akca-10k_20181231.htm

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

The aggregate market value of the common stock held by non‑affiliates of the registrant was approximately $209.3 million as of June 30, 2018 based upon the closing sale price on the NASDAQ Global Select Market reported for such date. Shares of common stock held by each executive officer and director and certain holders of more than 10% of the outstanding shares of the registrant’s common stock have been excluded in that such persons may be deemed to be affiliates. Shares of common stock held by other persons, including certain other holders of more than 10% of the outstanding shares of common stock, have not been excluded in that such persons are not deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of common stock outstanding as of February 20, 2019 was 89,433,187.

Portions of the Registrant’s definitive Information Statement with the Securities and Exchange Commission in connection with the Registrant’s annual meeting of stockholders are incorporated by reference into Part III of this Report. Such information statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the Registrant’s fiscal year ended December 31, 2018.

This report on Form 10-K and the information incorporated herein by reference includes forward-looking statements regarding our business. 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, particularly risks related to our financial condition and need for additional capital, the clinical development and regulatory review and approval of our drugs, the commercialization of our drugs, our dependence on third parties to develop and commercialize our drugs, our relationship with Ionis Pharmaceuticals, Inc., our controlling stockholder, and risks related to our business and industry generally, such as risks inherent in the process of discovering, developing and commercializing drugs that are safe and effective for use as human therapeutics. Our forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report on Form 10-K, including those identified in Item 1A entitled “Risk Factors”. Although our forward-looking statements reflect the good faith judgment of our management, these statements are based only on facts and factors currently known by us. As a result, you are cautioned not to rely on these forward-looking statements. These statements, like all statements in this report, speak only as of the date of this annual report on Form 10-K (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments.

In this report, unless the context requires otherwise, “Akcea,” “Company,” “we,” “our,” and “us” refers to Akcea Therapeutics, Inc. and its subsidiaries.

"Akcea," the Akcea logo, TEGSEDI, and other trademarks or service marks of Akcea Therapeutics, Inc. appearing in this report are the property of Akcea Therapeutics, Inc. This report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this report may appear without the ® or TM symbols.

We are a commercial stage biopharmaceutical company developing and marketing drugs globally to treat patients with rare and serious diseases. We are bringing novel and transformative medicines to patients by driving clinical program execution, understanding patient and physician needs, preparing the market, creating market access, and commercializing our products on a global basis. As an affiliate of Ionis Pharmaceuticals, Inc., or Ionis, we have a robust portfolio of development-, registration- and commercial-stage drugs covering multiple targets and diseases using antisense therapeutics. Our immediate focus is on the commercial launch of our first commercially approved therapy, TEGSEDI in the United States, or U.S., the European Union, or E.U., and Canada. TEGSEDI treats the polyneuropathy caused by hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, in adults. We estimate that there are approximately 50,000 patients globally with hATTR amyloidosis, the majority of whom have symptoms of polyneuropathy. We are also focused on commercial preparations for WAYLIVRA in the E.U. and on regulatory discussions for WAYLIVRA in the U.S. and Canada. The Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, has adopted a positive opinion recommending conditional marketing authorization of WAYLIVRA as an adjunct to diet in adult patients with genetically confirmed familial chylomicronemia syndrome, or FCS, who are at high risk for pancreatitis, in whom response to diet and triglyceride lowering therapy has been inadequate. The positive opinion will now be referred to the EC, which grants marketing authorization for medicines in the European Union, as well as to European Economic Area members Iceland, Liechtenstein and Norway. With this positive opinion, and, pending adoption of the positive opinion by the EC, we plan to leverage our existing commercial infrastructure in Europe to market WAYLIVRA. FCS is an ultra-rare, devastating hereditary disease that causes unpredictable and potentially fatal acute pancreatitis, chronic complications due to permanent organ damage, and a severe impact on daily living. The hallmark of FCS is extremely elevated triglycerides. There are approximately 3,000 to 5,000 patients with FCS worldwide. We are advancing a mature pipeline of novel drugs with the potential to treat multiple diseases. TEGSEDI, WAYLIVRA and our pipeline drugs, AKCEA-APO(a)-L_Rx, AKCEA-ANGPTL3-L_Rx, AKCEA-APOCIII-L_Rx and AKCEA-TTR-L_Rx,are all based on Ionis’ antisense technology platform. Our pipeline drugs use Ionis' advanced Ligand Conjugated Antisense, or LICA, technology, which enhances the effective uptake and activity of these drugs in particular tissues.

TEGSEDI is the world’s first subcutaneous, RNA-targeted therapeutic that substantially reduces the production of transthyretin, or TTR protein. Importantly, TEGSEDI is Akcea’s first commercially approved drug, and our launch is underway in three regions: the U.S., the E.U. and Canada. We continue to work toward our goal to make TEGSEDI available to people globally.

We are continuing to build our commercial infrastructure to support TEGSEDI, and plan to use this infrastructure to support WAYLIVRA and the other drugs in our pipeline, if approved in the future as we anticipate further commercialization in serious and rare diseases. A key element of our commercial strategy is to provide the specialized, patient-centric support required to successfully address rare disease patient populations. We believe our focus on treating patients with inadequately addressed rare and serious diseases will allow us to partner efficiently and effectively with the specialized medical community that supports these underserved patient communities. For example, at approval we launched Akcea Connect^TM, a drug treatment program made up of dedicated, regionally-based nurse case managers who have a wide range of medical knowledge and experience, in the United States. This program offers free, private and personalized support to patients and their caregivers and families across the country. Internationally, Akcea Connect is being rolled out in each of the countries where we launch with what we believe is the highest level of patient and physician support allowed in accordance with local regulations. In addition, in August 2018 we entered into an agreement with Express Scripts’ Accredo to be our specialty pharmacy partner for the distribution of TEGSEDI in the U.S. We chose Express Scripts’ Accredo Health Group, Inc., or Accredo because of their experience supporting the unique needs of rare disease communities and their proven track record for simplifying access to therapy. Accredo has a team of specialty clinicians, pharmacists and over 600 field-based nurses located throughout the U.S. who are augmenting the Akcea Connect team of nurse case managers to provide support and address the needs of the hATTR amyloidosis community. Our supply chain is fully operational in the U.S., E.U. and Canada. To further support the hATTR amyloidosis community, Akcea and Ambry Genetics Corporation, or Ambry, a Konica Minolta company, launched hATTR Compass™ in the U.S. and Canada, a no-cost, confidential genetic testing and genetic counseling program for people with suspected hATTR amyloidosis. This program is intended to empower people with accurate genetic information, so they can make informed decisions about their healthcare.

As we build Akcea, we continue to execute a strategy for expansion of our business globally. Depending on the geographic region, the number of patients impacted by the diseases we are treating and the regulatory environment of the local countries, in some regions we may choose to build out the commercial infrastructure ourselves, and in other instances, we may choose to partner with another company for commercial sales and distribution. For instance, in August 2018, we entered into a licensing agreement with PTC Therapeutics International Limited, or PTC Therapeutics, to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries. Our decision to partner with PTC to accelerate commercial access for patients in Latin America reflects our commitment to bringing TEGSEDI and WAYLIVRA to patients as rapidly as possible. PTC has an established rare disease team in Latin America that has experience in patient identification, in physician and patient education and support programs and in efficiently obtaining market access. PTC’s patient-focused approach for rare diseases aligns with our approach, making them a great partner for this region.

To maximize the commercial potential of two of the drugs in our pipeline, we initiated a strategic collaboration with Novartis Pharma AG, or Novartis, for the development and commercialization of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. In February 2019, Novartis exercised its option to license AKCEA-APO(a)-L_Rx. Novartis is currently preparing to initiate a Phase 3 study of AKCEA-APO(a)-L_Rx in patients with established cardiovascular disease (CVD) and elevated levels of lipoprotein(a), or Lp(a). We believe Novartis brings significant resources and expertise to the collaboration that can accelerate our ability to deliver these potential therapies to the large populations of patients who have high cardiovascular risk due to inadequately treated lipid disorders. As part of our collaboration, we received $75.0 million in an upfront option payment, of which we retained $60.0 million and paid $15.0 million to Ionis as a sublicense fee. We also earned a $150.0 million license fee when Novartis exercised its option to license AKCEA-APO(a)-L_Rx of which we will pay $75.0 million to Ionis as a sublicense fee. We will pay Ionis the sublicense fee in Akcea common stock. Novartis is now responsible for all future development and commercialization activities for AKCEA-APO(a)-L_Rx. We are eligible to receive license fees, milestone payments and royalties on sales of AKCEA-APO(a)-L_Rx from Novartis if and when it meets the development, regulatory and sales milestones specified in our agreement. In connection with Novartis’ exercise of its option to exclusively license AKCEA-APO(a)-L_Rx, Akcea and Novartis established a more definitive framework under which they would negotiate the co-commercialization of AKCEA-APO(a)-L_Rx between the two companies in selected markets. Included in this framework is an option by which Novartis could solely commercialize AKCEA-APO(a)-L_Rx in exchange for Novartis paying Akcea increased commercial milestone payments based on sales of AKCEA-APO(a)-L_Rx. We will share any license fees, milestone payments and royalties equally with Ionis.

For AKCEA-APOCIII-L_Rx, under our agreement with Novartis, after we complete Phase 2 development and if Novartis exercises its option to license AKCEA-APOCIII-L_Rx,we would receive an additional $150.0 million license fee which we would also share equally with Ionis. If exercised, Novartis would conduct and pay for a Phase 3 cardiovascular outcome study in patients with hypertriglyceridemia and prior cardiovascular risk. If approved, Novartis would commercialize AKCEA-APOCIII-L_Rxworldwide. Novartis will have 60 days plus additional time that could be required for Hart-Scott-Rodino, or HSR, filing and review following the end-of-Phase 2 meeting to exercise its option for AKCEA-APOCIII-L_Rx. As part of the collaboration, we may co-commercialize AKCEA-APOCIII-L_Rx in selected markets, on mutually agreed terms and conditions. Similar to AKCEA-APO(a)-L_Rx, we are eligible to receive license fees, milestone payments and royalties on sales of AKCEA-APOCIII-L_Rx from Novartis if and when it meets the development, regulatory and sales milestones specified in our agreement. We will share any license fees, milestone payments and royalties equally with Ionis.

We believe we are on our way to becoming a premier global biotechnology company offering treatments for previously inadequately treated serious and rare diseases. The critical components of our business strategy to achieve this goal include the following:

TEGSEDI is a drug that Ionis discovered and developed using Ionis’ proprietary antisense technology platform. TEGSEDI is designed to reduce the production of transthyretin, or TTR, protein. In patients with hereditary transthyretin, or hATTR, amyloidosis, a severe, rare and fatal genetic disease, both the hereditary and wild-type, or wt, TTR protein builds up as fibrils in tissues, such as the peripheral nerves, heart, gastrointestinal system, eyes, kidneys, central nervous system, thyroid and bone marrow. The presence of TTR fibrils interferes with the normal functions of these tissues. The progressive accumulation of TTR amyloid deposits in these tissues and organs leads to sensory, motor and autonomic dysfunction often having debilitating effects on multiple aspects of a patient’s life and eventually leads to death.

TEGSEDI is now approved in three markets: the U.S., E.U. and Canada. On October 5, 2018, we received approval from the U.S. Food and Drug Administration, or FDA, for TEGSEDI for the treatment of the polyneuropathy of hATTR amyloidosis in adults. On October 3, 2018, TEGSEDI was approved by Health Canada for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hATTR amyloidosis. And on July 11, 2018, TEGSEDI received marketing authorization, or MA, approval from the European Commission, or EC, for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hATTR amyloidosis. We estimate that there are approximately 50,000 patients globally with hATTR amyloidosis, the majority of whom have symptoms of polyneuropathy. TEGSEDI is available in the U.S., Germany and Canada and we continue to work today on making TEGSEDI available to patients across various European countries with the ultimate goal of making TEGSEDI available to patients globally.

hATTR amyloidosis is a rare, progressive, and fatal disease that often affects multiple organs, including the nerves, heart, gastrointestinal tract and kidneys. hATTR amyloidosis occurs when misfolded TTR protein deposits throughout the body as amyloid fibrils, disrupting tissue and organ structure and function. The burden of hATTR amyloidosis is high as patients often suffer from progressive neuropathy, cardiac, gastrointestinal and psychosocial symptoms affecting every aspect of their life. Without therapeutic intervention, patient quality of life progressively and rapidly deteriorates, leading to a reduction in ambulation and daily function, and ultimately resulting in premature death. As the disease progresses, many patients are no longer able to work and or are forced to take substantial time off. The impact of the disease is not limited to physical symptoms but also impacts mental health and outlook as patients often live in fear and isolation. An accurate and timely diagnosis and early treatment initiation is critical to optimize disease management.

All products were discovered by Ionis and either developed by Ionis or co-developed by Ionis and Akcea.

WAYLIVRA was discovered by Ionis and is being co-developed by Akcea and Ionis and is based on Ionis’ antisense technology platform. WAYLIVRA is designed to address the serious and unmet medical needs of the underserved FCS patient community. We are focused on commercial preparations for WAYLIVRA in the E.U. and on regulatory discussions for WAYLIVRA in the U.S. and Canada. The CHMP of the EMA has adopted a positive opinion recommending conditional marketing authorization of WAYLIVRA as an adjunct to diet in adult patients with genetically confirmed FCS who are at high risk for pancreatitis, in whom response to diet and triglyceride lowering therapy has been inadequate. The positive opinion will now be referred to the EC, which grants marketing authorization for medicines in the European Union, as well as to European Economic Area members Iceland, Liechtenstein and Norway. With this positive opinion, and, pending adoption of the positive opinion by the EC, we plan to leverage our existing commercial infrastructure in Europe to market WAYLIVRA. In the U.S., on May 10, 2018, the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee voted to support approval of WAYLIVRA for the treatment of people with FCS. On August 27, 2018, we and Ionis announced that we received a Complete Response Letter from the Division of Metabolism and Endocrinology Products of the FDA regarding the New Drug Application for WAYLIVRA. The FDA did not cite any new concerns beyond those described in the advisory committee briefing book, in which the main areas of focus were the dosing schedule and management of thrombocytopenia, a deficiency of platelets in the blood. In November 2018, we received a Notice of Noncompliance withdrawal letter, or NON-W, from Health Canada for WAYLIVRA. We and Ionis are engaged with the FDA and plan to work with Health Canada to confirm a path forward for WAYLIVRA.

FCS is a severe and rare lipid disorder characterized by extremely elevated levels of triglycerides. FCS has life-threatening consequences such as acute pancreatitis and the lives of patients with this disease are impacted daily by the associated symptoms. In our clinical program, we have observed consistent and substantial (>70%) decreases in triglycerides and improvements in other manifestations of FCS, including pancreatitis attacks and abdominal pain. We believe the safety and efficacy data from the WAYLIVRA program demonstrate a favorable risk-benefit profile for patients with FCS. The FDA and EMA have granted orphan drug designation to WAYLIVRA for the treatment of patients with FCS.

WAYLIVRA is also in Phase 3 clinical development for the treatment of familial partial lipodystrophy, or FPL. People with FPL lack subcutaneous adipose tissue and have abnormal subcutaneous fat distribution causing increased incidence of potentially life-threatening pancreatitis, diabetes, extreme insulin resistance and increased liver fat. BROADEN is a randomized, double-blind, placebo-controlled study of 300 mg of WAYLIVRA administered by a subcutaneous injection in patients with FPL. We plan to report results from the BROADEN study this year.

The other drugs in our pipeline - AKCEA-APO(a)-L_Rx, AKCEA-ANGPTL3-L_Rx, AKCEA-APOCIII-L_Rx and AKCEA-TTR-L_Rx utilize Ionis' advanced Ligand Conjugated Antisense, or LICA, technology. LICA technology conjugates specific chemical structures or molecules to antisense drugs to increase the efficiency of drug uptake in a particular tissue. We believe the enhancements from LICA technology have the potential to allow for less frequent administration and significantly lower doses, providing greater patient convenience. Data from a number of Phase 1 studies and our Phase 2 study of AKCEA-APO(a)-L_Rx have shown that doses up to 30-fold lower than non-LICA drugs result in consistent target reductions and a favorable safety and tolerability profile. Our current pipeline includes drugs with the potential to treat patients with ATTR and a wide range of lipid disorders associated with cardiometabolic disease that other technologies, such as small molecules and antibodies, have not been able to adequately address.

Our clinical pipeline contains novel drugs with the potential to treat inadequately addressed serious and rare disorders.

AKCEA-APO(a)-L_Rx. We are developing AKCEA-APO(a)-L_Rx for patients who are at significant risk of cardiovascular disease, or CVD, because of their elevated levels of Lp(a). AKCEA-APO(a)-L_Rx inhibits the production of the apolipoprotein(a), or apo(a), protein, thereby reducing Lp(a). Apo(a) is a form of low-density lipoprotein, or LDL, that is very atherogenic (promoting the formation of plaques in the arteries) and very thrombogenic (promoting the formation of blood clots). In September 2018, we reported positive results from the Phase 2 dose-ranging study of AKCEA-APO(a)-L_Rx in patients with elevated levels of Lp(a) greater than 60 mg/dL, and established CVD.

In February 2019, Novartis exercised its option to license AKCEA-APO(a)-L_Rx. Planning and initiation activities are underway for Novartis to run a Phase 3 cardiovascular outcomes study of AKCEA-APO(a)-L_Rx in patients with established CVD and elevated levels of lipoprotein(a), or Lp(a). We believe Novartis brings significant resources and expertise to the collaboration that can accelerate our ability to deliver this potential therapy to patients at risk of CVD due to elevated levels of Lp(a). If AKCEA-APO(a)-L_Rxis approved, Novartis will be responsible for worldwide commercialization. As part of the collaboration, we may co-commercialize AKCEA-APO(a)-L_Rx in selected markets, on mutually agreed terms and conditions.

Novartis’ decision follows positive results from a Phase 2 study in this patient population. The Phase 2 study was designed to evaluate the safety and tolerability of AKCEA-APO(a)-L_Rx and to determine the appropriate dosing for a planned Phase 3 cardiovascular outcomes study. The randomized, double-blind, placebo-controlled, dose-ranging Phase 2 study included 286 patients with established CVD and high Lp(a) levels (baseline mean of approximately 100mg/dL [250 nmol/L] - more than three times the upper limit of normal). The trial had five cohorts: 20 mg (every 4 weeks), 40 mg (every 4 weeks), 60 (every 4 weeks), 20 mg (every 2 weeks), and 20 mg (every week). The primary efficacy endpoint was the percent change in Lp(a) from baseline at the primary analysis time point (6 months) compared to placebo. The secondary efficacy endpoints were mean percent change in LDL-C, apoB, OxPL-apoB, OxPL-apo(a), and the number of patients reaching pre-specific thresholds of Lp(a) reduction of <125 nmol/L (<50 mg/dL) or <75 nmol/L (<30 mg/dL). Patients were treated with AKCEA-APO(a)-L_Rx or placebo for at least six months, with some patients treated up to one year. The study met all primary and secondary efficacy endpoints analyzed at 6 months. Results from the study show statistically significant and dose dependent reductions from baseline in Lp(a) levels:

Approximately 90% of patients completed treatment and the rate of discontinuation was comparable between the active (12.1%) and placebo (14.9%) groups.

Despite the management of LDL-C with statins and other therapies, the incidence of CVD continues to rise dramatically. Lipid disorders are a cause of this continuing rise. Hyperlipoproteinemia(a), defined as levels of Lp(a) above 30mg/dL, which is present in approximately 20% of the general population, causes CVD.

Currently, there is no effective drug therapy to specifically and robustly lower elevated levels of Lp(a). Lp(a) levels are determined at birth and, therefore, lifestyle modification, including diet and exercise, do not impact Lp(a) levels. Statins do not have significant effects on Lp(a) levels. Further, a new class of drugs that lower LDL-C and modestly lower Lp(a) levels, known as PCSK9 inhibitors, inactivate a protein in the plasma that regulates the number of LDL receptors on the liver cell surface, thereby capturing and removing additional LDL particles from the blood. While PCSK9 inhibitors reduce Lp(a) by approximately 25%, we believe this level of reduction is unlikely to materially reduce the risk of cardiovascular events related to hyperlipoproteinemia(a). The only currently known effective way to significantly reduce plasma Lp(a) is to physically remove the particles from blood through a process called apheresis. In this process, the patient's blood is filtered through a machine where the LDL-C and Lp(a) particles are removed and the blood is returned to the patient's body. Since 2010, apheresis has been an approved therapy in Germany to treat patients with hyperlipoproteinemia(a), but it is expensive, time consuming and only performed by a small number of centers worldwide. Lp(a) apheresis has been shown to lower the rate of cardiovascular events, providing support that lowering Lp(a) can provide therapeutic benefit.

A number of expert groups, including the National Institutes for Health, European Society of Cardiology and the National Lipid Association, and publications have stated that Lp(a) is an independent cause of cardiovascular risk. The authors of three such publications evaluated data from over 180,000 participants and used statistical and genetic approaches to evaluate the correlation between Lp(a) levels and cardiovascular risk. The specific techniques the authors used were epidemiological/meta-analyses, Mendelian randomization and genome wide associations. In each technique used, the authors demonstrated a clear relationship between elevated levels of Lp(a) and increased cardiovascular risk.

Elevated levels of Lp(a) are associated with increased cardiovascular risk and lowering Lp(a) may reduce the risk. We estimate eligible population, patients with elevated levels of Lp(a) and prior CVD, to be greater than 8 million people globally. We believe that positive results from a large cardiovascular outcome study will be required to support marketing authorization for the treatment of these patients. Since Novartis has licensed AKCEA-APO(a)-L_Rx, it will conduct, at its expense, such a study pursuant to our strategic collaboration and, if approved, will commercialize AKCEA-APO(a)-L_Rx for these patients. As part of the collaboration, we may co-commercialize AKCEA-APO(a)-L_Rx in selected markets, on mutually agreed terms and conditions.

While some fat in the liver is normal, a significant percentage of individuals have elevated levels of liver fat. Individuals with excessive fat accumulation in the liver also have elevated risk of developing insulin resistance and metabolic syndrome, type 2 diabetes and CVD. These risks are further elevated in patients with hyperlipidemia, especially those with elevated triglyceride levels. The most common form of fatty liver disease is NAFLD, which is associated with obesity-related disorders even in patients who drink little or no alcohol, and is characterized by the gradual accumulation of fat in the liver, or steatosis. One of the key causes of this condition is the Western diet, which is rich in processed foods with high fat and sugar content. In the early stages of NAFLD, patients typically experience steatosis that is slow progressing. Over time, a subset of these patients progresses to steatohepatitis, a more severe and progressive form of NAFLD characterized by chronic inflammation and liver-cell damage, called NASH. Eventually, the chronic inflammation caused by NASH can lead to the formation of scar tissue in the liver, known as fibrosis. As scar tissue gradually replaces healthy liver tissue, blood flow is restricted, which can lead to the loss of normal liver function, cirrhosis, portal hypertension, liver cancer and ultimately liver failure. Currently, there are no approved treatments specifically for NAFLD or NASH. If the disease ultimately progresses beyond NASH, the only alternative is a liver transplant.

NAFLD is the most common chronic liver disease worldwide and more than 75 million patients are affected in the United States alone. Approximately 30% of patients with NAFLD will eventually progress to NASH. In the United States, the most recent epidemiological studies show that approximately 3% to 5% of the general population has NASH. We believe there are a comparable number of patients in Europe and the rest of the world. While there are a number of treatments currently in development for the treatment of NAFLD and NASH, none are currently approved and we believe there will continue to be a significant unmet medical need in this population.

ApoC-III is an important emerging target linking hypertriglyceridemia with CVD. Several studies have found that apoC-III levels are an independent risk factor for CVD. Further, its presence on lipoproteins may increase their atherogenicity. A study in the New England Journal of Medicine reported that out of a sample of over 100,000 people, individuals with an apoC-III gene loss of function mutation had a reduced risk of clinical coronary heart disease. Each decrease of 1 mg/dL in plasma levels of apoC-III was associated with a 4% decrease in the risk of incident coronary heart disease. Triglycerides may also play a role in cardiovascular risk. As shown in the figure below, in two separate studies encompassing nearly 20,000 patients, as triglyceride levels increased, so did the risk of a cardiovascular event. In summary, apoC-III impacts triglyceride levels and may also increase inflammatory processes, and this combination of effects makes apoC-III a promising target for reducing the residual CVD risk in patients already on statin therapy, but for whom triglycerides are poorly controlled.

ApoC-III levels and elevated triglycerides have been linked to increased cardiovascular risk and lowering apoC-III and triglycerides may reduce this risk. We estimate the eligible population to be greater than 8 million people globally. We believe that positive results from a large cardiovascular outcome study will be required to support marketing authorization for the treatment of these patients. If Novartis exercises its option to license AKCEA-APOCIII-L_Rx, it plans to conduct, at its expense, such a study pursuant to our strategic collaboration to conduct this study and to commercialize AKCEA-APOCIII-L_Rx for these patients. As part of the collaboration, we may co-commercialize AKCEA-APOCIII-L_Rx in selected markets, on mutually agreed terms and conditions.

The introduction of new medicines for the ATTR amyloidosis community will increase awareness and diagnosis while AKCEA-TTR-L_Rxis being developed. There are currently around 50,000 hATTR amyloidosis patients worldwide and we believe that approximately 60% of patients have symptoms of both polyneuropathy and cardiomyopathy. We believe the number of people with predominant cardiomyopathy symptoms is significantly underdiagnosed. We believe this is especially true in the African American population in which approximately 3% carry the V122I mutation, one of the most dominant mutations causing ATTR. The epidemiology of wild-type TTR amyloidosis is not well characterized, but the number of patients diagnosed is rapidly increasing. It is estimated that there are more than 200,000 diagnosed people with wild-type ATTR.

Ionis discovered each of the drugs in our pipeline using its innovative antisense technology platform. Antisense technology is based on the use of synthetic nucleic acid sequences, which are primarily used to interrupt the production of a specified protein by targeting the specific corresponding messenger RNA, or mRNA, that encodes that protein. In this way, antisense drugs can be used to reduce the level of proteins that cause, or contribute to, the progression of various diseases. Because there are virtually no undruggable mRNA targets, we believe antisense technology may have broader potential than small molecule- and antibody-based technologies that target proteins. Furthermore, antisense technology has the potential to target a growing number of disease-related genes more directly and efficiently than other protein-directed modalities. We believe this technology represents an important advance in treating diseases.

The production of a protein starts with a process called transcription, where the instructions for making a protein are transcribed from a gene, or DNA, into mRNA. The cell's protein production process is called translation, and antisense drugs can be designed to interrupt this process by causing the destruction of the targeted mRNA and therefore preventing the production of a protein of interest. The graphic below further illustrates the impact of antisense drugs on the production of proteins via this mechanism of action:

Ionis has made significant improvements in its antisense drug technology in recent years, most notably the creation of the advanced ligand conjugated antisense, or LICA technology. Other improvements include the discovery screening processes, which resulted in second-generation drugs with better safety and tolerability properties compared to Ionis' generation 2.0 drugs. These improved second-generation drugs are referred to as generation 2+ drugs.

The unique properties of our antisense drugs provide several potential advantages over traditional drug modalities. These advantages include:

Ionis formed Akcea as a wholly owned subsidiary to complete development of and commercialize Ionis’ drugs to treat lipid disorders. We began business operations in January 2015. We licensed our cardiometabolic franchise from Ionis at the beginning of 2015. Prior to licensing these drugs, Ionis’ employees performed all of the development, regulatory and manufacturing activities for these drugs either themselves or through third-party providers. As such, Ionis incurred all of the expenses associated with these activities and reported them in its consolidated financial statements. We licensed TEGSEDI and AKCEA-TTR-L_Rx from Ionis in April 2018. Prior to then, Ionis had been advancing these drugs in development and incurring the expenses for those activities. Under our license agreements with Ionis, Ionis continued and is continuing to conduct development, regulatory or manufacturing activities for most of our drugs and to charge us for this work. As of December 31, 2018, Ionis owned approximately 75 percent of our outstanding stock.

Exclusive Rights to Development Pipeline and Intellectual Property; Right of First Negotiation

Ionis is the leading company researching and developing antisense drugs. Under our agreements with Ionis, we have rights to Ionis' proprietary technologies for use with our drugs. Specifically, we obtained an exclusive license from Ionis to globally commercialize our pipeline of drugs, including TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx, AKCEA-ANGPTL3-L_Rx_, AKCEA-APOCIII-L_RxandAKCEA-TTR-L_Rx. Ionis also agreed that it would not work on its own or with other parties to develop or commercialize antisense drugs that target the same gene targets as the drugs we are developing and commercializing. Under our agreements with Ionis, we have a license to use Ionis' technology platform with our drugs. We also have access to future improvements Ionis may make to its antisense technology platform, such as improved manufacturing technologies.

In addition, Ionis has granted us a right of first negotiation with respect to Ionis development candidates that are designed to treat a rare cardiometabolic disease or a rare inherited metabolic disease.

In January 2017, we initiated a strategic collaboration with Novartis for the development and commercialization of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. In February 2019, Novartis exercised its option to license AKCEA-APO(a)-L_Rx. Novartis is currently preparing to initiate a Phase 3 study of AKCEA-APO(a)-L_Rx in patients with established cardiovascular disease (CVD) and elevated levels of lipoprotein(a), or Lp(a). Novartis is now responsible for all future development and commercialization activities for AKCEA-APO(a)-L_Rx. We are eligible to receive license fees, milestone payments and royalties on sales of AKCEA-APO(a)-L_Rx from Novartis if and when it meets the development, regulatory and sales milestones specified in our agreement. In connection with Novartis’ exercise of its option to exclusively license AKCEA-APO(a)-L_Rx, Akcea and Novartis established a more definitive framework under which they would negotiate the co-commercialization of AKCEA-APO(a)-L_Rx between the two companies in selected markets. Included in this framework is an option by which Novartis could solely commercialize AKCEA-APO(a)-L_Rx in exchange for Novartis paying Akcea increased commercial milestone payments based on sales of AKCEA-APO(a)-L_Rx. We will share any license fees, milestone payments and royalties equally with Ionis.

Under the strategic collaboration, option and license agreement, Novartis also has an exclusive option to develop and commercialize AKCEA-APOCIII-L_Rx. We are responsible for completing a Phase 2 program and conducting an end-of-Phase 2 meeting with the FDA for AKCEA-APOCIII-L_Rxand delivering API. Following the successful completion of the Phase 2 program, and prior to initiation of the Phase 3 study, Novartis will be able to exercise its option to license and commercialize AKCEA-APOCIII-L_Rx. Novartis will have 60 days plus additional time that could be required for Hart-Scott-Rodino, or HSR, filing and review following the end-of-Phase 2 meeting to exercise its option for AKCEA-APOCIII-L_Rx. If Novartis exercises its option, Novartis will be responsible, at its expense, to use commercially reasonable efforts to develop and commercialize AKCEA-APOCIII-L_Rx.

From this collaboration, we received $75.0 million in an upfront option payment, of which we retained $60.0 million and paid Ionis $15.0 million as a sublicense fee under our license agreement with Ionis. In conjunction with this collaboration, Novartis purchased $100.0 million of Ionis' common stock at a premium. We also earned a $150.0 million license fee when Novartis exercised its option to license AKCEA-APO(a)-L_Rx of which we will pay $75.0 million to Ionis as a sublicense fee. The $75.0 million obligation to Ionis will be settled in Akcea common stock. During the years ended December 31, 2018 and 2017, we recognized $50.6 million and $43.4 million of revenue related to our Novartis collaboration, respectively.

In addition, for AKCEA-APO(a)-L_Rx, we are eligible to receive up to $675.0 million in milestone payments, including $25.0 million for the achievement of a development milestone, up to $290.0 million for the achievement of regulatory milestones and up to $360.0 million for the achievement of commercialization milestones. In addition, for AKCEA-APOCIII-L_Rx, we are eligible to receive a license fee of $150.0 million and up to $530.0 million in milestone payments, including $25.0 million for the achievement of a development milestone, up to $240.0 million for the achievement of regulatory milestones and up to $265.0 million for the achievement of commercialization milestones. We will earn the next milestone payment of $25.0 million under this collaboration if Novartis advances the Phase 3 study for either drug. We are also eligible to receive tiered royalties in the mid-teens to low-twenty percent range on net sales of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. Novartis will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the product in a specific country. We will pay 50% of these license fees, milestone payments and royalties to Ionis as a sublicense fee.

For each product Novartis commercializes under this agreement, we may co-commercialize with Novartis in selected markets, through our specialized sales force, on terms and conditions that we plan to negotiate with Novartis in the future.

If Novartis does not exercise its option, or stops developing or commercializing after exercising its option with respect to a particular drug, we will have all rights to develop or commercialize the drug (including the right to sublicense these rights to a third party) at our sole expense. If Novartis stops developing or commercializing a drug after exercising its option, and we subsequently commercialize the drug on our own or with another party, we are required to negotiate in good faith and mutually agree with Novartis the terms of a royalty payable to Novartis on the returned drug.

