectively. We had a net loss attributable to our common stockholders of $24.5 million and $89.7 million for the same periods in 2020. Basicasic and diluted net loss per share for the three and nine months ended September 30,March 31, 2022 and 2021 were $0.58 and $1.80, respectively, compared to $0.180.46 and $0.64 for the same periods in 2020., respectively.
Liquidity and Capital Resources
We have financed our operations primarily from research and development collaborative agreements. We also finance our operations from commercial revenue from SPINRAZA royalties and TEGSEDI and WAYLIVRA commercial revenue. From our inception through September 30, 2021,March 31, 2022, we have earned approximately $5.4 $6.0 billion in revenue. We have also financed our operations through the sale of our equity securities and the issuance of long-term debt. From the time we were founded through September 30, 2021, March 31, 2022, we have raised net proceeds of approximately $2.0 billion from the sale of our equity securities. Additionally, from our inception through September 30, 2021,March 31, 2022, we have borrowed approximately $2.1 billion under long-term debt arrangements to finance a portion of our operations.
Our cash, cash equivalents and short-term investments, debt obligations and working capital increaseddid not change significantly from December 31, 20202021 to September 30, 2021, primarily as a result of issuing $632.5 million of 0% Notes (due in April 2026) and repurchasing $247.9 million of our 1% Notes in April 2021.
The following table summarizes our contractual obligations as of September 30, 2021. March 31, 2022. The table provides a breakdown of when obligations become due. We provide a more detailed description of the major components of our debt in the paragraphs following the table:
Contractual Obligations | | Payments Due by Period (in millions) | | | Payments Due by Period (in millions) | |
(selected balances described below) | | Total | | | Less than 1 year | | | More than 1 year | | | Total | | | Less than 1 year | | | More than 1 year | |
0% Notes (principal payable) | | $ | 632.5 | | | $ | — | | | $ | 632.5 | | |
0 % Notes (principal payable) | | | $ | 632.5 | | | $ | — | | | $ | 632.5 | |
0.125% Notes (principal and interest payable) | | $ | 551.2 | | | $ | 0.7 | | | $ | 550.5 | | | | 550.9 | | | | 0.7 | | | | 550.2 | |
1% Notes (principal and interest payable) | | $ | 62.3 | | | $ | 62.3 | | | $ | — | | |
Building mortgage payments (principal and interest payable) | | $ | 74.0 | | | $ | 2.5 | | | $ | 71.5 | | | | 72.8 | | | | 3.0 | | | | 69.8 | |
Operating leases | | $ | 27.6 | | | $ | 3.7 | | | $ | 23.9 | | | | 26.6 | | | | 4.3 | | | | 22.3 | |
Other obligations (principal and interest payable) | | $ | 1.0 | | | $ | 0.1 | | | $ | 0.9 | | | | 0.8 | | | | 0.1 | | | | 0.7 | |
Total | | $ | 1,348.6 | | | $ | 69.3 | | | $ | 1,279.3 | | | $ | 1,283.6 | | | $ | 8.1 | | | $ | 1,275.5 | |
Our contractual obligations consist primarily of our convertible debt. In addition, we also have facility mortgages, facility leases, equipment financing arrangements and other obligations. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, we have excluded our gross unrecognized tax benefits from our contractual obligations table above. We have not entered into, nor do we currently have, any off-balance sheet arrangements (as defined under SEC rules).
Convertible Debt and Call Spread
Refer to our Convertible Debt and Call Spread accounting policies in Note 2, Significant Accounting Policies, and Note 6, 7, Convertible Debt, in the Notes to our condensed consolidated financial statements for the significant terms of each convertible debt instrument.
Research and Development and Manufacturing Facilities
In July 2017, we purchased the building that houses our primary R&D facility for $79.4 million and our manufacturing facility for $14.0 million. We financed the purchase of these two facilities with mortgage debt of $60.4 million in total. Our primary R&D facility mortgage has an interest rate of 3.88 percent. Our manufacturing facility mortgage has an interest rate of 4.20 percent. During the first five years of both mortgages, we are only required to make interest payments. Both mortgages mature in August 2027.
Operating Leases
In September 2021, we entered into an operating lease agreement for office space located in Boston, Massachusetts with an initial term ending 91 months following the lease commencement date. We included our contractual obligations related to this operating lease agreement in the table above. Refer to the Note 2, Significant Accounting Policies in the Notes of our condensed consolidated financial statements for the significant terms of the operating lease agreement.
Other Obligations
In addition to contractual obligations, we had outstanding purchase orders as of September 30, 2021 March 31, 2022 for the purchase of services, capital equipment and materials as part of our normal course of business.
We may enter into additional collaborations with partners which could provide for additional revenue to us and we may incur additional cash expenditures related to our obligations under any of the new agreements we may enter into. We currently intend to use our cash, cash equivalents and short-term investments to finance our activities. However, we may also pursue other financing alternatives, like issuing additional shares of our common stock, issuing debt instruments, refinancing our existing debt, or securing lines of credit. Whether we use our existing capital resources or choose to obtain financing will depend on various factors, including the future success of our business, the prevailing interest rate environment and the condition of financial markets generally.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are exposed to changes in interest rates primarily from our investments in certain short-term investments. We primarily invest our excess cash in highly liquid short-term investments of the U.S. Treasury and reputable financial institutions, corporations, and U.S. government agencies with strong credit ratings. We typically hold our investments for the duration of the term of the respective instrument. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions to manage exposure to interest rate changes. Accordingly, we believe that, while the securities we hold are subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.
We are also exposed to changes in foreign currency exchange rates as we have foreign subsidiaries with functional currencies other than the U.S. dollar. We translate our subsidiaries’ functional currencies into our reporting currency, the U.S. dollar. As a result, our financial position, results of operations and cash flows can be affected by market fluctuations in the foreign currencies to U.S. dollar exchange rate, which are difficult to predict. A hypothetical 10 percent change in foreign exchange rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.
ITEM 4. | CONTROLS AND PROCEDURES |
We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We design and evaluate our disclosure controls and procedures recognizing that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance and not absolute assurance of achieving the desired control objectives.
As of our most recently completed fiscal year and as of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2021.March 31, 2022. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to September 30, 2021.March 31, 2022.
We also performed an evaluation of any changes in our internal controls over financial reporting that occurred during our last fiscal quarter and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We conducted this evaluation under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. That evaluation did not identify any changes in our internal controls over financial reporting that occurred during our latest fiscal quarter and that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
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 the potential loss from any legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgment is required to determine the probability of a loss and whether the amount of the loss is reasonably estimable. The outcome of any proceeding is not determinable in advance. As a result, the assessment of a potential liability and the amount of accruals recorded are based only on the information available to us at the time. As additional information becomes available, we reassess the potential liability related to the legal proceeding, and may revise our estimates.
On August 5, 2021, four purported former stockholders of Akcea filed an action in the Delaware Court of Chancery captioned John Makris, et al. v. Ionis Pharmaceuticals, Inc., et al., C.A. No. 2021-0681, or the “Delaware Action.” The plaintiffs in the Delaware Action assert claims against (i) former members of Akcea’s board of directors; and (ii) Ionis, or collectively, the “Defendants.” The plaintiffs assert putatively direct claims on behalf of a purported class of former Akcea stockholders. The plaintiffs in the Delaware Action assert that the Defendants breached their fiduciary duties in connection with the October 2020 take-private transaction that we and Akcea entered into, in which Akcea became a wholly ownedwholly-owned subsidiary of Ionis. We believe that the claims asserted in the Delaware Action are without merit and planwe filed a motion to dismiss the claims in November 2021. Briefing and argument on the motion to dismiss is complete and we are awaiting the court’s ruling on the motion.
On January 19, 2022, a purported stockholder of Ionis filed a stockholder derivative complaint in the Delaware Court of Chancery captioned Leo Shumacher, et al. v. Joseph Loscalzo, et al., C.A. No. 2022-0059, or the “Action.” The complaint names as defendants the current members of Ionis’ board of directors, collectively the “Directors”. The company is a nominal defendant. Plaintiff asserts a breach of fiduciary duty claim against the Directors for awarding and receiving allegedly excessive compensation. Plaintiff also asserts an unjust enrichment claim against the non-employee Directors as a result of the compensation they received. The complaint seeks, among other things, damages, restitution, attorneys’ fees and costs, and such other relief as deemed just and proper by the court. The defendants have indicated they intend to file a motion to dismiss in November 2021 pursuant to an agreed upon scheduling order thatthe claim, however no briefing schedule has been entered by the Court.set.
Investing in our securities involves a high degree of risk. You should carefully consider the following information about the risks described below, together with the other information contained in this report and in our other public filings in evaluating our business. If any of the following risks actually occur, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected. As a result, the trading price of our securities could decline, and you might lose all or part of your investment. We have marked with an asterisk those risk factors that reflect substantive changes from the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Summary of Risk Factors
There are a number of risks related to our business and our securities. Some of the principal risks related to our business include the following:
| ● | the impact on our operations and financial condition from the effects of the current COVID-19 pandemic; |
| ● | our ability to generate substantial revenue from the sale of our medicines; |
| ● | our and our partners’ ability to compete effectively; |
| ● | the availability of adequate coverage and payment rates for our medicines; |
| ● | our ability to successfully manufacture our medicines; |
| ● | our ability to successfully develop and obtain marketing approvals for our medicines; |
| ● | our ability to secure and maintain effective corporate partnerships; |
| ● | our ability to sustain cash flows and achieve consistent profitability; |
| ● | our ability to protect our intellectual property; |
| ● | our ability to maintain the effectiveness of our personnel; and |
| ● | the other factors set forth below. |
Risks Related to the COVID-19 Pandemic
Our business could be materially adversely affected by the effects of health epidemics. To date, we believe the impacts of the recent COVID-19 pandemic on our business are limited and manageable.*
Our business could be materially adversely affected by health epidemics in regions where we or our partners are commercializing our medicines, have concentrations of clinical trial sites or other business operations, and could cause significant disruption in the operations of third-party manufacturers and contract research organizations upon whom we rely. For example, since December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, has spread worldwide. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, or the COVID-19 Pandemic, and the U.S. government-imposedgovernment imposed restrictions on travel between the U.S., Europe and certain other countries. In addition, the Governor of the State of California and the Governor of the Commonwealth of Massachusetts, the states in which our offices are located, each declared a state of emergency related to the spread of COVID-19 and issued executive orders that directed residents to stay at home.