The agreement with Novartis will continue until the earlier of the date that all of Novartis' options to obtain the exclusive licenses under the agreement expire unexercised or, if Novartis exercises its options, until the expiration of all payment obligations under the agreement. In addition, the agreement as a whole or with respect to any drug under the agreement may terminate early under the following situations:

Additionally, in January 2017, we and Ionis entered into a Stock Purchase Agreement, or SPA, with Novartis. Under the SPA, in July 2017, Novartis purchased $50.0 million of our common stock in a separate private placement concurrent with the completion of our IPO at a price per share equal to the IPO price.

The commercialization of new drugs is competitive, and we may face worldwide competition from major pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies, nutraceutical companies and ultimately generic companies. Our competitors may develop or market therapies that are more effective, safer, more convenient to use, or less costly than any that we are commercializing, or may obtain regulatory or reimbursement approval for their therapies more rapidly than we may obtain approval for ours. Many of our competitors have substantially greater financial, technical and human resources than we have. Additionally, mergers and acquisitions in the pharmaceutical industry may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances made in the commercial applicability of technologies and greater availability of capital for investment in these fields.

With respect to TEGSEDI and AKCEA-TTR-L_Rx, ONPATTRO (patisiran), which is an RNAi therapy made by Alnylam, is currently marketed for hATTR amyloidosis with polyneuropathy in the U.S. and E.U. The product label for TEGSEDI in the United States has a boxed warning for thrombocytopenia and glomerulonephritis, requires periodic blood and urine monitoring, and TEGSEDI has a Risk Evaluation and Mitigation Strategy, or REMS, program. Though ONPATTRO requires intravenous administration and pre-treatment with steroids, it does not have a boxed warning or REMS. In addition, Tafamidis is currently available in the E.U. for stage 1 hATTR amyloidosis with polyneuropathy, and is currently under review in the U.S. for ATTR with cardiomyopathy, with a PDUFA date in July 2019. Beyond these drugs that are either marketed or under regulatory review, there are also additional drugs in clinical development. Alnylam is developing next generation RNAi drug vutrisiran which is currently in Phase 3 clinical development in hATTR amyloidosis with polyneuropathy, with plans to move into cardiomyopathy. Eidos is developing AG10 for patients with ATTR with cardiomyopathy and has recently completed Phase 2, with plans to move into Phase 3.

With respect to WAYLIVRA to treat patients with FCS, Gemphire's Gemcabene is being studied in patients with severe hypertriglyceridemia, defined as triglycerides above 500 mg/dL. Gemphire announced in June 2018 that Gemcabene met its Phase 2b primary endpoint and demonstrated statistically significant lowering of triglycerides in SHTG. In August 2018, however, the FDA has requested that Gemphire produce data from a sub-chronic toxicology study to lift the partial clinical hold that was issued in 2004 (The FDA issued the partial clinical hold as PPAR agonists are potential liver toxins). The initiation of Phase 3 will not take place until the partial hold is lifted and Gemphire has announced that it plans to conduct these required studies and expects to submit the additional results to the FDA in the second quarter of 2019.

Metreleptin is in a Phase 3 trial for FPL patients who also have NASH. Metreleptin is currently approved for use in the U.S. and E.U. in generalized lipodystrophy, or GL patients. Metreleptin does not affect apoC-III levels. ApoC-III levels have been shown to be elevated in FPL patients and directly correlated to triglyceride levels. In addition, many patients with FCS and FPL use diet, niacin, fish oils and/or fibrates to reduce their elevated triglycerides. Niacin, fish oils and fibrates are generally not effective in patients with FCS. The ultra-low-fat diet that patients with FCS and FPL are required to maintain is extremely burdensome to patients and their families. Based on our WAYLIVRA clinical experience, including in individuals with FCS, we believe that WAYLIVRA will work equally well as a single agent or in combination with other triglyceride-lowering drugs or approaches.

With respect to WAYLIVRA and AKCEA-APOCIII-L_Rx, in January 2019, Arrowhead filed for regulatory clearance to begin Phase 1 study of ARO-APOC3, an RNAi-based drug targeting apoC-III for treatment of hypertriglyceridemia. Arrowhead has announced that it intends to proceed with this Phase 1 single and multiple dose-escalating study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamic effects of ARO-APOC3 in adult healthy volunteers, hypertriglyceridemic patients, and patients with FCS. To our knowledge, there are currently no other direct competitors for lowering apoC-III in clinical development.

With respect to AKCEA-APO(a)-L_Rx, we are not aware of any other drugs currently in clinical development specifically for the treatment of hyperlipoproteinemia(a) and associated cardiovascular disease. Arrowhead and Amgen have a Phase 1 program ongoing for AMG890, formerly referred to as ARO-LPA, which uses an RNAi drug conjugated with a GalNAc for the same target as AKCEA-APO(a)-L_Rx . Under its strategic collaboration agreement with Alnylam Pharmaceuticals, Inc., or Alnylam, Ionis received an exclusive, royalty-bearing license to Alnylam's chemistry, RNA targeting mechanism and target-specific intellectual property for oligonucleotides against apo(a), which means that Alnylam agreed not to use the exclusively licensed technology to develop or commercialize an oligonucleotide against apo(a).

AKCEA-ANGPTL3-L_Rx may compete with Evinacumab, a monoclonal antibody that binds to ANGPTL3 that Regeneron Pharmaceuticals, Inc. is developing. Evinacumab is currently in Phase 2 development for the treatment of HoFH and severe forms of hyperlipidemia. Additionally, many patients with familial hyperlipidemias are treated using diet and statins, which have limited effect in these patients.

We have in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to WAYLIVRA, AKCEA-APO(a)-L_Rx, our other drugs in development and, more generally, the development and commercialization of oligonucleotide therapeutics. Our objective is to continue to develop and strengthen our proprietary position to further protect our drugs.

We obtained our rights to the patents covering WAYLIVRA, AKCEA-APO(a)-L_Rx and our other drugs in development and our rights in Ionis' proprietary technology platform and know-how under our development, commercialization and license agreement with Ionis. We seek to expand our portfolio of patents and patent applications by filing and prosecuting existing patent rights and filing additional patent applications.

We seek patent protection in significant markets and/or countries for each drug in development. We also seek to maximize patent term. The patent exclusivity period for a drug will prevent generic drugs from entering the market. Patent exclusivity depends on a number of factors, including initial patent term and available patent term extensions based upon delays caused by the regulatory approval process.

We have an exclusive license under Ionis' TTR patent estate to develop and commercialize TEGSEDI and the LICA follow-on drug AKCEA-TTR-L_Rx.

The TTR patent estate includes granted US patents covering the TEGSEDI compound, composition, and uses (e.g. US 8,101,743; US 8,697,860; US 9,061,044; and US 9,399,774) that together provide natural patent term to 2031. We have applied for patent term extension to recapture a portion of the term lost during regulatory review. The issued claims protect TEGSEDI from generic competition in the United States until at least 2031. Similar patents covering TEGSEDI are granted in several foreign jurisdictions including Europe and Japan.

The TTR patent estate also includes granted and pending claims covering AKCEA-TTR-L_Rx worldwide. Granted claims in Europe cover the sequence of AKCEA-TTR-L_Rx and its use in treating transthyretin amyloidosis with natural patent term to 2031 (EP2563920). Claims covering the specific chemical composition of AKCEA-TTR-L_Rx and use in treating transthyretin amyloidosis are pending and have natural patent term to 2034 excluding any additional term adjustments or patent term extensions.

We have an exclusive license under Ionis' apoC-III patent estate to develop and commercialize WAYLIVRA and the LICA follow-on drug AKCEA-APOCIII-L_Rx. The apoC-III patent estate includes patent claims in the United States drawn to the use of antisense compounds complementary to the mRNA of human apoC-III, including compounds designed to the region targeted by WAYLIVRA and AKCEA-APOCIII-L_Rx (US 7,598,227) which, excluding any additional term adjustments or patent term extensions, expires in 2023. Similar claims covering compounds complementary to any site on human apoC-III have granted in Australia.

The apoC-III patent estate also includes issued patent claims to the specific antisense sequence and chemical composition of WAYLIVRA in the United States (US 7,750,141), Australia and Europe (EP1622597). The issued claims in the United States should protect WAYLIVRA from generic competition in the United States until at least 2023. In addition, depending upon the timing, duration and specifics of FDA regulatory review, this patent may be eligible for patent term restoration to recapture a portion of the term lost during such review. We are also pursuing additional patent applications directed to methods of using WAYLIVRA and other apoC-III compounds for treating various disorders, including FCS in jurisdictions worldwide. Claims drawn to methods of using apoC-III specific inhibitors, and specifically compounds designed to target the same sequence as WAYLIVRA and AKCEA-APOCIII-L_Rx, for treating FCS have issued in the United States (US 9,593,333) and will expire in 2034, excluding any additional term adjustments or patent term extensions.

The apoC-III patent estate also includes issued patent claims covering the specific chemical composition of AKCEA-APOCIII-L_Rx in the United States (US 9,163,239). The claims should protect AKCEA-APOCIII-L_Rx from generic competition until at least 2034. We are pursuing additional patent coverage for AKCEA-APOCIII-L_Rx in jurisdictions worldwide.

We have an exclusive license under Ionis' apo(a) patent estate to develop and commercialize AKCEA-APO(a)-L_Rx. The apo(a) patent estate includes issued patent claims to the specific antisense sequence and chemical composition of AKCEA-APO(a)-L_Rx in the United States (US 9,181,550). The issued claims directed to the composition should protect AKCEA-APO(a)-L_Rx from generic competition in the United States until at least 2034. In addition, patent term restoration may be available to recapture a portion of the term lost during FDA regulatory review. We are also pursuing additional patent applications designed to protect the AKCEA-APO(a)-L_Rx composition and additional dosing and methods of use in jurisdictions worldwide.

We have an exclusive license under Ionis' ANGPTL3 patent estate to develop and commercialize AKCEA-ANGPTL3-L_Rx. The ANGPTL3 patent estate includes issued patent claims drawn to the use of antisense compounds complementary to ANGPTL3 RNA for inhibiting the production of ANGPTL3 (US 8,653,047). The ANGPTL3 patent estate also includes issued patent claims covering the specific antisense sequence and chemical composition of AKCEA-ANGPTL3-L_Rx in the United States (US 9,382,540). The issued claims directed to the chemical composition should protect AKCEA-ANGPTL3-L_Rx from generic competition until at least 2035. We are pursuing additional patent claims designed to protect the sequence and chemical composition of AKCEA-ANGPTL3-L_Rx in jurisdictions worldwide.

In addition to the protections afforded by patents and other regulatory protections, we may rely, in some circumstances, on trade secrets to protect our technology. Trade secrets may be useful to protect proprietary know-how that is not patentable or which we elect not to patent. Trade secrets may also be useful for processes or improvements for which patents are difficult to enforce. We also protect our drugs and the proprietary technology platform by confidentiality agreements with employees, consultants, advisors, contractors and collaborators. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Ionis has dedicated significant resources to develop ways to improve manufacturing efficiency and capacity. Since Ionis can use variants of the same nucleotide building blocks and the same type of equipment to produce our oligonucleotide drugs, we and Ionis found that the same techniques used to efficiently manufacture one oligonucleotide drug could help improve the manufacturing processes for many other oligonucleotide drugs. With Ionis’ expertise in optimizing manufacturing of oligonucleotides, we and Ionis believe we can develop new processes to scale up manufacturing of our LICA medicines at commercially competitive prices. By developing several proprietary chemical processes to scale up our manufacturing capabilities, Ionis has greatly reduced the cost of producing oligonucleotide drugs. For example, they have significantly reduced the cost of raw materials through improved yield efficiency, while at the same time increasing capacity to make the drugs. Through both Ionis’ internal research and development programs and collaborations with outside vendors we and Ionis may achieve even greater efficiency and further cost reductions. In connection with Novartis’ exercise of its option to license AKCEA-APO(a)-L_Rx_, and if Novartis exercises its option to license AKCEA-APOCIII-L_Rx_,Novartis will be responsible for the long-term supply of drug substance and finished drug product for the licensed drug.

For TEGSEDI’s commercial drug supply, we are using contract manufacturing organizations, or CMOs, to produce custom raw materials, active pharmaceutical ingredient, or API, and finished goods. Our CMO partners have extensive technical expertise and current good manufacturing practice, or cGMP, experience. We believe our current network of CMO partners are capable of providing sufficient quantities to meet anticipated commercial demands. Additionally, we continue to evaluate relationships with additional suppliers to increase overall capacity as well as reduce further risks. While we believe that there are alternate sources of supply that can satisfy our commercial requirements, we cannot be certain that identifying and establishing relationships with such sources, if necessary, would not result in significant delay or material additional costs. We also cannot provide assurance that we will not experience a disruption in supply from our current CMO partners.

CMOs are subject to the FDA’s cGMP requirements and other rules and regulations prescribed by foreign regulatory authorities. We depend on our CMO partners for continued compliance with cGMP requirements and applicable foreign standards.

Ionis has supplied us with API and finished drug product to complete our ongoing activities for WAYLIVRA through either Ionis’ own manufacturing processes or through outside vendors. Ionis has also supplied the API and the finished drug product for WAYLIVRA’s commercial launch, if approved. We believe the API and drug product is adequate for at least the first two years of WAYLIVRA’s commercial launch. We plan to leverage our relationships with CMOs, to procure our own long-term raw material and drug supplies at competitive prices in the future.

We believe we have sufficient manufacturing capacity, through Ionis, to meet our current development needs, including the ongoing studies for AKCEA-ANGPTL3-L_Rx, AKCEA-APOCIII-L_Rx and AKCEA-TTR-L_Rx. We believe that we have, or will be able to develop or acquire, sufficient supply capacity to meet our anticipated future needs. Ionis has supplied the API and the finished drug product for the clinical studies for each of the drugs in our pipeline through the completion of the on-going studies. Ionis also has agreed to supply and has supplied the API and the finished drug product for our drugs. We and Ionis have long-standing and strong relationships with third-party vendors who can supply us with both API and finished drug product and are currently supplying API and finished drug product to other of Ionis' partners. Ionis also has long-standing and strong relationships with the vendors who supply the key raw materials to Ionis to make our drugs and to a major oligonucleotide CMO. We also believe that with anticipated benefits from increases in scale and improvements in chemistry, through Ionis or third parties, we will be able to manufacture our antisense drugs at commercially reasonable prices.

For LICA-conjugated drugs, to date, Ionis has manufactured itself or through a contract manufacturing organization only limited supplies of LICA for their own and our own nonclinical and clinical studies. LICA enables lower doses than unconjugated oligonucleotides. Along with Ionis' expertise in optimizing manufacturing of oligonucleotides, we believe this will enable the development of new processes to scale up manufacturing of these LICA conjugated drugs at commercially competitive prices.

In the United States, the FDA regulates drugs. The Federal Food, Drug and Cosmetic Act, or FDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling and import and export of drugs. To obtain regulatory approvals in the United States and in foreign countries, and subsequently comply with applicable statutes and regulations, we will need to spend substantial time and financial resources.

The FDA must approve any new unapproved drug or certain changes to a previously approved drug before a manufacturer can market it in the United States. If a company does not comply with applicable United States requirements, it may be subject to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending applications, Warning or Untitled Letters, clinical holds, drug recalls, drug seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. The steps we must complete before we can market a drug include:

It generally takes companies many years to satisfy the FDA approval requirements, but this varies substantially based upon the type, complexity and novelty of the drug or disease. Preclinical tests include laboratory evaluation of a drug's chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the drug. The conduct of the preclinical tests must comply with federal regulations and requirements, including GLP. The company submits the results of the preclinical testing to the FDA as part of an IND along with other information, including information about the drug's chemistry, manufacturing and controls, and a proposed clinical study protocol. Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after submitting the initial IND.

The FDA requires a 30-day waiting period after the submission of each IND before a company can begin clinical testing in humans in the United States. If the FDA has neither commented on nor questioned the IND within this 30-day period, the IND sponsor may begin the proposed clinical study. However, the FDA may, within the 30-day time period, raise concerns or questions relating to one or more proposed clinical studies and place the clinical study on a clinical hold. In such a case, the company and the FDA must resolve any outstanding concerns before the company begins the clinical study. Accordingly, the submission of an IND may or may not be sufficient for the FDA to permit the sponsor to start a clinical study. The company must also make a separate submission to an existing IND for each successive clinical study conducted during drug development.

Clinical studies involve administering the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. The company must conduct clinical studies:

The company must submit each protocol involving testing on United States patients and subsequent protocol amendments to the FDA as part of the IND. The FDA may order the temporary, or permanent, discontinuation of a clinical study at any time, or impose other sanctions, if it believes that the sponsor is not conducting the clinical study in accordance with FDA requirements or presents an unacceptable risk to the clinical study patients. The sponsor must also submit the study protocol and informed consent information for patients in clinical studies to an IRB for approval. An IRB may halt the clinical study, either temporarily or permanently, for failure to comply with the IRB's requirements, or may impose other conditions.

Companies generally divide the clinical investigation of a drug into three or four phases.

While companies usually conduct these phases sequentially, they are sometimes overlapped or combined. A combined phase trial, such as a Phase 1/2 or a Phase 2/3 trial, is one that combines elements of objectives from two ordinarily sequential phases of development. For example, in a Phase 1/2 trial, the objectives may include both dose-finding and initial efficacy. In a Phase 2/3 trial, dosing regimen or population selection objectives are combined with confirmation of the safety and efficacy of the administration schedule in the intended population.

A pivotal study is a clinical study that adequately meets regulatory agency requirements to evaluate a drug's efficacy and safety to justify the approval of the drug. Generally, pivotal studies are Phase 3 studies, but the FDA may accept results from Phase 2 studies if the study design provides a well-controlled and reliable assessment of clinical benefit, particularly in situations in which there is an unmet medical need and the results are sufficiently robust.

The FDA, the IRB or the clinical study sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Additionally, an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board or committee, may oversee some clinical studies. This group provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study. We may also suspend or terminate a clinical study based on evolving business objectives and the competitive climate.

After we complete the required clinical testing, we can prepare and submit an NDA to the FDA, which must approve the NDA before we can start marketing the drug in the United States. An NDA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the drug's chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical studies on a drug, or from a number of alternative sources, including studies initiated by investigators. To support marketing authorization, the data we submit must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational drug to the FDA's satisfaction.

The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user fee, and the manufacturer and/or sponsor under an approved new drug application are also subject to annual program user fees. The FDA typically increases these fees annually. Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages and user-fee waivers.

The FDA has 60 days from its receipt of an NDA to determine whether it will accept the application for filing based on the agency's threshold determination that the application is sufficiently complete to permit substantive review. Once the FDA accepts the filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of NDAs. Under the Prescription Drug User Fee Act, the FDA has a goal of responding to standard review NDAs within ten months after the 60-day filing review period, but this timeframe is often extended. The FDA reviews most applications for standard review drugs within ten to 12 months and most applications for priority review drugs within six to eight months. Priority review can be applied to drugs that the FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists.

The FDA may also refer applications for novel drugs that present difficult questions of safety or efficacy to an advisory committee. This is typically a panel that includes clinicians and other experts that will review, evaluate and recommend whether the FDA should approve the application. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the drug unless compliance with cGMP is satisfactory and the NDA contains data that provide evidence that the drug is safe and effective in the indication studied.

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter indicates that the FDA has completed its review of the application and the agency has determined that it will not approve the application in its present form. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional clinical data and/or other significant, expensive and time-consuming requirements related to clinical studies, preclinical studies and/or manufacturing. The FDA has committed to reviewing resubmissions of the NDA addressing such deficiencies in two or six months, depending on the type of information included. Even if we submit such data, the

FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Also, the government may establish additional requirements, including those resulting from new legislation, or the FDA's policies may change, which could delay or prevent regulatory approval of our drugs under development.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. The requirement for REMS can materially affect the potential market and profitability of the drug. Moreover, the FDA may condition approval on substantial post-approval testing and surveillance to monitor the drug's safety or efficacy. Once granted, the FDA may withdraw drug approvals if the company fails to comply with regulatory standards or identifies problems following initial marketing.

Changes to some of the conditions established in an approved application, including changes in indications, labeling or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before we can implement the change. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing new NDAs. As with new NDAs, the FDA often significantly extends the review process with requests for additional information or clarification.

A sponsor may seek approval of its drug candidate under programs designed to accelerate the FDA's review and approval of NDAs. For example, the FDA may grant Fast Track Designation to a drug intended for treatment of a serious or life-threatening disease or condition that has potential to address unmet medical needs for the disease or condition. The key benefits of Fast Track Designation are the eligibility for priority review, rolling review (submission of portions of an application before the complete marketing application is submitted), and accelerated approval, if the application meets relevant criteria. Based on results of the Phase 3 clinical study(ies) submitted in an NDA, upon the request of an applicant, the FDA may grant the NDA a priority review designation, which sets the target date for FDA action on the application at six months after the FDA accepts the application for filing. The FDA grants priority review where there is evidence that the proposed drug would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition. If the criteria for priority review are not met, the application is subject to the standard FDA review period of ten months after the FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

Under the accelerated approval program, the FDA may approve an NDA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. The FDA generally requires post-marketing studies or completion of ongoing studies after marketing authorization to verify the drug's clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, a sponsor may seek FDA designation of its drug candidate as a breakthrough therapy if the drug can, alone or in combination with one or more other drugs, treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The FDA regulates drugs that we manufacture or distribute pursuant to FDA approvals and has specific requirements pertaining to recordkeeping, periodic reporting, drug sampling and distribution, advertising and promotion and reporting of adverse experiences with the drug. After approval, the FDA must provide review and approval for most changes to the approved drug, such as adding new indications or other labeling claims. There also are continuing, annual program user fee requirements for any marketed drugs, as well as new application fees for supplemental applications with clinical data.

In some cases, the FDA may condition approval of an NDA for a drug on the sponsor's agreement to conduct additional clinical studies after approval. In other cases, a sponsor may voluntarily conduct additional clinical studies after approval to gain more information about the drug. We typically refer to such post-approval studies as Phase 4 clinical studies.

Drug manufacturers are subject to periodic unannounced inspections by the FDA and state agencies for compliance with cGMP requirements. There are strict regulations regarding changes to the manufacturing process, and depending on the significance of the change, it may require prior FDA approval before we can implement it. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

We rely, and expect to continue to rely, on third parties for the production of clinical quantities of our drugs and we expect to rely in the future on third parties for the production of commercial quantities. Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of previously unknown problems with a drug or the failure to comply with applicable requirements may result in restrictions on a drug, manufacturer or holder of an approved NDA, including withdrawal or recall of the drug from the market or other voluntary, FDA-initiated or judicial actions that could delay or prohibit further marketing.

The FDA may withdraw approval if a company does not comply with regulatory requirements and maintain standards or if problems occur after the drug reaches the market. If a company or the FDA discovers previously unknown problems with a drug, including adverse events of unanticipated severity or frequency, issues with manufacturing processes or the company's failure to comply with regulatory requirements, the FDA may require revisions to the approved labeling to add new safety information; impose post-marketing studies or other clinical studies to assess new safety risks; or impose distribution or other restrictions under a REMS program. Other potential consequences may include:

The FDA strictly regulates marketing, labeling, advertising and promotion of drugs that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. We could be subject to significant liability if we violated these laws and regulations.

The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and making the drug for this type of disease or condition will be recovered from sales in the United States.

Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages and user-fee waivers. In addition, if a drug receives FDA approval for the indication for which it has orphan designation, the drug has orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the drug with orphan exclusivity.

Under the Pediatric Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which the FDA has granted an orphan designation.

Patent term can also be extended based on the amount of time the patented drug spends in regulatory review for drug approval. The length of time between drug launch and patent expiration is significantly less than the full 20-year patent term because companies often obtain the patents relating to a drug early in development and the development path for regulatory approval is long. In the United States, The Drug Price Competition and Patent Term Restoration Act of 1984 (commonly known as the Hatch-Waxman Act) permits a patent holder to seek a patent extension, commonly called patent term restoration, for a patent on a drug governed by the FDCA. The length of patent term restoration is related to the length of time the drug is under regulatory review. Patent term restoration can be a maximum of 5 years and cannot extend the remaining term of a patent beyond a total of 14 years from the date of drug approval. Only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug in that jurisdiction.

In 1984, with passage of the Hatch-Waxman Act, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic manufacturer may rely on the preclinical and clinical testing previously conducted for a drug previously approved under an NDA, known as the reference listed drug, or RLD.

Specifically, in order to approve an ANDA, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form and the strength of the drug. At the same time, the FDA must also determine that the generic drug is bioequivalent to the RLD. Under the statute, a generic drug is bioequivalent to an RLD if "the rate and extent of absorption of the generic drug do not show a significant difference from the rate and extent of absorption of the listed drug…"

Upon approval of an ANDA, the FDA indicates that the generic drug is "therapeutically equivalent" to the RLD and it assigns a therapeutic equivalence rating to the approved generic drug in its publication "Approved Drug Products with Therapeutic Equivalence Evaluations," also referred to as the "Orange Book." Physicians and pharmacists consider an "AB" therapeutic equivalence rating to mean that a generic drug is fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA's designation of an "AB" rating often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.

The FDCA provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity. In cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations that were conducted by or for the applicant and are essential to the approval of the application, and are not bioavailability or bioequivalence studies. This three-year exclusivity period often protects changes to a previously approved drug, such as a new dosage form, route of administration, combination or indication.

Upon approval of an NDA or a supplement thereto, NDA sponsors must list with the FDA each patent with claims that cover the applicant's drug or a method of using the drug. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference drug in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. Specifically, the applicant must certify with respect to each patent that:

A certification that the new drug will not infringe the already approved drug's listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the FDA will not approve the ANDA application until all the listed patents claiming the referenced drug have expired.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA applicant.

Sponsors of clinical studies of FDA-regulated products, including drugs, are required to register and disclose certain clinical study information. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of the clinical study is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical studies after completion. Disclosure of the results of these studies can be delayed until the new drug or new indication being studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

In the United States and foreign jurisdictions, the legislative landscape continues to evolve. There have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. In March 2010, the Patient Protection and Affordable Care Act, or PPACA, was enacted, which includes measures that have significantly changed health care financing by both governmental and private insurers. The provisions of the PPACA of importance to the pharmaceutical and biotechnology industry are, among others, the following:

Since its enactment there have been judicial and Congressional challenges to or proposals to amend certain aspects of PPACA. We expect there will be additional challenges and amendments to it in the future.

In addition, other health reform measures have been proposed and adopted in the United States since PPACA was enacted. For example, as a result of the Budget Control Act of 2011, providers are subject to Medicare payment reductions of 2% per fiscal year through 2025 unless additional Congressional action is taken. Further, the American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments from providers from three to five years. More recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

In the European Union, drugs follow a similar demanding process as that we described above for the United States and the ICH Common Technical Document is the basis for applications. Prior to submitting a European Marketing Authorization Application, or MAA, it is necessary to gain approval of a detailed Pediatric Investigation Plan, or PIP, with the European Medicines Agency's Pediatric Committee, or PDCO. After gaining PIP approval, EU regulatory authorities can authorize the drug using either the centralized authorization procedure or national authorization procedures.

Under the centralized procedure, after the EMA issues an opinion, the European Commission issues a single marketing authorization valid across the European Union, as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for human drugs that: are derived from biotechnology processes, such as genetic engineering; contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions; and are officially designated orphan drugs. For drugs that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the EMA, as long as the drug concerned is a significant therapeutic, scientific or technical innovation, or if its authorization would be in the interest of public health. WAYLIVRA has been granted a Promising Innovative Medicine, or PIM, Designation by the United Kingdom's Medicines and Healthcare products Regulatory Agency, or MHRA, for the treatment of people with FCS. A PIM Designation is an early indication that a medicinal product is a promising candidate for the Early Access to Medicines Scheme, or EAMS, in the UK, intended for the treatment, diagnosis or prevention of a life-threatening or seriously debilitating condition, with the potential to address an unmet medical need.

There are also two other possible routes to authorize medicinal products in several countries, which are available for products that fall outside the scope of the centralized procedure:

Like the FDA, the EMA, the competent authorities of the European Union Member States, and other regulatory agencies regulate and inspect equipment, facilities and processes used in the manufacturing of drugs prior to approving a drug. If, after receiving clearance from regulatory agencies, a company makes a material change in manufacturing equipment, location or process, additional regulatory review and approval may be required. Once we or our partners commercialize drugs, we will be required to comply with cGMP and drug-specific regulations enforced by the European Commission, the EMA and the competent authorities of European Union Member States following drug approval. Also like the FDA, the EMA, the competent authorities of the European Union Member States, and other regulatory agencies also conduct regular, periodic visits to re-inspect equipment, facilities and processes following the initial approval of a drug. If, as a result of these inspections, the regulatory agencies determine that our or our partners' equipment, facilities, or processes do not comply with applicable regulations and conditions of drug approval, they may seek civil, criminal or administrative sanctions and/or remedies against us, including the suspension of our manufacturing operations or the withdrawal of our drug from the market.

Similar to the United States, there is a process to authorize generic versions of innovative drugs in the European Union. Generic competitors can submit abridged applications to authorize generic versions of drugs authorized by EMA through a centralized procedure referencing the innovator's data and demonstrating bioequivalence to the reference drug, among other things. New drugs in the European Union can receive eight years of data exclusivity coupled with two years of market exclusivity, and a potential one-year extension, if the marketing authorizations holder obtains an authorization for one or more new therapeutic indications that demonstrates "significant clinical benefit" in comparison with existing therapies. This system is usually referred to as "8+2." Abridged applications cannot rely on an innovator's data until after expiry of the eight-year date exclusivity term, meaning that a competitor can file an application for a generic drug, but the drug cannot be marketed until the end of the market exclusivity term.

In some international markets (such as China or Japan), although data generated in United States or European Union studies may be submitted in support of a marketing authorization application, regulators may require additional clinical studies conducted in the host territory, or studying people of the ethnicity of the host territory, prior to the filing or approval of marketing applications within the country.

Significant uncertainty exists as to the coverage and reimbursement status of any drugs for which we may obtain regulatory approval. In the United States and in other countries, sales of any drugs for which we receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug may be separate from the process for setting the reimbursement rate that the payor will pay for the drug. Third-party payors may limit coverage to specific drugs on an approved list, or formulary, which might not include all of the FDA-approved drugs for a particular indication. Moreover, a payor's decision to provide coverage for a drug does not imply that an adequate reimbursement rate will be approved. Additionally, coverage and reimbursement for drugs can differ significantly from payor to payor. One third-party payor's decision to cover a particular drug does not ensure that other payors will also provide coverage for the drug, or will provide coverage at an adequate reimbursement rate. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development.

Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of drugs and services, in addition to their safety and efficacy. To obtain coverage and reimbursement for any drug that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies to demonstrate the medical necessity and cost-effectiveness of our drug. These studies will be in addition to the studies required to obtain regulatory approvals. If third-party payors do not consider a drug to be cost-effective compared to other available therapies, they may not cover the drug after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its drugs at a profit.

The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic drugs for branded prescription drugs. By way of example, the PPACA contains provisions that may reduce the profitability of drugs, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for our drugs.

In the European community, governments influence the price of drugs through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those drugs to consumers. Some jurisdictions operate positive and negative list systems under which drugs may only be marketed once a reimbursement price has been agreed to by the government. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical studies that compare the cost effectiveness of a particular drug candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new drugs. In addition, in some countries, cross border imports from low-priced markets exert a commercial pressure on pricing within a country.

The marketability of any drugs for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, the focus on cost containment measures in the United States and other countries has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if we attain favorable coverage and reimbursement status for one or more drugs for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, other divisions of the U.S. Department of Health and Human Services, the U.S. Department of Justice, and similar foreign, state and local government authorities, regulate sales, promotion and other activities following drug approval. As described above, the FDA regulates all advertising and promotion activities for drugs under its jurisdiction both prior to and after approval. Only those claims relating to safety and efficacy that the FDA has approved may be used in labeling. Physicians may prescribe legally available drugs for uses that are not described in the drug's labeling and that differ from those we tested and the FDA approved. Such off-label uses are common across medical specialties and often reflect a physician's belief that the off-label use is the best treatment for the patients. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers' communications regarding off-label uses. If we do not comply with applicable FDA requirements, we may face adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the FDA. Promotion of off-label uses of drugs can also implicate the false claims laws described below.

In the United States sales, marketing and scientific/educational programs must also comply with various federal and state laws pertaining to healthcare "fraud and abuse," including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. Due to the breadth of the statutory provisions, limited statutory exceptions and regulatory safe harbors, and the absence of guidance in the form of regulations and very few court decisions addressing industry practices, it is possible that our practices might be challenged under anti-kickback or similar laws. Moreover, recent healthcare reform legislation has strengthened these laws. For example, the PPACA among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes to clarify that a person or entity does not need to have

actual knowledge of this statute or specific intent to violate it. In addition, PPACA clarifies that the government may assert that a claim that includes items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment, to third-party payors (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities relating to the sale and marketing of our drugs may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid) and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties also can be imposed upon executive officers and employees, including criminal sanctions against executive officers under the so-called "responsible corporate officer" doctrine, even in situations where the executive officer did not intend to violate the law and was unaware of any wrongdoing.

Given the significant penalties and fines that can be imposed on companies and individuals if convicted, allegations of such violations often result in settlements even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and corporate integrity agreements. If the government were to allege or convict us or our executive officers of violating these laws, our business could be harmed. In addition, private individuals can bring similar actions. Our activities could be subject to challenge for the reasons discussed above and due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities. Other healthcare laws that may affect our ability to operate include the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; analogous state laws governing the privacy and security of health information, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, and the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members. Further, there are an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. Given the lack of clarity in laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent state authorities.