In response to these public health directives and orders, in March 2020, we implemented work-from-home policies for most of our employees globally and generally suspended business-related travel. In the U.S., as vaccinations have become more widely available, states have lifted restrictions implemented as part of the pandemic response and reopened their economies. In June 2021, the Governor of California terminated the vast majority of executive actions that were put in place beginning in March 2020, leaving only a subset of provisions that facilitate the ongoing recovery. In May 2021, the Commonwealth of Massachusetts also lifted most of its pandemic restrictions. We have modifiedcontinue to modify our policies for our employees in California, Massachusetts, and internationally to align with current local guidance. We believe the effects of these work-from-home and travel policies have had a limited impact on our business.
These public health directives and orders have impacted our and our partners’ sales efforts. For example, some physician and hospital policies that have been put in place as a result of the COVID-19 Pandemic restrict in-person access by third parties, which has in some cases impacted our commercialization efforts for TEGSEDI and WAYLIVRA. Additionally, Biogen has reported that as a result ofit is monitoring the demand for SPINRAZA, including the duration and degree to which it might see delays in starting new patients on SPINRAZA due to hospitals diverting resources necessary to administer SPINRAZA to care for COVID-19 Pandemic, SPINRAZA sales revenues have decreased in part because SPINRAZA doses have been delayed due, directly or indirectly, to the COVID-19 Pandemic, and that future SPINRAZA sales revenues may be adversely affected by continued dosing delays.patients. These and similar, and perhaps more severe, disruptions in our or our partner’s commercial operations could materially impact our business, operating results and financial condition in the future.
Quarantines, shelter-in-place, executive and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, could impact personnel at third-party manufacturing facilities in the U.S. and other countries, or the availability or cost of materials, which would disrupt our supply chain. Recently there have been major disruptions to the global supply chain due to the COVID-19 Pandemic. To date, we have not experienced any significant consequences to our business as a result of the current supply chain disruptions, but could in the future if such disruptions persist or worsen.
We have experienced impacts to our clinical trial operations due to the COVID-19 Pandemic; however, we believe such impacts are limited and manageable. Some examples of these impacts include:
| ● | we have experienced some impact ondelays in clinical site initiation, site monitoring and patient enrollment due to restrictions imposed as a result of the COVID-19 Pandemic; |
| o | For example, in March 2020, we instituted a temporary suspension of enrollment for new subjects in our Phase 3 studies of eplontersen based on advice from our trial advisory committee; however, enrollment has resumed. |
| ● | some patients have not been able to meet protocol requirements, as quarantines have impeded patient movement and interrupted healthcare services; |
| ● | we have experienced some delays in site initiations due to principle investigators and site staff focusing on and prioritizing COVID-19 patient care; and |
| ● | we have experienced some delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel. |
In addition, some of our partners have experienced impacts to their clinical trial operations as a result of the COVID-19 Pandemic. For example, in December 2021, Novartis announced that enrollment for the Phase 3 HORIZON study had been delayed due to the COVID-19 Pandemic.
The spread of COVID-19 has caused a broad impact globally. While the potential economic impact brought by, and the duration of, the COVID-19 Pandemic may be difficult to assess or predict, it could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and has and could continue to affect the value of our securities.
The global COVID-19 Pandemic continues to rapidly evolve. While we have not yet experienced material adverse effects to our business as a result of the COVID-19 Pandemic, the ultimate impact of the COVID-19 Pandemic or a similar health epidemic is highly uncertain and subject to change. As such, we do not yet know the full extent of delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 Pandemic closely.
Risks Related to the Commercialization of our Medicines
We have limited experience as a company in commercializing medicines and we maywill have to invest significant resources to develop these capabilities. If we are unable to establish effective marketing, sales, market access, distribution, and distribution capabilitiesrelated functions, or enter into agreements with third parties to market, sell and distributecommercialize our medicines, we may not be able to generate revenue from our medicines.
We have limited experience as a company in commercializing medicines and we will have to invest significant financial and management resources to develop the marketing, sale and distribution of pharmaceutical products and thereinfrastructure required to successfully commercialize our medicines. There are significant risks involved in building and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. We will also need to scale-up existing internal support functions to aid our commercialization efforts, in particular, regulatory affairs and medical affairs. Any failure to effectively managebuild or maintain the infrastructure required to successfully commercialize our internalmedicines, including our sales, marketing, market access, distribution, and distributionrelated capabilities, wouldor scale-up our existing support functions, could adversely impact the commercialization ofrevenue we generate from our medicines. In addition, if we choose to rely on third parties to assist us in commercializing our medicines, we may not be able to enter into collaborations or hire consultants or external service providers to assist us in sales, marketing and distribution functions on acceptable financial terms, or at all. Even ifIf we are able todo engage third parties to market, sell and distributeassist us in the commercialization of our medicines, our product revenues and profitability may be lower if we rely on such third parties for these functions than if we were to perform them on our own. We also will likely have little control overcommercialized such third parties, and any of them may fail to devote the necessary resources and attention to market, sell and distribute our medicines effectively. If we are not successful in commercializing our medicines, either on our own or through arrangements with one or more third parties, we may not be able to generate revenue from our medicines.
If the market does not accept our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, we are not likely to generate substantial revenues or become consistently profitable.
Even if our medicines are authorized for marketing, including SPINRAZA, TEGSEDI and WAYLIVRA, our success will depend upon the medical community, patients and third-party payers accepting our medicines as medically useful, cost-effective, safe and convenient. Even when the FDA or foreign regulatory authorities authorize our or our partners’ medicines for commercialization, doctors may not prescribe our medicines to treat patients. Furthermore, we and our partners may not successfully commercialize additional medicines.
Additionally, in many of the markets where we or our partners may sell our medicines in the future, if we or our partners cannot agree with the government or other third-party payers regarding the price we can charge for our medicines, then we may not be able to sell our medicines in that market. Similarly, cost control initiatives by governments or third-party payers could decrease the price received for our medicines or increase patient coinsurance to a level that makes our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, economically unviable. If the pricing of any of our medicines decreases for any reason, it will reduce our revenue for such medicine. For example, Biogen has disclosed that SPINRAZA revenue has decreased in part due to lower pricing in the U.S. and certain rest of world markets.
The degree of market acceptance for our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, depends upon a number of factors, including the:
| ● | receipt and scope of marketing authorizations; |
| ● | establishment and demonstration in the medical and patient community of the efficacy and safety of our medicines and their potential advantages over competing products; |
| ● | cost and effectiveness of our medicines compared to other available therapies; |
| ● | patient convenience of the dosing regimen for our medicines; and |
| ● | reimbursement policies of government and third-party payers. |
Based on the profile of our medicines, physicians, patients, patient advocates, payers or the medical community in general may not accept or use any medicines that we may develop.
For example, TEGSEDI requires periodic blood and urine monitoring, is available in the U.S. only through a REMS program, and the product label for TEGSEDI in the U.S. has a boxed warning for thrombocytopenia and glomerulonephritis, requires periodic blood and urine monitoring, and TEGSEDI is only available through a Risk Evaluation and Mitigation Strategy, or REMS, program.glomerulonephritis. Our main competition in the U.S. market for TEGSEDI is patisiran, marketed by Alnylam Pharmaceuticals, Inc. Although patisiran requires intravenous administration and pre-treatment with steroids, it does not have a boxed warning or REMS.nor is it available only through a REMS program. Additionally, the product label for WAYLIVRA in the EU requires regular blood monitoring. In each case, these label requirements couldhave negatively affectaffected our ability to attract and retain patients for these medicines. We believe that the enhanced monitoring we have implemented to support early detection and management of these issues can help mitigate safety issues so that patients can continue treatment. Since implementation of the enhanced monitoring, serious platelet events have been infrequent. While we believe we can better maintain patients on TEGSEDI and WAYLIVRA through our patient-centric commercial approach where we or our partner plan to have greater involvement with physicians and patients, ifIf we or our partner cannot effectively maintain patients on TEGSEDI or WAYLIVRA, including due to limitations or restrictions on the ability to conduct periodic blood and urine monitoring of our patients as a result of the current COVID-19 Pandemic, we may not be able to generate substantial revenue from TEGSEDI or WAYLIVRA sales.
If we or our partners fail to compete effectively, our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, will not contributegenerate significant revenues.*
Our competitors engage in drug discovery throughout the world, are numerous, and include, among others, major pharmaceutical companies and specialized biopharmaceutical firms. Other companies are engaged in developing antisense technology. Our competitors may succeed in developing medicines that are:
| ● | priced lower than our medicines; |
| ● | reimbursed more favorably by government and other third-party payers than our medicines; |
| ● | safer than our medicines; |
| ● | more effective than our medicines; or |
| ● | more convenient to use than our medicines. |
These competitive developments could make our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, obsolete or non-competitive.