Similar rigid restrictions are imposed on the promotion and marketing of drugs in the European Union and other countries. Even in those countries where we may not be directly responsible for the promotion and marketing of our drugs, if our potential international distribution partners engage in inappropriate activity it can have adverse implications for us.

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts.

As of February 20, 2019, we employed 248 people. A significant number of our management and professional employees have had prior experience with pharmaceutical, biotechnology or medical product companies. Collective bargaining agreements do not cover any of our employees and management considers relations with our employees to be good.

We incorporated in Delaware in December 2014. Our principal offices are in Boston, Massachusetts. We make available, free of charge, on our website, www.akceatx.com, our reports on Forms 10-K, 10-Q, 8-K and amendments thereto, as soon as reasonably practical after we file such materials with the Securities and Exchange Commission. Any information that we include on or link to our website is not a part of this report or any registration statement that incorporates this report by reference. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

The following sets forth certain information regarding our executive officers as of February 20, 2019:

Ms. Soteropoulos joined Akcea as Chief Executive Officer and as a member of our board of directors in January 2015. Prior to joining Akcea, Ms. Soteropoulos was a member of the executive leadership team of Moderna Therapeutics Inc., now a public biotechnology company, serving as the Cardiometabolic Business Unit General Manager and Senior Vice President of Strategic Alliances from July 2013 to December 2014. Prior to Moderna, Ms. Soteropoulos spent 21 years at Genzyme Corporation in various leadership positions driving strategy, sales and marketing, business development, manufacturing process development, strategic capacity planning, and supply chain development. Since July 2013, Ms. Soteropoulos has served on the supervisory board of uniQure N.V., a public biotechnology company. Ms. Soteropoulos also serves on the advisory board of the Tufts University Chemical and Biological Engineering Department. Our board of directors believes that Ms. Soteropoulos is uniquely suited to serve on our board of directors because of her experience in the biotechnology industry and her daily insight into corporate matters as our Chief Executive Officer.

Ms. Boyce joined Akcea as a Board member and President in April 2018. Previously, she was the Chief Business Officer of Ionis Pharmaceuticals. In this role Ms. Boyce was responsible for leading investor relations and corporate communications, business development, alliance management, competitive intelligence and patient advocacy. She led the effort to establish a global agreement with Ionis and Novartis to develop and commercialize AKCEA APO(a)-L_Rxand AKCEA APOCIII-L_Rx. Ms. Boyce also served as Vice President, Head of International Business Strategy and Operations at Forest Laboratories, Inc. where she led the establishment and expansion of their international pharmaceutical and consumer health businesses. Prior to Forest, she served as a global business leader at Alexion and Novartis. Sarah Boyce is an experienced life sciences industry leader who has built out and overseen divisions and global commercial operations for a range of innovative therapies including Soliris®, Gleevec® and Tasigna®.

Mr. MacLean has served as Chief Financial Officer of Akcea since September 2017. Prior to joining Akcea, from September 2015 to September 2017, Mr. MacLean was Chief Financial Officer and Executive Vice President for PureTech Health, an advanced, clinical-stage, public biopharmaceutical company focusing on diseases caused by dysfunctions in the nervous, gastrointestinal and immune systems. Previously, Mr. MacLean served as Senior Vice President of Finance and Chief Accounting Officer of Biogen Inc. where he led the Company's worldwide finance organization.

Mr. Goldberg joined Akcea as Chief Operating Officer in January 2015. Prior to joining Akcea, from December 2012 to September 2014, Mr. Goldberg was a member of the executive leadership team at Proteostasis Therapeutics, Inc., now a public biotechnology company focusing on neurology and orphan diseases, where he served as Vice President of Business Operations. Prior to that, Mr. Goldberg spent over 11 years in positions of increasing responsibility with Genzyme and Sanofi S.A., most recently as Associate Vice President, Project Head, within Sanofi Oncology.

Dr. O'Dea joined Akcea as Chief Medical Officer in January 2016. Prior to joining Akcea, Dr. O'Dea was Chief Medical Officer at Oxford Immunotec Global PLC, now a public diagnostics company, from June 2014 to January 2016, overseeing medical affairs and clinical development. Prior to Oxford, Dr. O'Dea was Chief Medical Officer and Head of Regulatory Affairs at Moderna from January 2012 to June 2014. Before Moderna, Dr. O'Dea held positions including Chief Medical Officer at Radius Health, Inc., a public biopharmaceuticals company, an academic position at McGill University, and worldwide Head of Clinical Development for Endocrine and Metabolic products at Serono.

Investing in our securities involves a high degree of risk. You should consider carefully 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. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Ionis Pharmaceuticals, Inc., or Ionis, incorporated us as a Delaware corporation in December 2014, and we have operated as an affiliate of Ionis since that time. As such, we have limited experience as a company, and no experience operating independently from Ionis, and have not yet demonstrated that we can successfully overcome many of the risks and uncertainties frequently encountered in new and rapidly evolving fields, particularly the biotechnology and pharmaceutical fields.

As a company, we have limited experience commercializing products. Our ability to generate substantial revenue and achieve profitability depends on our ability, alone or with strategic partners, to successfully develop our drugs, obtain the regulatory approvals necessary to commercialize our drugs, including WAYLIVRA^TM (volanesorsen), AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, and continue the commercialization of TEGSEDI^TM (inotersen). Although we received our first revenue from product sales in the fourth quarter of 2018, if we are not successful in growing revenue and controlling costs, we will not achieve profitable operations or positive cash flow, and even if we achieve profitability in the future, we may not sustain profitability in subsequent periods. Our ability to generate revenue sufficient to achieve profitability from product sales depends heavily on our and our current and future strategic partners' success in:

We may not successfully develop our products or generate product revenue sufficient to cover operating expenses or become profitable. If we cannot achieve or maintain profitability, it would depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. If the market price of our common stock declined, you could lose all or part of your investment.

Because drug development requires substantial lead-time and funding prior to commercialization, we have incurred expenses while generating limited revenue from our operating activities since our formation. Our net losses were $225.8 million and $121.6 million for the years ended December 31, 2018 and December 31, 2017 (as revised), respectively. As of December 31, 2018, we had an accumulated deficit of approximately $522.0 million. Most of the losses resulted from costs incurred in connection with our development programs and from general and administrative costs associated with our operations. We expect to incur additional operating losses for the foreseeable future, and these losses may increase if we cannot generate substantial revenue.

We will require substantial additional funding to achieve our goals. If we fail to obtain timely funding, we may need to curtail or abandon some of our programs.

All of our drugs are undergoing clinical studies. All of our drug programs, except TEGSEDI in the United States, EU, and Canada, will require additional nonclinical and/or clinical testing and/or marketing authorization prior to commercialization. We will need to spend significant additional resources to conduct these activities. Our expenses could increase beyond expectations if the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, or other regulatory authorities require us to perform clinical studies and other studies in addition to those that we currently anticipate. As of December 31, 2018, we had cash, cash equivalents and investments equal to $252.6 million. Our operating expenses were $295.7 million and $163.9 million for the ended December 31, 2018 and December 31, 2017, respectively.

Prior to our IPO, we funded our operating activities through a $100.0 million cash contribution we received from Ionis in 2015, $75.0 million that we received from initiating our collaboration with Novartis and $106.0 million in drawdowns under our line of credit with Ionis. The line of credit converted to our common stock when we closed our IPO. We no longer have access to the line of credit following the closing of our IPO and we do not have any firm commitment from Ionis to fund our cash flow deficits or provide other direct or indirect financial assistance to us. Additionally, in July 2017 we received $182.3 million in net proceeds from our IPO including $25.0 million that Ionis invested in our IPO and the Novartis concurrent private placement of $50.0 million. In April 2018, we received $200.0 million from the common stock we issued in connection with the licensing transaction with Ionis discussed in Note 7, License Agreements and Services Agreement with Ionis, to our consolidated financial statements included in this Form 10-K. We expect that we will need to raise additional funding to continue developing the drugs in our pipeline and to seek regulatory approval for and to commercialize TEGSEDI, WAYLIVRA and other drugs in our pipeline.

We have received marketing authorization approval for TEGSEDI from the FDA for the treatment of the polyneuropathy of hATTR in adult patients in the United States, from the European Commission, or EC, and from Health Canada for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hATTR, and we will continue to incur significant costs commercializing TEGSEDI. Even if we obtain marketing authorizations to sell WAYLIVRA, AKCEA-APO(a)-L_Rxor AKCEA-TTR-L_Rx, we will incur

significant costs to commercialize the approved product. To date, only one of our product(s), TEGSEDI, has commercially launched, and even if we generate substantial revenue from the sale of approved products, we may not become profitable and would need to obtain additional funding to continue operations.

Risks Related to Clinical Development, Regulatory Review and Approval of Our Drugs

If the results of clinical testing indicate that any of our drugs 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 drugs are a relatively new approach to therapeutics. If we cannot demonstrate that our drugs are safe and effective for human use in the intended indication, we may need to abandon one or more of our drug development programs.

If any of our drugs in clinical studies, including WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, do not show sufficient safety and efficacy in patients with the targeted indication, it would negatively affect our development and commercialization goals for the drug and we would have expended significant resources with little or no benefit to us.

Even if our drugs are successful in preclinical and earlier-stage clinical studies, the drugs may not be successful in later-stage clinical studies.

Successful results in preclinical or initial clinical studies, including the results of earlier studies for our drugs in development, may not predict the results of subsequent clinical studies, including the Phase 3 study of WAYLIVRA for the treatment of FPL and the Phase 3 study of AKCEA-APO(a)-L_Rx in patients with established cardiovascular disease and elevated levels of lipoprotein(a). There are a number of factors that could cause a clinical study to fail or be delayed, including:

In addition, WAYLIVRA and AKCEA-APOCIII-L_Rx have the same mechanism of action, TEGSEDI and AKCEA-TTR-L_Rx, also have the same mechanism of action and all of our current drugs, including WAYLIVRA, AKCEA-APO(a)-L_Rx, AKCEA-ANGPTL3-L_Rx and AKCEA-APOCIII-L_Rx, are chemically similar to each other and the drugs Ionis and other companies are developing separately. As a result, a safety observation we, Ionis or other companies encounter with one of our or their drugs could have or be perceived by a regulatory authority to have an impact on a different drug we are developing. This could cause the FDA and other regulators to ask questions or take actions that could harm or delay our ability to develop and commercialize our drugs 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 drugs: 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. Similarly, we have an ongoing Phase 3 study of WAYLIVRA in patients with FPL, an ongoing open label extension study of WAYLIVRA in patients with FCS and an open label extension study of TEGSEDI in patients with hATTR, and an early access program, or EAP, for both WAYLIVRA and TEGSEDI. 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 amyloidosis or the commercial opportunity for WAYLIVRA or TEGSEDI. In August 2018 we received a Complete Response Letter, or CRL, 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 Notice of Noncompliance withdrawal letter, or Non-W, from Health Canada for WAYLIVRA in November 2018. We and Ionis are engaged with the FDA and plan to work with Health Canada to confirm a path forward for WAYLIVRA. As a result, we will need to submit additional data to FDA and may need to conduct additional clinical studies before obtaining marketing authorization, which in turn could delay or prevent us from generating any revenue or profit from the sale of WAYLIVRA. The regulatory authorities and Europe could have a similar response to the pending marketing authorization application. Any failure or delay in the clinical studies for any of our drugs in development could reduce the commercial potential or viability of our drugs.

We may not have appropriately designed the planned and ongoing clinical studies for WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development to support submission of a marketing application to the FDA and foreign regulatory authorities or demonstrate safety or efficacy at the level required by the FDA and foreign regulatory authorities for product approval.

We completed a Phase 3 clinical program for WAYLIVRA for the treatment of FCS in 2018 and are conducting or plan to conduct additional clinical studies for WAYLIVRA in patients with FPL, as well as for AKCEA-TTR-L_Rx, AKCEA-APO(a)-L_Rx, AKCEA-ANGPTL3-L_Rx and AKCEA-APOCIII-L_Rx.

Even if we achieve positive results on the endpoints for these clinical studies or any future clinical studies, the FDA or foreign regulatory authorities may believe the clinical studies do not show the appropriate balance of safety and efficacy in the indication being sought or may interpret the data differently than we do, and deem the results insufficient to demonstrate the appropriate balance of safety and efficacy at the level required for product approval. For example, in August 2018 we received a CRL 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. We and Ionis are engaged with the FDA and plan to work with Health Canada to confirm a path forward for WAYLIVRA. As a result, we will need to submit additional data to the FDA and may need to conduct additional clinical studies before obtaining marketing authorization, which in turn could delay or prevent us from generating any revenue or profit from the sale of WAYLIVRA. The CHMP of the EMA has adopted a positive opinion recommending conditional marketing authorization of WAYLIVRA as an adjunct to diet in adult patients with genetically confirmed FCS who are at high risk for pancreatitis, in whom response to diet and triglyceride lowering therapy has been inadequate. The positive opinion will now be referred to the EC, which grants marketing authorization for medicines in the European Union, as well as to European Economic Area members Iceland, Liechtenstein and Norway, however, the EC may decide not to adopt the CHMP’s positive opinion. These risks are more likely to occur since we are developing our drugs against therapeutic targets or to treat diseases in which there is little or no clinical experience. In addition, these risks may be more likely to occur for WAYLIVRA since there were some patients in the Phase 3 program that experienced serious platelet events (grade 4 thrombocytopenia), a condition in which the patient has very low platelet levels, and additional patients experienced other adverse events in the program, including patients who discontinued participation in the APPROACH study due to platelet count declines. We believe that the enhanced monitoring we have implemented to support early detection and management of these issues can help manage these safety issues so that patients can continue treatment. Since implementation of the enhanced monitoring, serious platelet events have been infrequent.

We may make modifications to the clinical study protocols or designs of our ongoing clinical studies that delay enrollment or completion of such clinical studies and could delay regulatory approval of WAYLIVRA and our other drugs in development. Any failure to obtain approval for WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development on the timeline that we currently anticipate, or at all, would have a material and adverse impact on our business, prospects, financial condition and results of operations and could cause our stock price to decline.

Clinical studies for WAYLIVRA, AKCEA-APO(a)-L_Rx, AKCEA-TTR-L_Rx, AKCEA-ANGPTL3-L_Rx, AKCEA-APOCIII-L_Rx or our other drugs may not demonstrate safety or efficacy at the level required by the FDA and foreign regulatory authorities for product approval.

The EMA is currently reviewing our application for regulatory approval for WAYLIVRA. The CHMP of the EMA has adopted a positive opinion recommending conditional marketing authorization of WAYLIVRA as an adjunct to diet in adult patients with genetically confirmed FCS who are at high risk for pancreatitis, in whom response to diet and triglyceride lowering therapy has been inadequate. The positive opinion will now be referred to the EC, which grants marketing authorization for medicines in the European Union, as well as to European Economic Area members Iceland, Liechtenstein and Norway, however, the EC may decide not to adopt the CHMP’s positive opinion. We and Ionis are conducting or intend to conduct clinical studies for AKCEA-APO(a)-L_Rx, AKCEA-TTR-L_Rx, AKCEA-ANGPTL3-L_Rx and AKCEA-APOCIII-L_Rx.

Even if positive results on the endpoints for the clinical studies are achieved, the FDA or foreign regulatory authorities may believe the clinical studies do not show the appropriate balance of safety and efficacy in the indication being sought or may interpret the data differently than we do, and may deem the results insufficient to demonstrate the appropriate balance of safety and efficacy at the level required for product approval. For example, in August 2018 we received a CRL 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. We and Ionis are engaged with the FDA and plan to work with Health Canada to confirm a path forward for WAYLIVRA. As a result, we will need to submit additional data to FDA and may need to conduct additional clinical studies before obtaining marketing authorization, which in turn could delay or prevent us from generating any revenue or profit from the sale of WAYLIVRA. The regulatory authorities in Europe could have a similar response to the pending marketing authorization application. As an additional example, the foreign regulatory authorities could claim that we have not tested WAYLIVRA, AKCEA-APO(a)-L_Rx, AKCEA-TTR-L_Rx, AKCEA-ANGPTL3-L_Rx and AKCEA-APOCIII-L_Rx in a sufficient number of patients to demonstrate that the drug is safe and effective in patients with other indications to support an application for marketing authorization for the applicable indication. In such a case, we may need to conduct additional clinical studies before obtaining marketing authorization, which would be expensive and delay the development and commercialization of the drug.

Any failure to obtain approvals for WAYLIVRA in other important markets outside of the United States and Canada, including the EU, on the timeline that we currently anticipate, or at all, would have a material and adverse impact on our business, prospects, financial condition and results of operations and could cause our stock price to decline.

If we or our partners fail to obtain regulatory approval for our drugs, including WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, or additional approvals for TEGSEDI, we or our partners cannot sell them in the applicable markets.

We cannot guarantee that any of our drugs, including WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, will be safe and effective, or will be approved or receive additional approvals for commercialization. We and our partners must conduct time-consuming, extensive and costly clinical studies to demonstrate the safety and efficacy of each of our drugs, including WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, 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 or our partners may not obtain necessary regulatory approvals on a timely basis, if at all, for any of our drugs. It is possible that regulatory authorities will not approve TEGSEDI in additional markets or any of our other drugs, including WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, for marketing. If the FDA or another regulatory authority believes that we or our partners have not sufficiently demonstrated the safety or efficacy of any of our drugs, including WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, the authority will not approve the specific drug or will require additional studies, which can be time consuming and expensive and which will delay or harm our ability to successfully commercialize the drug. For example, in August 2018 we received a CRL 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. We and Ionis are engaged with the FDA and plan to work with Health Canada to confirm a path forward for WAYLIVRA. As a result, we will need to submit additional data to FDA and may need to conduct additional clinical studies before obtaining marketing authorization, which in turn could delay or prevent us from generating any revenue or profit from the sale of WAYLIVRA. The regulatory authority in Europe could have a similar response to the pending marketing authorization.

The FDA or other comparable foreign regulatory authorities can delay, limit or deny approval of a drug for many reasons, including:

Failure to successfully develop WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, or to receive marketing authorization for these drugs in important markets or delays in these authorizations would prevent or delay the commercial launch of the drug, and, as a result, would negatively affect our ability to generate revenue.

We may not be able to benefit from orphan drug designation for WAYLIVRA, TEGSEDI or any of our other drugs.

The FDA and EMA have granted orphan drug designation to TEGSEDI and to WAYLIVRA for the treatment of patients with FCS. In addition, the EMA has granted orphan drug designation to WAYLIVRA for the treatment of patients with FPL. The FDA, however, refused to grant our request for orphan drug designation for WAYLIVRA for the treatment of patients with FPL in the United States in 2017.

In the United States, under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States. 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.

Even if approval is obtained on a drug that has been designated as an orphan drug, we may lose orphan drug exclusivity if the FDA determines that the request for designation was materially defective or if we cannot assure sufficient quantity of the applicable drug to meet the needs of patients with the rare disease or condition, or if a competitor is able to gain approval for the same drug in a safer or more effective form or that makes a major contribution to patient care.

Even if we maintain orphan drug exclusivity for TEGSEDI or WAYLIVRA for the treatment of patients with FCS or obtain orphan drug exclusivity for our other drugs, the exclusivity may not effectively protect the drug from competition because regulatory authorities still may authorize different drugs for the same condition.

We may expend our limited resources to pursue a particular drug or indication and fail to capitalize on drugs or indications that may be more profitable or for which there is a greater likelihood of success.

We will continue to dedicate a substantial amount of our resources to commercialize TEGSEDI and support the continued development of AKCEA-TTR-L_Rx. In addition, we may dedicate a substantial amount of our resources to develop and seek regulatory approval for WAYLIVRA to treat patients with FCS and FPL. As a result, we may forego or delay pursuit of opportunities with our other drugs or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. Our spending on current and future research and development programs and drugs for specific indications may not yield any commercially viable drugs.

Our drugs, including TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, could be subject to regulatory limitations following approval.

Following approval of a drug, we and our partners must comply with comprehensive government regulations regarding the manufacture, marketing and distribution of drug products. Promotional communications regarding prescription drugs must be consistent with the information in the product's approved labeling. We and our partners may not obtain the labeling claims necessary or desirable to successfully commercialize our drug products, including TEGSEDI, and if approved, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development.

The FDA and foreign regulatory authorities can impose significant restrictions on an approved drug product through the product label and on advertising, promotional and distribution activities. For example:

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. If the results of such post-marketing studies are not satisfactory, the FDA or a foreign regulatory authority may withdraw marketing authorization or may condition continued marketing on commitments from us or our partners that may be expensive and/or time consuming to fulfill.

In addition, if we or others identify side effects after any of our drug products are on the market, 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 could be subject to:

Any one or a combination of these events could prevent us from achieving or maintaining market acceptance of the affected drug product or could substantially increase the costs and expenses of commercializing such drug product, which in turn could delay or prevent us from generating any revenue or profit from the sale of the drug product.

The development and commercialization of TEGSEDI and WAYLIVRA may place strain on our management team’s time and attention and may divert our management team’s attention from our other existing products.

Although we have personnel with experience commercializing drugs, we ourselves have limited experience commercializing products. We commercially launched TEGSEDI during the fourth quarter of 2018 and, if regulatory approval is obtained, we plan to commercially launch WAYLIVRA during 2019. The commercial launch of TEGSEDI will continue to and, if approved, the commercial launch of WAYLIVRA will, require significant efforts and the devotion of substantial resources, as we finalize regulatory submissions, manage the manufacturing of sufficient quantities of product to support long-term commercial sales and integrate, optimize or maintain, as applicable, the global sales, marketing, medical, for each of WAYLIVRA and TEGSEDI, and patient support infrastructure, which may place pressure on the management team’s time and attention. These efforts may also divert the attention of the management team from our other business operations, such as the development or commercialization of our other pipeline products, including AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx, AKCEA-ANGPTL3-L_Rx and AKCEA-APOCIII-L_Rx. As a result, our business, results of operations, financial condition and prospects for future growth could be adversely impacted and the market price of our common stock may decline.

If we cannot effectively manage our marketing and sales capabilities or enter into agreements with third parties to market and sell our drug products, we may not generate product revenue.

We commercially launched TEGSEDI in the fourth quarter of 2018 and, if approved, plan to commercialize WAYLIVRA. To successfully commercialize TEGSEDI and WAYLIVRA, we must effectively manage our marketing, sales and distribution capabilities or make arrangements with third parties to perform these services. We may not be successful in doing so. To commercialize WAYLIVRA in the initial indications we plan to pursue and to continue the commercialization of TEGSEDI, we will need to optimize and maintain specialty sales forces in the global regions where we currently market or expect to market TEGSEDI and WAYLIVRA, supported by case managers, reimbursement specialists, partnerships with specialty pharmacies, injection training, routine blood and urine monitoring and a medical affairs team. We may seek to further penetrate markets by expanding our sales forces or through strategic partnerships with other pharmaceutical or biotechnology companies or third-party sales organizations.

Even though certain members of our management team and other employees have significant experience commercializing drug products, as a company we have limited experience marketing, selling or distributing drug products, and there are significant risks involved in building and managing a commercial infrastructure. It is expensive and time consuming for us to maintain our own sales forces and related compliance protocols to market TEGSEDI and it will be increasingly expensive and time consuming as we commercially launch additional drug products, if approved. We may never successfully optimize or manage this capability and any failure could delay or preclude the commercial launch of WAYLIVRA or adversely affect TEGSEDI sales. We and our partners, if any, will have to compete with other companies to recruit, hire, train, manage and retain marketing and sales personnel. As a result of our receipt of a CRL from the FDA regarding the new drug application for WAYLIVRA, on September 6, 2018, we enacted a plan to reorganize our workforce to better align with the immediate needs of our business. In connection with this reorganization plan, we reduced our workforce by approximately 12%. If WAYLIVRA is subsequently approved in the United States, we will again need to increase our operations and expand our use of third-party contractors.

We have incurred expenses launching TEGSEDI in the EU, Canada and the U.S. and integrating and managing the marketing and sales infrastructure. If regulatory requirements or other factors cause the commercialization of TEGSEDI to be less successful than expected in important markets, we would incur additional expenses for having invested in these capabilities prior to realizing any significant revenue from sales of TEGSEDI. Our sales force and marketing teams may not successfully commercialize TEGSEDI.

We will incur expenses prior to the launch of WAYLIVRA to integrate and manage the marketing and sales infrastructure. If regulatory requirements or other factors cause a delay in the commercial launch of WAYLIVRA, we would incur additional expenses for having invested in these capabilities earlier than required and prior to realizing any revenue from sales of WAYLIVRA. Our sales force and marketing teams may not successfully commercialize WAYLIVRA.

To the extent we decide to rely on third parties to commercialize TEGSEDI or WAYLIVRA in a particular geographic market, we may receive less revenue than if we commercialized TEGSEDI or WAYLIVRA by ourselves. For example, in August 2018, we granted PTC Therapeutics International Limited, or PTC Therapeutics, the exclusive right to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries, and will continue to rely on PTC Therapeutics to commercialize TEGSEDI and WAYLIVRA in those geographic markets. In addition, in August 2018 we entered into an agreement with Accredo Health Group, Inc., or Accredo, a subsidiary of Express Scripts, to be our specialty pharmacy partner for distribution of TEGSEDI in the U.S. Further, we have less control over the sales efforts of other third parties, including PTC Therapeutics and Accredo, involved in commercializing TEGSEDI or WAYLIVRA.

If we cannot effectively build and manage our distribution, medical affairs, market access, marketing and sales infrastructure, or find a suitable third party to perform such functions, the sales of TEGSEDI and commercial launch of WAYLIVRA may be adversely affected, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

If we are unable to rely on third-party specialty channels to distribute our drugs to patients we may be unable to generate adequate revenue

We and our strategic partners have contracted with, rely on and will continue to rely on third-party specialty pharmacies to distribute our drugs to patients. A specialty pharmacy is a pharmacy that specializes in dispensing medications for complex or chronic conditions, a process that requires a high level of patient education and ongoing management. Our management team will need to devote a significant amount of its attention to optimizing and managing this distribution network. If we cannot effectively optimize and manage this distribution process, the commercial launch of WAYLIVRA, AKCEA-APO(a)-L_Rxand AKCEA-TTR-L_Rx and the sales of TEGSEDI will be adversely affected.

In addition, the use of specialty pharmacies involves certain risks, including, but not limited to, risks that these organizations will:

Any such events may result in decreased sales and lower revenue, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

If the market does not accept our drugs, including TEGSEDI, WAYLIVRA, AKCEA-TTR-L_Rx and our other drugs in development, we are not likely to generate substantial product revenue or become profitable.

Even though we have obtained marketing authorization approval from the FDA, the EC and Health Canada for TEGSEDI, and if we or our strategic partners obtain a marketing authorization for WAYLIVRA, AKCEA-TTR-L_Rx and our other drugs in development, our success will depend upon the medical community, patients and third-party payors accepting our drugs as medically useful, cost-effective, safe and convenient. Even if the FDA or foreign regulatory authorities authorize our drugs for commercialization, doctors may not prescribe our drugs to treat patients. We and our partners may not successfully commercialize additional drugs.

Additionally, in many of the markets where we or our partners may sell our drugs in the future, if we cannot agree with the government or other third-party payors regarding the price we can charge for our drugs, then we may not be able to sell our drugs in that market. Similarly, cost control initiatives by governments or third-party payors could decrease the price received for our drugs or increase patient coinsurance to a level that makes the continued commercializing of TEGSEDI and the commercializing of WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development economically unviable.

The degree of market acceptance for TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development depends upon a number of factors, including the:

Based on the profile of our drugs, physicians, patients, patient advocates, payors or the medical community in general may not accept and/or use any drugs that we may develop.

For example, the product label for TEGSEDI in the United States has a boxed warning for thrombocytopenia and glomerulonephritis, requires periodic blood and urine monitoring, and TEGSEDI has a Risk Evaluation and Mitigation Strategy, or REMS, program. Our main competition in the U.S. market for TEGSEDI is ONPATTRO (patisiran), marketed by Alnylam Pharmaceuticals, Inc. Although ONPATTRO requires intravenous administration and pre-treatment with steroids, it does not have a boxed warning or REMS. Additionally, in the clinical studies with WAYLIVRA, declines in platelet counts were observed in many patients and some patients discontinued the study because of platelet declines. Therefore, we expect the product label for WAYLIVRA will require periodic blood monitoring. In each case, these label requirements could negatively affect our ability to attract and retain patients for these drugs. We believe that the enhanced monitoring we have implemented to support early detection and management of these issues can help manage these 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 plan to have greater involvement with physicians and patients, if we cannot effectively maintain patients on TEGSEDI and WAYLIVRA, we may not be able to generate substantial revenue from TEGSEDI and WAYLIVRA sales.

The patient populations suffering from FCS and FPL are small and have not been established with precision. If the actual number of patients is smaller than we estimate, or if we cannot raise awareness of these diseases and diagnosis is not improved, our revenue and ability to achieve profitability from WAYLIVRA may be adversely affected.

We estimate there are 3,000 to 5,000 FCS patients and an additional 3,000 to 5,000 FPL patients globally. Our estimates of the sizes of the patient populations are based on published studies as well as internal analyses. If the results of these studies or our analyses of them do not accurately reflect the number of patients with FCS and FPL, our assessment of the market potential for WAYLIVRA may be inaccurate, making it difficult or impossible for us to meet our revenue goals, or to obtain and maintain profitability. In addition, as is the case with most orphan diseases, if we cannot successfully raise awareness of these diseases and improve diagnosis, it will be more difficult or impossible to achieve profitability.

In addition, since the patient populations for FCS and FPL are small, the per-patient drug pricing must be priced appropriately in order to recover our development and manufacturing costs, fund adequate patient support programs and achieve profitability. For these initial indications, we may not maintain or obtain sufficient sales volume at a price that justifies our product development efforts and our sales and marketing and manufacturing expenses.

The patient population suffering from hATTR amyloidosis is small and has not been established with precision. If the actual number of patients is smaller than we estimate, or if we cannot raise awareness of the disease and diagnosis is not improved, our revenue and ability to achieve profitability from either TEGSEDI or AKCEA-TTR-L_Rx may be adversely affected.

Our estimate of the sizes of the patient populations are based on published studies as well as internal analyses. If the results of these studies or our analyses of them do not accurately reflect the number of patients with hATTR amyloidosis, our assessment of the market potential for either TEGSEDI or AKCEA-TTR-L_Rxmay be inaccurate, making it difficult or impossible for us to meet our revenue goals, or to obtain and maintain profitability. In addition, as is the case with most orphan diseases, if we cannot successfully raise awareness of these diseases and improve diagnosis, it will be more difficult or impossible to achieve profitability. For these initial indications, we may not maintain or obtain sufficient sales volume at a price that justifies our product development efforts and our sales and marketing and manufacturing expenses.

If we or our partners fail to compete effectively, WAYLIVRA, TEGSEDI and our other drugs in development will not contribute significant revenue.

Our competitors engage in drug discovery throughout the world, are numerous and include, among others, major pharmaceutical companies and specialized biopharmaceutical firms. Our competitors may succeed in developing drugs that are:

These competitive developments could make our drugs, including WAYLIVRA, TEGSEDI, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, obsolete or non-competitive. Further, all of our drugs are delivered by injection, which may render them less attractive to patients than non-injectable products offered by our current or future competitors.

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, in obtaining FDA and other regulatory authorizations and in commercializing pharmaceutical products. Accordingly, our competitors may succeed in obtaining regulatory authorization for products earlier than we do. Marketing and sales capability is another factor relevant to the competitive position of our drugs, and many of our competitors will have greater marketing and sales capabilities than our capabilities.

There are several pharmaceutical and biotechnology companies engaged in the development or commercialization of products against targets that are also targets of drugs in our development pipeline. For example, if approved, WAYLIVRA could face competition from drugs like metreleptin and gemcabene. Metreleptin, produced by Novelion Therapeutics, Inc., is currently approved in the U.S. and E.U. for use in generalized lipodystrophy patients. WAYLIVRA may also compete with gemcabene, an oral small molecule that reduces apoC-III, that Gemphire Therapeutics, Inc. is developing to treat patients with triglycerides above 500 mg/dL.

As an additional example, TEGSEDI could face competition from drugs like ONPATTRO, marketed by Alnylam for hATTR amyloidosis with polyneuropathy in the U.S. and E.U., tafamidis, available in the E.U. for stage 1 hATTR amyloidosis with polyneuropathy and under review in the U.S. for ATTR with cardiomyopathy, and AG10, which is being developed by Eidos for patients with ATTR with cardiomyopathy. For example, ONPATTRO is approved in the United States and Europe for a similar and broader indication as TEGSEDI. AG10, which recently completed its Phase 2 dose-finding study, is an orally administered TTR tetramer stabilizer for ATTR amyloidosis. If WAYLIVRA, TEGSEDI or the other drugs in our pipeline cannot compete effectively with these and other products with common or similar indications to the drugs in our pipeline, we may not be able to generate substantial revenue from our product sales.

If government or other third-party payors fail to provide adequate coverage and payment rates for TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, our revenue and prospects for profitability will be limited.