Certain of our partners are pursuing other technologies or developing other medicines either on their own or in collaboration with others, including our competitors, to treat the same diseases our own collaborative programs target. Competition may negatively impact a partner’s focus on and commitment to our medicines and, as a result, could delay or otherwise negatively affect the commercialization of our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA.
Many of our competitors have substantially greater financial, technical and human resources than we do. In addition, many of these competitors have significantly greater experience than we do in conducting preclinical testing and human clinical studies of new pharmaceutical products, in obtaining FDA and other regulatory authorizations of such products and in commercializing such products. Accordingly, our competitors may succeed in obtaining regulatory authorization for products earlier than we do.
There are several pharmaceutical and biotechnology companies engaged in the development or commercialization in certain geographic markets of products against targets that are also targets of products in our development pipeline. For example:
| ● | Onasemnogene abeparvovec and risdiplam compete with SPINRAZA; |
| ● | Patisiran, tafamidis and tafamidis meglumine compete with TEGSEDI;TEGSEDI and could compete with eplontersen; |
| ● | Vutrisiran and acoramidis could compete with TEGSEDI and eplontersen; |
| ● | ARO-APOC3, lomitapide, evinacumab, BIO89-100, and gemcabene could compete with WAYLIVRA and olezarsen; and |
| ● | AMG890 could compete with pelacarsen; |
| ● | Arimoclomol, ultomiris, mastinib and trehalose could compete with tofersentofersen; and ION363. |
| ● | Lanadelumab-flyo, C1 esterase inhibitor, berotralstat, C1 esterase inhibitor subcutaneous, garadacimab, KVD824, and NTLA-2002 could compete with donidalorsen. |
SPINRAZA injection for intrathecal use is an antisense medicine indicated for the treatment of SMA patients of all ages approved in over 50 countries. Specifically, SPINRAZA faces competition from onasemnogene abeparvovec, a gene therapy product that was approved in the U.S. in May 2019 and in the EU in May 2020 for the treatment of SMA, as well as risdiplam, an oral product for the treatment of SMA that was approved in the U.S. in August 2020.2020 and in the EU in March 2021. Biogen has disclosed that SPINRAZA revenue has decreased primarily due to a reduction in part to lower sales volumesdemand as a result of increased competition and that future sales of SPINRAZA may be adversely affected by the commercialization of competing products. SPINRAZA injection for intrathecal use is an antisense medicine indicated for the treatment of SMA patients of all ages approved in over 50 countries.products.
Additionally, companies that are developing medicines that target the same patient populations as our medicines in development may compete with us to enroll participants in the clinical trials for such medicines, which could make it more difficult for us to complete enrollment for these clinical trials.
Certain of our medicines may compete with our other medicines, which could reduce our expected revenues.
Certain of our medicines inhibit the production of the same protein. For example, WAYLIVRA inhibits the production of the same protein as olezarsen and TEGSEDI inhibits the production of the same protein as eplontersen. We believe the enhancements we incorporated into olezarsen and eplontersen can provide greater patient convenience by allowing for significantly lower doses and less frequent administration compared to WAYLIVRA and TEGSEDI, respectively. As such, to the extent physicians and patients elect to use olezarsen or eplontersen instead of WAYLIVRA or TEGSEDI, respectively, it will reduce the revenue we derive from those medicines. In addition, while vupanorsen, olezarsen and WAYLIVRA use different mechanisms of action, if vupanorsen and olezarsen can effectively lower triglyceride levels in patients, including patients with FCS, WAYLIVRA, vupanorsen and olezarsen may compete with each other.
Our medicines could be subject to regulatory limitations following approval.*
Following approval of a medicine, we and our partners must comply with comprehensive government regulations regarding the manufacture, marketing and distribution of medicines. Promotional communications regarding prescription medicines must be consistent with the information in the product’s approved labeling. We or our partners may not obtain the labeling claims necessary or desirable to successfully commercialize our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development.
The FDA and foreign regulatory bodies have the authority to impose significant restrictions on an approved medicine through the product label and on advertising, promotional and distribution activities. For example:
| ● | in the U.S., TEGSEDI’s label contains a boxed warning for thrombocytopenia and glomerulonephritis; |
| ● | TEGSEDI requires periodic blood and urine monitoring; and |
| ● | in the U.S., TEGSEDI is available only through a REMS program. |
Prescription medicines may be promoted only for the approved indications in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
In addition, when approved, the FDA or a foreign regulatory authority may condition approval on the performance of post-approval clinical studies or patient monitoring, which could be time consuming and expensive. For example, in connection with the conditional marketing approval for WAYLIVRA in the EU, we are required to conduct a post-authorization safety study to evaluate the safety of WAYLIVRA on thrombocytopenia and bleeding in FCS patients taking WAYLIVRA. If the results of such post-marketing studies are not satisfactory, the FDA, EC or other foreign regulatory authority may withdraw marketing authorization or may condition continued marketing on commitments from us or our partners that may be expensive and time consuming to fulfill.
If we or others identify side effects after any of our medicines are on the market, or if manufacturing problems occur subsequent to regulatory approval, or if we, our manufacturers or our partners fail to comply with regulatory requirements, we or our partners may, among other things, lose regulatory approval and be forced to withdraw products from the market, need to conduct additional clinical studies, incur restrictions on the marketing, distribution or manufacturing of the product, and/or change the labeling of our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA.
We depend on our collaboration with Biogen for the development and commercialization of SPINRAZA.
We have entered into a collaborative arrangement with Biogen to develop and commercialize SPINRAZA. We entered into this collaboration primarily to:
| ● | fund our development activities for SPINRAZA; |
| ● | seek and obtain regulatory approvals for SPINRAZA; and |
| ● | successfully commercialize SPINRAZA. |
We are relying on Biogen to obtain additional regulatory approvals for SPINRAZA, generate additional clinical data for SPINRAZA, manufacture and successfully commercialize SPINRAZA. In general, we cannot control the amount and timing of resources that Biogen devotes to our collaboration. If Biogen fails to further develop SPINRAZA, obtain additional regulatory approvals for SPINRAZA, manufacture or commercialize SPINRAZA, or if Biogen’s efforts are not effective, our business may be negatively affected.
Our collaboration with Biogen may not continue for various reasons. Biogen can terminate our collaboration at any time. If Biogen stops developing or commercializing SPINRAZA, we would have to seek or spend additional funding, and SPINRAZA’s commercialization may be harmed or delayed.
Our collaboration with Biogen may not result in the continued successful commercialization of SPINRAZA. If Biogen does not continue to successfully commercialize SPINRAZA, we will receive limited revenues for SPINRAZA.
We depend on our collaboration with AstraZeneca for the joint development and commercialization of eplontersen.
We have entered into a collaborative arrangement with AstraZeneca to develop and commercialize eplontersen. Under the terms of the collaboration agreement, Ionis and AstraZeneca will co-develop and co-commercialize eplontersen in the U.S. and AstraZeneca will have the sole right to commercialize eplontersen in all other countries, except for certain Latin American countries. Prior to co-commercializing eplontersen in the U.S., we will need to negotiate a co-commercialization agreement with AstraZeneca to govern the parties’ performance of co-commercialization, which agreement will include a commercial plan and budget. As a company we do not have experience with co-commercialization arrangements. We also do not have control over the amount and timing of resources that AstraZeneca devotes to our collaboration, particularly outside of the U.S. If the co-commercialization arrangement for eplontersen is not successful for any reason, eplontersen may not meet our commercial objectives and our revenues for eplontersen may be limited.
In addition, a Joint Steering Committee, or JSC, having equal membership from us and AstraZeneca, and various subcommittees oversee and coordinate the development, manufacturing, commercialization and other exploitation activities for eplontersen in the U.S. by mutual agreement. If any subcommittee cannot reach unanimous agreement on any matter within its respective scope of authority, such matter may be referred to the JSC for resolution. If the JSC cannot come to a mutual agreement on any particular matter, this could delay our ability to develop or commercialize eplontersen.
We are relying on third parties to market, sell and distribute TEGSEDI and WAYLIVRA.*
We have entered into agreements with third parties to commercialize TEGSEDI and WAYLIVRA as follows:follows:
| ● | In April 2021, we entered into a distribution agreement with Sobi to commercialize TEGSEDI in the U.S. and Canada; |
| ● | In December 2020, we entered into a distribution agreement with Sobi to commercialize TEGSEDI and WAYLIVRA in Europe; and |
| ● | In August 2018, we granted PTC the exclusive right to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries. |
We are relying on Sobi and PTC to effectively market, sell and distribute TEGSEDI and WAYLIVRA and have less control over sales efforts and may receive less revenue than if we commercialized TEGSEDI or WAYLIVRA by ourselves. If Sobi or PTC does not successfully commercialize TEGSEDI or WAYLIVRA, including as a result of delays or disruption caused by the current COVID-19 Pandemic, we may receive limited revenue for TEGSEDI or WAYLIVRA in the U.S., Canada, Europe, Latin America or certain Caribbean countries, which could have a material adverse effect on our business, prospects, financial condition and results of operations.
Our operations are subject to additional healthcare laws.
Our operations are subject to additional healthcare laws, including federal and state anti-kickback laws, false claims laws, transparency laws, such as the federal Sunshine Act, and health information privacy and security laws, which are subject to change at any time. For example, in November 2020, the U.S. Department of Health and Human Services issued a final rule modifying the anti-kickback law safe harbors for Medicare Part D plans, pharmacies, and pharmaceutical benefit managers. Efforts to ensure that our operations comply with current applicable healthcare laws and regulations involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. Penalties for violations of applicable healthcare laws and regulations may include significant civil, criminal and administrative penalties, damages, disgorgement, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and additional reporting requirements and oversight if we enter into a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws. In addition, violations may also result in reputational harm, diminished profits and future earnings.earnings.
If government or other third-party payers fail to provide adequate coverage and payment rates for our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, our revenue will be limited.*
In both domestic and foreign markets, sales of our current and future products will depend in part upon the availability of coverage and reimbursement from third-party payers. The majority of patients in the U.S. who would fit within our target patient populations for our medicines have their healthcare supported by a combination of Medicare coverage, other government health programs such as Medicaid, managed care providers, private health insurers and other organizations. Coverage decisions may depend upon clinical and economic standards that disfavor new medicines when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming coverage is approved, the resulting reimbursement payment rates might not be enough to make our medicines affordable. Even if favorable coverage status and adequate reimbursement rates are attained, less favorable coverage policies and reimbursement rates may be implemented in the future. Accordingly, SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, will face competition from other therapies and medicines for limited financial resources. We or our partners may need to conduct post-marketing studies to demonstrate the cost-effectiveness of any future products to satisfy third-party payers. These studies might require us to commit a significant amount of management time and financial and other resources. Third-party payers may never consider our future products as cost-effective. Adequate third-party coverage and reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.
Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the U.S., no uniform policy of coverage and reimbursement for medicines exists among third-party payers. Therefore, coverage and reimbursement for medicines can differ significantly from payer to payer. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act was passed in March 2010, and substantially changed the way healthcare is financed by both governmental and private insurers, and continues to significantly impact the U.S. pharmaceutical industry. There have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, as well as efforts to repeal or replace certain aspects of the Affordable Care Act. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. However, in March 2020, before the District Court could rule on the remaining provisions of the Affordable Care Act, the U.S. Supreme Court agreed to review the case. In June 2021, the Supreme Court dismissed the case on the basis that the states and individuals that brought the lawsuit did not have standing to challenge the law. It is unclear how future litigation and healthcare reform measures will impact the Affordable Care Act and our business.
Further, we believe that future coverage, reimbursement and pricing will likely be subject to increased restrictions both in the U.S. and in international markets. In the U.S., recent health reform measures have resulted in reductions in Medicare and other healthcare funding, and there have been several recent U.S. Congressional inquiries, legislation and executive orders designed to, among other things, reduce drug prices (e.g., by supporting drug price negotiation in Medicare Parts B and D, with those negotiated prices also available to commercial plans, and progressing legislation to slow price increases over time on existing drugs), increase competition (e.g., by supporting legislation to speed the entry of biosimilar and generic drugs, including shortening the period of exclusivity, policies in Medicare Part B to increase the prescribing of biosimilars by physicians, and a prohibition on “pay-for-delay” agreements and anti-competitive practices by drug manufacturers), lower out-of-pocket drug costs for patients (e.g., by capping Medicare Part D beneficiary out-of-pocket pharmacy expenses), and foster scientific innovation to promote better health care and improved health (e.g., by investing in public and private research and incentivizing the market to promote discovery of valuable and accessible new treatments). At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Third-party coverage and reimbursement for medicines may not be available or adequate in either the U.S. or international markets, and third-party payers, whether foreign or domestic, or governmental or commercial, may allocate their resources to address the current COVID-19 Pandemic or experience delays or disruptions in their ability to devote resources to coverage and reimbursement matters related to our products or medicines as a result of the COVID-19 Pandemic, which would negatively affect the potential commercial success of our products, our revenue and our profits.
If we cannot manufacture our medicines or contract with a third party to manufacture our medicines at costs that allow us to charge competitive prices to buyers, we cannot market our products profitably.*
To successfully commercialize any of our medicines, we would need to optimize and manage large-scale commercial manufacturing capabilities either on a standalone basis or through a third-party manufacturer. We rely on third-party manufacturers to supply the drug substance and drug product for TEGSEDI and drug product for WAYLIVRA. Any delays or disruption to our own or third-party commercial manufacturing capabilities, including any interruption to our supply chain as a result of the current COVID-19 Pandemic or the ongoing war between Russia and Ukraine, could limit the commercial success of our medicines. In addition, as our drug development and commercial pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity. For example, we have plans to expand our manufacturing infrastructure to support our wholly owned pipeline. If we are not successful in executing this expansion, it could limit our ability to meet our manufacturing requirements and commercial objectives in the future.
Additionally, we have limited experience manufacturing pharmaceutical products of the chemical class represented by our medicines, called oligonucleotides, on a commercial scale for the systemic administration of a medicine. There are a small number of suppliers for certain capital equipment and raw materials that we use to manufacture our medicines, and some of these suppliers will need to increase their scale of production to meet our projected needs for commercial manufacturing. Further, we must continue to improve our manufacturing processes to allow us to reduce our drug costs. We or our partners may not be able to manufacture our medicines at a cost or in quantities necessary to make commercially successful products.
Also, manufacturers, including us, must adhere to the FDA’s cGMP regulations and similar regulations in foreign countries, which the applicable regulatory authorities enforce through facilities inspection programs. We, our partners and our contract manufacturers may not comply or maintain compliance with cGMP, or similar foreign regulations. Non-compliance could significantly delay or prevent receipt of marketing authorizations for our medicines, including authorizations for SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development, or result in enforcement action after authorization that could limit the commercial success of our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development.
Risks Related to the Development and Regulatory Approval of our Medicines
If we or our partners fail to obtain regulatory approval for our medicines and additional approvals for SPINRAZA, TEGSEDI and WAYLIVRA, we or our partners cannot sell them in the applicable markets.
We cannot guarantee that any of our medicines will be considered safe and effective or will be approved for commercialization. In addition, it is possible that SPINRAZA, TEGSEDI and WAYLIVRA may not be approved in additional markets or for additional indications. We and our partners must conduct time-consuming, extensive and costly clinical studies to demonstrate the safety and efficacy of each of our medicines before they can be approved or receive additional approvals for sale. We and our partners must conduct these studies in compliance with FDA regulations and with comparable regulations in other countries.
We and our partners may not obtain necessary regulatory approvals on a timely basis, if at all, for our medicines. It is possible that regulatory agencies will not approve our medicines for marketing or SPINRAZA, TEGSEDI or WAYLIVRA in additional markets or for additional indications. If the FDA or another regulatory agency believes that we or our partners have not sufficiently demonstrated the safety or efficacy of any of our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, or our medicines in development, the agency will not approve the specific medicine or will require additional studies, which can be time consuming and expensive and which will delay or harm commercialization of the medicine. For example, in August 2018 we received a complete response letter from the FDA regarding the new drug application for WAYLIVRA in which the FDA determined that the safety concerns identified with WAYLIVRA in our clinical development program outweighed the expected benefits of triglyceride lowering in patients with FCS. We also received a Non-W from Health Canada for WAYLIVRA in November 2018.
The FDA or other comparable foreign regulatory authorities can delay, limit or deny approval of a medicine for many reasons, including:
| ● | such authorities may disagree with the design or implementation of our clinical studies; |
| ● | we or our partners may be unable to demonstrate to the satisfaction of the FDA or other regulatory authorities that a medicine is safe and effective for any indication; |
| ● | such authorities may not accept clinical data from studies conducted at clinical facilities that have deficient clinical practices or that are in countries where the standard of care is potentially different from the U.S.; |
| ● | we or our partners may be unable to demonstrate that our medicine’s clinical and other benefits outweigh its safety risks to support approval; |
| ● | such authorities may disagree with the interpretation of data from preclinical or clinical studies; |
| ● | such authorities may find deficiencies in the manufacturing processes or facilities of third-party manufacturers who manufacture clinical and commercial supplies for our medicines, or may delay the inspection of such facilities due to restrictions related to the COVID-19 Pandemic; and |
| ● | the approval policies or regulations of such authorities or their prior guidance to us or our partners during clinical development may significantly change in a manner rendering our clinical data insufficient for approval. |
Failure to receive marketing authorization for our medicines, or failure to receive additional marketing authorizations for SPINRAZA, TEGSEDI or WAYLIVRA, or delays in these authorizations, could prevent or delay commercial introduction of the medicine, and, as a result, could negatively impact our ability to generate revenue from product sales.
We may not be able to benefit from orphan drug designation for our medicines.
In the U.S., under the Orphan Drug Act, the FDA may designate a medicine as an orphan drug if it is intended to treat a rare disease or condition affecting fewer than 200,000 individuals in the U.S. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process, but it can provide financial incentives, such as tax advantages and user-fee waivers, as well as longer regulatory exclusivity periods. The FDA has granted orphan drug designation to eplontersen for the treatment of patients with transthyretin-mediated amyloidosis. The FDA and EMA have granted orphan drug designation to TEGSEDI for the treatment of patients with ATTRv-PN, to WAYLIVRA for the treatment of patients with FCS, and to tominersen for the treatment of patients with HD. In addition, the EMA has granted orphan drug designation to WAYLIVRA for the treatment of patients with FPL. Even if approval is obtained on a medicine that has been designated as an orphan drug, we may lose orphan drug exclusivity if the FDA or EMA determines that the request for designation was materially defective or if we cannot assure sufficient quantity of the applicable medicine to meet the needs of patients with the rare disease or condition, or if a competitor is able to gain approval for the same medicine in a safer or more effective form or that makes a major contribution to patient care. If we lose orphan drug exclusivity on any of our medicines, we may face increased competition and lose market share for such medicine.