In both domestic and foreign markets, sales of our future products will depend in part upon the availability of coverage and reimbursement from third-party payors. The majority of patients in the United States who would fit within our target patient populations for our drugs 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 drug products 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 drugs affordable. Accordingly, TEGSEDI and, if approved, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, will face competition from other therapies and drugs for limited financial resources. We may need to conduct post-marketing studies to demonstrate the cost-effectiveness of any future products to satisfy third-party payors. These studies might require us to commit a significant amount of management time and financial and other resources. Third-party payors 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 payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions both in the United States and in international markets. For example, in the United States, recent health reform measures have resulted in reductions in Medicare and other healthcare funding, and there have been several recent U.S. Congressional inquiries and proposed federal legislation designed to, among other things, reform government program reimbursement methodologies for drug products and bring more transparency to drug pricing. Third-party coverage and reimbursement for our products or drugs may not be available or adequate in either the United States or international markets, which would negatively affect the potential commercial success of our products, our revenue and our profits.

If we are found in violation of federal or state "fraud and abuse" laws or other healthcare laws and regulations, we may be required to pay a penalty and/or be suspended from participation in federal or state healthcare programs, which may adversely affect our business, financial condition and results of operation.

We may be subject to various federal and state laws pertaining to healthcare "fraud and abuse," including anti-kickback laws and false claims laws. Anti-kickback laws, among other things, make it illegal for a prescription drug manufacturer to pay, or offer to pay, a healthcare provider to refer, purchase or prescribe a particular drug. Due to the breadth of the statutory and regulatory provisions, it is possible that government authorities and others might challenge our practices under anti-kickback or other fraud and abuse laws. Moreover, recent healthcare reform legislation has strengthened these laws. In addition, false claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment, to government third-party payors, including Medicare and Medicaid claims for reimbursed drugs that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws. If we violated fraud and abuse laws, we could face a combination of:

Given the significant penalties and fines that the government can impose on companies and individuals if convicted, allegations of violations often result in settlements even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and corporate integrity agreements. If the government were to allege or convict us or our executive officers of violating these laws, our business could be harmed. In addition, private individuals may bring similar actions under the False Claims Act. Our activities could be subject to challenge for the reasons discussed above and due to the broad scope of these laws and the increasing focus on these laws by law enforcement authorities. To the extent we have access to protected health information we could be subject to federal and state health information privacy and security laws, including without limitation, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information. State health information privacy and security laws in certain circumstances are more stringent than HIPAA and many of the state laws differ from each other in significant ways and may not have the same effect, thus complicating compliance. Our failure to comply with applicable federal and state health information privacy and security laws could subject us to significant fines and multi-year corrective action plans. TEGSEDI commercially launched in the U.S. in the fourth quarter of 2018 and as such we are now required to report annually to Centers for Medicare and Medicaid Services certain information related to payments and other transfers of value we may provide to physicians and teaching hospitals. Further, an increasing number of state laws require manufacturers to make reports to states on pricing and marketing information. Many of these laws are unclear as to what is required to comply with the laws. Given the lack of clarity in laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent state authorities.

Similar rigid restrictions related to anti-kickbacks and promoting and marketing medicinal products apply in the European Union and other countries. Authorities in these countries strictly enforce these restrictions. Even in those countries where we will not be directly responsible for promoting and marketing our products, inappropriate activity by any of our international commercialization partners we may have could harm us.

We plan to substantially depend on our collaboration with Novartis to develop and commercialize AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx.

We have granted Novartis an exclusive option to exclusively license each of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx pursuant to our strategic collaboration, option and license agreement with Novartis_. In February 2019, Novartis exercised its option to license AKCEA-APO(a)-L_Rx. We plan to substantially depend on Novartis to further develop and commercialize AKCEA-APO(a)-L_Rx and potentially AKCEA-APOCIII-L_Rx. We initiated this collaboration primarily to have Novartis:

Since Novartis has exercised its option to license AKCEA-APO(a)-L_Rx, we will rely on Novartis to further develop, obtain regulatory approvals for, and commercialize it. In general, we cannot control the amount and timing of resources that Novartis devotes to our strategic collaboration. If Novartis fails to use commercially reasonable efforts to further develop, obtain regulatory approvals for, or commercialize AKCEA-APO(a)-L_Rx, or if Novartis' efforts are not effective, our business may be negatively affected. Novartis could pursue other technologies or develop other drugs either on its own or in collaboration with others to treat the same diseases as we and Novartis plan to treat with AKCEA-APO(a)-L_Rx. Novartis could pursue these technologies and develop these other drugs at the same time as it is developing or commercializing AKCEA-APO(a)-L_Rx, and Novartis is not required to inform us of such activities.

If Novartis exercises its option to license AKCEA-APOCIII-L_Rx, we would rely on Novartis to further develop, obtain regulatory approvals for, and commercialize it. In general, we cannot control the amount and timing of resources that Novartis devotes to our strategic collaboration. If Novartis fails to use commercially reasonable efforts to further develop, obtain regulatory approvals for, or commercialize AKCEA-APOCIII-L_Rx, or if Novartis' efforts are not effective, our business may be negatively affected. Novartis could pursue other technologies or develop other drugs either on its own or in collaboration with others to treat the same disease as we and Novartis plan to treat with AKCEA-APOCIII-L_Rx. Novartis could pursue these technologies and develop these other drugs at the same time as it is developing or commercializing AKCEA-APOCIII-L_Rx and Novartis is not required to inform us of such activities.

Our strategic collaboration with Novartis may not continue for various reasons. Novartis can terminate our agreement at any time and is under no obligation to exercise the options we granted them. If Novartis stops developing or commercializing AKCEA-APO(a)-L_Rx, or does not exercise its option to license AKCEA-APOCIII-L_Rx_, we will have to seek additional sources for funding and may have to delay or reduce our development and commercialization plans for these drugs.

In addition, following Novartis’ exercise of its option to license AKCEA-APO(a)-L_Rxin February 2019, and if Novartis exercises its option to license AKCEA-APOCIII-L_Rx, Novartis will be responsible for the long-term supply of drug substance and finished drug product for the licensed drug.

Our strategic collaboration with Novartis may not result in the successful commercialization of AKCEA-APO(a)-L_Rx or AKCEA-APOCIII-L_Rx. If Novartis does not successfully develop, manufacture or commercialize AKCEA-APO(a)-L_Rx or AKCEA-APOCIII-L_Rx, we may receive limited or no revenues for these drugs.

We plan to substantially depend on our collaboration with PTC Therapeutics to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries.

In August 2018, we granted PTC Therapeutics International Limited the exclusive right to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries. We plan to substantially depend on PTC to commercialize these drugs in those geographic markets.

In general, we cannot control the amount and timing of resources that PTC devotes to our strategic collaboration. If PTC fails to use commercially reasonable efforts to obtain regulatory approvals for, or commercialize these drugs, or if PTC’s efforts are not effective, our business may be negatively affected. PTC could pursue other technologies or develop other drugs either on its own or in collaboration with others to treat the same diseases as we and PTC plan to treat with TEGSEDI and WAYLIVRA. PTC could pursue these technologies and develop these other drugs at the same time as it is developing or commercializing TEGSEDI and WAYLIVRA, and PTC is not required to inform us of such activities.

Our strategic collaboration with PTC may not continue for various reasons. If PTC stops commercializing a drug, we will have to seek additional sources for funding and may have to delay or reduce our commercialization plans for TEGSEDI and WAYLIVRA in Latin America or certain Caribbean countries.

Our strategic collaboration with PTC may not result in the successful commercialization of TEGSEDI or WAYLIVRA in Latin America or certain Caribbean countries. If PTC does not successfully commercialize TEGSEDI or WAYLIVRA, we may receive limited revenue for TEGSEDI or no revenue for WAYLIVRA in Latin America or certain Caribbean countries.

AKCEA-APOCIII-L_Rx and AKCEA-ANGPTL3-L_Rx may compete with WAYLIVRA, which could reduce our expected revenues for WAYLIVRA.

WAYLIVRA and AKCEA-APOCIII-L_Rx both inhibit the production of the same protein. We believe the enhancements we incorporated into AKCEA-APOCIII-L_Rx can provide greater patient convenience by allowing for significantly lower doses and less frequent administration compared to WAYLIVRA. As such, if Novartis exercises its option and successfully commercializes AKCEA-APOCIII-L_Rx while we are commercializing WAYLIVRA, to the extent physicians and patients elect to use AKCEA-APOCIII-L_Rx instead of WAYLIVRA, it will reduce the revenue we derive from WAYLIVRA. In addition, while AKCEA-ANGPTL3-L_Rx and WAYLIVRA use different mechanisms of action, if AKCEA-ANGPTL3-L_Rx can effectively lower triglyceride levels in FCS patients, it may likewise reduce the revenue we derive from WAYLIVRA.

If we cannot manufacture our drugs or contract with a third party to manufacture our drugs at costs that allow us to charge competitive prices to buyers, we will not be able to operate profitably.

To successfully commercialize TEGSEDI and, if approved, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, we will need to optimize and manage large-scale commercial manufacturing capabilities either on our own or through a third-party manufacturer. In addition, as our drug development pipeline matures, we will have a greater need for clinical study and commercial manufacturing capacity. We have no direct experience manufacturing pharmaceutical products of the chemical class represented by our drugs, called oligonucleotides, on a commercial scale for the systemic administration of a drug. We currently rely and expect to rely for the foreseeable future on Ionis' manufacturing capacity and efficiency and the capacity and efficiency of third parties to produce our oligonucleotide drugs, and our business could be negatively affected if Ionis and these third parties ceased to provide us with this capability for any reason. In addition, there are a small number of suppliers for certain raw materials that we use to manufacture our drugs, and some of these suppliers will need to increase their scale of production to meet our projected needs for commercial manufacturing. Further, if we cannot continue to acquire raw materials from these suppliers on commercially reasonable terms or at all, we may be required to find alternative suppliers, which could be expensive and time consuming and negatively affect our ability to develop or commercialize our drugs in a timely manner or at all. We may not be able to manufacture our drugs at a cost or in quantities necessary to make commercially successful products.

We do not have long-term supply agreements for our drugs. We cannot guarantee that we will have a steady supply of drug to complete clinical studies, make registration batches for approval or satisfy market demand if commercialized at prices that are commercially acceptable. In addition, if we need to change manufacturers for any reason, we will need to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. The delays associated with verifying a new manufacturer could negatively affect our ability to develop drugs in a timely manner or within budget.

Also, manufacturers must adhere to the FDA's current Good Manufacturing Practices regulations and similar regulations in foreign countries, which the applicable regulatory authorities enforce through facilities inspection programs. Our contract manufacturers may not comply or maintain compliance with Good Manufacturing Practices, or similar foreign regulations. Non-compliance could significantly delay or prevent receipt of marketing authorization for our drugs, including authorizations for WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, or result in enforcement action after authorization that could limit the commercial success of our drugs, including WAYLIVRA, TEGSEDI, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development.

We depend on Ionis and third parties to conduct our clinical studies for our drugs and any failure of those parties to fulfill their obligations could adversely affect our development and commercialization plans.

We depend on Ionis and independent clinical investigators, contract research organizations and other third-party service providers to conduct the clinical studies for our drugs and expect to continue to do so in the future. For example, we use clinical research organizations for the clinical studies for WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development. 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, approved protocols for the study and applicable regulations. Ionis and third parties may not complete activities on schedule or may not conduct our clinical studies in accordance with regulatory requirements or our stated protocols. The failure of these parties to carry out their obligations or a termination of our relationship with these third parties could delay or prevent the development, marketing authorization and commercialization of our drugs, including authorizations for WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development.

We may seek to form additional partnerships in the future with respect to WAYLIVRA, and our other drugs in development, and we may not realize the benefits of such partnerships.

Although we intend to develop and commercialize WAYLIVRA for patients with FCS and FPL ourselves, we may form partnerships, create joint ventures or collaborations or enter into licensing arrangements with third parties for the development and commercialization of our drugs in development. For example, we have granted PTC an exclusive license to commercialize WAYLIVRA in Latin America and certain Caribbean countries. We face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Any delays in entering into new strategic partnership agreements related to our drugs could delay the development and commercialization of our drugs and reduce their competitiveness even if they reach the market. Moreover, we may not be successful in our efforts to establish other strategic partnerships or other collaborative arrangements for any additional drugs because the potential partner may consider that our development pipeline is not advanced enough to justify a collaborative effort, or that WAYLIVRA and our other drugs in development do not have the requisite potential to demonstrate safety and efficacy in the target populations in other geographic markets. In addition, we will need to mutually agree with Ionis on the terms of any additional sublicenses to a third party for WAYLIVRA and our other drugs in development. If we cannot mutually agree on terms for a sublicense to a third party or if Ionis does not agree to a sublicense at all, it could delay our ability to develop and commercialize WAYLIVRA and our other drugs in development. Even if we are successful in establishing such a strategic partnership or collaboration, we cannot be certain that, following such a strategic transaction or collaboration, we will be able to progress the development and commercialization of the applicable drugs as envisioned, or that we will achieve the revenue that would justify such transaction. If we do not accurately evaluate the commercial potential or target market for a particular drug, we may relinquish valuable rights to that drug through future collaboration, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.

Ionis controls the direction of our business, and the concentrated ownership of our common stock will prevent you and other stockholders from influencing significant decisions.

Ionis owns 67,383,965 shares of our common stock, or approximately 75 percent, of the economic interest and voting power of our outstanding common stock as of February 20, 2019, which ownership will be expected to increase further if we achieve certain milestone events and pay the associated milestone payment in shares of common stock pursuant to the payment election. As long as Ionis beneficially controls a majority of the voting power of our outstanding common stock, it will generally be able to determine the outcome of all corporate actions requiring stockholder approval, including the election and removal of directors. Even if Ionis were to control less than a majority of the voting power of our outstanding common stock, it may influence the outcome of such corporate actions so long as it owns a significant portion of our common stock. If Ionis continues to hold its shares of our common stock, it could remain our controlling stockholder for an extended period of time or indefinitely.

The licensing transaction with Ionis and the common stock issuances in connection with the achievement of the TEGSEDI regulatory milestones has increased Ionis’ ownership percentage, and this increase, along with Ionis’ increased reliance on Akcea as a commercialization partner, given that Akcea could now be commercializing at least two Ionis-developed products (WAYLIVRA and TEGSEDI), may increase the length of time during which Ionis will control us. As a general matter, the TEGSEDI license agreement and the related Investor Rights Agreement increased Ionis’ control over our affairs. In addition, our TEGSEDI licensing agreement requires Ionis’ consent to the budget related to the commercialization of TEGSEDI and AKCEA-TTR-L_Rx.

Ionis' interests may not be the same as, or may conflict with, the interests of our other stockholders. You will not be able to affect the outcome of any stockholder vote while Ionis controls the majority of the voting power of our outstanding common stock. As a result, Ionis can control, directly or indirectly and subject to applicable law, all matters affecting us, including:

Because Ionis' interests may differ from ours or yours, actions that Ionis takes with respect to us, as our controlling stockholder, may not be favorable to us or you.

As a “controlled company” under the marketplace rules of the Nasdaq Stock Market, we may rely on exemptions from certain corporate governance requirements that provide protection to stockholders of companies that are subject to such requirements.

Ionis beneficially owns more than 50% of the voting power of our outstanding common stock. As a result, we are a “controlled company” under the marketplace rules of the Nasdaq Stock Market, or Nasdaq, and eligible to rely on exemptions from Nasdaq corporate governance requirements generally obligating listed companies to maintain:

Currently, a majority of our board is made up of independent directors. As a controlled company, we have and in the future may avail ourselves of some of these exemptions. Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to the Nasdaq corporate governance requirements described above.

If Ionis sells a controlling interest in our company to a third party in a private transaction, you may not realize a change of control premium on shares of our common stock, and we may become subject to the control of a presently unknown third party.

Ionis owns a significant equity interest in our company. This means that Ionis could choose to sell some or all of its shares of our common stock in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of our company.

Ionis' ability to privately sell its shares of our common stock, with no requirement for a concurrent offer to be made to acquire your shares of our common stock, could prevent you from realizing any change of control premium on your shares of our common stock that may otherwise accrue to Ionis on its private sale of our common stock. Additionally, if Ionis privately sells its significant equity interest in our company, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with those of other stockholders. In addition, if Ionis sells a controlling interest in our company to a third party, such a sale could negatively impact or accelerate any future indebtedness we may incur, and negatively impact any other commercial agreements and relationships, all of which may adversely affect our ability to run our business as described herein and may have a material adverse effect on our operating results and financial condition.

Certain of our directors and officers may have actual or potential conflicts of interest because of their positions with Ionis.

Damien McDevitt, Chief Business Officer for Ionis, and B. Lynne Parshall, Senior Strategic Advisor and board member for Ionis, serve on our board of directors and retain their positions or engagements with Ionis. In addition, these individuals own Ionis equity and Ionis equity awards. Ionis common stock, options to purchase Ionis common stock and other Ionis equity awards represent a significant portion of these individuals' net worth. Their position at Ionis and the ownership of any Ionis equity or equity awards creates, or may create the appearance of, conflicts of interest when we ask these individuals to make decisions that could have different implications for Ionis than the decisions have for us. In addition, our certificate of incorporation provides for the allocation of certain corporate opportunities between us and Ionis. Under these provisions, neither Ionis or its other affiliates, nor any of their officers, directors, agents or stockholders, will have any obligation to present to us certain corporate opportunities. For example, a director of our company who also serves as a director, officer or employee of Ionis or any of its other affiliates may present to Ionis certain acquisitions, in-licenses, potential development programs or other opportunities that may be complementary to our business and, as a result, such opportunities may not be available to us. To the extent attractive corporate opportunities are allocated to Ionis or its other affiliates instead of to us, we may not be able to benefit from these opportunities.

The resources Ionis provides us under the license agreements and the services agreement may not be sufficient for us to operate as a standalone company, and we may experience difficulty in separating our resources from Ionis.

Because we have not operated separately from Ionis in the past, we may have difficulty doing so. We will need to acquire resources in addition to, and eventually in lieu of, those provided by Ionis to our company, and may also face difficulty in separating our resources from Ionis' resources and integrating newly acquired resources into our business. In addition, Ionis may prioritize its own research, development, manufacturing and other needs ahead of the services Ionis has agreed to provide us, or Ionis employees who conduct services for us may prioritize Ionis' interests over our interests. Our business, financial condition and results of operations could be harmed if we have difficulty operating as a standalone company, fail to acquire resources that prove to be important to our operations or incur unexpected costs in separating our resources from Ionis' resources or integrating newly acquired resources.

We may not realize the benefits of the licensing transaction with Ionis if we are unable to successfully transition, integrate and support the development and commercialization of TEGSEDI and AKCEA-TTR-L_Rx.

As a result of the licensing transaction with Ionis, we need to successfully transition, integrate and support the assets we acquired related to the commercialization and development of TEGSEDI and AKCEA-TTR-L_Rx if we are to realize any of the potential benefits of the licensing transaction. The failure to meet these integration challenges, including the addition of TEGSEDI commercial team and other employees from Ionis and the coordination across geographies between our headquarters in Massachusetts and our commercialization team in other locations, including major global markets, could seriously harm our results of operations. Our failure to implement an orderly integration could result in failure of, or delays in, the development or commercialization of TEGSEDI and AKCEA-TTR-L_Rx. Such failure or delay could adversely impact our business, results of operations, financial condition and prospects for future growth.

Ionis currently performs or supports many important corporate functions for our company. Our consolidated financial statements reflect charges for these services on an allocation basis. Under our services agreement with Ionis we can use these Ionis services for a fixed term established on a service-by-service basis. However, we generally will have the right to terminate a service earlier if we give notice to Ionis. Partial reduction in the provision of any service requires Ionis' consent. In addition, either party will be able to terminate the agreement due to a material breach of the other party, upon prior written notice, subject to limited cure periods.

We will pay Ionis mutually agreed upon fees for these services, based on Ionis' costs of providing the services. Since we negotiated the services agreement in the context of a parent subsidiary relationship, the terms of the agreement, including the fees charged for the services, may be higher or lower than those that would be agreed to by parties bargaining at arm's length for similar services and may be higher or lower than the costs reflected in the allocations in our historical consolidated financial statements. Ionis will pass third party costs through to us at Ionis' cost. In addition, while Ionis provides us these services, our operational flexibility to modify or implement changes with respect to such services or the amounts we pay for them will be limited.

We may not be able to replace these services or enter into appropriate third-party agreements on terms and conditions, including cost, comparable to those that we will receive from Ionis under our services agreement. Additionally, after the agreement terminates, we may not sustain the services at the same levels or obtain the same benefits as when we were receiving such services and benefits from Ionis. When we begin to operate these functions separately, if we do not have our own adequate systems and business functions in place, or cannot obtain them from other providers, we may not operate our business effectively or at comparable costs, and our business may suffer. In addition, we have historically received informal support from Ionis, which may not be addressed in our services agreement. The level of this informal support will diminish and could end in the future.

We may not be able to fully realize the expected benefits of our license agreements with Ionis.

We have development, commercialization and license agreements with Ionis pursuant to which, subject to certain restrictions, we and Ionis will share development responsibilities for WAYLIVRA, TEGSEDI, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development. We are paying for research and development costs and reimbursing Ionis for Ionis' employees supporting our development activities. Until we build or acquire our own capabilities to replace those Ionis is providing to us, particularly development, regulatory and manufacturing services, we will be heavily dependent on Ionis.

While we and Ionis intend the license agreements, on the whole, to bolster our capabilities, certain terms of the license agreements and the other related agreements with Ionis may limit our ability to achieve the expected benefits of these transactions, including:

Each of the foregoing terms and Ionis' other rights under the license agreements, could limit our ability to realize the expected benefits of the license agreements or otherwise limit our ability to pursue transactions or development efforts other stockholders may view as beneficial. Further, if Ionis does not continue to own a significant portion of our equity, Ionis' incentive to help us would be diminished. If we fail to achieve the expected benefits of our agreements with Ionis, it may be more difficult, time consuming or expensive for us to develop and commercialize WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development and continue the commercialization of TEGSEDI, or may result in our drugs being later to market than those of our competitors or prevent them from ever getting to market. If these events cause delays in new product development we could lose the first in class products in a given therapeutic area.

If we breach our obligations under any of our license agreements with Ionis, we could lose our rights to WAYLIVRA, TEGSEDI, AKCEA-TTR-L_Rx and our other drugs in development.

We obtained our rights to WAYLIVRA, TEGSEDI, AKCEA-TTR-L_Rx and our other drugs in development under our license agreements with Ionis. If we breach our obligations under these license agreements and, as a result, Ionis subsequently exercises its right to terminate it, we generally would not be able to continue to develop or commercialize TEGSEDI, WAYLIVRA, AKCEA-TTR-L_Rx and our other drugs in development that incorporate Ionis' intellectual property, and Ionis would receive a royalty-free, nonexclusive license to our improvements to those programs, meaning we would lose the benefits of our investment in these programs. If we breach our obligations under the license agreement with respect to AKCEA-APO(a)-L_Rx or AKCEA-APOCIII-L_Rx and, as a result, Ionis exercises its right to terminate it, then our strategic collaboration with Novartis would convert into a direct strategic collaboration between Novartis and Ionis, and Ionis would receive all of the revenue and other benefits associated with that strategic collaboration. Similarly, if we breach our obligations under the license agreement with respect to TEGSEDI or AKCEA-TTR-L_Rx and, as a result, Ionis exercises its right to terminate it, then our strategic collaboration with PTC in Latin America and certain Caribbean countries would convert into a direct strategic collaboration between PTC and Ionis, and Ionis would receive all of the revenue and other benefits associated with that strategic collaboration.

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 secure and maintain intellectual property rights that protect TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development. However, patents may not issue from any of our pending patent applications in the United States or in other countries and we may not be able to obtain, maintain or enforce our owned or licensed patents and other intellectual property rights which could impact our ability to compete effectively. In addition, the scope of any of our owned or licensed 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.

Composition of matter patents on the active pharmaceutical ingredient for a product are generally considered to be the strongest form of intellectual property protection for pharmaceutical products, as such patents provide protection without regard to any method of use. Our WAYLIVRA patent portfolio currently includes:

The natural term of the issued U.S. patent covering the WAYLIVRA composition of matter will expire in 2023, but we plan to seek to extend the U.S. patent expiration beyond 2023 based upon the development and regulatory review period in the United States. The natural term of the granted European and Australian patents covering WAYLIVRA will expire in 2024, but we plan to seek to extend each of these patents beyond 2024 based upon the development and regulatory review periods in Europe and Australia.

The natural term of the last expiring issued U.S. patent covering the composition of matter of TEGSEDI will expire in 2031. Patents issued in other countries will have the same natural term. We plan to seek to extend the term of one patent covering TEGSEDI in the U.S., if approved, and any other jurisdictions where such extension is available, based upon the development and regulatory review periods for TEGSEDI and in accordance with applicable laws.

We cannot be certain that the U.S. Patent and Trademark Office, or U.S. PTO, and courts in the United States or the patent offices and courts in foreign countries will consider the claims in our owned or licensed patents and applications covering WAYLIVRA, TEGSEDI, AKCEA-APO(a)-L_Rx, AKCEA-TTR-L_Rx and our other drugs 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, including through legal action.

If we or any licensor partner loses or cannot obtain patent protection for TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx or our other drugs in development it could have a material adverse impact on our business.

Intellectual property litigation could cause us to spend substantial resources and prevent us from pursuing our programs.

From time to time we may 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. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our strategic partners to develop, manufacture, market and sell our drugs and use our proprietary technologies without infringing the proprietary rights and intellectual property of third parties. Extensive litigation regarding patents and other intellectual property rights is common in the biotechnology and pharmaceutical industries. We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our drugs and technology, including interference, derivation, reexamination, post-grant review, opposition, cancellation or similar proceedings before the U.S. PTO or its foreign counterparts.

Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. For example, a potential competitor was issued a patent which they have broadly characterized in their annual report on Form 10-K for the year ended December 31, 2017 as being directed to single-stranded antisense polynucleotide molecules capable of inhibiting expression of the human transthyretin gene, and having certain combinations of structural features. This third party has also attempted to broadly characterize certain other patents that they hold. While we believe that we would have substantial defenses in the event this competitor brought a claim against us with respect to TEGSEDI or AKCEA-TTR-L_Rx, patent litigation is inherently uncertain, involves substantial cost and is a distraction to management. Moreover, our stock price may be impacted by the existence of or developments during a litigation, even developments that are preliminary in nature.

We may not be aware of all such intellectual property rights potentially relating to our drugs and their uses. If a third party claims that WAYLIVRA, TEGSEDI, AKCEA-APO(a)-L_Rx, AKCEA-TTR-L_Rx, our other drugs in development or our technology infringe its patents or other intellectual property rights, we or our partners 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 United States 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. Thus, we do not know with certainty that our drugs or our intended commercialization thereof, does and will not infringe or otherwise violate any third party's intellectual property.

We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents on our drugs in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those we could obtain in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products. In addition, competitors may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patent rights or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biotechnology. This could make it difficult for us to stop competitors from infringing our patent rights or misappropriating our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit our right to enforce our patent rights against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. We must ultimately seek patent protection on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

In addition, proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patent rights at risk of being invalidated or interpreted narrowly, could put our owned or licensed patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

If we do not obtain additional protection under the Hatch-Waxman Amendments and similar foreign legislation by extending the patent protection for TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx, and our other drugs in development, our business may be materially harmed.

Depending upon the timing, duration and specifics of the first FDA marketing authorization of TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx, and our other drugs in development, a United States patent that we own or license may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments allow the owner of an approved product to extend patent protection for up to five years as compensation for patent term lost during product development and the FDA regulatory review process. During this period of extension, the scope of protection is limited to the approved product and approved uses.

In 2018 we applied for patent term extensions to U.S. patents covering the TEGSEDI compound, composition and uses to recapture a portion of the term lost during regulatory review. Although we have applied for patent term extension for TEGSEDI, and plan on seeking patent term restoration for our other products, we may not succeed if, for example, we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we cannot obtain patent term restoration or the term of any such patent restoration is less than we request, our competitors may enter the market and compete against us sooner than we anticipate, and our ability to generate revenue could be materially adversely affected.

Changes in United States patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

Recent United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the United States Congress, the federal courts, and the U.S. PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

If we and our partners do not adequately protect the trademarks and trade names for our products, then we and our partners may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our competitors or other third parties may challenge, infringe or circumvent the trademarks or trade names for our products. We and our partners may not be able to protect these trademarks and trade names. In addition, if the trademarks or trade names for one of our products infringe the rights of others, we or our partners may be forced to stop using the trademarks or trade names, which we need for name recognition in our markets of interest. If we cannot establish name recognition based on our trademarks and trade names, we and our partners may not be able to compete effectively and our business may be adversely affected.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

Should any of these events occur, they could significantly harm our business, results of operations and prospects.

We will need to significantly increase the size of our organization, and we may experience difficulties in managing growth.

We are currently a small company. To continue the commercialization of TEGSEDI and commercialize our drugs in development that we are responsible for commercializing, we will need to increase our operations and expand our use of third-party contractors. We plan to continue to build our compliance, financial and operating infrastructure to ensure the maintenance of a well-managed company including hiring additional staff within our regulatory, clinical and medical affairs groups and an in-house commercial organization initially focused on marketing and selling TEGSEDI and, if approved, WAYLIVRA. We have added a significant number of new employees to our sales and marketing capability to commercialize TEGSEDI.

We may also anticipate needs for growth that do not materialize. For example, in anticipation of WAYLIVRA’s potential approval, we added a significant number of new employees to our sales and marketing capability to develop WAYLIVRA in the second half of 2017. However, as a result of our receipt of a complete response letter, or CRL, from the FDA regarding the new drug application for WAYLIVRA, on September 6, 2018, we enacted a plan to reorganize our workforce to better align with the immediate needs of our business. In connection with this reorganization plan, we reduced our workforce by approximately 12%. If WAYLIVRA is subsequently approved in the United States, we will again need to increase our operations and expand our use of third-party contractors. We cannot assure you that we will not build out our compliance, financial or operating infrastructure again in anticipation of developments that do not occur or that occur later than we anticipate.

The current and future growth will impose significant added responsibilities on our management, including the need to maintain, integrate, optimize and manage additional employees. In addition, to meet our obligations as a public company, we will need to increase our general and administrative capabilities. Our current management, personnel and systems may not be adequate to support this growth. Our future financial performance and our ability to commercialize our drugs and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to:

Our staff, financial resources, systems, procedures or controls may be inadequate to support our operations and our management may be unable to successfully manage future market opportunities or our relationships with customers and other third parties.

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 drug will enter into clinical trials, when we anticipate completing a clinical study, when we anticipate filing an application for marketing authorization, or when we or our partners plan to commercially launch a drug. We base our estimates on present facts and a variety of assumptions. Many underlying assumptions are outside of our control. If we do not achieve milestones in accordance with our or our investors' or securities analysts' expectations, including milestones related to WAYLIVRA, TEGSEDI, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development, the price of our securities could decrease.

The loss of key personnel, or if we cannot 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 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 development work and marketing, sales and commercial support personnel to perform commercialization activities. We may not be able to attract and retain skilled and experienced scientific and commercial personnel on acceptable terms because of intense competition for experienced personnel among many pharmaceutical and health care companies, universities and non-profit research institutions. In addition, failure to successfully complete clinical studies, obtain regulatory approvals or effectively commercialize drugs may make it more challenging to recruit and retain qualified personnel.

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 TEGSEDI, WAYLIVRA, AKCEA-APO(a)-L_Rx,AKCEA-TTR-L_Rx and our other drugs in development. We have clinical study insurance coverage and commercial product liability insurance coverage. In addition, Novartis has agreed to indemnify us against specific claims arising from Novartis' development and commercialization of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx, and PTC has agreed to indemnify us against specific claims arising from PTC’s commercialization of TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries. However, this insurance coverage and indemnities may not be adequate to cover claims against us. Insurance may not be available to us at an acceptable cost, if at all. Regardless of their merit or eventual outcome, products liability claims may result in decreased demand for our drug products, injury to our reputation, withdrawal of clinical study volunteers and loss of revenue. Thus, whether or not we are insured or indemnified, a product liability claim or product recall may result in losses that could be material.

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 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 cannot completely eliminate the risk of contamination, which could cause:

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 development, manufacturing or commercialization 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.

A variety of risks associated with operating our business and marketing our drugs internationally could materially adversely affect our business.

In addition to our U.S. operations, we are commercializing TEGSEDI in Europe and Canada and, following approval, plan to establish operations to commercialize our products in other countries globally. We face risks associated with our current and planned 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:

Our business activities outside of the United States 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 a material 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.

On June 23, 2016, the United Kingdom, or the UK, voted to leave the EU in an advisory referendum, which is generally referred to as Brexit. On March 29, 2017, the UK delivered notice under Article 50 of the Lisbon Treaty of its intent to leave the EU, beginning a two year negotiation period for the UK and the 27 remaining members of the EU to reach agreement on the terms of Brexit. The UK is a significant pharmaceutical market, and Brexit may lead to legal uncertainty and potentially divergent laws and regulations between the UK and the EU as the UK determines which EU laws to replicate or replace. We cannot predict whether or not the UK will significantly alter its current laws and regulations in respect of the pharmaceutical industry and, if so, what impact any such alteration would have on us or our business.