If the results of clinical testing indicate that any of our medicines are not suitable for commercial use, we may need to abandon one or more of our drug development programs.*
Drug discovery and development has inherent risks and the historical failure rate for drugs is high. Antisense medicines are a relatively new approach to therapeutics. If we cannot demonstrate that our medicines are safe and effective for human use in the intended indication, we may need to abandon one or more of our drug development programs.
Even if our medicines are successful in preclinical and human clinical studies, the medicines may not be successful in late-stage clinical studies.*
Successful results in preclinical or initial human clinical studies, including the Phase 2 results for some of our medicines in development, may not predict the results of subsequent clinical studies. If any of our medicines in Phase 3 clinical studies, including the studies of tofersen,eplontersen, olezarsen, donidalorsen, ION363, pelacarsen eplontersen, olezarsen and ION363,tofersen, do not show sufficient efficacy in patients with the targeted indication, or if such studies are discontinued for any other reason, it could negatively impact our development and commercialization goals for these medicines and our stock price could decline.
In the past, we have invested in clinical studies of medicines that have not met the primary clinical endpoints in their Phase 3 studies or have been discontinued for other reasons. For example, in October 2021, Biogen reported that tofersen did not meet the primary clinical endpoint in the Phase 3 VALOR study; however, trends favoring tofersen were seen across multiple secondary and exploratory measures of disease activity and clinical function. In addition, in March 2021, Roche decided to discontinue dosing in the Phase 3 GENERATION HD1 study of tominersen in patients with manifest Huntington’s disease based on the results of a pre-planned review of data from the Phase 3 study conducted by an unblinded Independent Data Monitoring Committee. Similar results could occur in clinical studies for our other medicines, including the studies of pelacarsen, eplontersen,, olezarsen, donidalorsen, ION363 and ION363.pelacarsen.
There are a number of factors that could cause a clinical study to fail or be delayed, including:
| ● | the clinical study may produce negative or inconclusive results; |
| ● | regulators may require that we hold, suspend or terminate clinical research for noncompliance with regulatory requirements; |
| ● | we, our partners, the FDA or foreign regulatory authorities could suspend or terminate a clinical study due to adverse side effects of a medicine on subjects or lack of efficacy in the trial; |
| ● | we, or our partners, may decide, or regulators may require us, to conduct additional preclinical testing or clinical studies; |
| ● | enrollment in our clinical studies may be slower than we anticipate; |
| ● | we or our partners, including our independent clinical investigators, contract research organizations and other third-party service providers on which we rely, may not identify, recruit and train suitable clinical investigators at a sufficient number of study sites or timely enroll a sufficient number of study subjects in the clinical study; |
| ● | the institutional review board for a prospective site might withhold or delay its approval for the study; |
| ● | enrollment in our clinical studies may be slower than we anticipate; |
| ● | people who enroll in the clinical study may later drop out due to adverse events, a perception they are not benefiting from participating in the study, fatigue with the clinical study process or personal issues; |
| ● | a clinical study site may deviate from the protocol for the study; |
| ● | the cost of our clinical studies may be greater than we anticipate; |
| ● | our partners may decide not to exercise any existing options to license and conduct additional clinical studies for our medicines; and |
| ● | the supply or quality of our medicines or other materials necessary to conduct our clinical studies may be insufficient, inadequate or delayed. |
The current COVID-19 Pandemic could make some of these factors more likely to occur.
In addition, our current medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, are chemically similar to each other. As a result, a safety observation we encounter with one of our medicines could have, or be perceived by a regulatory authority to have, an impact on a different medicine we are developing. This could cause the FDA andor other regulators to ask questions or take actions that could harm or delay our ability to develop and commercialize our medicines or increase our costs. For example, the FDA or other regulatory agencies could request, among other things, any of the following regarding one of our medicines: additional information or commitments before we can start or continue a clinical study, protocol amendments, increased safety monitoring, additional product labeling information, and post-approval commitments. This happened in connection with the conditional marketing approval for WAYLIVRA in the EU, as the EC is requiring us to conduct a post-authorization safety study to evaluate the safety of WAYLIVRA on thrombocytopenia and bleeding in FCS patients taking WAYLIVRA. We have an ongoing open label extension, or OLE, study ofpost-marketing studies for WAYLIVRA in patients with FCS and an OLE study of TEGSEDI in patients with hATTR, and an EAP for WAYLIVRA. Adverse events or results from these studies or the EAPs could negatively impact our pending or future marketing approval applications for WAYLIVRA and TEGSEDI in patients with FCS or hATTR amyloidosisATTRv-PN, respectively, or the commercial opportunity for WAYLIVRA or TEGSEDI.
Any failure or delay in our clinical studies, including the studies of tofersen, pelacarsen, eplontersen,, olezarsen, donidalorsen, and ION363, could reduce the commercial potential or viability of our medicines.
We depend on third parties to conduct our clinical studies for our medicines and any failure of those parties to fulfill their obligations could adversely affect our development and commercialization plans.*
We depend on independent clinical investigators, contract research organizations and other third-party service providers to conduct our clinical studies for our medicines and expect to continue to do so in the future. For example, we use clinical research organizations, such as Pharmaceutical Research Associates, Inc., Icon Clinical Research Limited, Syneos Health, Inc., PPDThermo Fisher Scientific Inc. and Medpace for the clinical studies for our medicines, including tofersen,eplontersen, olezarsen, donidalorsen, ION363, pelacarsen eplontersen, olezarsen and ION363.tofersen. We rely heavily on these parties for successful execution of our clinical studies, but do not control many aspects of their activities. For example, the investigators are not our employees. However, we are responsible for ensuring that these third parties conduct each of our clinical studies in accordance with the general investigational plan and approved protocols for the study. Third parties may not complete activities on schedule or may not conduct our clinical studies in accordance with regulatory requirements or our stated protocols. For example, some of our key vendors are experiencing labor shortages, which could impact their ability to perform services for us for certain of our clinical trials. The failure of these third parties to carry out their obligations, including as a result of delays or disruption caused by the current COVID-19 Pandemic that may affect the third party’s ability to conduct the clinical studies for our medicines, or a termination of our relationship with these third parties, could delay or prevent the development, marketing authorization and commercialization of our medicines or additional marketing authorizations for TEGSEDI and WAYLIVRA.
In addition, while we do not have any clinical trial sites in Ukraine, we do have a limited number of clinical trial sites in Russia and surrounding countries that may be impacted by the ongoing war between Russia and Ukraine, and could result in difficulties enrolling or completing our clinical trials in such areas on schedule. Furthermore, the U.S. and its European allies have imposed significant new sanctions against Russia, including regional embargoes, full blocking sanctions, and other restrictions targeting major Russian financial institutions. The U.S. government has also indicated it will consider imposing additional sanctions and other similar measures in the near future. Our ability to conduct clinical trials in Russia may become restricted under applicable sanctions laws, which would require us to identify alternative trial sites, and could increase our costs and delay the clinical development of certain of our medicines.
Since corporate partnering is a significant part of our strategy to fund the advancement and commercialization of our development programs, if any of our collaborative partners fail to fund our collaborative programs, or if we cannot obtain additional partners, we may have to delay or stop progress on our drug development programs.
To date, corporate partnering has played a significant role in our strategy to fund our development programs and to add key development resources. We plan to continue to rely on additional collaborative arrangements to develop and commercialize many of our unpartnered medicines. However, we may not be able to negotiate favorable collaborative arrangements for these drug programs. If we cannot continue to secure additional collaborative partners, our revenues could decrease and the development of our medicines could suffer.
Our corporate partners are developing and/or funding many of the medicines in our development pipeline. For example, we are relying on:
| ● | RocheAstraZeneca for the joint development and funding of tominersen;eplontersen; |
| ● | Novartis for development and funding of pelacarsen; and |
| ● | Biogen for development and funding of tofersen.tofersen; and |
| ● | Roche for development and funding of tominersen. |
If any of these pharmaceutical companies stops developing and/or funding these medicines, our business could suffer and we may not have, or be willing to dedicate, the resources available to develop these medicines on our own. Our collaborators can terminate their relationships with us under certain circumstances, many of which are outside of our control. For example, as part ofafter a reprioritization of its pipeline and strategic review of its rare disease business, GSK declined its optiondata from the global Phase 2b study of vupanorsen, Pfizer decided to license TEGSEDI and IONIS-FB-LRx.
discontinue the clinical development program for vupanorsen.
Even with funding from corporate partners, if our partners do not effectively perform their obligations under our agreements with them, it would delay or stop the progress of our drug development and commercial programs.
In addition to receiving funding, we enter into collaborative arrangements with third parties to:
| ● | conduct clinical studies; |
| ● | seek and obtain marketing authorizations; and |
| ● | manufacture, market and sell our medicines. |
Once we have secured a collaborative arrangement to further develop and commercialize one of our drug development programs, such as our collaborations with AstraZeneca, Bayer, Biogen, GSK, Janssen, Novartis, Pfizer and Roche, these collaborations may not continue or result in commercialized medicines, or may not progress as quickly as we first anticipated.
For example, a collaborator such as AstraZeneca, Bayer, Biogen, GSK, Janssen, Novartis, Pfizer or Roche, could determine that it is in its financial interest to:
| ● | pursue alternative technologies or develop alternative products that may be competitive with the medicine that is part of the collaboration with us; |
| ● | pursue higher-priority programs or change the focus of its own development programs; or |
| ● | choose to devote fewer resources to our medicines than it does for its own medicines. |
If any of these occur, it could affect our partner’s commitment to the collaboration with us and could delay or otherwise negatively affect the commercialization of our medicines, including SPINRAZA, tominersen, pelacarsen, tofersen, and tofersen.eplontersen.
If we do not progress in our programs as anticipated, the price of our securities could decrease.*
For planning purposes, we estimate and may disclose the timing of a variety of clinical, regulatory and other milestones, such as when we anticipate a certain medicine will enter clinical trials, when we anticipate completing a clinical study, or when we anticipate filing an application for, or obtaining, marketing authorization, or when we or our partners plan to commercially launch a medicine. We base our estimates on present facts and a variety of assumptions, many of which are outside of our control, including the current COVID-19 Pandemic. If we do not achieve milestones in accordance with our or our investors’ or securities analysts’ expectations, including milestones related to SPINRAZA, TEGSEDI, WAYLIVRA, tominersen,eplontersen, olezarsen, donidalorsen, ION363, pelacarsen and tofersen, pelacarsen, eplontersen, olezarsen and ION363, the price of our securities could decrease.
Risks Associated with our Businesses as a Whole
Risks related to our financial condition
We have incurred losses, and our business will suffer if we fail to consistently achieve profitability in the future.
Because drug discovery and development requires substantial lead-time and money prior to commercialization, our expenses have generally exceeded our revenue since we were founded in January 1989. As of September 30, 2021,March 31, 2022, we had an accumulated deficit of approximately $1.4$1.2 billion and stockholders’ equity of approximately $0.5$0.7 billion. Most of our historical losses resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. Most of our income has come from collaborative arrangements, including commercial revenue from royalties and R&D revenue, with additional income from research grants and the sale or licensing of our patents, as well as interest income. If we do not continue to earn substantial revenue, we may incur additional operating losses in the future. We may not successfully develop any additional medicines or achieve or sustain future profitability.
If we fail to obtain timely funding, we may need to curtail or abandon some of our programs.
Many of our medicines are undergoing clinical studies or are in the early stages of research and development. Most of our drug programs will require significant additional research, development, manufacturing, preclinical and clinical testing, marketing authorizations, preclinical activities and commitment of significant additional resources prior to their successful commercialization. These activities will require significant cash. As of September 30, 2021March 31, 2022, we had cash, cash equivalents and short-term investments equal to $2.02.1 billion. If we or our partners do not meet our goals to successfully commercialize our medicines, including SPINRAZA, TEGSEDI and WAYLIVRA, or to license certain medicines and proprietary technologies, we will need additional funding in the future. Our future capital requirements will depend on many factors, such as the following:
| ● | successful commercialization of SPINRAZA, TEGSEDI and WAYLIVRA; |
| ● | additional marketing approvals for WAYLIVRA and TEGSEDI; |
| ● | the profile and launch timing of our medicines, including TEGSEDIeplontersen, olezarsen, donidalorsen, ION363, pelacarsen and WAYLIVRA;tofersen; |
| ● | changes in existing collaborative relationships and our ability to establish and maintain additional collaborative arrangements; |
| ● | continued scientific progress in our research, drug discovery and development programs; |
| ● | the size of our programs and progress with preclinical and clinical studies; |
| ● | the time and costs involved in obtaining marketing authorizations; |
| ● | competing technological and market developments, including the introduction by others of new therapies that address our markets; and |
| ● | our manufacturing requirements and capacity to fulfill such requirements. |
If we need additional funds, we may need to raise them through public or private financing. Additional financing may not be available at all or on acceptable terms. If we raise additional funds by issuing equity securities, the shares of existing stockholders will be diluted and the price, as well as the price of our other securities, may decline. If adequate funds are not available or not available on acceptable terms, we may have to cut back on one or more of our research, drug discovery or development programs. Alternatively, we may obtain funds through arrangements with collaborative partners or others, which could require us to give up rights to certain of our technologies or medicines.
Risks related to our intellectual property
If we cannot protect our patent rights or our other proprietary rights, others may compete more effectively against us.
Our success depends to a significant degree upon whether we can continue to develop, secure and maintain intellectual property rights to proprietary products and services. However, we may not receive issued patents on any of our pending patent applications in the U.S. or in other countries and we may not be able to obtain, maintain or enforce our patents and other intellectual property rights which could impact our ability to compete effectively. In addition, the scope of any of our issued patents may not be sufficiently broad to provide us with a competitive advantage. Furthermore, other parties may successfully challenge, invalidate or circumvent our issued patents or patents licensed to us so that our patent rights do not create an effective competitive barrier or revenue source.
We cannot be certain that the U.S. Patent and Trademark Office, or U.S. PTO, and courts in the U.S. or the patent offices and courts in foreign countries will consider the claims in our patents and applications covering SPINRAZA, TEGSEDI, WAYLIVRA, or any of our medicines in development as patentable. Method-of-use patents protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products off-label. Although off-label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement is difficult to prevent, includingeven through legal action.
If we or any licensor partner loses or cannot obtain patent protection for SPINRAZA, TEGSEDI, WAYLIVRA, or any of our other medicines in development, it could have a material adverse impact on our business.
business.
Intellectual property litigation could be expensive and prevent us from pursuing our programs.
From time to time we have to defend our intellectual property rights. If we are involved in an intellectual property dispute, we may need to litigate to defend our rights or assert them against others. Disputes can involve arbitration, litigation or proceedings declared by the U.S. PTO or the International Trade Commission or foreign patent authorities. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
If a third party claims that our medicines or technology infringe its patents or other intellectual property rights, we may have to discontinue an important product or product line, alter our products and processes, pay license fees or cease certain activities. We may not be able to obtain a license to needed intellectual property on favorable terms, if at all. There are many patents issued or applied for in the biotechnology industry, and we may not be aware of patents or patent applications held by others that relate to our business. This is especially true since patent applications in the U.S. are filed confidentially for the first 18 months. Moreover, the validity and breadth of biotechnology patents involve complex legal and factual questions for which important legal issues remain.
Risks related to our business strategy and personnel
If we fail to successfully integrate Akcea’s business and operations, it may adversely affect our future results.
We believe our Akcea Merger will result in certain benefits, including a single vision and set of strategic priorities, led by one team, accelerating our next phase of growth and positioning us to more effectively deliver our medicines to patients. Following this transaction, Ionis now retains more value from Akcea’s pipeline and commercial medicines, further strengthening our financial position and supporting continued investments in our future. The success of the transaction will depend on our ability to realize these anticipated benefits. We may fail to realize the anticipated benefits of the Akcea Merger for a variety of reasons, including the following:
| ● | failure to successfully manage relationships with partners, customers, distributors and suppliers; |
| ● | disruptions to Akcea’s commercial operations; |
| ● | potential incompatibility of technologies and systems; |
| ● | failure to leverage the capabilities of the combined company quickly and effectively; |
| ● | potential difficulties integrating and harmonizing business systems and processes; |
| ● | tax benefits of the combined structure may not be available or in the expected amounts; and |
| ● | the loss of key employees. |
If our management transition is not successful our business could suffer.
In January 2020, Dr. Crooke, our founder and Chief Executive Officer, transitioned from Chief Executive Officer to Executive Chairman of our Board of Directors, and Dr. Monia, who was our Chief Operating Officer and a member of our team since our founding over 30 years ago, began serving as our Chief Executive Officer. Following the 2021 Annual Meeting of Stockholders, Dr. Crooke stepped down from the Board and now serves as a Strategic Advisor to the Company, providing strategic advice and continuing to participate in the Company’s scientific activities. In June 2021, Dr. Loscalzo, a member of our Board since February 2014, was appointed Chairman of the Board. If this transition is not successful, our business could suffer.
The loss of key personnel, or the inability to attract and retain highly skilled personnel, could make it more difficult to run our business and reduce our likelihood of success.
We are dependent on the principal members of our management and scientific staff. We do not have employment agreements with any of our executive officers that would prevent them from leaving us. The loss of our management and key scientific employees might slow the achievement of important research and development goals. It is also critical to our success that we recruit and retain qualified scientific personnel to perform research and development work. We may not be able to attract and retain skilled and experienced scientific personnel on acceptable terms because of intense competition for experienced scientists among many pharmaceutical and health care companies, universities and non-profit research institutions. In addition, failure to succeed in clinical studies may make it more challenging to recruit and retain qualified scientific personnel. Similarly, we are dependent on the principal members of our staff responsible for marketing, sales and distribution activities. If we are not able to recruit and retain qualified marketing and sales personnel, the sales of TEGSEDI and WAYLIVRA may be adversely affected.
Risks related to taxes
Our ability to use our net operating loss carryovers and certain other tax attributes may be limited.*
Under the Internal Revenue Code of 1986, as amended, or the Code, a corporation is generally allowed a deduction for net operating losses, or NOLs, carried over from a prior taxable year. Under that provision,the Code, we can carryforward our NOLs to offset our future taxable income, if any, until such NOLs are used or expire. The same is true of other unused tax attributes, such as tax credits.