As part of Brexit, the EMA, currently situated in London, is expected to relocate to Amsterdam. There is a risk that the relocation process will interrupt current administrative routines and occupy resources, which may lead to delays in the EMA’s handling of our WAYLIVRA application and generally adversely affect our dealings with the EMA. Further, there is considerable uncertainty resulting from a lack of precedent and the complexity of the UK and EU’s intertwined legal regimes as to how Brexit will impact the life sciences industry in Europe, including our company, including with respect to ongoing or future clinical trials. The impact will largely depend on the model and means by which the UK’s relationship with the EU is governed post‑Brexit. For example, following Brexit, the UK will no longer be covered by the centralized procedures for obtaining EU-wide marketing authorization from the EMA and, unless a specific agreement is entered into, a separate process for authorization of drug products, including our product candidates, will be required in the UK, the potential process for which is currently unclear. Brexit may adversely affect and delay our ability to commercialize, market and sell our product candidates in the UK. Brexit may also result in a reduction of funding to the EMA if the UK no longer makes financial contributions to European institutions, such as the EMA. If UK funding is so reduced, it could create delays in the EMA issuing regulatory approvals for our product candidates and, accordingly, have a material adverse effect on our business, financial condition, results or prospects.

If a natural or man-made disaster strikes our development or manufacturing facilities or otherwise affects our business, it could delay our progress developing and commercializing our drugs.

We currently rely on Ionis to manufacture our clinical supplies in a manufacturing facility located in Carlsbad, California and third party contract manufacturing organizations to manufacture active pharmaceutical ingredient and finished drug product for TEGSEDI. The facilities and the equipment required to develop and manufacture our drugs would be costly to replace and could require substantial lead time to repair or replace. Natural or man-made disasters, including, without limitation, earthquakes, floods, fires and acts of terrorism may harm these facilities. If a disaster affects these facilities, our and our partners' development and commercialization efforts would be delayed. Although we possess insurance for damage to our property and the disruption of our business from casualties, 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, a shutdown of the U.S. government, including the FDA could harm or delay our development and commercialization activities.

Our business and operations would suffer in the event of computer system failures.

We are dependent upon our own or 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. 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/or state breach notification laws and foreign law equivalents, subject us to mandatory 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/or 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, there can be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or 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.

We are an "emerging growth company" and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Prior to the completion of our IPO in July 2017, no public market for our common stock existed. An active public trading market for our common stock may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares. Additionally, as of February 20, 2019, Ionis owns approximately 75 percent of our outstanding common stock. Ionis intends to hold its shares of our common stock for the foreseeable future, which could reduce the public market for our stock.

The market price for our common stock may be volatile, which could contribute to the loss of your investment.

Fluctuations in the price of our common stock could contribute to the loss of all or part of your investment. There has been a public market for our common stock for a limited period of time. The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our common stock and our common stock may trade at prices significantly below your purchase price. In such circumstances the trading price of our common stock may not recover and may experience a further decline.

Broad market and industry factors may materially harm the market price of our common stock irrespective of our operating performance. The stock market in general, and NASDAQ and the market for biotechnology companies in particular, have 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 which 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.

Sales of a substantial number of shares of our common stock by our existing stockholders in the public market may cause our stock price to decline.

Sales of our common stock in the public market, or the perception that these sales may occur, could cause the market price of our common stock to decline. Novartis has agreed that it will not sell any of its shares until the earlier of January 5, 2020 or six months after we stop developing a drug under our agreement with Novartis. Thereafter, Novartis may only sell a limited number of shares each day. In addition, as of February 20, 2019 Ionis owns 67,383,965 shares, or approximately 75 percent, of our common stock. While the shares of common stock held by Ionis are eligible for sale in the public market, any sales by Ionis will be subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. In addition, 18,500,000 shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans are eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. To the extent the holders of these shares sell them into the market or our stockholders believe these sales might occur, the market price of our common stock could decline.

We cannot predict with certainty whether or when Ionis will sell a substantial number of shares of our common stock. Ionis' sale of a substantial number of shares, or a perception that such sales could occur, could significantly reduce the market price of our common stock.

You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.

Changes in tax laws, regulations and treaties could affect our future taxable income.

A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could materially affect us. For Example, on December 22, 2017, the United States enacted H.R.1., known as the Tax Cuts and Jobs Act, which represented a substantial change to tax laws in the United States, but which did not have a material impact on our financial statements because we maintain a valuation allowance on all our net operating losses and other deferred tax assets. However, any future changes in tax laws in any U.S. or non-U.S jurisdictions could have a material effect on our business.

We are subject to U.S. federal, state, local and sales taxes in the United States 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.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.

Provisions in our amended and restated certificate of incorporation, our amended and restated bylaws and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. Further, Novartis has agreed that until Novartis holds less than 7.5% of our outstanding common stock, Novartis will vote the Novartis Private Placement Shares consistent with the recommendation of our board of directors. Although Novartis has retained the right to vote the Novartis Private Placement Shares in its sole discretion in connection with certain enumerated matters, including any transaction which would result in our change of control, our agreement with Novartis may nevertheless delay or prevent changes in our management or board of directors.

In addition, because we are incorporated in the State of Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit your opportunity to receive a premium for your shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Our bylaws designate the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that our stockholders may initiate, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our bylaws provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware and federal court within the State of Delaware will be exclusive forums for any:

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our bylaws described above. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Our corporate headquarters is located in Boston, Massachusetts. We currently occupy approximately 30,175 square feet of office space. Our lease expires in November 2028. We also lease approximately 4,723 square feet of office space located in Carlsbad, California, which lease is set to expire in June 2023.

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded publicly through The Nasdaq Global Select Market under the symbol “AKCA.” Prior to our initial public offering, or IPO, on July 19, 2017, there was no public trading market for our common stock. Our initial public offering was priced at $8.00 per share on July 17, 2017. On February 20, 2019, the closing price of our common stock on The Nasdaq Global Select Market was $26.25 per share.

As of February 20, 2019, there were 8 stockholders of record of our common stock. Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Set forth below is a chart comparing the total return on an indexed basis of $100 invested on July 19, 2017, which is the date our shares began trading, in our common stock, the NASDAQ Composite Index (total return) and the NASDAQ Biotechnology Index through December 31, 2018. The total return assumes reinvestment of dividends. Historical stockholder return is not necessarily indicative of the performance to be expected for any future periods.

Among Akcea Therapeutics, Inc., the NASDAQ Composite Index and the NASDAQ Biotechnology Index

*$100 invested on July 19, 2017 in stock or June 30, 2017 index, including reinvestment of dividends. Fiscal year ending December 31.

During the year ended December 31, 2018, we did not issue or sell any unregistered securities not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

On July 19, 2017, we closed our IPO of 17,968,750 shares of common stock at an offering price of $8.00 per share, resulting in gross proceeds to us of approximately $143.8 million. All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-216949), which was declared effective by the SEC on July 13, 2017. Cowen and Company, LLC, Stifel, Nicolaus & Company, Incorporated and Wells Fargo Securities, LLC acted as joint book-running managers for our initial public offering and BMO Capital Markets Corp. acted as lead manager for our initial public offering. The offering commenced on June 20, 2017 and did not terminate before all of the securities registered in the registration statement were sold.

As of December 31, 2018, we have applied all of the offering proceeds in accordance with the planned use of proceeds from our offering as described in final prospectus for our IPO dated July 13, 2017 and filed with the SEC pursuant to Rule 424(b)(4). As of December 31, 2018, all expenses incurred in connection with our initial public offering had been paid.

This selected financial data should be read in conjunction with our audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K. Our consolidated financial information may not be indicative of our future performance. Set forth below are our selected consolidated financial data (in thousands, except per share amounts):

	Years Ended December 31,
	2018			2017 ⁽¹⁾			2016			2015			2014
				(as revised)
Consolidated Statement of Operations Data:
Product revenue	$	2,237		$	—		$	—		$	—		$	—
Licensing revenue	$	12,000		$	—		$	—		$	—		$	—
Research and development revenue under collaborative agreements	$	50,630		$	43,401		$	—		$	—		$	—
Cost of sales - product	$	1,820		$	—		$	—		$	—		$	—
Cost of sales - intangible asset amortization	$	2,713		$	—		$	—		$	—		$	—
Cost of license	$	7,200		$	—		$	—		$	—		$	—
Research and development expenses	$	130,340		$	126,890		$	68,459		$	50,885		$	29,028
Selling, general and administrative expenses	$	153,610		$	36,981		$	15,053		$	10,553		$	995
Net loss	$	(225,821	)	$	(121,559	)	$	(83,217	)	$	(61,422	)	$	(30,023	)
Net loss per share of preferred stock, basic and diluted	$	—		$	(1.80	)	$	(2.88	)	$	(2.13	)	$	(1.04	)
Weighted-average shares of preferred stock outstanding, basic and diluted		—			15,748			28,885			28,885			28,885
Net loss per share of common stock owned by Ionis, basic and diluted	$	(2.74	)	$	(3.08	)	$	—		$	—		$	—
Weighted-average shares of common stock outstanding owned by Ionis, basic and diluted		59,812,394			20,669,446			—			—			—
Net loss per share of common stock owned by others, basic and diluted	$	(2.87	)	$	(3.08	)	$	—		$	—		$	—
Weighted-average shares of common stock outstanding owned by others, basic and diluted		21,553,407			9,593,322			—			—			—

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This financial review presents our operating results for each of the three years in the period ended December 31, 2018, and our financial condition at December 31, 2018. Except for the historical information contained herein, the following discussion contains forward-looking statements which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically under Item 1A of Part I of this report, "Risk Factors." In addition, the following review should be read in connection with the information presented in our consolidated financial statements and the related notes to our consolidated financial statements as indexed on page F-1.

We are a commercial stage biopharmaceutical company developing and marketing drugs globally to treat patients with rare and serious diseases. We are bringing novel and transformative medicines to patients by driving clinical program execution, understanding patient and physician needs, preparing the market, creating market access, and commercializing our products on a global basis. As an affiliate of Ionis Pharmaceuticals, Inc., or Ionis, we have a robust portfolio of development-, registration- and commercial-stage drugs covering multiple targets and diseases using antisense therapeutics. Our immediate focus is on the commercial launch of our first commercially approved therapy, TEGSEDI in the United States, or U.S., the European Union, or E.U., and Canada. TEGSEDI treats the polyneuropathy caused by hereditary transthyretin-mediated amyloidosis, or hATTR amyloidosis, in adults. We are also focused on commercial preparations for WAYLIVRA in the E.U. and on regulatory discussions for WAYLIVRA in the U.S. and Canada. The Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, has adopted a positive opinion recommending conditional marketing authorization of WAYLIVRA as an adjunct to diet in adult patients with genetically confirmed familial chylomicronemia syndrome, or FCS, who are at high risk for pancreatitis, in whom response to diet and triglyceride lowering therapy has been inadequate. The positive opinion will now be referred to the EC, which grants marketing authorization for medicines in the European Union, as well as to European Economic Area members Iceland, Liechtenstein and Norway. With this positive opinion, and, pending adoption of the positive opinion by the EC, we plan to leverage our existing commercial infrastructure in Europe to market WAYLIVRA. FCS is an ultra-rare, devastating hereditary disease that causes unpredictable and potentially fatal acute pancreatitis, chronic complications due to permanent organ damage, and a severe impact on daily living. The hallmark of FCS is extremely elevated triglycerides. There are approximately 3,000 to 5,000 patients with FCS worldwide. We are advancing a mature pipeline of novel drugs with the potential to treat multiple diseases. TEGSEDI, WAYLIVRA and our pipeline drugs, AKCEA-APO(a)-L_Rx, AKCEA-ANGPTL3-L_Rx, AKCEA-APOCIII-L_Rx and AKCEA-TTR-L_Rx,are all based on Ionis’ antisense technology platform.

We are continuing to build our current commercial infrastructure to support TEGSEDI, and plan to use this infrastructure to support WAYLIVRA in the E.U. and the other drugs in our pipeline, if approved, as we anticipate further commercialization in serious and rare diseases. A key element of our commercial strategy is to provide the specialized, patient-centric support required to successfully address rare disease patient populations. We believe our focus on treating patients with inadequately addressed rare and serious diseases will allow us to partner efficiently and effectively with the specialized medical community that supports these underserved patient communities. Our supply chain is fully operational in both the U.S. and E.U. To further support the hATTR amyloidosis community, Akcea and Ambry Genetics Corporation, or Ambry, a Konica Minolta company, launched hATTR Compass™ in the U.S. and Canada, a no-cost, confidential genetic testing and genetic counseling program for people with suspected hATTR amyloidosis. This program is intended to empower people with accurate genetic information, so they can make informed decisions about their healthcare.

In 2018, we obtained TEGSEDI and AKCEA-TTR-L_Rx, the ligand conjugated antisense, or LICA, drug in development for TTR, under an exclusive license from Ionis. With the licensing agreement, we have expanded our efforts to treat people with serious and under-served rare diseases focusing on transthyretin amyloidosis, or ATTR amyloidosis, and cardiometabolic diseases.

TEGSEDI is an antisense drug designed to reduce the production of the TTR protein. In patients with hATTR amyloidosis, a severe, rare and fatal genetic disease, both the hereditary and wild-type, or wt, TTR protein builds up as fibrils in tissues, such as the peripheral nerves, heart, gastrointestinal system, eyes, kidneys, central nervous system, thyroid and bone marrow. The presence of TTR fibrils interferes with the normal functions of these tissues. The progressive accumulation of TTR amyloid deposits in these tissues and organs leads to sensory, motor and autonomic dysfunction often having debilitating effects on multiple aspects of a patient’s life and eventually leads to death.

We estimate that there are approximately 50,000 patients globally with hATTR amyloidosis, the majority of whom have symptoms of polyneuropathy.

TEGSEDI was discovered and developed by Ionis Pharmaceuticals and was licensed by us in April 2018. In addition to TEGSEDI, we and Ionis are developing AKCEA-TTR-L_Rx for hereditary and wild-type forms of transthyretin amyloidosis, or ATTR amyloidosis. We initiated clinical development of AKCEA-TTR-L_Rx in 2018.

Our lipid/cardiometabolic drugs, WAYLIVRA, AKCEA-APO(a)-L_Rx, AKCEA-ANGPTL3-L_Rx and AKCEA-APOCIII-L_Rx, are all based on antisense technology developed by Ionis. We are focused on commercial preparations for WAYLIVRA in the E.U. and on regulatory discussions for WAYLIVRA the U.S. and Canada. The Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, has adopted a positive opinion recommending conditional marketing authorization of WAYLIVRA as an adjunct to diet in adult patients with genetically confirmed familial chylomicronemia syndrome, or FCS, who are at high risk for pancreatitis, in whom response to diet and triglyceride lowering therapy has been inadequate. The positive opinion will now be referred to the EC, which grants marketing authorization for medicines in the European Union, as well as to European Economic Area members Iceland, Liechtenstein and Norway. With this positive opinion, and, pending adoption of the positive opinion by the EC, we plan to leverage our existing commercial infrastructure in Europe to market WAYLIVRA. On May 10, 2018, the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee voted to support approval of WAYLIVRA for the treatment of people with FCS. On August 27, 2018, we and Ionis announced that we received a Complete Response Letter from the Division of Metabolism and Endocrinology Products of the FDA regarding the New Drug Application for WAYLIVRA. The FDA did not cite any new concerns beyond those described in the advisory committee briefing book, in which the main areas of focus were the dosing schedule and management of thrombocytopenia. We continue to feel strongly that WAYLIVRA demonstrates a favorable benefit/risk profile in people with FCS, as was reflected in the positive outcome from the Advisory Committee meeting. We received a preliminary notification of a Notice of Noncompliance withdrawal letter, or NON-W, from Health Canada for WAYLIVRA. We and Ionis are engaged with the FDA and plan to work with Health Canada to confirm a path forward for WAYLIVRA.

FCS is a severe and rare lipid disorder characterized by extremely elevated levels of triglycerides. FCS has life-threatening consequences such as acute pancreatitis and the lives of patients with this disease are impacted daily by the associated symptoms. In our clinical program, we have observed consistent and substantial (>70%) decreases in triglycerides and improvements in other manifestations of FCS, including pancreatitis attacks and abdominal pain. We believe the safety and efficacy data from the WAYLIVRA program demonstrate a favorable risk-benefit profile for patients with FCS. WAYLIVRA is also in Phase 3 clinical development for the treatment of familial partial lipodystrophy, or FPL. Our other three lipid/cardiometabolic drugs are currently in Phase 2 clinical development.

We are continuing to build our global infrastructure as we begin to commercialize TEGSEDI and prepare to commercialize WAYLIVRA in the E.U., and we have commercial teams in place in the U.S., E.U. and Canada. In addition, in August 2018, we entered into a licensing agreement with PTC Therapeutics International Limited, or PTC Therapeutics, to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries. A key element of our commercial strategy is to provide the specialized, patient-centric support required to successfully address rare disease patient populations. We believe our focus on treating patients with inadequately addressed rare and serious diseases will allow us to partner efficiently and effectively with the specialized medical community that supports these underserved patient communities.

exclusively license AKCEA-APO(a)-L_Rx, Akcea and Novartis established a more definitive framework under which they would negotiate the co-commercialization of AKCEA-APO(a)-L_Rx between the two companies in selected markets. Included in this framework is an option by which Novartis could solely commercialize AKCEA-APO(a)-L_Rx in exchange for Novartis paying Akcea increased commercial milestone payments based on sales of AKCEA-APO(a)-L_Rx. We will share any license fees, milestone payments and royalties equally with Ionis.

Our strategic collaboration with Novartis has a potential aggregate transaction value of over $1.0 billion, plus royalties, which we would generally be required to share equally with Ionis. The calculation of potential aggregate transaction value assumes that Novartis licenses, successfully develops and achieves regulatory approval for both AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx in the U.S., E.U. and Japan, and that Novartis achieves pre-specified sales targets with respect to both drugs. In addition, to the upfront payment that we have received, for AKCEA-APO(a)-L_Rx we are eligible to receive up to $675.0 million in milestone payments, including $25.0 million for the achievement of a development milestone, up to $290.0 million for the achievement of regulatory milestones and up to $360.0 million for the achievement of commercialization milestones. In addition, for AKCEA-APOCIII-L_Rx we are eligible to receive up to $530.0 million in milestone payments, including $25.0 million for the achievement of a development milestone, up to $240.0 million for the achievement of regulatory milestones and up to $265.0 million for the achievement of commercialization milestones. We are also eligible to receive tiered royalties in the mid-teens to low twenty percent range on net sales of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx, and Novartis will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the product in a specific country. We will pay 50% of these license fees, milestone payments and royalties to Ionis as a sublicense fee. See Note 6, Strategic Collaboration with Novartis, to our consolidated financial statements for additional information.

We began recognizing revenue under the collaboration with Novartis upon its initiation in 2017. Our collaboration revenue for 2018 was $50.6 million. In addition, we began to recognize TEGSEDI product revenue in 2018 and recognized licensing revenue in the third quarter of 2018 related to our collaboration and license agreement with PTC Therapeutics. Our product revenue and licensing revenue for 2018 was $2.2 million and $12.0 million respectively. Our total revenue for 2018 was $64.9 million. Our net losses have resulted from costs incurred in developing TEGSEDI, WAYLIVRA and the other drugs in our pipeline, preparing to commercialize TEGSEDI and potentially WAYLIVRA upon approval, and general and administrative activities associated with our operations. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future. The transition to profitability is dependent upon the successful development, approval, and commercialization of our products and product candidates and the achievement of a level of revenue adequate to support our cost structure. We incur meaningful expenses to support commercialization, including manufacturing, marketing, sales and distribution functions. Further, we incur additional costs associated with operating as a public company.

As of December 31, 2018, we had cash, cash equivalents and investments of $252.6 million. We have funded our operating activities through a $100.0 million cash contribution that we received from Ionis in 2015, $75.0 million from initiating our collaboration with Novartis that we received in the first quarter of 2017 and $106.0 million in drawdowns under our line of credit with Ionis that we received in the first and second quarters of 2017. In July 2017, we completed our IPO and raised $182.3 million in net proceeds from the IPO including the $50.0 million Novartis concurrent private placement. In April 2018, we completed a licensing transaction with Ionis to commercialize TEGSEDI. In conjunction with this transaction, Ionis purchased 10.7 million shares of our common stock for $200.0 million. As a result of the MA approval for TEGSEDI in the EU, on August 3, 2018 we issued 1,597,571 shares of our common stock to Ionis as payment of the $40.0 million regulatory milestone for TEGSEDI, and as a result of the regulatory approval for TEGSEDI in the United States, on October 17, 2018 we issued 1,671,849 shares of our common stock to Ionis as payment of the $50.0 million regulatory milestone for TEGSEDI. See Note 7, License Agreements and Services Agreement with Ionis, to our consolidated financial statements included in this Form 10-K for more information about our TTR licensing agreement with Ionis. We plan to use our cash, cash equivalents and investments on hand as of December 31, 2018 to further our commercialization efforts of TEGSEDI and WAYLIVRA and continue the advancement of our pipeline drugs.

We expect that our cash, cash equivalents and investments of $252.6 million as of December 31, 2018, together with the receipt of the $150.0 million license fee payment expected in March 2019 as a result of Novartis opt in for the ACKEA-APO(a)-LRx, and cash expected to be generated from sales of TEGSEDI, which has been approved in the U.S., the EU and Canada, will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months from issuance of these financial statements. However, we expect to raise additional funding in the future to continue developing the drugs in our pipeline and to commercialize TEGSEDI, or any other approved drug, including WAYLIVRA. We may seek to obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan.

Ionis formed Akcea as a wholly owned subsidiary to complete development of and commercialize Ionis’ drugs to treat lipid disorders. We began business operations in January 2015. We licensed our cardiometabolic franchise from Ionis at the beginning of 2015. Prior to licensing these drugs, Ionis’ employees performed all of the development, regulatory and manufacturing activities for these drugs either themselves or through third-party providers. As such, Ionis incurred all of the expenses associated with these activities and reported them in its consolidated financial statements. TEGSEDI and AKCEA-TTR-L_Rx were licensed from Ionis in April 2018. Prior to then, Ionis had been advancing these drugs in development and incurring the expenses for those activities. Under our license agreements with Ionis, Ionis continued and is continuing to conduct development, regulatory or manufacturing activities for our drugs and to charge us for this work. As of December 31, 2018, Ionis owed approximately 75 percent of our outstanding stock.

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP. 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. In the following paragraphs, we describe our most significant accounting policies, which we believe are the most critical to aid in fully understanding and evaluating our reported financial results. As described below, there are specific risks associated with these critical accounting policies and we caution that future events rarely develop exactly as one may expect, and that best estimates may require adjustment. The significant accounting policies, which we believe are the most critical to aid in fully understanding and evaluating our reported financial results, are as follows:

We began to record revenues from product sales in the fourth quarter of 2018 subsequent to the approval of TEGSEDI in the U.S., EU and Canada. Prior to the fourth quarter of 2018, our revenues were derived from our collaboration agreement with Novartis and collaboration and license agreement with PTC Therapeutics. The terms of such collaboration agreements may include consideration such as nonrefundable license fees, funding of research and development services, payments due upon the achievement of clinical and pre-clinical performance-based development milestones, regulatory milestones, manufacturing services, sales-based milestones and royalties on product sales.

On January 1, 2018, we adopted the new revenue standard, discussed below under Note 2, Summary of Significant Accounting Policies, which amended revenue recognition principles and provides a single, comprehensive set of criteria for revenue recognition within and across all industries. Our adoption of the new revenue standard had a material impact on our consolidated financial statements, as discussed below in Note 2. This new revenue standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, then assess whether each promised good or service is distinct. When we offer options for additional goods or services, such as an option to license a drug in the future or for additional goods or services to be provided in the future, we evaluate whether such options are material rights that should be treated as additional performance obligations. We typically have not concluded that the option to license a drug or the options for additional goods or services that may be requested in the future under our collaboration agreement are material rights as the amounts attributable to such options represent standalone selling price, and therefore no consideration is allocated to these items at the inception of an agreement. When a partner exercises its option to

license a drug or requests the additional goods or services, a new performance obligation is created for that item. Once performance obligations are identified, we then recognize as revenue the amount of the transaction price that we allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time. If the performance obligation is satisfied over time, we recognize revenue based on the use of an output or input method. As of December 31, 2018, we have three revenue streams: our strategic collaboration, option and license agreement, or collaboration agreement, with Novartis Pharma AG, or Novartis, which we entered into in January 2017, our collaboration and license agreement with PTC Therapeutics International Limited, or PTC Therapeutics, which we entered into in August 2018 and commercial product revenue related to sales of TEGESDI in the fourth quarter of 2018. For a complete discussion of the accounting for our revenue streams, see Note 6, Strategic Collaboration with Novartis, Note 8, Collaboration and License Agreement with PTC Therapeutics, and Note 2, Summary of Significant Accounting Policies.

Effective January 1, 2018, we adopted Topic 606 using the full retrospective transition method. Under this method, we revised our consolidated financial statements for prior period amounts including the periods included in this Report on Form 10-K, as if Topic 606 had been effective for such periods. The references “as revised” used herein refer to revisions of amounts originally reported for the year ended December 31, 2017 and as of December 31, 2017 as a result of our adoption of Topic 606.

As a result of adopting Topic 606 on January 1, 2018, we revised our comparative financial statements for the prior years as if Topic 606 had been effective for that period. On September 18, 2018, we filed a Current Report on Form 8-K to present recast consolidated financial statements for each of the three years ended December 31, 2015, 2016 and 2017, to reflect our adoption of the new accounting standard for revenue recognition set forth in Topic 606. The financial information recast in the Form 8-K was originally filed with the SEC in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which was filed with the SEC on February 28, 2018. Under Topic 605, we recognized revenue from our collaboration with Novartis over time on a straight-line basis. Under Topic 606, we recognize revenue from our collaboration with Novartis using the input method based on the total cost of performing services over time. As a result, the following financial statement line items for fiscal year 2017 were affected.

Subsequent to regulatory approval in Europe on July 11, 2018 and FDA approval in the U.S. on October 5, 2018, in the fourth quarter of 2018 we began to sell TEGSEDI in the U.S. and Germany. In the U.S., the product is distributed through an exclusive distribution agreement with a third-party logistics (3PL) company that takes title to the product and represents our sole customer in the U.S. Our U.S. customer distributes TEGSEDI to a specialty pharmacy and a specialty distributor (collectively referred to as “wholesalers”), who then distribute the product to health care providers and patients. In Germany, the product is distributed through a non-exclusive distribution model with a 3PL that takes title to the product and currently represents our sole customer in Germany. Our customer in Germany then distributes TEGSEDI to hospitals and pharmacies in Germany.

Revenue from product sales are recognized when the customer obtains control of our product, which occurs at a point in time, upon transfer of title to the customer. We record shipping and handling costs within cost of goods sold on our consolidated statement of operations. We classify payments to customers or other parties in the distribution channel for services that are distinct and priced at fair value as selling, general and administrative expenses in our consolidated statements of operations. Otherwise payments to customers or other parties in the distribution channel that do not meet those criteria are classified as a reduction of revenue, as discussed further below. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue. We have elected not to adjust consideration for the effects of a significant financing component when the period between the transfer of a promised good or service to the customer and when the customer pays for that good or service will be one year or less. Our payment terms are generally between thirty to ninety days. We expense incremental costs of obtaining a contract as and when incurred since the expected amortization period of the asset that we would have recognized is one year or less.

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates, co-pay assistance and other allowances that are offered within contracts between us and our customers, wholesalers, health care providers and other indirect customers relating to the sale of TEGSEDI. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

The following are the components of variable consideration related to product revenue:

Chargebacks: In the U.S., we estimate obligations resulting from contractual commitments with the government and other entities to sell products to qualified healthcare providers at prices lower than the list prices charged to our U.S. customer. Our U.S. customer charges us for the difference between what they pay for the product and the selling price to the qualified healthcare providers. We record reserves for these chargebacks related to product sold to our U.S. customer during the reporting period, as well as our estimate of product that remains in the distribution channel at the end of the reporting period that we expect will be sold to qualified healthcare providers in future periods.

Government rebates: We are subject to discount obligations under government programs, including Medicaid programs and Medicare in the United States. We estimate Medicaid and Medicare rebates based upon a range of possible outcomes that are probability-weighted for the estimated payer mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability that is included in accrued expenses on our consolidated balance sheet. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. On a quarterly basis, we update our estimates and record any adjustments in the period that we identify the adjustments. In Germany, pharmaceutical companies must grant a specified rebate percentage to the German government. We have included this rebate as a reduction of revenue in the period the related product revenue is recognized.

Trade discounts and allowances: We provide customary invoice discounts on TEGSEDI sales to our U.S. customer for prompt payment that are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive and pay for various distribution services from our U.S. customer and wholesalers in the U.S. distribution channel. For services that are either not distinct from the sale of our product or for which we cannot reasonably estimate the fair value, such fees are classified as a reduction of product revenue.

Product Returns: Our U.S. customer has return rights and the wholesalers have limited return rights primarily related to the product’s expiration date. We estimate the amount of product sales that may be returned and record the estimate as a reduction of revenue and a refund liability in the period the related product revenue is recognized. Based on the distribution model for TEGSEDI, contractual inventory limits with our customer and wholesalers and the price of TEGSEDI, we believe there will be minimal returns. Our customer in Germany only takes title to the product once it receives an order from a hospital or pharmacy and therefore does not maintain any inventory of TEGSEDI. Therefore, there is limited return risk and the Company has not recorded any return estimate in the transaction price for TEGSEDI sold in Germany.

Other incentives: In the U.S., other incentives include co-payment assistance we provide to patients with commercial insurance that have coverage and reside in states that allow co-payment assistance. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue. The estimate is recorded as a reduction of revenue in the same period the related revenue is recognized.

During the year ended December 31, 2018, we recorded product revenue, net, of $2.2 million, which consist of $1.2 million of TEGSEDI sales in the U.S., and $1.0 million of TEGSEDI sales in Germany. The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the year ended December 31, 2018 (in thousands):

Prior to the regulatory approval of our product candidates, we incur expenses for the manufacturing of drug product that could potentially be available to support the commercial launch of our products. Until the first reporting period when regulatory approval has been received or is otherwise considered probable, we record all such costs as research and development expense.

For inventory related costs incurred subsequent to July 1, 2018, we reflected these amounts as inventory on our consolidated balance sheets at the lower of cost or market value under the first-in, first-out, or FIFO, basis. We periodically analyze our inventory levels, and write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and inventory in excess of expected sales requirements as cost of product sales. The determination of whether inventory costs will be realizable requires estimates by our management and if actual market conditions are less favorable than projected by our management, additional write-downs of inventory may be required which would be recorded as a cost of product sales in the consolidated statements of operations.

At December 31, 2018 a majority of our physical inventory for TEGSEDI was produced prior to when we obtained regulatory approval and accordingly had no cost basis as we recorded the related costs as research and development expense in prior periods. At December 31, 2018 the amount of finished goods recorded in our consolidated balance sheets in other current assets related to our approved product TEGSEDI was $85,000.

We obtained exclusive licenses from Ionis for specific patents that Ionis owns and maintains related to our drug pipeline. We recorded our licenses from Ionis as a capital contribution using the carryover basis of Ionis' historical cost for the related patents. We are amortizing our capitalized licenses over their estimated useful life, which is the term of the underlying individual patents owned by Ionis.

In addition, we maintain definite-lived intangible assets related to regulatory milestone payments made to Ionis that are recoverable through future cash flows from approved products, which are capitalized as license intangible assets. These assets are amortized over their remaining useful lives, which are generally estimated to be the remaining patent life. If our estimate of the product’s useful life is shorter than the remaining patent life, then the shorter period is used. Intangible assets are amortized using the economic consumption method if anticipated future revenue can be reasonably estimated. The straight-line method is used when future revenue cannot be reasonably estimated. Amortization expense is recorded as a component of cost of sales to the extent the underlying license is commercialized or research and development prior to its commercialization in the consolidated statements of operations.

As a result of receiving marketing authorization, or MA, approval for TEGSEDI from the European Commission, or EC, in July 2018, we began recording all TEGSEDI related expenses as cost of product sales starting in July 2018. Cost of product sales consists of manufacturing costs, transportation and freight, and indirect overhead costs associated with the manufacturing and distribution of TEGSEDI. Cost of product sales may also include period costs related to certain manufacturing services and inventory adjustment charges. Additionally, we expensed a significant portion of the cost of producing TEGSEDI that we will use in the commercial launch as research and development expense prior to the regulatory approval of TEGSEDI.

We record accrued liabilities related to expenses for which vendors or service providers have not yet billed us. These liabilities are for products or services that we have received and primarily relate to ongoing nonclinical and clinical studies. These costs primarily include third-party clinical management costs, laboratory and analysis costs, toxicology studies and investigator grants. We have drugs in concurrent nonclinical and clinical studies at several sites throughout the world. To ensure that we have adequately provided for ongoing nonclinical and clinical research and development costs during the period in which we incur such costs, we maintain an accrual to cover these costs. We update our estimate for this accrual on at least a quarterly basis. The assessment of these costs is a subjective process that requires judgment. Upon settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements. Our historical accrual estimates have not been materially different from our actual amounts.