Under the Tax Cut and Jobs Act of 2017, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act,current U.S. federal net operating losses incurredincome tax law, U.S. federal NOLs generated in 2018 and in futuretaxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such U.S. federal net operating lossesNOLs in taxable years beginning after December 31, 2020 is limited to 80 percent of taxable income beginning in 2021.income. It is uncertain if and to what extent various states will conform to thecurrent U.S. federal Tax Act or the CARES Act. The CARES Act also reinstated the net operating loss carryback provisions whereby net operating losses incurred in calendarincome tax years 2018, 2019law, and 2020there may be carried back to offset taxableperiods during which states suspend or otherwise limit the use of NOLs for state income of the five tax years preceding the year of the loss.purposes.
In June 2020, California enacted Assembly Bill 85 (AB 85), which suspends NOLs and limits credit utilization to $5 million per year for the 2020, 2021 and 2022 tax years. AB 85 did not have a material impact on our 2020 tax provision, and we do not expect that it will materially impact our 2021 tax provision, but it is possible that it may in future years.
In addition, under Sections 382 and 383 of the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentpercentage-point cumulative change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating lossNOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating lossNOL carryforwards or other tax attributes is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. As a result of the Akcea Merger, we are subject to the Separate Return Limitation Year,separate return limitation year, or SRLY, rules. Under the SRLY rules, our utilization of Akcea’s pre-merger net operating lossNOL and tax credit carryforwards is limited to the amount of income that Akcea contributes to our consolidated taxable income. The Akcea pre-merger tax attributes cannot be used to offset any of the income that Ionis contributes to our consolidated taxable income. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Our future taxable income could be impacted by changes in tax laws, regulations and treaties.
A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could materially affect us.
We could be subject to additional tax liabilities.
We are subject to U.S. federal, state, local and foreign income taxes, sales taxes in the U.S. and foreign income taxes,, withholding taxes and transaction taxes in foreign jurisdictions. Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including those relating to income tax nexus, by recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes, sales taxes and value-added taxes against us. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our operating results or cash flows in the period for which a determination is made.
General Risk Factorsrisk factors
If the price of our securities continues to be highly volatile, this could make it harder for you to liquidate your investment and could increase your risk of suffering a loss.*
The market price of our common stock, like that of the securities of many other biopharmaceutical companies, has been and is likely to continue to be highly volatile. These fluctuations in our common stock price may significantly affect the trading price of our securities. During the 12 months preceding September 30, 2021,March 31, 2022, the market price of our common stock ranged from $64.37$47.87 to $33.52$25.04 per share. Many factors can affect the market price of our securities, including, for example, fluctuations in our operating results, announcements of collaborations, clinical study results, technological innovations or new products being developed by us or our competitors, the commercial success of our approved medicines, governmental regulation, marketing authorizations, changes in payers’ reimbursement policies, developments in patent or other proprietary rights and public concern regarding the safety of our medicines.
TheBroad market factors may materially harm the market price of our common stock irrespective of our operating performance. For example, the current COVID-19 Pandemic has caused a significant disruption of global financial markets and has resulted in increased volatility in the trading price of our common stock. Additionally, broad marketThe global credit and financial markets may also be adversely affected by the ongoing war between Russia and Ukraine and measures taken in response thereto. In addition, industry factors may also materially harm the market price of our common stock irrespective of our operating performance. The stock market in general, andstock. NASDAQ, and the market for biotechnology companies in particular, have historically experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of ours, may not be predictable. A loss of investor confidence in the market for biotechnology or pharmaceutical stocks or the stocks of other companies whichthat investors perceive to be similar to us, the opportunities in the biotechnology and pharmaceutical market or the stock market in general, could depress our stock price regardless of our business, prospects, financial conditions or results of operations.
Provisions in our certificate of incorporation, convertible notes documents, call spread hedge transaction documents and Delaware law may prevent stockholders from receiving a premium for their shares.
Our certificate of incorporation provides for classified terms for the members of our board of directors. Our certificate also includes a provision that requires at least 66 2/3 percent of our voting stockholders to approve a merger or certain other business transactions with, or proposed by, any holder of 15 percent or more of our voting stock, except in cases where certain directors approve the transaction or certain minimum price criteria and other procedural requirements are met.
Our certificate of incorporation also requires that any action required or permitted to be taken by our stockholders must be taken at a duly called annual or special meeting of stockholders and may not be taken by written consent. In addition, only our board of directors, chairman of the board or chief executive officer can call special meetings of our stockholders. We have in the past, and may in the future, implement a stockholders’ rights plan, also called a poison pill, which could make it uneconomical for a third party to acquire our company on a hostile basis. In addition, our board of directors has the authority to fix the rights and preferences of, and issue shares of preferred stock, which may have the effect of delaying or preventing a change in control of our company without action by our stockholders.
The provisions of our convertible senior notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the notes will have the right, at their option, to require us to repurchase all of their notes or a portion of their notes, which may discourage certain types of transactions in which our stockholders might otherwise receive a premium for their shares over the then current market prices.
In April 2021, we completed a $632.5 million offering of 0% Notes and used a portion of the net proceeds from the issuance of the 0% Notes to repurchase $247.9 million of our 1% Notes for $257.0 million. In December 2019, we entered into privately negotiated exchange and/or subscription agreements with certain new investors and certain holders of our existing 1% Notes to exchange $375.6 million of our 1% Notes for $439.3 million of our 0.125% Notes, and to issue $109.5 million of our 0.125% Notes. Additionally, in connection with the pricing of our 0% Notes and 0.125% Notes, we entered into call spread transactions in which we purchased note hedges and sold warrants. Terminating or unwinding the call spread transactions could require us to make substantial payments to the counterparties under those agreements or may increase our stock price. The costs or any increase in stock price that may arise from terminating or unwinding such agreements could make an acquisition of our company significantly more expensive to the purchaser.
These provisions, as well as Delaware law, including Section 203 of the Delaware General Corporation Law, and other of our agreements, may discourage certain types of transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices, and may limit the ability of our stockholders to approve transactions that they think may be in their best interests.
Future sales of our common stock in the public market could adversely affect the trading price of our securities.
Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect trading prices of our securities. For example, we may issue approximately 18.417.5 million shares of our common stock upon conversion of our 0% Notes 0.125% Notes, and 1%0.125% Notes, up to 10.9 million shares in connection with the warrant transactions we entered into in connection with the issuance of our 0% Notes, and up to 6.6 million shares in connection with the warrant transactions we entered into in connection with the issuance of our 0.125% Notes, in each case subject to customary anti-dilution adjustments. The addition of any of these shares into the public market may have an adverse effect on the price of our securities.
In addition, pursuant to the call spread transactions we entered into in connection with the pricing of our 0% Notes and 0.125% Notes, the counterparties are likely to modify their hedge positions from time to time at or prior to the conversion or maturity of the notes by purchasing and selling shares of our common stock, other of our securities, or other instruments, including over-the-counter derivative instruments, that they may wish to use in connection with such hedging, which may have a negative effect on the conversion value of those notes and an adverse impact on the trading price of our common stock. The call spread transactions are expected generally to reduce potential dilution to holders of our common stock upon any conversion of our 0% Notes or 0.125% Notes or offset any cash payments we are required to make in excess of the principal amount of the converted 0% Notes or 0.125% Notes, as the case may be. However, the warrant transactions could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the applicable strike price of the warrants.
We are exposed to potential product liability claims, and insurance against these claims may not be available to us at a reasonable rate in the future or at all.
Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing, marketing and sale of therapeutic products, including potential product liability claims related to SPINRAZA, TEGSEDI and WAYLIVRA, and our medicines in development. We have clinical study insurance coverage and commercial product liability insurance coverage. However, this insurance coverage may not be adequate to cover claims against us, or be available to us at an acceptable cost, if at all. Regardless of their merit or eventual outcome, product liability claims may result in decreased demand for our medicines, injury to our reputation, withdrawal of clinical study volunteers and loss of revenues. Thus, whether or not we are insured, a product liability claim or product recall may result in losses that could be material.
We are dependent on information technology systems, infrastructure and data, which exposes us to data security risks.*
We are dependent upon our own and third-party information technology systems, infrastructure and data, including mobile technologies, to operate our business. The multitude and complexity of our computer systems may make them vulnerable to service interruption or destruction, disruption of data integrity, malicious intrusion, or random attacks. Likewise, data privacy or security incidents or breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, customers or other business partners may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity, with third-party phishing and social engineering attacks in particular increasing in connection withduring the COVID-19 Pandemic. In addition, the number and frequency of cybersecurity events globally may be heightened during times of geopolitical tension or instability between countries, including, for example, the ongoing war between Russia and Ukraine, as a result of which several companies (not including Ionis) have reported recent cybersecurity events.
Cyber-attacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our business partners face similar risks and any security breach of their systems could adversely affect our security posture. A security breach or privacy violation that leads to disclosure or modification of or prevents access to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and state breach notification laws and foreign law equivalents, subject us to financial penalties and mandatory and costly corrective action, require us to verify the correctness of database contents and otherwise subject us to litigation or other liability under laws and regulations that protect personal data, any of which could disrupt our business and result in increased costs or loss of revenue. Moreover, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other intellectual property. While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, our efforts may not prevent service interruptions or identify breaches in our systems that could adversely affect our business and operations and result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related breaches.