We measure stock-based compensation expense for equity-classified awards, principally related to stock options, restricted stock units, or RSUs, and stock purchase rights under our employee stock purchase plan, or ESPP, based on the estimated fair value of the award on the date of grant. We recognize the value of the portion of the award that we ultimately expect to vest as stock-based compensation expense over the requisite service period in our consolidated statements of operations. We reduce stock-based compensation expense for estimated forfeitures at the time of grant and revise the expense in subsequent periods if actual forfeitures differ from those estimates.

We value our stock option awards and stock purchase rights under our ESPP using the Black-Scholes model. The determination of the grant date fair value of options using an option pricing model is affected principally by our estimated common stock fair value and requires us to make a number of other assumptions, including: the expected life of the option, the volatility of the underlying stock, the risk-free interest rate and expected dividends.

The fair value of RSUs is based on the market price of our common stock on the date of grant. The RSUs we have granted vest annually over a four-year period.

Prior to December 2015, Ionis granted our employees options to purchase shares of Ionis' common stock, or Ionis options. In December 2015, we granted our employees holding Ionis options additional options to purchase shares of our common stock, or Akcea options.

We determined the stock-based compensation expense for the Ionis options at the date of grant and recognized compensation expense over the vesting period of the Ionis options. In December 2015, we accounted for the issuance of the Akcea options as a modification to the original grant of the Ionis options because the grant of the Ionis options and Akcea options essentially represented a single stock award as the exercisability provisions of the Ionis options and Akcea options grants were interrelated and mutually exclusive. The total compensation expense measured on the modification date was the sum of the grant date fair value of the Ionis options plus any incremental compensation cost resulting from the grant of the Akcea options.

In 2016, we began concurrently granting Ionis options and Akcea options to our employees. Because the exercisability provisions of the awards are interrelated and mutually exclusive as described above, the fair values of the Ionis options and the Akcea options were determined on the date of grant and the option with the greater fair value was recognized over the vesting period of the awards. In 2017, we no longer concurrently granted Ionis and Akcea options. Our board of directors only receive grants under the Akcea option plan.

Following our IPO, we no longer grant Ionis options to our employees. Under the terms of the Ionis options, when we completed our IPO, the Ionis options our employees were holding were terminated. The termination of the Ionis options was determined not to be a modification, as the options were terminated based upon the existing contractual terms of the option agreements. As such, we will continue to recognize expense based on the valuation that was determined upon the grant date for options issued in 2016 or the modification date for options issued in 2015 and 2017.

The fair value of stock options granted under our 2015 Equity Incentive Plan is based on the fair value of our common stock on the date of grant. The fair value of stock options granted under the Ionis 2011 Equity Incentive Plan is based on the fair value of Ionis' common stock on the date of grant. Options granted to employees vest over a four-year period, with 25 percent exercisable at the end of one year from the date of the grant and the balance vesting ratably, on a monthly basis, thereafter and have a term of ten years. Options granted to directors vest annually over a four-year period and have a term of ten years.

See Note 9, Equity and Stock-based Compensation, for additional information regarding our stock-based compensation plans.

Prior to the completion of our IPO we filed our tax returns on a consolidated and combined basis with Ionis for federal and state income tax purposes, respectively. For financial statement purposes when we are required to file on a consolidated or combined basis, we calculate our income tax amounts, including net operating losses and tax credit carryforwards, using a separate return methodology which determines income taxes as if we were a separate taxpayer from Ionis. Effective July 19, 2017, the date of our IPO, we are no longer included in the consolidated federal income tax return with Ionis. We determined the amount of federal tax attributes, primarily net operating losses and tax credit carryforwards that transferred to us upon deconsolidation from Ionis. We are still required to file most of our state tax returns on a consolidated or combined basis with Ionis. Therefore, for financial statement purposes we calculated our state income tax amounts using the separate return method.

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carry forwards. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.

We apply the authoritative accounting guidance prescribing a threshold and measurement attribute for the financial recognition and measurement of a tax position taken or expected to be taken in a tax return. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation settlement. The second step is to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included within other long-term liabilities in the consolidated balance sheets.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves for changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may impact the provision for income taxes in the period in which such determination is made.

Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including scheduled reversal of deferred tax liabilities, past operating results, the feasibility of tax planning strategies and estimates of future taxable income. Estimates of future taxable income are based on assumptions that are consistent with our plans. Assumptions represent management's best estimates and involve inherent uncertainties and the application of management's judgment. Should actual amounts differ from our estimates, the amount of our tax expense and liabilities could be materially impacted.

We record a valuation allowance to reduce the balance of our net deferred tax assets to the amount we believe is more-likely-than-not to be realized. We have incurred financial statement losses since inception and as a result we have a full valuation allowance recorded against our net deferred tax assets. We regularly assess the future realization of our net deferred tax assets and will reduce the valuation allowance in any such period in which we determine that all, or a portion, of our deferred tax assets are more-likely-than-not to be realized.

We do not provide for a U.S. income tax liability and foreign withholding taxes on undistributed foreign earnings of our foreign subsidiaries. The earnings of non-U.S. subsidiaries are currently expected to be indefinitely reinvested in non-U.S. operations.

In order to analyze and compare our results of operations to other similar companies, we believe it is important to exclude non-cash stock-based compensation expense related to equity awards from our expenses. We believe non-cash stock-based compensation expense is not indicative of our operating results or cash flows from our operations. Further, we internally evaluate the performance of our operations excluding it. All numbers presented below exclude stock-based compensation expense unless otherwise indicated.

The following table sets forth our revenue for the periods presented (in thousands):

Product revenue. Product revenue of $2.2 million for 2018 relates to sales of TEGSEDI in the Unites States and Germany. For the year ended December 31, 2017, we did not generate any product revenue.

Licensing revenue. Licensing revenue of $12.0 million for 2018 relates to the upfront payment received from PTC Therapeutics related to our PTC License Agreement entered into in August 2018. For the year ended December 31, 2017, we did not generate any licensing revenue.

Research and development revenue. In 2018, we recognized $50.6 million compared to $43.4 million in 2017 (as revised), in research and development revenue from our collaboration with Novartis. The increase in research and development revenue is primarily the result of level of efforts related to activities for our AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx programs.

The following table sets forth our cost of sales and license expense for the periods presented (in thousands):

Cost of sales – product expense of $1.7 million for 2018 consists of period costs and certain fixed costs associated with the manufacturing of TEGSEDI. We do not expect fixed costs will increase in direct correlation to sales. Based on our policy, we expense costs associated with the manufacture of our products as research and development prior to regulatory approval. Certain product costs of TEGSEDI units recognized as revenue during the year ended December 31, 2018 were incurred prior to the July 2018 EU approval, and therefore are not included in cost of sales during the year. We expect cost of sales to increase as we deplete these inventories. The cost of units sold during the period for which there was no cost basis was $0.1 million for the year ended December 31, 2018. No product cost of sales was recorded for the year ended December 31, 2017. All amounts exclude non-cash compensation expense related to equity awards.

Cost of sales expense – intangible asset amortization of $2.7 million for 2018 consist of amortization of intangible assets recorded as a result of the achievement of TEGSEDI regulatory milestones in the U.S. and E.U. All amounts exclude non-cash compensation expense related to equity awards.

Cost of license of $7.2 million for 2018 consists of TTR sub-license expense due to Ionis related to the payment received as part of the licensing agreement entered into with PTC Therapeutics in August 2018. No license cost of sales was recorded for the year ended December 31, 2017. All amounts exclude non-cash compensation expense related to equity awards.

The following table sets forth our research and development expenses for the periods presented (in thousands):

Research and development expenses were $120.9 million for the year 2018 compared to $118.3 million for the same period in 2017. The slight increase in research and development expenses was primarily due to development activities related to TEGSEDI, development activities related to our Phase 2b studies for AKCEA APOCIII-L_Rx and AKCEA-ANGPTL3-L_Rx which were initiated in the first quarter of 2018 and personnel and overhead expense to support our development efforts. This increase was offset primarily due to sublicensing expenses related to our collaboration with Novartis, which we incurred in the first quarter of 2017, the majority of which were non-cash, a decrease in development activities for AKCEA APO(a)-L_Rx as the clinical study ended, finished data collection and reported topline results, as well as a decrease in development activities for WAYLIVRA. All amounts exclude non-cash compensation expense related to equity awards.

The following table sets forth our selling, general and administrative expenses for the periods presented (in thousands):

Selling, general and administrative expenses were $118.9 million for 2018 compared to $28.1 million for the same period in 2017. Our selling, general and administrative expenses increased due to the ongoing buildout of our commercial organization and advancement of pre-commercialization and commercialization activities necessary to launch TEGSEDI in the U.S., the EU and Canada, and WAYLIVRA, if approved for marketing in the EU. All amounts exclude non-cash compensation expense related to equity awards.

Investment income. Investment income for 2018 totaled $5.7 million compared to $1.8 million for the same period in 2017. The increase in investment income was primarily due to a higher average investment balance and an increase in the interest rates on high quality debt and U.S. government agencies investments during 2018 compared to 2017.

Interest expense. Interest expense is comprised entirely of interest incurred under our line of credit agreement with Ionis. We incurred no interest expense during 2018. Interest expense for 2017 totaled $1.7 million. The outstanding principal and accrued interest under our line of credit converted into 13,438,339 shares of our common stock in connection with the closing of our IPO in July 2017 and we no longer have access to this line of credit following the closing of our IPO.

Net loss for 2018 was $225.8 million compared to $121.6 million for the same period in 2017 (as revised). We incurred a higher net loss during 2018 compared to 2017 primarily due to the development and pre-commercialization and commercial activities for TEGSEDI, the increase in expenses related to pre-commercialization and development activities for WAYLIVRA and our other drugs, and the ongoing global expansion of our company. Basic and diluted net loss per preferred share for the year ended December 31, 2017 (as revised) was $1.80. We had no outstanding preferred shares at December 31, 2018. Basic and diluted net loss per common share owned by Ionis and owned by others for the year ended December 31, 2018 was $2.74 and $2.87, respectively. Basic and diluted net loss per common share owned by Ionis and owned by others for the year ended December 31, 2017 (as revised) was $3.08.

For the year ended December 31, 2017, we recognized $43.4 million in research and development revenue (as revised) from our collaboration with Novartis, which we initiated in January 2017. For the year ended December 31, 2016, we did not generate any revenue.

The following table sets forth our research and development expenses for the periods presented (in thousands):

Research and development expenses were $118.3 million for 2017 and increased compared to $63.9 million for 2016. The increase in expenses was primarily due to sublicensing expenses related to our collaboration with Novartis, which we incurred in the first quarter of 2017, the majority of which were non-cash. The progression of our other drugs in development, including AKCEA-APO(a)-L_Rx, AKCEA-APOCIII-L_Rx and AKCEA-ANGPTL3-L_Rx, during 2017 also contributed to the increase in our expenses. In particular we commenced four Phase 2 trials in 2017. This increase in research and development expenses was offset in part by a decrease in external WAYLIVRA expenses primarily related to the completion of the phase 3 program. All amounts exclude non-cash compensation expense related to equity awards.

The following table sets forth our selling, general and administrative expenses for the periods presented (in thousands):

Selling, general and administrative expenses were $28.1 million for 2017 and increased compared to $9.5 million for 2016. Our general and administrative expenses increased due to the ongoing buildout of our commercial organization and advancement of pre-commercialization activities necessary to launch WAYLIVRA, if approved for marketing in the US, Canada and certain EU countries. All amounts exclude non-cash compensation expense related to equity awards.

Investment income. Investment income for 2017 totaled $1.8 million compared to $0.3 million for 2016. The increase in investment income was primarily due to a higher average short-term investment balance and an increase in the interest rates on high quality debt and U.S. government agencies investments during 2017 compared to 2016.

Interest expense. Interest expense is comprised entirely of interest incurred under our line of credit agreement with Ionis. Interest expense for 2017 totaled $1.7 million. We incurred no interest expense for 2016. The outstanding principal and accrued interest under our line of credit converted into 13,438,339 shares of our common stock in connection with the closing of our IPO in July 2017 and we no longer have access to this line of credit following the closing of our IPO.

Net loss for 2017 (as revised) was $121.6 million compared to $83.2 million for 2016. Basic and diluted net loss per preferred share for the year ended December 31, 2017 (as revised) was $1.80 compared to $2.88 for 2016. Basic and diluted net loss per common share owned by Ionis and owned by others for the year ended December 31, 2017 (as revised) was $3.08. We had no outstanding common stock at December 31, 2016. We incurred a higher net loss in 2017 compared to 2016 primarily due to the increase in expenses related to pre-commercialization and development activities for our drugs, sublicensing expenses related to our collaboration with Novartis, the ongoing global expansion of our company and becoming and operating as a public company.

At December 31, 2018, we had cash, cash equivalents and investments of $252.6 million and accumulated deficit of $522.0 million.

We have funded our operating activities through a $100.0 million cash contribution that we received from Ionis in 2015, $75.0 million from initiating our collaboration with Novartis that we received in the first quarter of 2017 and $106.0 million in drawdowns under our line of credit with Ionis that we received in the first and second quarters of 2017. Our borrowings under our line of credit agreement with Ionis converted into shares of our common stock at the IPO price in connection with the closing of our IPO in July 2017. We no longer have access to the line of credit. Additionally, in July 2017 we received $182.3 million in net proceeds from our IPO, including $25.0 million Ionis invested in our IPO and the Novartis concurrent private placement of $50.0 million.

In April 2018, the stockholders other than Ionis and its affiliates approved the development, commercialization, collaboration and license agreement, or TTR License Agreement, pursuant to which we acquired an exclusive license from Ionis to TEGSEDI and AKCEA-TTR-L_Rx and a stock purchase agreement, or Ionis SPA, with Ionis, our majority shareholder, which we entered into on March 14, 2018. To support our commercialization of TEGSEDI and AKCEA-TTR-L_Rx, Ionis purchased 10.7 million shares of our common stock for $200.0 million.

At December 31, 2018, we had working capital of $186.5 million compared to working capital of $178.4 million at December 31, 2017. Working capital increased in 2018 primarily due to the increase in our cash, cash equivalents and investments as a result of our financing activities. This increase is offset by activities related to our normal course of business. As of December 31, 2018, our outstanding payable to Ionis was $18.9 million under our Amended Services Agreement with Ionis

TEGSEDI is approved in the U.S., E.U. and Canada and we are now beginning our commercialization efforts in these three regions. We began to generate product revenue from TEGSEDI drug sales in the fourth quarter of 2018. We anticipate that we will continue to incur losses for the foreseeable future, and losses may continue to increase as we develop, seek regulatory approval for, and begin to commercialize our other pipeline drugs. We are subject to all of the risks incident in developing and commercializing new drugs and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

On February 22, 2019, Novartis exercised its option to license AKCEA-APO(a)-L_Rx as part of our strategic collaboration with Novartis discussed in Note 6, Strategic Collaboration with Novartis. As a result we earned a license fee of $150.0 million of which we will pay $75.0 million to Ionis as a sublicense fee. We will issue 2,837,373 shares of our common stock to Ionis as payment of the $75.0 million sublicense fee.

We expect to raise additional funding in the future to continue developing the drugs in our pipeline and to expand our commercial efforts for TEGSEDI, which has been approved in the U.S., E.U. and Canada, and WAYLIVRA, for which we are in on going regulatory discussion in those same jurisdictions. We expect that our cash, cash equivalents and investments of $252.6 million as of December 31, 2018, together with the receipt of the $150.0 million license fee payment expected in March 2019 as a result of Novartis opt in for the ACKEA-APO(a)-LRx, and cash expected to be generated from sales of TEGSEDI, which has been approved in the U.S., the EU and Canada, will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months from issuance of these financial statements. Until such time, if ever, as we can generate substantial product revenue, we may finance our cash needs through additional financing in the future through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. In any event, we may not generate significant revenue from product sales prior to the use of our existing cash, cash equivalents and investments. We do not have any committed external source of funds. Additional capital may not be available on reasonable terms, if at all. To the extent that we raise additional capital through the sale of stock or convertible debt securities, the ownership interest of our stockholders will be diluted and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include increased fixed payment obligations and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, selling or licensing intellectual property rights and other operating restrictions that could adversely affect our ability to conduct our business. If we raise additional funds through collaborations or licensing arrangements with third parties, we may have to relinquish valuable rights to our drugs or grant licenses on terms that may not be favorable to us. If we cannot raise additional funds through stock offerings or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and commercialize our drugs even if we would otherwise prefer to develop and commercialize the drugs ourselves.

Our forecast of the period of time through which our financial resources will be adequate to support our operations involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect. The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected.

On April 5, 2018, we entered into an operating lease agreement with MEPT Seaport 13 Stillings LLC, or MEPT, for 30,175 square feet of office space located in Boston, Massachusetts for our new corporate headquarters. The commencement date of the lease was August 2018 and the initial term of the lease is 123 months with one five-year renewal option. We took occupancy of the office space in Boston, Massachusetts in September 2018. MEPT is providing us with a three-month free rent period, which commenced on August 15, 2018, and a tenant improvement allowance up to $3.8 million. We provided MEPT with a letter of credit to secure our obligations under the lease in the initial amount of $2.4 million, to be reduced to $1.8 million on the third anniversary of the rent commencement date and to $1.2 million on the fifth anniversary of the rent commencement date if we meet certain conditions set forth in the lease at each such time. This balance is included in deposits and other assets on the accompanying consolidated balance sheets.

On November 12, 2018, we entered into an operating lease agreement with Ionis Pharmaceuticals to sublease 4,723 square feet of office space located in Carlsbad, California. The commencement date was March 2018 and the term of the lease is 64 months with a four-month free rent period.

Rent expense for the year ended December 31, 2018, 2017 and 2016 was $2.4 million, $0.7 million and $0.4 million, respectively. We recognize rent expense on a straight-line basis over the lease term for the lease of our office spaces, which resulted in a deferred rent balance of $4.8 million and $39,000 at December 31, 2018 and 2017, respectively.

Purchase commitments include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including, fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Such obligations are related principally to inventory purchase orders based on our current manufacturing needs and require significant lead times to be fulfilled by our vendors. Purchase commitments exclude agreements that are cancelable without penalty

On February 22, 2019, Novartis exercised its option to license AKCEA-APO(a)-L_Rx as part of our strategic collaboration with Novartis discussed in Note 6, Strategic Collaboration with Novartis to our consolidated financial statements included in this Form 10-K. As a result we earned a license fee of $150.0 million of which we will pay $75.0 million to Ionis as a sublicense fee. We will issue 2,837,373 shares of our common stock to Ionis as payment of the $75.0 million sublicense fee.

We describe the recently issued accounting pronouncements that apply to us in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements.

We did not have any off-balance sheet arrangements during the period presented, as defined in the rules and regulations of the SEC.

We are exposed to changes in interest rates primarily from our investments in certain short-term investments. We place our cash equivalents and short-term investments with reputable financial institutions. We primarily invest our excess cash in commercial paper and debt instruments of the U.S. Treasury, financial institutions, corporations, and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody's, Standard & Poor's, or Fitch, respectively. We have established guidelines relative to diversification and maturities that are designed to maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity. 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.

Our results of operations are subject to foreign currency exchange rate fluctuations as we have foreign subsidiaries, Akcea Therapeutics UK Ltd., or Akcea UK, Akcea Therapeutics Canada, Inc., or Akcea Canada, Akcea Therapeutics France SAS, , or Akcea France, Akcea Therapeutics Germany GmbH, or Akcea Germany, and Akcea Therapeutics Ireland Limited, or Akcea Ireland with functional currencies other than the U.S. dollar. We created these foreign subsidiaries to support our initial pre-commercialization activities in North America and Europe and to serve as potential entities for future North American and European operations. We translate the foreign subsidiaries' functional currencies to 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. However, because the Akcea foreign subsidiaries currently have limited operations, the effect of fluctuations of the foreign currencies to U.S. dollar exchange rate on our consolidated results is immaterial to our consolidated financial statements. Our business strategy incorporates potentially significant international expansion, particularly in anticipation of approval of WAYLIVRA, therefore we expect that the impact of foreign currency exchange rate fluctuations may become more substantial in the future.

We filed our consolidated financial statements and supplementary data required by this item as exhibits hereto, and listed them under Item 15(a)(1) and (2), and incorporate them herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act) that are designed to ensure that information we are required to disclose in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We designed and 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 the end of the period covered by this report on Form 10-K, we carried out an evaluation of our disclosure controls and procedures under the supervision of, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2018.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company's principal executive and principal financial officer and effected by the company's board of preparation of financial statements for external purposes in accordance with GAAP and directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company's assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our principal executive and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2018, based on criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on its assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2018, based on those criteria.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to the deferral allowed under the JOBS Act for emerging growth companies

The above assessment did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We incorporate by reference the information required by this Item with respect to directors and the Audit Committee from the information under the caption "ELECTION OF DIRECTORS," including in particular the information under "Nominating, Governance and Review Committee" and "Audit Committee," contained in our definitive information statement (the "Information Statement"), to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2018.

We incorporate by reference the required information concerning our Code of Ethics from the information under the caption "Code of Ethics and Business Conduct" contained in the Information Statement. Our Code of Ethics and Business Conduct is posted on our website at www.akceatx.com⁽¹⁾and is available in print free of charge to any stockholder upon request. We intend to disclose future amendments to, or waivers from, our Code of Ethics and Business Conduct on our website. No such waivers have been issued during fiscal 2017.

Item 1, Part I of this Report contains information concerning our executive officers. We incorporate by reference the information required by this Item concerning compliance with Section 16(a) of the Exchange Act from the information under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" contained in the Information Statement to be filed within 120 days after the end of the fiscal year ended December 31, 2018.

We incorporate by reference the information required by this item to the information under the caption "EXECUTIVE COMPENSATION," "Compensation Committee Interlocks and Insider Participation" and "COMPENSATION COMMITTEE REPORT" contained in the Information Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2018.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We incorporate by reference the information required by this item to the information under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" contained in the Information Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2018.

The following table sets forth information regarding outstanding options and shares reserved for future issuance under our equity compensation plans as of December 31, 2018.

Item 13. Certain Relationships and Related Transactions, and Director Independence

We incorporate by reference the information required by this item to the information under the captions "Independence of the Board of Directors" and "Certain Relationships and Related Transactions" contained in the Information Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2018.

We incorporate by reference the information required by this item to the information under the caption "Ratification of Selection of Independent Auditors" contained in the Information Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2018.

We submitted the consolidated financial statements required by this item in a separate section beginning on page F-1 of this Report.

We omitted these schedules because they are not required, or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 1^st day of March, 2019.

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paula Soteropoulos and Michael MacLean, or any of them, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Title	Date

/s/ PAULA SOTEROPOULOS	Chief Executive Officer and Director	March 1, 2019
Paula Soteropoulos	(Principal executive officer)


/s/ MICHAEL MACLEAN	Chief Financial Officer	March 1, 2019
Michael MacLean	(Principal financial and accounting officer)


/s/ SARAH BOYCE	President and Director	March 1, 2019
Sarah Boyce


/s/ CHRISTOPHER GABRIELI	Chairman of the Board	March 1, 2019
Christopher Gabrieli


/s/ EDWARD M. FITZGERALD	Director	March 1, 2019
Edward M. Fitzgerald


/s/ ELAINE HOCHBERG	Director	March 1, 2019
Elaine Hochberg


/s/ B. LYNNE PARSHALL	Director	March 1, 2019
B. Lynne Parshall, J.D.


/s/ SANDFORD D. SMITH	Director	March 1, 2019
Sandford D. Smith

/s/ RICHARD A. MOSCICKI	Director	March 1, 2019
Richard A. Moscicki

/s/ DAMIEN MCDEVITT	Director	March 1, 2019
Damien McDevitt

We have audited the accompanying consolidated balance sheets of Akcea Therapeutics, Inc. (the Company) as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2017 and 2018 due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

	December 31,
	2018			2017
				(as revised)
ASSETS
Current assets:
Cash and cash equivalents	$	86,454		$	58,367
Short-term investments		166,155			201,763
Accounts receivable		4,597			5,413
Other current assets		10,029			1,302
Total current assets		267,235			266,845
Property, plant and equipment, net		5,696			77
Licenses, net		88,914			1,221
Deposits and other assets		3,416			661
Total assets	$	365,261		$	268,804

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,068		$	2,381
Payable to Ionis Pharmaceuticals, Inc.		18,901			14,365
Accrued compensation		8,583			4,083
Accrued liabilities		14,787			7,570
Current portion of deferred revenue		25,354			58,192
Other current liabilities		968			1,875
Total current liabilities		80,661			88,466
Long-term portion of deferred rent		4,442			12
Long-term portion of deferred revenue		3,434			12,501
Total liabilities		88,537			100,979
Stockholders’ equity:
Common stock, $0.001 par value; 125,000,000 and 100,000,000 shares authorized, 89,345,978 and 66,541,629 shares issued and outstanding at December 31, 2018 and 2017, respectively.		89			67
Additional paid-in capital		799,001			464,430
Accumulated other comprehensive loss		(324	)		(451	)
Accumulated deficit		(522,042	)		(296,221	)
Total stockholders’ equity		276,724			167,825
Total liabilities and stockholders’ equity	$	365,261		$	268,804

	Years Ended December 31,
	2018			2017			2016
				(as revised)
Revenue:
Commercial revenue:
Product revenue	$	2,237		$	—		$	—
Licensing revenue		12,000			—			—
Total commercial revenue		14,237			—			—
Research and development revenue under collaborative agreement		50,630			43,401			—
Total revenue		64,867			43,401			—

Expenses:
Cost of sales - product		1,820			—			—
Cost of sales - intangible asset amortization		2,713			—			—
Cost of license		7,200			—			—
Research and development		130,340			126,890			68,459
Selling, general and administrative		153,610			36,981			15,053
Total expenses		295,683			163,871			83,512

Loss from operations		(230,816	)		(120,470	)		(83,512	)

Other income (expense):
Investment income		5,631			1,813			295
Interest expense		—			(1,731	)		—
Other income (expense)		(189	)		104			—

Loss before income tax expense		(225,374	)		(120,284	)		(83,217	)

Income tax expense		(447	)		(1,275	)		—

Net loss	$	(225,821	)	$	(121,559	)	$	(83,217	)

Net loss per share of preferred stock, basic and diluted	$	—		$	(1.80	)	$	(2.88	)
Weighted-average shares of preferred stock outstanding, basic and diluted		—			15,748,009			28,884,540
Net loss per share of common stock owned by Ionis, basic and diluted	$	(2.74	)	$	(3.08	)	$	—
Weighted-average shares of common stock outstanding owned by Ionis, basic and diluted		59,812,394			20,669,446			—
Net loss per share of common stock owned by others, basic and diluted	$	(2.87	)	$	(3.08	)	$	—
Weighted-average shares of common stock outstanding owned by others, basic and diluted		21,553,407			9,593,322			—

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

	Convertible										Additional			Accumulated Other			Accumulated			Total Stockholders'
	Preferred Stock						Common Stock				Paid In			Comprehensive			Deficit			Equity (Deficit)
Description	Shares			Amount			Shares		Amount		Capital			Loss			(as revised)			(as revised)
Balance at December 31, 2015		28,885		$	100,000			—	$	—	$	46,787		$	(75	)	$	(91,445	)	$	55,267
Net loss		—			—			—		—		—			—			(83,217	)		(83,217	)
Change in unrealized gains, net of tax		—			—			—		—		—			75			—			75
Currency translation adjustment		—			—			—		—		—			(21	)		—			(21	)
Stock-based compensation expense		—			—			—		—		10,149			—			—			10,149
Balance at December 31, 2016		28,885		$	100,000			—	$	—	$	56,936		$	(21	)	$	(174,662	)	$	(17,747	)
Net loss		—			—			—		—		—			—			(121,559	)		(121,559	)
Change in unrealized gains (losses), net of tax		—			—			—		—		—			(337	)		—			(337	)
Currency translation adjustment		—			—			—		—		—			(93	)		—			(93	)
Conversion of convertible preferred stock to common stock		(28,885	)		(100,000	)		28,885		29		99,971			—			—			—
Initial public offering of common stock, net of commissions, underwriting discounts and offering costs		—			—			17,969		18		132,273			—			—			132,291
Issuance of common stock in connection with conversion of line of credit with Ionis Pharmaceuticals Inc. together with accrued interest		—			—			13,438		14		107,717			—			—			107,731
Issuance of common stock in connection with private placement		—			—			6,250		6		49,994			—			—			50,000
Stock-based compensation expense		—			—			—		—		17,539			—			—			17,539
Balance at December 31, 2017		—		$	—			66,542	$	67	$	464,430		$	(451	)	$	(296,221	)	$	167,825
Net loss		—			—			—		—		—			—			(225,821	)		(225,821	)
Change in unrealized gains (losses), net of tax		—			—			—		—		—			144			—			144
Currency translation adjustment		—			—			—		—		—			(17	)		—			(17	)
Exercise of common stock options		—			—			831		1		6,621			—			—			6,622
Issuance of common stock in connection with employee stock purchase plan		—			—			32		—		341			—			—			341
Issuance of restricted common stock		—			—			5		—		—			—			—			—
Stock compensation expense		—			—			—		—		44,282			—			—			44,282
Issuance of common stock to Ionis in connection with TTR License Agreement		—			—			18,667		18		200,094			—			—			200,112
Distribution to Ionis in connection with the TTR license transaction		—			—			—		—		(7,792	)		—			—			(7,792	)
Issuance of common stock to Ionis in connection with TEGSEDI regulatory milestones		—			—			3,269		3		89,997			—			—			90,000
Capital contribution from Ionis		—			—			—		—		1,028			—			—			1,028
Balance at December 31, 2018		—			—			89,346	$	89	$	799,001		$	(324	)	$	(522,042	)	$	276,724

	Years Ended December 31,
	2018			2017			2016
				(as revised)
Operating activities:
Net loss	$	(225,821	)	$	(121,559	)	$	(83,217	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		307			108			12
Amortization of licenses		2,870			120			119
Amortization of discount/premium on investment securities, net		(23	)		499			170
Non-cash interest expense for line of credit with Ionis Pharmaceuticals, Inc.		—			1,731			—
Non-cash sublicensing expense		—			33,394			—
Stock-based compensation expense		44,282			17,539			10,149
Changes in operating assets and liabilities:
Accounts receivable		816			(5,413	)		—
Other current and long-term assets		(8,765	)		(1,761	)		64
Accounts payable		8,444			1,905			(54	)
Payable to Ionis Pharmaceuticals, Inc.		4,527			(43,385	)		15,157
Accrued compensation		4,500			1,578			1,582
Deferred rent		1,203			(15	)		20
Accrued liabilities		7,217			6,587			637
Income taxes payable		(540	)		1,789			—
Deferred revenue		(41,905	)		70,693			—
Net cash used in operating activities		(202,888	)		(36,190	)		(55,361	)

Investing activities:
Purchases of short-term investments		(136,895	)		(301,377	)		(16,638	)
Proceeds from sale of short-term investments		208,559			98,778			51,464
Purchase of property, plant and equipment		(1,119	)		(9	)		(179	)
Net cash provided by (used in) investing activities		70,545			(202,608	)		34,647

Financing activities:
Proceeds from exercise of common stock options and employee stock purchase plan issuances		6,963			—			—
Proceeds from issuance of common stock, net of underwriters' discount		—			135,438			—
Proceeds from sale of common stock to Novartis in private placement		—			50,000			—
Proceeds from line of credit from Ionis Pharmaceuticals, Inc.		—			106,000			—
Net proceeds from issuance of common stock to Ionis in connection with TTR License Agreement		155,868			—			—
Offering costs paid		—			(2,037	)		(818	)
Net cash provided by (used in) financing activities		162,831			289,401			(818	)
Effect of exchange rates on cash		(17	)		(93	)		—

Net increase (decrease) in cash and cash equivalents		30,471			50,510			(21,532	)
Cash, cash equivalents and restricted cash at beginning of period		58,367			7,857			29,389
Cash, cash equivalents and restricted cash at end of period	$	88,838		$	58,367		$	7,857

Supplemental disclosures of non-cash investing and financing activities:
Unpaid deferred offering costs	$	—		$	—		$	291
Conversion of preferred stock to common stock upon initial public offering	$	—		$	100,000		$	—
Conversion of line of credit from Ionis Pharmaceuticals, Inc. into common stock	$	—		$	107,731		$	—
Purchase of property, plant and equipment included in accounts payable	$	1,252		$	—		$	—
Purchase of property, plant and equipment included in long-term deferred rent liability	$	3,555		$	—		$	—
Acquisition of research and development licenses and milestone payments	$	90,563		$	—		$	—
Capital contribution from Ionis	$	1,028		$	—		$	—

We were incorporated in Delaware in December 2014. We were organized by Ionis Pharmaceuticals, Inc., or Ionis, to focus on developing and commercializing drugs to treat patients with rare and serious diseases. On July 19, 2017, we completed our initial public offering, or IPO. As of December 31, 2018, Ionis owned approximately 75% of our common stock and is our majority shareholder. Prior to our IPO, we were wholly owned by Ionis.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP. Certain amounts in the prior period financial statements have been revised to conform to the presentation of the current period financial statements. See Note 2, Summary of Significant Accounting Policies, for a discussion of these revisions to prior period financial statements made in connection with our adoption of the new revenue recognition guidance retroactive to January 1, 2016.