Because we use biological materials, hazardous materials, chemicals and radioactive compounds, if we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
Our research, development and manufacturing activities involve the use of potentially harmful biological materials as well as materials, chemicals and various radioactive compounds that could be hazardous to human health and safety or the environment. We store most of these materials and various wastes resulting from their use at our facilities in Carlsbad, California pending ultimate use and disposal. We cannot completely eliminate the risk of contamination, which could cause:
| ● | interruption of our research, development and manufacturing efforts; |
| ● | injury to our employees and others; |
| ● | environmental damage resulting in costly clean up; and |
| ● | liabilities under federal, state and local laws and regulations governing health and human safety, as well as the use, storage, handling and disposal of these materials and resultant waste products. |
In such an event, we may be held liable for any resulting damages, and any liability could exceed our resources. Although we carry insurance in amounts and types that we consider commercially reasonable, we do not have insurance coverage for losses relating to an interruption of our research, development or manufacturing efforts caused by contamination, and the coverage or coverage limits of our insurance policies may not be adequate. If our losses exceed our insurance coverage, our financial condition would be adversely affected.
Our business may be adversely affected by climate change, extreme weather events, earthquakes, pandemics, war, civil or political unrest, terrorism or other catastrophic events.*
In recent years, extreme weather events and changing weather patterns have become more common. As a result, we are potentially exposed to varying natural disaster or extreme weather risks such as hurricanes, tornadoes, fires, droughts, floods, or other events that may result from the impact of climate change on the environment. The potential impacts of climate change may also include increased operating costs associated with additional regulatory requirements and investments in reducing energy, water use and greenhouse gas emissions. In addition, we manufacture most of our research and clinical supplies in a manufacturing facility located in Carlsbad, California. We manufacture the finished drug product for TEGSEDI and WAYLIVRA at third-party contract manufacturers. Biogen manufactures the finished drug product for SPINRAZA. The facilities and the equipment we, our partners and our contract manufacturers use to research, develop and manufacture our medicines would be costly to replace and could require substantial lead time to repair or replace. Our facilities or those of our partners or contract manufacturers may be harmed by natural disasters or other events outside our control, such as earthquakes, pandemics, war, civil or political unrest, deliberate acts of sabotage, terrorism or industrial accidents such as fire and explosion, whether due to human or equipment error, and if such facilities are affected by a disaster or other event, our development and commercialization efforts would be delayed. Although we possess property damage and business interruption insurance coverage, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. In addition, our development and commercialization activities could be harmed or delayed by a shutdown of the U.S. government, including the FDA.
Our business is subject to changing regulations for corporate governance and public disclosure that has increased both our costs and the risk of noncompliance.
Each year we are required to evaluate our internal controlscontrol systems in order to allow management to report on and our Independent Registered Public Accounting Firm to attest to, our internal controls as required by Section 404 of the Sarbanes-Oxley Act. As a result, we continue to incur additional expenses and divert our management’s time to comply with these regulations. In addition, if we cannot continue to comply with the requirements of Section 404 in a timely manner, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC, the Public Company Accounting Oversight Board, or PCAOB, or The Nasdaq Global Select Market. Any such action could adversely affect our financial results and the market price of our common stock.
The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. On July 21, 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt, or where the SEC has adopted, additional rules and regulations in these areas such as “say on pay” and proxy access. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business.
Negative conditions in the global credit markets and financial services and other industries may adversely affect our business.*
The global credit markets, the financial services industry, the U.S. capital markets, and the U.S. economy as a whole are currently experiencinghave recently experienced substantial turmoil and uncertainty characterized by unprecedented intervention by the U.S. federal government in response to the COVID-19 Pandemic. In addition, the global credit and financial markets may be adversely affected by the ongoing war between Russia and Ukraine and measures taken in response thereto. In the past, the failure, bankruptcy, or sale of various financial and other institutions created similar turmoil and uncertainty in such markets and industries. It is possible that a crisis in the global credit markets, the U.S. capital markets, the financial services industry or the U.S. economy may adversely affect our business, vendors and prospects, as well as our liquidity and financial condition. More specifically, our insurance carriers and insurance policies covering all aspects of our business may become financially unstable or may not be sufficient to cover any or all of our losses and may not continue to be available to us on acceptable terms, or at all. In addition, due to the rapidly rising inflation rate, we may experience increased costs of goods and services for our business.
A variety of risks associated with operating our business and marketing our medicines internationally could adversely affect our business.
In addition to our U.S. operations, we are commercializing TEGSEDI in the EU, Canada, Latin America and certain Caribbean countries, and WAYLIVRA in the EU, Latin America and certain Caribbean countries. We face risks associated with our international operations, including possible unfavorable regulatory, pricing and reimbursement, political, tax and labor conditions, which could harm our business. Because we have international operations, we are subject to numerous risks associated with international business activities, including:
| ● | compliance with differing or unexpected regulatory requirements for our medicines and foreign employees; |
| ● | complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems; |
| ● | difficulties in staffing and managing foreign operations; |
| ● | in certain circumstances, increased dependence on the commercialization efforts and regulatory compliance of third-party distributors or strategic partners; |
| ● | foreign government taxes, regulations and permit requirements; |
| ● | U.S. and foreign government tariffs, trade restrictions, price and exchange controls and other regulatory requirements; |
| ● | anti-corruption laws, including the Foreign Corrupt Practices Act, or the FCPA, and its equivalent in foreign jurisdictions; |
| ● | economic weakness, including inflation, natural disasters, war , events of terrorism, political instability or public health issues or pandemics, such as the current COVID-19 Pandemic, in particular foreign countries or globally; |
| ● | fluctuations in currency exchange rates, which could result in increased operating expenses and reduced revenue, and other obligations related to doing business in another country; |
| ● | compliance with tax, employment, privacy, immigration and labor laws, regulations and restrictions for employees living or traveling abroad; |
| ● | workforce uncertainty in countries where labor unrest is more common than in the U.S.; and |
| ● | changes in diplomatic and trade relationships. |
The United Kingdom’s exit from the E.U. could increase these risks.
Our business activities outside of the U.S. are subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the United Kingdom’s Bribery Act 2010. In many other countries, the healthcare providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, any dealings with these prescribers and purchasers may be subject to regulation under the FCPA. There is no certainty that all employees and third-party business partners (including our distributors, wholesalers, agents, contractors and other partners) will comply with anti-bribery laws. In particular, we do not control the actions of manufacturers and other third-party agents, although we may be liable for their actions. Violation of these laws may result in civil or criminal sanctions, which could include monetary fines, criminal penalties, and disgorgement of past profits, which could have an adverse impact on our business and financial condition.
The impact on us of the vote by the United Kingdom to leave the European Union cannot be predicted.
The withdrawal of the UK from the EU, commonly referred to as “Brexit,” may adversely impact our ability to obtain regulatory approvals of our medicines in the EU, result in restrictions or imposition of taxes and duties for importing our medicines into the EU, and may require us to incur additional expenses in order to develop, manufacture and commercialize our medicines in the EU.
Following the result of a referendum in 2016, the UK left the EU on January 31, 2020. Pursuant to the formal withdrawal arrangements agreed between the UK and the EU, the UK was subject to a transition period that ended December 31, 2020, or the Transition Period, during which EU rules continued to apply. A trade and cooperation agreement, or the Trade and Cooperation Agreement, that outlines the future trading relationship between the UK and the EU was agreedsigned in December 2020.
Since a significant proportion of the regulatory framework in the UK applicable to our business and our medicines is derived from EU directives and regulations, Brexit has had, and may continue to have, a material impact upon the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our medicines in the UK or the EU. For example, Great Britain is no longer covered by the centralized procedures for obtaining EU-wide marketing authorization from the EMA, and a separate marketing authorization will be required to market our medicines in Great Britain. It is currently unclear whether the Medicines & Healthcare products Regulatory Agency in the UK is sufficiently prepared to handle the increased volume of marketing authorization applications that it is likely to receive. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would delay or prevent us from commercializing our medicines in the UK or the EU.EU.
While the Trade and Cooperation Agreement provides for the tariff-free trade of medicinal products between the UK and the EU, there may be additional non-tariff costs to such trade which did not exist prior to the end of the Transition Period. Further, should the UK diverge from the EU from a regulatory perspective in relation to medicinal products, tariffs could be put into place in the future. We could therefore, both now and in the future, face significant additional expenses (when compared to the position prior to the end of the Transition Period) to operate our business.business.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Not applicable.
ITEM 3. | DEFAULT UPON SENIOR SECURITIES |
Not applicable.
ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
Not applicable.
Exhibit Number | | Description of Document |
| | Amended and Restated Neurology Drug Discovery and Development Collaboration, Option and License Agreement by and between the Registrant and Biogen MAIonis Pharmaceuticals, Inc. dated July 12, 2021. Portions of this exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed.Severance Benefit Plan. |
| | |
10.2 | | Collaboration and License Agreement by and between the Registrant and BicycleTX Limited dated July 9, 2021. Portions of this exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed. |
| | |
| | Certification by Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
| | |
| | Certification by Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
| | |
32.1* | | Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
101 | | The following financial statements from the Ionis Pharmaceuticals, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2021,March 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated statements of comprehensive income (loss), (iv) condensed consolidated statements of stockholders’ equity, (v) condensed consolidated statements of cash flows and (vi) notes to condensed consolidated financial statements (detail tagged). |
| | |
104 | | Cover Page Interactive Data File (formatted in iXBRL and included in exhibit 101). |
* | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures | | Title | | Date |
| | | | |
/s/ BRETT P. MONIA | | Director and Chief Executive Officer | | |
Brett P. Monia, Ph.D. | (Principal executive officer) | November 3, 2021May 4, 2022 |
| | | | |
/s/ ELIZABETH L. HOUGEN | | Executive Vice President, Finance and Chief Financial Officer | | |
Elizabeth L. Hougen | (Principal financial and accounting officer) | November 3, 2021May 4, 2022 |