The consolidated financial statements include the accounts of Akcea Therapeutics, Inc. ("we," "our," and "us") and our wholly owned subsidiaries. All intercompany transactions and balances were eliminated in consolidation. We included all normal recurring adjustments in the financial statements, which we considered necessary for a fair presentation of our financial position and our operating results and cash flows for the years ended December 31, 2018, 2017 and 2016.

In accordance with Accounting Standard Codification, or ASC, 205-40, Going Concern, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. We have incurred losses since our inception and have funded our cash flow deficits primarily through the issuance of capital stock and the proceeds from licensing and collaboration agreements. As of December 31, 2018, we had an accumulated deficit of $522.0 million. During the year ended December 31, 2018, we incurred a loss of $225.8 million and used $202.9 million of cash in operations. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future. The transition to profitability is dependent upon the successful development, approval, and commercialization of our products and product candidates and the achievement of a level of revenue adequate to support our cost structure. We believe that our currently available funds of $252.6 million as of December 31, 2018, together with the receipt of the $150.0 million license fee payment expected in March 2019 as a result of Novartis opt in for the ACKEA-APO(a)-L_Rx, and cash expected to be generated from sales of TEGSEDI, which has been approved in the U.S., the EU and Canada, will be sufficient to fund our operations through at least the next 12 months from the issuance of this Annual Report on Form 10-K. Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, we may need to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and commercialize our drugs even if we would otherwise prefer to develop and commercialize the drugs ourselves.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, revenue recognition, the accrual for research and development expenses and prior to our IPO, the valuation of common stock. Estimates are periodically reviewed in light of changes in facts, circumstances and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

For our foreign subsidiaries that report in a functional currency other than U.S. dollars, we translate their assets and liabilities into U.S. dollars using the exchange rate at the balance sheet date. We translate revenue and expenses at the monthly average exchange rates for the period. We translate transactions in our capital accounts at the historic exchange rate in effect at the date of the transaction. We include foreign currency translation adjustments as a component of accumulated other comprehensive loss within the consolidated statements of comprehensive loss.

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments and accounts receivables. We place our cash, cash equivalents and short-term investments with reputable financial institutions. We primarily invest our excess cash in commercial paper and debt instruments of the U.S. Treasury, financial institutions, corporations and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody's, Standard & Poor's, or S&P, or Fitch, respectively. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

We consider all liquid investments with maturities of three months or less when we purchase them to be cash equivalents. Our short-term investments have initial maturities of greater than three months from date of purchase. We classify our short-term investments as available-for-sale and we carry them at fair market value based upon prices for identical or similar items on the last day of the fiscal period. We record unrealized gains and losses as a separate component of comprehensive income (loss) and we include net realized gains and losses in investment income (expense) on our consolidated statement of operations. We use the specific identification method to determine the cost of securities sold.

For TEGSEDI inventory related costs incurred subsequent to July 1, 2018, we reflected these amounts as inventory on our consolidated balance sheets at the lower of cost or market value under the first-in, first-out, or FIFO, basis. We periodically analyze our inventory levels, and write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and inventory in excess of expected sales requirements as cost of product sales. The determination of whether inventory costs will be realizable requires estimates by our management and if actual market conditions are less favorable than projected by our management, additional write-downs of inventory may be required which would be recorded as a cost of product sales in the consolidated statements of operations.

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method over the estimated useful life of each asset. Furniture and fixtures are depreciated over seven years. Leasehold improvements are amortized over the shorter of the lease term or the ten-year estimated useful life of the asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to income. Repairs and maintenance costs are expensed as incurred.

We have estimated the fair value of our financial instruments. The amounts reported for cash equivalents, accounts payable and accrued expenses approximate fair value because of their short maturities. We report our investment securities at their estimated fair value based on a three-tier fair value hierarchy to prioritize the inputs used in our fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets, which includes our money market funds and treasury securities classified as available-for-sale securities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, which includes our fixed income securities and commercial paper classified as available-for-sale securities; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions. We have not historically held any Level 3 investments. Our securities have been classified as Level 1 or Level 2. We obtain the fair value of our Level 2 investments from our custodian bank and from a professional pricing service. We validate the fair value of our Level 2 investments by understanding the pricing model used by the custodian banks or professional pricing service provider and comparing that fair value to the fair value based on observable market prices. We recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, which amended the guidance for accounting for revenue from contracts with customers. This ASU superseded the revenue recognition requirements in ASC Topic 605, Revenue Recognition, or Topic 605, and created a new Topic 606, Revenue from Contracts with Customers, or Topic 606. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, then assess whether each promised good or service is distinct. When we offer options for additional goods or services, such as an option to license a drug in the future or for additional goods or services to be provided in the future, we evaluate whether such options are material rights that should be treated as additional performance obligations. We typically have not concluded that the option to license a drug or the options for additional goods or services that may be requested in the future under our collaboration agreement are material rights as the amounts attributable to such options represent standalone selling price, and therefore no consideration is allocated to these items at the inception of an agreement. When a partner exercises its option to license a drug or requests the additional goods or services, a new performance obligation is created for that item. Once performance obligations are identified, we then recognize as revenue the amount of the transaction price that we allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time. If the performance obligation is satisfied over time, we recognize revenue based on the use of an output or input method. As of December 31, 2018, we have three revenue streams: our strategic collaboration, option and license

agreement, or collaboration agreement, with Novartis Pharma AG, or Novartis, which we entered into in January 2017, our collaboration and license agreement with PTC Therapeutics International Limited, or PTC Therapeutics, which we entered into in August 2018 and commercial product revenue related TEGESDI sales subsequent to product launch in the fourth quarter of 2018. For a complete discussion of the accounting for our revenue streams, see Note 6, Strategic Collaboration with Novartis, Note 8, Collaboration and License Agreement with PTC Therapeutics, and Note 2, Summary of Significant Accounting Policies.

The following are the components of variable consideration related to product revenue:

We incur sublicense expenses under our TTR Development, Commercialization, Collaboration and License Agreement with Ionis related to the drugs we have licensed under the agreement. We include our sublicense fee expenses in our cost of license expenses on our consolidated statements of operations for those drugs that are approved for marketing. We recognize sublicense fee expenses in the period they are incurred.

Our research and development expenses include wages, benefits, facilities, supplies, external services, clinical study and manufacturing costs and other expenses that are directly related to our research and development activities. We expense research and development costs as we incur them. We do not conduct research activities and no such costs are included in these amounts.

If we make payments for research and development services prior to the services being rendered, we record those amounts as prepaid assets on our balance sheet and we expense them as the services are provided.

We incur sublicense expenses under our cardiometabolic development, commercialization and license agreement and services agreement with Ionis related to the drugs we have licensed under the agreement. We include our sublicense fee expenses in our research and development expenses on our consolidated statements of operations since the applicable drugs are not yet approved for marketing. We recognize sublicense fee expenses in the period they are incurred.

The fair value of RSUs is based on the market price of our common stock on the date of grant. The RSUs we have granted vest annually over a four-year period.

See Note 9, Equity and Stock-based Compensation, for additional information regarding our stock-based compensation plans.

Accumulated other comprehensive loss is comprised of unrealized gains and losses on investments, net of taxes and currency translation adjustments. The following table summarizes changes in accumulated other comprehensive loss for the years ended December 31, 2018, 2017 and 2016 (in thousands):

On December 22, 2017, the United States enacted H.R.1., known as the Tax Cuts and Jobs Act, which represented a substantial change to tax laws in the United States. The SEC staff subsequently issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. For the year ended December 31, 2017, we recorded provisional amounts in accordance SAB 118 where it was possible to make reasonable estimates of the effects of the Tax Act. All aspects of the Tax Act were accounted for prior to the closure of the one-year measurement period provided by SAB 118 and our accounting for these matters is now complete.

In February 2016, the FASB issued amended accounting guidance related to lease accounting, which will require us to record all leases with a term longer than one year on our balance sheet. When we record leases on our balance sheet under the new guidance, we will record a liability with a value equal to the present value of payments we will make over the life of the lease (lease liability) and an asset representing the underlying leased asset (right of use asset). The new accounting guidance requires us to determine if our leases are operating or financing leases. We will record expense for operating leases on a straight-line basis as an operating expense. If we determine a lease is a financing lease, we will record both interest and amortization expense and generally the expense will be higher in the earlier periods of the lease. We adopted this guidance on January 1, 2019 and adjusted our opening balance sheet on that date. We elected the available practical expedients. The most significant impact was the recognition of right of use assets and lease liabilities for our operating leases. We are in the process of finalizing the impact of the adoption. The adoption will not have an impact in our consolidated statement of operations or statement of cash flows.

In February 2018, the FASB issued updated guidance for reclassification of tax effects from accumulated other comprehensive income (loss). The updated guidance gives entities an option to reclassify the stranded tax effects resulting from changes due to the Tax Act from accumulated other comprehensive income (loss) to retained earnings. The updated guidance is effective for all entities for fiscal years beginning after December 31, 2018, and interim periods within those fiscal years. Early adoption is permitted and adoption is optional. We are currently assessing the impact this updated guidance could have on our consolidated financial statements and the timing of potential adoption.

In June 2018, the FASB issued updated guidance to simplify the accounting for stock-based compensation expense for non-employees. We adopted this guidance in the second quarter of 2018. We have not granted stock options to non-employees as of December 31, 2018 and therefore this new guidance has no impact on our consolidated financial statements.

In August 2018, the FASB updated its disclosure requirements related to Level 1, 2 and 3 fair value measurements. The update included deletion and modification of certain disclosure requirements and additional disclosure related to Level 3 measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. We anticipate we will adopt this updated guidance on January 1, 2019 and we do not expect it to have a significant impact on our disclosures.

In August 2018, the FASB issued clarifying guidance on how to account for implementation costs related to hosted cloud-servicing arrangements. The primary change is to include any arrangement in which the customer accesses or uses software but does not take possession of the software when assessing for the capitalization of implementation costs of internal use software. Qualified costs are to be capitalized and amortized over the service period and they need to be expensed in the same line item as the service expense and recognized on the balance sheet in the same category as amounts prepaid for the hosted cloud-servicing arrangements generally as another asset. Cash flows related to the capitalized implementation costs should be presented consistent with the presentation of cash flows for the fees related to hosted cloud-servicing arrangements. The update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The updated guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period. We are currently assessing the effects this updated guidance could have on our consolidated financial statements and timing of potential adoption.

In November 2018, the FASB issued clarifying guidance of the interaction between the collaboration accounting guidance and the new revenue recognition guidance we adopted on January 1, 2018 (Topic 606). The clarifying guidance included the following:

The updated guidance is effective for public entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We plan to adopt this guidance on January 1, 2020. We are currently assessing the effects it will have on our consolidated financial statements and disclosures.

As of December 31, 2018 and 2017, we primarily invested our excess cash in debt instruments of the U.S. Treasury, financial institutions, corporations and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody's, S&P or Fitch, respectively. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The following is a summary of our investments at December 31, 2018 and 2017 (in thousands):

We recorded unrealized losses related to the securities listed above as of December 31, 2018 and 2017. We believe that the decline in value of these securities is temporary and primarily related to the change in market interest rates since purchase. We believe it is more likely than not that we will be able to hold our debt securities to maturity. Therefore, we anticipate a full recovery of the amortized cost basis of our debt securities at maturity.

All of our available-for-sale securities are available to us for use in our current operations. As a result, we categorized all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

The following tables present the investments we held at December 31, 2018 and 2017 that are regularly measured and carried at fair value. The table segregates each security by the level within the fair value hierarchy of the valuation techniques we utilized to determine the respective securities' fair value (in thousands):

The following table presents property and equipment, at cost, and related accumulated depreciation (in thousands):

Total depreciation expense amounted to $307,000, $108,000 and $12,000 for the years ended December 31, 2018, 2017 and 2016, respectively. As part of the operating lease for our new corporate headquarters, the landlord has provided a tenant improvement allowance of $3.6 million which is included in our leasehold improvements.

The increase in capitalized regulatory milestones as of December 31, 2018 was due to a milestone of $40.0 million paid to Ionis which was incurred upon the EU approval of TEDSEDI on July 11, 2018 and a milestone of $50.0 million paid to Ionis which was incurred upon the FDA approval of TEDSEDI on October 5, 2018.

The Company recorded $2.9 million, $0.1 million and $0.1 million, respectively, in amortization expense related to intangible assets during the years ended December 31, 2018, 2017 and 2016. Estimated future amortization expense for intangible assets as of December 31, 2018 is as follows (in thousands):

The weighted average remaining amortizable life of our patents was 12.15 years at December 31, 2018.

For additional detail of Akcea's license agreements with Ionis see Note 7, License Agreements and Services Agreement with Ionis.

In January 2017, we initiated a strategic collaboration with Novartis for the development and commercialization of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. Under the Novartis collaboration, Novartis has an exclusive option to further develop and commercialize these drugs. We are responsible for completing a Phase 2 program, conducting an end-of-Phase 2 meeting with the United States Food and Drug Administration, or FDA, and providing initial quantities of the active pharmaceutical ingredient, or API, for each drug. On September 24, 2018 Akcea and Ionis announced positive top-line results from the Phase 2 study of AKCEA-APO(a)-L_Rx. If Novartis exercises an option for one of these drugs, Novartis will be responsible for all further global development, regulatory and co-commercialization activities and costs for such drug.

We received a $75.0 million upfront payment in the first quarter of 2017, of which we retained $60.0 million and we paid Ionis $15.0 million as a sublicense fee under our Cardiometabolic License Agreement with Ionis. If Novartis exercises its option for a drug, Novartis will pay us a license fee equal to $150.0 million for each drug licensed by Novartis. In addition, for we are eligible to receive up to $675.0 million in milestone payments, including $25.0 million for the achievement of a development milestone, up to $290.0 million for the achievement of regulatory milestones and up to $360.0 million for the achievement of commercialization milestones. In addition, for AKCEA-APOCIII-L_Rx, we are eligible to receive up to $530.0 million in milestone payments, including $25.0 million for the achievement of a development milestone, up to $240.0 million for the achievement of regulatory milestones and up to $265.0 million for the achievement of commercialization milestones. We will earn the next milestone payment of $25.0 million under this collaboration if Novartis advances the Phase 3 study for either drug. We are also eligible to receive tiered royalties in the mid-teens to low twenty percent range on net sales of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. Novartis will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the product in a specific country. We will pay 50% of these license fees, milestone payments and royalties to Ionis as a sublicense fee. We may co-commercialize through our specialized sales force any licensed drug commercialized by Novartis in selected markets, under terms and conditions that we plan to negotiate with Novartis in the future.

At commencement of our strategic collaboration, we identified the following four distinct performance obligations:

The development activities and the supply of API are distinct because Novartis or another third party could provide these items without our assistance.

We determined the transaction price for the Novartis collaboration was $108.4 million, comprised of the following:

We are recognizing the $75.0 million upfront payment plus the premium paid by Novartis from its purchase of Ionis’ stock and the premium associated with Novartis’ obligation to purchase Ionis’ stock if we did not complete our IPO because we are the party providing the services and API under the collaboration agreement.

None of the options or development or regulatory milestone payments under this agreement have been included in the transaction price as all payments are fully constrained. As part of our evaluation of the constraint, we considered numerous factors, including the fact that achievement of the milestones is outside of our control and contingent upon the success of our clinical trials, Novartis’ efforts, and the receipt of regulatory approval. We will re-evaluate the transaction price, including estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Based on the distinct performance obligations under the Novartis collaboration, we allocated the $108.4 million transaction price based on relative stand-alone selling prices of each of our performance obligations as follows:

We are recognizing revenue related to each of our performance obligations as follows:

Additionally, we and Ionis entered into a stock purchase agreement, or SPA, with Novartis. Under the SPA, in July 2017, Novartis purchased $50.0 million of our common stock in a separate private placement concurrent with the completion of our IPO at a price per share equal to the IPO price. Our IPO is discussed in Note 11, Initial Public Offering.

During the years ended December 31, 2018 and 2017 (as revised), we earned revenue of $50.6 million and $43.4 million, respectively, from our strategic collaboration with Novartis, representing 100% of our research and development revenue. We did not earn research and development revenue during the year ended December 31, 2016. During the year ended December 31, 2018 we recognized $42.2 million of revenue from amounts that were in our beginning deferred revenue balance. Our consolidated balance sheet at December 31, 2018 and 2017 (as revised) included deferred revenue of $28.8 million and $70.7 million, respectively, related to our strategic collaboration with Novartis.

In December 2015, we entered into a development, commercialization and license agreement related to our cardiometabolic franchise and a services agreement with Ionis. In March 2018, we entered into a new development, commercialization, collaboration and license agreement related to our TTR franchise and amended the services agreement previously in place with Ionis. The following sections summarize these related party agreements with Ionis.

Our development, commercialization and license agreement, or Cardiometabolic License Agreement, with Ionis granted exclusive rights to us to develop and commercialize WAYLIVRA, AKCEA-APO(a)-L_Rx, AKCEA-APOCIII-L_Rx, and AKCEA-ANGPTL3-L_Rx, which are collectively referred to as the Lipid Drugs. Ionis granted us an exclusive license to certain patents to develop and commercialize products containing the Lipid Drugs. Ionis also granted us a non-exclusive license to the Ionis antisense platform technology for us to develop and commercialize products containing the Lipid Drugs. Ionis also granted us non-exclusive rights under its manufacturing technology to manufacture the Lipid Drugs in our own facility or at a contract manufacturer. As a part of this agreement both companies agreed not to work with any other parties to develop or commercialize other RNA-targeting drugs that are designed to inhibit any of the Lipid Drug targets so long as we are developing or commercializing the Lipid Drugs.

We and Ionis share development responsibilities for the Lipid Drugs. We pay Ionis for the research and development expenses it incurs on our behalf, which include both external and internal expenses. External research and development expenses include costs for contract research organizations, or CROs, costs to conduct nonclinical and clinical studies on our drugs, costs to acquire and evaluate clinical study data, such as investigator grants, patient screening fees and laboratory work, and fees paid to consultants. Internal research and development expenses include costs for the work that Ionis' research and development employees perform for us. Ionis charges us a full-time equivalent rate that covers personnel-related expenses, including salaries and benefits, plus an allocation of facility-related expenses, including rent, utilities, insurance and property taxes, for those development employees who work either directly or indirectly on the development of our drugs. We also pay Ionis for the API and drug product we use in our nonclinical and clinical studies for all of our drugs. Ionis manufactures the API for us and charges us a price per gram consistent with the price Ionis charges its pharmaceutical partners, which includes the cost for direct materials, direct labor and overhead required to manufacture the API. If we need the API filled in vials for our clinical studies and Ionis contracts with a third party to perform this work, Ionis will charge us for the resulting cost.

As we commercialize each of the Lipid Drugs, we will pay Ionis royalties from the mid-teens to the mid-twenty percent range on sales related to the Lipid Drugs that we sell. If we sell a Lipid Drug for a Rare Disease Indication (defined in the agreement as less than 500,000 patients worldwide or an indication that required a Phase 3 program of less than 1,000 patients and less than two years of treatment), we will pay a higher royalty rate to Ionis than if we sell a Lipid Drug for a Broad Disease Patient Population (defined in the agreement as more than 500,000 patients worldwide or an indication that required a Phase 3 program of 1,000 or more patients and two or more years of treatment). Other than with respect to the drugs licensed to Novartis under the collaboration agreement, if our annual sales reach $500.0 million, $1.0 billion and $2.0 billion, we will be obligated to pay Ionis sales milestones in the amount of $50.0 million for each sales milestone reached by each Lipid Drug. If and when triggered, we will pay Ionis each of these sales milestones over the subsequent 12 quarters in equal payments.

We may terminate this agreement if Ionis is in material breach of the agreement. Ionis may terminate this agreement if we are in material breach of the agreement. In each circumstance the party that is in breach will have an opportunity to cure the breach prior to the other party terminating this agreement.

In the first quarter of 2017, we entered into letter agreements with Ionis to reflect the agreed upon payment terms with respect to the upfront option payment that we received from Novartis and to allocate the premium that Novartis paid for Ionis' common stock in connection with our strategic collaboration with Novartis. For additional detail regarding our strategic collaboration with Novartis, see Note 6, Strategic Collaboration with Novartis.

On April 17, 2018, our stockholders, other than Ionis and its affiliates, approved the development, commercialization, collaboration and license agreement, or TTR License Agreement, and a stock purchase agreement, or Ionis SPA, with Ionis, our majority shareholder which was entered into on March 14, 2018. In addition, in connection with these agreements, we entered into an amended and restated services agreement, or Amended Services Agreement, and an amended and restated investor rights agreement, or Amended Investor Rights Agreement, with Ionis.

We determined that the TTR License Agreement and Ionis SPA included provisions which required the approval of the agreements by our stockholders other than Ionis and its affiliates, which we deemed was not perfunctory in nature, therefore, we concluded that the approved date of the agreements for accounting purposes was April 17, 2018, the date on which such approval was received and the closing of the agreements took place.

In accordance with the terms and provisions of the TTR License Agreement, we received rights to:

As consideration for the grant of rights under the TTR License Agreement, we paid an upfront licensing fee of $150.0 million, which was paid through the issuance of 8 million shares of our common stock priced by reference to a trading average at the time of execution of the agreements. In addition, we are obligated to make milestone payments to Ionis in connection with the achievement of certain development, regulatory and commercialization events. These milestone payments include up to $110.0 million, if all TEGSEDI regulatory approval milestones are met; up to $145.0 million, if all AKCEA-TTR-L_Rx regulatory milestones are met; and a total of $1.3 billion, in the form of seven milestone payments, if all sales milestones for the combined products are met. We can elect to pay each milestone payment in cash or shares of our common stock and Ionis may require payment in shares of common stock up until the achievement of the milestone event for aggregate worldwide annual net sales of $750.0 million for the products. Subsequent to the achievement of the milestone event for aggregate worldwide annual net sales of $750.0 million, all subsequent milestone payments must be paid in cash.

Under the TTR License Agreement, we and Ionis also agreed to share TEGSEDI and AKCEA-TTR-L_Rx profits and losses as follows: for TEGSEDI, beginning on the earlier of (i) the first day of the quarter after receipt of regulatory approval of TEGSEDI in the United States, or (ii) January 1, 2019, the parties will share profits and losses from the development and commercialization of TEGSEDI (A) on a 60/40 basis (60% to Ionis and 40% to us) through the end of the quarter in which the first commercial sale of AKCEA-TTR-L_Rx occurs, and (B) on a 50/50 basis commencing on the first day of the first quarter thereafter; and for AKCEA-TTR-L_Rx, beginning January 1, 2018, the parties will share all profits and losses from the development and commercialization of AKCEA-TTR-L_Rx on a 50/50 basis.

The TTR License Agreement will remain in effect until the expiration of all included payment obligations, or unless earlier terminated. The TTR License Agreement can be terminated by mutual consent of us and Ionis, by either us or Ionis upon certain events, by either party upon material breach, or by Akcea for convenience upon providing 90 days written notice to Ionis. Upon termination all rights received under the TTR License Agreement will terminate.

To support the commercialization of TEGSEDI and AKCEA-TTR-L_Rx, Ionis purchased 10.7 million shares of our common stock for $200 million.

In connection with the licensing transaction, we amended our Certificate of Incorporation to increase our authorized shares of common stock from 100,000,000 shares to 125,000,000 shares.

We determined that the upfront accounting for the TTR License Agreement should follow the accounting guidance for common control transactions given the nature of the relationship between us and Ionis, including the fact that Ionis maintains a controlling ownership position in us.

In addition, we assessed the identifiable assets that were acquired under the terms of the TTR License Agreement, including the licensed rights to TEGSEDI and AKCEA-TTR-L_Rx, certain batches of TEGSEDI materials, the transfer of a minimal number of employees from Ionis to us and certain manufacturing and clinical research agreements. We concluded that the licensed rights represented a group of similar identifiable assets and that substantially all of the fair value of the acquisition resides in the licensed rights. As such, we concluded that the acquired assets did not meet the definition of a business and that we should account for the TTR License Agreement as an asset acquisition under common control guidance. Accordingly, we recorded the carrying value of the licensed rights held by Ionis of $0.6 million as an intangible asset at the date of acquisition and will amortize the amount over the remaining patent life.

In connection with the transaction, we also purchased $4.7 million of commercial TEGSEDI inventory held by Ionis. Prospectively we will be responsible for the procurement of all additional inventory. The inventory did not have a carrying value on the books of Ionis at the time of the acquisition. As such, in accordance with the accounting guidance for common control transactions above, we recorded the purchase of this inventory as a reduction of additional paid in capital. This amount represented a cash distribution to Ionis, therefore, we have included this distribution as a distribution to Ionis for purposes of loss per share and we have applied the two–class method as discussed in Note 13, Basic and Diluted Net Loss Per Share.

We also determined that the TTR License Agreement represented a collaboration arrangement as defined by ASC 808. Prior to April 1, 2018, Ionis was responsible for all costs associated with TEGSEDI and for the period from April 1, 2018 to December 31, 2018, we are responsible for all costs associated with TEGSEDI. We and Ionis share all costs associated with AKCEA-TTR-L_Rx from January 1, 2018 forward on a 50/50 basis. We recorded $3.1 million paid to Ionis for costs related to the period prior to the closing of the TTR license agreement to equity, as these amounts were previously expensed in the financial statements of Ionis. This amount also represents a cash distribution to Ionis and was included as an adjustment to the net loss attributable to Ionis for purposes of applying the two-class method for loss per share as discussed in Note 13, Basic and Diluted Net Loss Per Share. Any amounts paid to or received from Ionis subsequent to the closing of the TTR License Agreement will be recorded to expense based on the underlying nature of the activities.

During the year ended December 31, 2018, we recorded $26.0 million, as a component of research and development expense related to the TTR License Agreement. We did not record any research and development expense related to the TTR License Agreement in the years ended December 31, 2017 and 2016.

In addition, on July 11, 2018, we received marketing authorization, or MA, approval for TEGSEDI from the European Commission, or EC, for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis, or hATTR amyloidosis, in the European Union, or EU. As a result of the MA approval in the EU, on August 3, 2018, we issued 1,597,571 shares of our common stock to Ionis as payment of the $40.0 million regulatory approval milestone for TEGSEDI. As a result of the marketing authorization in the EU, we capitalized this regulatory approval milestone payment as a license intangible asset on our consolidated balance sheets as the amount in expected to be recoverable through future cash flows.

In addition, on October 5, 2018, we received regulatory approval for TEGSEDI from the FDA for the treatment of polyneuropathy of hereditary transthyretin-mediated amyloidosis in adults in the United States. As a result of the regulatory approval in the United States, on October 17, 2018 we issued 1,671,849 shares of our common stock to Ionis as payment of the $50.0 million regulatory approval milestone for TEGSEDI. As a result of the FDA approval in the U.S., we capitalized this regulatory approval milestone payment as a license intangible asset on our consolidated balance sheets as the amount in expected to be recoverable through future cash flows.

Both milestone payments are being amortized to cost of sales on a straight-line basis over the licensed assets expected useful life of approximately 16 years from the date of the initial regulatory approval milestone achievement. Amortization expense for the TTR milestone payments was $2.7 million for the year ended December 31, 2018. We did not record any amortization expense for the TTR milestone payments for the years ended December 31, 2017 and 2016.

We originally entered into a services agreement with Ionis in December 2015 in conjunction with the Cardiometabolic License Agreement. We entered into the Amended Services Agreement with Ionis in April 2018 in conjunction with the TTR License Agreement (collectively, the service agreements). The primary purpose of the Amended Services Agreement was to allow for the expansion of general and administrative services provided to us by Ionis to cover the TEGSEDI and AKCEA-TTR-L_Rxproducts under terms substantially similar to the prior services agreement.

Our services agreement with Ionis is designed to be flexible to adjust for our increasing capabilities in various functions. Under the services agreement, Ionis provides us certain services, including, without limitation, general and administrative support services and development support services. Ionis allocated a certain percentage of personnel to perform the services that it provides to us based on its good faith estimate of the required services. We pay Ionis for these allocated costs, which reflect the Ionis full-time equivalent, or FTE, rate for the applicable personnel, plus out-of-pocket expenses, such as occupancy costs, associated with the FTEs allocated to providing us these services. We do not pay a mark-up or profit on the external or internal expenses Ionis bills to us. Ionis invoices us quarterly for all amounts due under the services agreement and payments are due within 30 days of the receipt of an invoice.

In addition, as long as Ionis continues to consolidate our financials, we will comply with Ionis' policies and procedures and internal controls. As long as we are consolidated into Ionis' financial statements under U.S. GAAP, we may continue to access the following services from Ionis:

However, if we wanted to provide the foregoing services internally, and doing so would not negatively impact Ionis' internal controls and procedures for financial reporting, we can negotiate in good faith with Ionis for a reduced scope of services related to the aforementioned services. When Ionis determines it should no longer consolidate our financials, we may mutually agree with Ionis in writing to extend the term of this arrangement in six-month increments.

We can establish our own benefits programs or continue to use Ionis' benefits, however we must provide Ionis a minimum advance notice to opt-out of using Ionis' benefits. We do not currently plan to establish our own benefits programs at this time or in the near future.

As of December 31, 2018 and 2017, we owed Ionis $18.9 million and $14.4 million, respectively.

The following table summarizes the amounts recorded related to transactions with Ionis including amounts related to the TTR licensing transaction for the following periods (in thousands):

	Years Ended December 31,
	2018			2017			2016
Operating expenses:
Services performed by Ionis	$	15,404		$	9,742		$	8,599
Active pharmaceutical ingredient manufactured by Ionis		5,229			6,012			12,648
Commercial inventory manufactured by Ionis		1,288			—			—
Sublicensing expenses		7,200			48,394			—
Out-of-pocket expenses paid by Ionis		50,870			37,426			42,367
Total operating expenses generated by transactions with Ionis		79,991			101,574			63,614
Distributions to Ionis:
Commercial inventory manufactured by Ionis		4,707			—			—
Distribution to Ionis in connection with the TTR license transaction		3,085			—			—
Total distribution to Ionis		7,792			—			—
Total charges generated by transactions with Ionis		87,783			101,574			63,614
Payable balance to Ionis at the beginning of the period		14,365			24,355			9,198
Less: total amounts paid to Ionis during the period		(83,247	)		(78,170	)		(48,457	)
Less: non-cash sublicensing expenses		—			(33,394	)		—
Total amount payable to Ionis at period end	$	18,901		$	14,365		$	24,355

In August 2018, we entered into a collaboration and license agreement with PTC Therapeutics, or the PTC License Agreement, to commercialize TEGSEDI and WAYLIVRA in Latin America and certain Caribbean countries, or the PTC Territory.

We received a $12.0 million upfront payment from PTC Therapeutics related to TEGSEDI in the third quarter of 2018 upon execution of the PTC License Agreement, of which we paid Ionis $7.2 million as a sub-license royalty related to the TTR License Agreement. If WAYLIVRA is approved by the FDA or EMA, PTC Therapeutics will pay us $6.0 million. In addition, we are eligible to receive up to $8.0 million for the achievement of regulatory milestones and royalties in the mid-twenty percent range on net sales of TEGSEDI and WAYLIVRA in the PTC Territory. PTC Therapeutics’ obligation to pay royalties to us begins on the earlier of 12 months after the first commercial sale of a product in Brazil or the date that PTC Therapeutics recognized revenue of at least $10.0 million in the PTC Territory. PTC Therapeutics will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the market share of the product in the PTC Territory. Milestone payments and royalties that we are eligible to receive from PTC Therapeutics for TEGSEDI will be split 60% to Ionis and 40% to Akcea. All WAYLIVRA milestone payments and royalties that we are eligible to receive from PTC will be split 50/50 with Ionis. PTC Therapeutics is solely responsible for the commercialization of the products in the PTC Territory at its sole cost and expense, including the pursuit and maintenance of applicable regulatory approvals. Unless earlier terminated, the PTC License Agreement will continue in effect until the date on which the royalty term and all payment obligations with respect to all products in all countries in the PTC Territory have expired.

At the commencement of the PTC License Agreement, we identified two performance obligations, consisting of the transfer of (1) the license to TEGSEDI and related know-how and (2) the license to WAYLIVRA and related know-how, both of which were satisfied during the third quarter of 2018. In addition, we identified a customer option related to PTC Therapeutics option to purchase supply of product from us for its development and commercial needs. The option to purchase supply from us is subject to a supply agreement we are negotiating with PTC. We considered the manufacturing capabilities of PTC Therapeutics and the fact that manufacturing services are not proprietary and can be provided by other vendors, to conclude that the licenses have stand-alone functionality and are distinct. Further, the customer options for manufacturing of product is expected to be priced similar to other manufacturing options with similar customers and is therefore not considered a material right. As there were no remaining unsatisfied performance obligations as of September 30, 2018, the $12.0 million upfront payment was recognized as license revenue upon contract execution in the third quarter of 2018. None of the regulatory milestones have been included in the transaction price, as all

milestones were fully constrained. As part of our evaluation of the constraint, we considered numerous factors, including that regulatory approvals are not within our control and accordingly the related milestones are fully constrained and excluded from the arrangement consideration until such regulatory approvals are received. Any consideration related to sales-based royalties will be recognized when the related sales occur.

In December 2015, we issued and sold to Ionis an aggregate of 28,884,540 shares of Series A convertible preferred stock for a total purchase price of $100.0 million plus the grant of the rights and licenses we received under the development, commercialization and license agreement with Ionis. The $100.0 million of proceeds we received was recorded in Series A convertible preferred stock on our consolidated balance sheet. We had 28,884,540 shares of Series A convertible preferred stock authorized, issued and outstanding as of December 31, 2016, of which all was held by Ionis.

Shares of our Series A convertible preferred stock were convertible 1:1 into common stock, subject to certain adjustments for reorganizations, reclassifications, stock splits, stock dividends and dilutive issuances. All shares of Series A convertible preferred stock automatically converted into common stock upon completion of the IPO in July 2017. As of December 31, 2018 and 2017, we had no shares of Series A convertible preferred stock issued or outstanding. Our IPO is discussed in Note 11, Initial Public Offering.

In July 2017, our board of directors approved an amendment and restatement of our certificate of incorporation to, among other things, change the authorized shares of our preferred stock to 10,000,000 shares with a par value of $0.001, all of which are undesignated. Our board of directors may establish the rights, preference and privileges of the preferred stock from time to time. The amended and restated certificate of incorporation was approved by our stockholders and became effective upon the completion of our IPO and the filing of the amended and restated certificate of incorporation with the State of Delaware in July 2017. As of December 31, 2018 and 2017, there were no shares of Preferred Stock outstanding.

At December 31, 2018 and 2017, we had 125,000,000 and 100,000,000, respectively shares of common stock authorized, of which 89,345,978 and 66,541,629 were issued and outstanding as of December 31, 2018 and 2017, respectively.

In May 2017, our board of directors approved an amendment to our certificate of incorporation to (1) effect a reverse stock split on outstanding shares of our common stock and preferred stock on a one-for-2.555 basis, (2) change the authorized shares of our preferred stock to 40,000,000 and (3) modify the threshold for automatic conversion of our preferred stock into shares of our common stock in connection with an IPO to eliminate the price per share threshold and only require that we raise at least $50.0 million in gross proceeds (collectively, the "Charter Amendment"). The par values of the common stock and preferred stock were not adjusted as a result of the reverse stock split. The amendment to our certificate of incorporation was approved by our stockholder and became effective upon the filing with the State of Delaware in June 2017. All issued and outstanding common stock and preferred stock and related share and per share amounts contained in these consolidated financial statements have been retroactively adjusted to reflect the reverse stock split for all periods presented.

In December 2015, our board of directors and stockholder adopted and approved our 2015 Equity Incentive Plan, or the 2015 Plan. In May 2017 and June 2017, our board of directors and stockholder, respectively, approved an amendment to our 2015 Equity Incentive Plan in order to, among other things, increase the number of shares of common stock reserved for issuance thereunder to 8,500,000 shares of common stock in conjunction with the IPO.

As of December 31, 2018, the aggregate number of shares of common stock that may be issued pursuant to stock awards under the 2015 Plan was 18,500,000 shares. The 2015 Plan also provides for the grant of nonstatutory stock options, or NSOs, incentive stock options, or ISOs, stock appreciation rights, restricted stock awards and restricted stock unit awards. At December 31, 2018, a total of 11,010,828 options were outstanding, of which 4,305,172 were exercisable, 38,134 restricted stock unit awards were outstanding, and 1,610,490 shares were available for future grant under the 2015 Plan.

In May 2017 and June 2017, our board of directors and stockholder, respectively, approved our 2017 Employee Stock Purchase Plan, or 2017 ESPP, which became effective upon the completion of our IPO, and the reservation for issuance thereunder of 500,000 shares of common stock. In addition, the number of shares of common stock that may be issued under the ESPP will automatically increase commencing on January 1, 2018 and ending on (and including) January 1, 2027 in an amount equal to the lesser of (i) 1% of the total number of shares of Common Stock outstanding on December 31st of the preceding calendar year, and (ii) 500,000 shares of Common Stock. On January 1, 2018, 500,000 shares of common stock were added to the ESPP.

As of December 31, 2018, the aggregate number of shares of common stock reserved under the 2017 ESPP was 1,000,000 and we had 968,449 shares available for future issuance under the 2017 ESPP. During the year ended December 31, 2018, 31,551 shares were issued under our 2017 ESPP. At December 31, 2018, accrued liabilities included $0.4 million of ESPP contributions for which the related shares were issued on January 1, 2019.

The following table summarizes the stock option activity for the year ended December 31, 2018 (in thousands, except per share and contractual life data) for the 2015 Plan:

The weighted-average estimated fair value of options granted were $18.29, $10.4 and $4.13 for the years ended December 31, 2018, 2017 and 2016, respectively. For the year ended December 31, 2017, no stock options were exercised. For the year ended December 31, 2018, 834,800 stock options were exercised. As of December 31, 2018, total unrecognized estimated non-cash stock-based compensation expense related to non-vested stock options was $60.5 million. We will adjust total unrecognized compensation cost for future forfeitures. We expect to recognize the cost of non-cash stock-based compensation expense related to non-vested stock options over a weighted average amortization period of 1.32 years.

The following table summarizes stock-based compensation expense for the years ended December 31, 2018, 2017 and 2016 (in thousands):

Valuation. We measure stock-based compensation expense for equity-classified awards related to stock options and stock purchase rights under the ESPP at the grant date, based on the estimated fair value of the award and we recognize the expense over the employee's requisite service period.

We use the Black-Scholes model to estimate the fair value of stock options granted and stock purchase rights under our ESPP. The expected term of stock options granted represents the period of time that we expect them to be outstanding. We estimate the expected term of options granted based on actual and projected exercise patterns. We recognize compensation expense for stock options granted and stock purchase rights under the ESPP using the accelerated multiple-option approach. Under the accelerated multiple-option approach (also known as the graded-vesting method), an entity recognizes compensation expense over the requisite service period for each separately vesting tranche of the award as though the award were in substance multiple awards, which results in the expense being front-loaded over the vesting period.

In valuing our options, we make a number of assumptions, including the risk-free interest rate, expected dividend yield, expected volatility, expected term, rate of forfeitures and fair value of common stock. We considered the following factors in applying these assumptions:

Risk-Free Interest Rate. We determine the risk-free interest rate assumption based on the yields of U.S. Treasury securities with maturities that correspond to the term of the award.

Expected Dividend Yield. We assume a dividend yield of zero as we have not paid dividends in the past and do not expect to pay dividends on our common stock for the foreseeable future.

Expected Volatility. We do not have sufficient history to estimate the volatility of our common stock. We calculate expected volatility based on a blend of our historical volatility and reported data from selected publicly traded peer companies for which historical information is available. We plan to continue to use this blend to calculate our volatility until the historical volatility of our common stock is sufficient to measure expected volatility for future option grants.

Expected Term. The expected term estimates represent the period of time that we expect the options to be outstanding. As we do not have historical information, we use the simplified method for estimating the expected term. Under the simplified method we calculate the expected term as the average time-to-vesting and the contractual life of the options. As we gain additional historical information, we will transition to calculating our expected term based on our exercise patterns.

Rate of Forfeiture. We estimate forfeitures based on Ionis' historical rates of forfeiture as we do not have similar historical information for ourselves. We and Ionis are engaged in similar businesses and we believe this is a good estimate of expected forfeitures. As we gain additional historical information, we will transition to using our historical forfeiture rate.

Fair Value of Common Stock. Prior to our IPO our board of directors estimated the fair value of our common stock considering, among other things, contemporaneous valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Subsequent to the IPO, we use the market closing price for our common stock on the date of grant as reported on Nasdaq to determine the fair value of our common stock on the date of grant.

For the years ended December 31, 2018, 2017 and 2016, we used the following weighted-average assumptions in our Black-Scholes calculations for stock option grants under our 2015 Equity Incentive Plan:

We recorded income tax expense of $0.4 million for the year ended December 31, 2018, which primarily consists of foreign income tax. We recorded income tax expense of $1.3 million for the year ended December 31, 2017, which primarily consists of state and foreign income tax. There is no provision for income taxes for the year ended December 31, 2016 because we have historically incurred net operating losses and we maintain a full valuation allowance against our net deferred tax assets.

The reconciliation between our effective tax rate on loss from continuing operations and the statutory U.S. tax rate is as follows (in thousands):

	Years Ended December 31,
	2018					2017					2016
						(as revised)
Pre-tax loss	$	(225,374	)			$	(120,284	)			$	(83,217	)
Statutory rate		(47,329	)	21.0	%		(42,099	)	35.0	%		(29,126	)	35.0	%
State income tax net of federal benefit		(6,441	)	2.9	%		(2,371	)	2.0	%		(4,099	)	4.9	%
Impact of foreign tax rate differential		1,735		(0.8	)%		4,072		(3.4	)%		—		—
Net change in valuation allowance		54,173		(24.0	)%		(18,917	)	15.7	%		43,438		(52.1	)%
IP Transfer		(3,947	)	1.8	%
Tax credits		(4,035	)	1.8	%		4,189		(3.5	)%		(11,007	)	13.2	%
IPO/Deconsolidation adjustment		—		—			37,911		(31.5	)%		—		—
Tax rate change		3,906		(1.7	)%		19,046		(15.8	)%		—		—
Nondeductible items and other		1,734		(0.9	)%		(556	)	0.5	%		794		(1.0	)%
Stock-based compensation		651		(0.3	)%		—		—			—		—
Effective rate	$	447		(0.2	)%	$	1,275		(1.0	)%	$	—		—

Significant components of our deferred tax assets and liabilities as of December 31, 2017 and 2016 are as follows (in thousands):

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). The Tax Act created a new requirement on global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries for tax years beginning on or after January 1, 2018. The GILTI provisions require foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s assets to be included in our U.S. income tax return. Under U.S. GAAP, we are permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current-period expense when incurred or to factor such amounts into our measurement of deferred taxes. We have made the election to account for GILTI as a component of current taxes incurred rather than as a component of deferred taxes.

We are still required to file most of our state tax returns on a consolidated or combined basis with Ionis. Therefore, for financial statement purposes we calculated our state income tax amounts using the separate return method. We have excluded from the deferred tax table above state net operating loss carryforwards (and the associated valuation allowance) that have been generated by Akcea on a separate company basis and utilized by Ionis in consolidated state tax return filings as the amounts represent hypothetical deferred tax assets which are not legally eligible to be utilized on tax returns by Akcea in future years.

At December 31, 2018, we had federal and state tax net operating loss carry forwards on a separate basis of $238.7 million and $4.2 million, respectively. $4.3 million of the federal net operating loss carry forwards will expire in 2034 and the remaining $234.4 million can be carried forward indefinitely. The state tax net operating loss carry forwards will begin to expire in 2029. We also have federal research and development tax credit carry forwards of $37.4 million that will begin to expire in 2034.

Utilization of the net operating loss carry forwards and credits may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Our valuation allowance increased by $92.5 million from December 31, 2017 to December 31, 2018. The increase relates primarily to the net operating loss carryforward generated in 2018 and certain costs associated with the Inotersen transaction with Ionis which are capitalized and amortized for tax purposes.

Pursuant to the SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), a company may select between one of three scenarios to determine a reasonable estimate arising from the Tax Act. Those scenarios are (i) a final estimate which effectively closes the measurement window; (ii) a reasonable estimate leaving the measurement window open for future revisions; and (iii) no estimate as the law is still being analyzed. The Company was able to provide a reasonable estimate for the provisional revaluation of deferred taxes and the effects of the transition tax on undistributed foreign earnings and profits for the period ended December 31, 2017. During the quarter ended December 31, 2018 the Company completed its accounting for the impacts of the Tax Act and identified no material changes from its original analysis.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02), which allows companies to reclassify stranded tax effects resulting from the Tax Act, from accumulated other comprehensive income to retained earnings. The new standard is effective for us beginning January 1, 2019, with early adoption permitted. We elected to early adopt the new standard at the beginning of the fourth quarter of 2018 using the aggregate portfolio approach. We elected not to reclassify the income tax effects of the Tax Act from AOCI to retained earnings.

We analyze our filing positions in all the U.S. federal, state and foreign jurisdictions where we are required to file income tax returns to determine if we have any uncertain tax positions on any income tax returns. We recognize the impact of an uncertain tax position on an income tax return at the largest amount that the relevant taxing authority is more-likely-than not to sustain upon audit. We do not recognize a tax benefit if the position has a less than 50 percent likelihood of being sustained upon examination.

The following table summarizes our gross unrecognized tax benefits (in thousands):

We have unrecognized tax benefits of $5.6 million and $5.0 million for the years ended December 31, 2018 and 2017, respectively. Due to our valuation allowance, there are no unrecognized tax benefits at December 31, 2018 that would impact our effective tax rate, if recognized.

We do not foresee any material changes to our gross unrecognized tax benefits within the next twelve months.

We recognize interest and/or penalties related to income tax matters in income tax expense. We did not recognize any accrued interest and penalties related to gross unrecognized tax benefits during the year ended December 31, 2018, 2017 or 2016.

We are subject to taxation in the United States and various state and foreign jurisdictions. The tax years for 2014 through 2018 are subject to examination by the U.S. federal, state and foreign tax authorities.

We do not provide for a U.S. income tax liability and foreign withholding taxes on undistributed foreign earnings of our foreign subsidiaries as we consider those earnings to be permanently reinvested. The amount of unrecognized deferred tax liabilities associated with these earnings is immaterial.

On July 19, 2017, we completed our IPO. Total net proceeds were $182.3 million, including the following:

In addition, both of the following occurred in connection with the completion of our IPO on July 19, 2017:

We have an employee 401(k) salary deferral plan covering all employees. Employees may make contributions by withholding a percentage of their salary up to the IRS annual limit $18,500 and $24,500 in 2018 for employees under 50 years old and employees 50 years old or over, respectively. We made approximately $1.6 million, $0.3 million and $0.2 million in matching contributions for the years ended December 31, 2018, 2017 and 2016, respectively.

We issued 28,884,540 shares of Series A convertible preferred stock in December 2015. The Series A convertible preferred stock converted into common stock in conjunction with the IPO in July 2017. As a result there were 66,541,629 shares of common stock issued and outstanding and there were no longer any outstanding shares of Series A convertible preferred stock. We determined that the Series A convertible preferred stock was in substance common stock during the period that it was outstanding because the Series A convertible preferred stock was the lowest form of subordinated equity outstanding during that period and this class of stock would have been required to absorb the losses of the Company. Accordingly, we are using the two-class method for computing EPS.

In connection with the TTR License Agreement completed on April 17, 2018 with Ionis, we made distributions to Ionis representing the consideration to be paid in cash provided to Ionis in excess of the carrying value of the related assets acquired. These distributions are treated as dividends to Ionis; therefore, we have applied the two-class method loss per share to reflect the allocation of these distributions to the participating Ionis common shares.

The two-class method is an earnings allocation formula that determines loss per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. For the purposes of calculating loss per share under the two-class method, we have allocated the net loss between the Series A convertible preferred stock, common stock owned by Ionis and common stock owned by others.

Basic loss per share for each class of stock is computed by dividing total distributable losses applicable to Series A convertible preferred stock, common stock owned by Ionis and common stock owned by others, including the 6% cumulative dividend contractually due to Series A convertible preferred shareholders, by the weighted-average of preferred and common shares outstanding during the requisite period. The cumulative preferred stock dividend was not paid upon completion of the IPO because the IPO was not a liquidation event or a change in control. Prior to the IPO, the 6% cumulative Series A convertible preferred stock dividend was considered as required under the two-class method regardless of whether those dividends were actually distributed.

The following table summarizes the distributable losses for the years ended December 31, 2018, 2017 and 2016:

The following table summarizes the reconciliation of weighted-average shares outstanding used in the calculation of basic loss per share for the years ended December 31, 2018, 2017 and 2016:

The following table summarizes the calculation of basic loss per share for the years ended December 31, 2018, 2017 and 2016 (in thousands, except per share amounts):

	Year Ended December 31,
	2018			2017			2016
Losses attributable to preferred shares	$	—		$	(48,485	)	$	(83,217	)
Less: Assumed dividend to preferred shares		—			20,100			—
Income (losses) allocated to preferred shares		—			(28,385	)		(83,217	)
Weighted-average preferred shares outstanding		—			15,748,009			28,884,540
Basic loss per preferred share	$	—		$	(1.80	)	$	(2.88	)

Losses allocated to Ionis	$	(171,730	)	$	(63,638	)	$	—
Plus: Distribution to Ionis		7,792			—			—
Losses available to Ionis		(163,938	)		(63,638	)		-
Weighted-average common shares outstanding owned by Ionis		59,812,394			20,669,446			—
Basic loss per common share owned by Ionis	$	(2.74	)	$	(3.08	)	$	—

Losses allocated to common shares owned by others	$	(61,883	)	$	(29,536	)	$	—
Weighted-average common shares outstanding owned by others		21,553,407			9,593,322			—
Basic loss per common share owned by others	$	(2.87	)	$	(3.08	)	$	—

For the years ended December 31, 2018, 2017 and 2016, we incurred a net loss; therefore, we did not include dilutive common equivalent shares in the computation of diluted net loss per share because the effect would have been anti-dilutive. Common stock from the following would have had an anti-dilutive effect on net loss per share:

The following table summarizes the contractual obligations as of December 31, 2018 (in thousands):

On September 6, 2018, we enacted a plan to reorganize our workforce to better align with the immediate needs of our business, the Reorganization Plan, following the August 27, 2018 announcement of the FDA’s issuance of a Complete Response Letter for our New Drug Application for WAYLIVRA. In connection with the Reorganization Plan, we reduced our workforce by approximately 12%. The Reorganization Plan was approved by our board of directors on September 2, 2018, and affected employees were informed on September 6, 2018. The Reorganization Plan impacted U.S. team members primarily from the WAYLIVRA field team and functions focused principally on WAYLIVRA.

For the year ended December 31, 2018, we recorded $1.7 million of restructuring-related costs in operating expense including employee severance, benefits and related costs, net of adjustments for employees who forfeited part of their benefits. In addition, we also recorded $0.4 million of non-cash stock option modifications expenses related to the Reorganization Plan for the year ended December 31, 2018. We do not expect to incur any additional significant costs associated with this reorganization.

The following table summarizes the restructuring costs by category for the periods indicated (in thousands):

The following table summarizes the restructuring reserve included in accrued compensation for the periods indicated (in thousands):

The following financial information reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods. Summarized quarterly data for the years ended December 31, 2018 and 2017 are as follows (in thousands, except per share data):

2018 Quarters	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenue:
Commercial revenue:
Product revenue	$	—		$	—		$	—		$	2,237
Licensing revenue		—			—			12,000			—
Total commercial revenue		—			—			12,000			2,237
Research and development revenue under collaborative agreement		17,108			18,321			7,241			7,960
Total revenue		17,108			18,321			19,241			10,197

Expenses:
Cost of sales - product		—			—			1,043			777
Cost of sales - intangible asset amortization		—			—			701			2,012
Cost of license		—			—			7,200			—
Research and development		27,970			39,457			29,381			33,532
Selling, general and administrative		19,465			42,287			45,924			45,934
Total expenses		47,435			81,744			84,249			82,255

Loss from operations		(30,327	)		(63,423	)		(65,008	)		(72,058	)

Other income (expense):
Investment income		868			1,546			1,675			1,542
Interest expense		—			—			—			—
Other income (expense)		(168	)		45			(25	)		(41	)

Loss before income tax expense		(29,627	)		(61,832	)		(63,358	)		(70,557	)

Income tax expense		—			(214	)		(233	)		—

Net loss	$	(29,627	)	$	(62,046	)	$	(63,591	)	$	(70,557	)

Net loss per share of preferred stock, basic and diluted	$	—		$	—		$	—		$	—
Weighted-average shares of preferred stock outstanding, basic and diluted		—			—			—			—
Net loss per share of common stock owned by Ionis, basic and diluted	$	(0.44	)	$	(0.72	)	$	(0.73	)	$	(0.79	)
Weighted-average shares of common stock outstanding owned by Ionis, basic and diluted		45,447,879			60,832,494			65,538,467			67,129,553
Net loss per share of common stock owned by others, basic and diluted	$	(0.44	)	$	(0.85	)	$	(0.73	)	$	(0.79	)
Weighted-average shares of common stock outstanding owned by others, basic and diluted		21,171,372			21,492,157			21,671,415			21,869,713

2017 Quarters	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(as revised)
Revenue:
Commercial revenue:
Product revenue	$	—		$	—		$	—		$	—
Licensing revenue		—			—			—			—
Total commercial revenue		—			—			—			—
Research and development revenue under collaborative agreement		6,094			5,713			9,906			21,688
Total revenue		6,094			5,713			9,906			21,688

Expenses:
Cost of sales - product		—			—			—			—
Cost of sales - intangible asset amortization		—			—			—			—
Cost of license		—			—			—			—
Research and development		64,794			18,487			17,640			25,968
Selling, general and administrative		4,676			6,915			8,373			17,018
Total expenses		69,470			25,402			26,013			42,986

Loss from operations		(63,376	)		(19,689	)		(16,107	)		(21,298	)

Other income (expense):
Investment income		61			245			687			819
Interest expense		(541	)		(965	)		(224	)		—
Other income (expense)		—			50			73			(19	)

Loss before income tax expense		(63,856	)		(20,359	)		(15,571	)		(20,498	)

Income tax expense		—			—			(2,066	)		791

Net loss	$	(63,856	)	$	(20,359	)	$	(17,637	)	$	(19,707	)

Net loss per share of preferred stock, basic and diluted	$	(2.21	)	$	(0.70	)	$	(0.01	)	$	—
Weighted-average shares of preferred stock outstanding, basic and diluted		28,884,540			28,888,450			5,651,323			—
Net loss per share of common stock owned by Ionis, basic and diluted	$	—		$	—		$	(0.33	)	$	(0.30	)
Weighted-average shares of common stock outstanding owned by Ionis, basic and diluted		—			—			36,555,903			45,447,879
Net loss per share of common stock owned by others, basic and diluted	$	—		$	—		$	(0.33	)	$	(0.30	)
Weighted-average shares of common stock outstanding owned by others, basic and diluted		—			—			16,966,712			21,093,750

The following table summarizes the distributable losses for the quarter ended September 30, 2017 (in thousands):

The following table summarizes the reconciliation of weighted-average shares outstanding used in the calculation of basic EPS for the quarter ended September 30, 2017:

The following table summarizes the calculation of basic EPS for the quarter ended September 30, 2017 (in thousands, except per share amounts):

Delaware		47-2608175
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

22 Boston Wharf Road, 9th Floor, Boston, MA		02110
(Address of Principal Executive Offices)		(Zip Code)

Title of each class		Name of each exchange on which registered
Common Stock, $.001 Par Value		The Nasdaq Stock Market, LLC

PART I
		Page
Item 1.	Business	4
Item 1A.	Risk Factors	30
Item 1B.	Unresolved Staff Comments	59
Item 2.	Properties	59
Item 3.	Legal Proceedings	59
Item 4.	Mine Safety Disclosures	59
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	60
Item 6.	Selected Financial Data	62
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	63
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 8.	Financial Statements and Supplementary Data	79
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	79
Item 9A.	Controls and Procedures	79
Item 9B.	Other Information	80

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	81
Item 11.	Executive Compensation	81
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	81
Item 13.	Certain Relationships and Related Transactions, and Director Independence	82
Item 14.	Principal Accounting Fees and Services	82

PART IV
Item 15.	Exhibits, Financial Statement Schedules	83
Item 16.	Form 10-K Summary	83

Signatures		86

	December 31, 2017 (in thousands)
	As Revised Under Topic 606			As Originally Reported Under Topic 605			Effect of Change
Current portion of deferred revenue	$	58,192		$	50,579		$	7,613
Long-term portion of deferred revenue		12,501			8,306			4,195
Accumulated deficit	$	(296,221	)	$	(284,413	)	$	(11,808	)

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☒

Name	Age	Position
Paula Soteropoulos	51	Chief Executive Officer
Sarah Boyce	47	President
Michael MacLean	53	Chief Financial Officer
Jeffrey M. Goldberg	46	Chief Operating Officer
Louis St. L. O'Dea, MB BCh BAO, FRCP(C)	68	Chief Medical Officer

	As of December 31,
	2018			2017 (1)			2016			2015
Consolidated Balance Sheet:				(as revised)
Cash, cash equivalents and short-term investments	$	252,609		$	260,130		$	7,857		$	64,310
Working capital	$	186,574		$	178,379		$	(19,344	)	$	53,761
Total assets	$	365,261		$	268,804		$	10,684		$	66,067
Payable to Ionis	$	18,901		$	14,365		$	24,355		$	9,198
Series A convertible preferred stock	$	—		$	—		$	100,000		$	100,000
Common stock and additional paid-in capital	$	799,090		$	464,497		$	—		$	—
Accumulated deficit	$	(522,042	)	$	(296,221	)	$	(174,662	)	$	(91,445	)
Stockholders’ equity (deficit)	$	276,724		$	167,825		$	(17,747	)	$	55,267

	Year Ended December 31, 2017 (in thousands, except per share data)
	As Revised Under Topic 606			As Originally Reported Under Topic 605			Effect of Change
Research and development revenue under collaborative Agreement	$	43,401		$	55,209		$	(11,808	)
Loss from operations		(120,470	)		(108,662	)		(11,808	)
Net loss		(121,559	)		(109,751	)		(11,808	)
Net loss per share of preferred stock, basic and diluted		(1.80	)		(1.55	)		(0.25	)
Net loss per share of common stock owned by Ionis, basic and diluted		(3.08	)		(2.82	)		(0.26	)
Net loss per share of common stock owned by others, basic and diluted	$	(3.08	)		(2.82	)	$	(0.26	)

	Years Ended December 31, 2017 (in thousands)
	As Revised Under Topic 606			As Originally Reported Under Topic 605			Effect of Change
Net loss	$	(121,559	)	$	(109,751	)	$	(11,808	)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred revenue		70,693			58,885			11,808
Cash, cash equivalents and restricted cash at beginning of period		7,857			7,857			—
Cash, cash equivalents and restricted at end of period	$	58,367		$	58,367		$	—

	Chargebacks, discounts and fees		Government and other rebates		Returns		Total
Balance at December 31, 2017	$	—	$	—	$	—	$	—
Provision related to current period sales		50		293		5		348
Adjustment related to prior period sales		—		—		—		—
Credit or payments made during the period		—		—		—		—
Balance at December 31, 2018	$	50	$	293	$	5	$	348

	Payments due by period
Year Ending December 31,	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Operating lease obligations	$	23,688	$	2,308	$	4,711	$	4,805	$	11,864
Purchase commitments		5,033		5,033		—		—		—
Total	$	28,721	$	7,341	$	4,711	$	4,805	$	11,864

Plan Category	Number of Shares to be Issued Upon Exercise of Outstanding Options		Weighted Average Exercise Price of Outstanding Options		Number of Shares Remaining Available for Future Issuance
Equity compensation plans approved by stockholders (a)		11,010,828	$	15.00		2,578,939	(b)

Total		11,010,828	$	15.00		2,578,939

		Incorporated by Reference
Exhibit	Description	Schedule / Form	File Number	Exhibit	File Date
3.1	Amended and Restated Certificate of Incorporation of the Registrant	8-K	001-38137	3.1	July 19, 2017
3.2	First Amendment to Amended and Restated Certificate of incorporation of the Registrant	8-K	001-38137	3.1	April 17, 2018
3.3	Second Amendment to Amended and Restated Certificate of Incorporation of the Registrant	10-Q	001-38137	3.1	May 7, 2018
3.4	Amended and Restated Bylaws of the Registrant	8-K	001-38137	3.2	July 19, 2017
4.1	Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4
4.2	Form of Common Stock Certificate of the Registrant	S-1	333-216949	4.1	June 20, 2017
4.3	Amended and Restated Investor Rights Agreement by and among the Registrant and Ionis Pharmaceuticals, Inc., dated March 14, 2018	8-K	001-38137	4.1	March 15, 2018
4.4	Form of Indenture, between the Registrant and one or more trustees to be named	S-3	333-227403	4.4	September 18, 2018
10.1#	Collaboration and License Agreement by and among the Registrant and PTC Therapeutics International Limited, dated August 1, 2018	10-Q	001-38137	10.1	November 6, 2018
10.2	Operating Lease Agreement by and among Registrant and MEPT Seaport 13 Stillings LLC, dated April 5, 2018	10-Q	001-38137	10.1	August 7, 2018
10.3*	Operating Sublease Agreement by and among Registrant and Ionis Pharmaceuticals, Inc., dated November 12, 2018
10.4†	Form of Indemnity Agreement	S-1	333-216949	10.1	April 10, 2017
10.5†	2015 Equity Incentive Plan, as amended, and Form of Award Agreement	8-K	001-38137	10.1	November 23, 2018
10.6†	2017 Employee Stock Purchase Plan	S-1	333-216949	10.3	June 20, 2017
10.7#	Development, Commercialization and License Agreement by and among Registrant and Ionis Pharmaceuticals, Inc., dated December 18, 2015	S-1	333-216949	10.4	March 27, 2017
10.8#	Services Agreement by and among Registrant and Ionis Pharmaceuticals, Inc., dated December 18, 2015	S-1	333-216949	10.5	March 27, 2017
10.9	Senior Unsecured Line of Credit by and among Registrant and Ionis Pharmaceuticals, Inc., dated January 18, 2017	S-1	333-216949	10.6	March 27, 2017
10.10#	Strategic Collaboration, Option and License Agreement by and among Registrant and Novartis Pharma AG, dated January 5, 2017	S-1	333-216949	10.7	March 27, 2017
10.11	Stock Purchase Agreement by and among Registrant, Ionis Pharmaceuticals, Inc. and Novartis Pharma AG, dated January 5, 2017	S-1	333-216949	10.8	March 27, 2017
10.12*†	Non-Employee Director Compensation Plan

	AKCEA THERAPEUTICS, INC.

	By:	/s/ PAULA SOTEROPOULOS
		Paula Soteropoulos
		Chief Executive Officer and Director (Principal executive officer)

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets		F-3

Consolidated Statements of Operations		F-4

Consolidated Statements of Comprehensive Loss		F-5

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)		F-6

Consolidated Statements of Cash Flows		F-7

Notes to Consolidated Financial Statements		F-9

	Chargebacks, discounts and fees		Government and other rebates		Returns		Total
Balance at December 31, 2017	$	—	$	—	$	—	$	—
Provision related to current period sales		50		293		5		348
Adjustment related to prior period sales		—		—		—		—
Credit or payments made during the period		—		—		—		—
Balance at December 31, 2018	$	50	$	293	$	5	$	348

			Gross Unrealized					Estimated
December 31, 2018	Cost		Gains		Losses			Fair Value
Available-for-sale securities:
Corporate debt securities	$	81,770	$	—	$	(151	)	$	81,619
Debt securities issued by U.S. government agencies		85,578		—		(42	)		85,536
Total securities with a maturity of one year or less	$	167,348	$	—	$	(193	)	$	167,155

			Gross Unrealized					Estimated
December 31, 2017	Cost		Gains		Losses			Fair Value
Available-for-sale securities:
Corporate debt securities	$	132,434	$	—	$	(206	)	$	132,228
Debt securities issued by U.S. government agencies		38,135		—		(59	)		38,076
Total securities with a maturity of one year or less		170,569		—		(265	)		170,304

Corporate debt securities		8,267		—		(35	)		8,232
Debt securities issued by U.S. government agencies		23,264		—		(37	)		23,227
Total securities with a maturity of one to two years		31,531		—		(72	)		31,459
Total available-for-sale securities	$	202,100	$	—	$	(337	)	$	201,763

	At December 31, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
Money market funds (1)	$	82,343	$	82,343	$	—
Corporate debt securities (2)		81,619		—		81,619
Debt securities issued by U.S. government agencies (3)		85,536		—		85,536
Total	$	249,498	$	82,343	$	167,155

	At December 31, 2017		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
Money market funds (1)	$	48,430	$	48,430	$	—
Corporate debt securities (3)		140,460		—		140,460
Debt securities issued by U.S. government agencies (3)		61,303		—		61,303
Total	$	250,193	$	48,430	$	201,763

	Total
2019	$	5,863
2020		5,879
2021		5,861
2022		5,856
2023		5,843
Thereafter		59,613
	$	88,914

	Number of Shares			Weighted Average Exercise Price per Share		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2017		7,905		$	9.64
Granted		4,833		$	22.86
Exercised		(835	)	$	7.98
Cancelled/forfeited/expired		(892	)	$	16.53
Outstanding at December 31, 2018		11,011		$	15.00		8.07	$	167,184
Exercisable at December 31, 2018		4,305		$	8.04		7.11	$	95,124

	Year Ended December 31,
Determination of shares:	2018		2017		2016
Weighted-average preferred shares outstanding		—		15,748,009		28,884,540
Weighted-average common shares outstanding owned by Ionis		59,812,394		20,669,446		—
Weighted-average common shares outstanding owned by others		21,553,407		9,593,322		—
Total weighted-average shares outstanding		81,365,801		46,010,777		28,884,540

	Year Ended December 31, 2018
	Cash		Adjustment			Non-Cash		Total
Research and development	$	327	$	(34	)	$	209	$	502
Selling, general and administrative		1,562		(116	)		200	$	1,646
Total	$	1,889	$	(150	)	$	409	$	2,148

	Year Ended December 31, 2018
Restructuring reserve beginning balance	$	—
Restructuring expenses incurred during the period		1,889
Adjustments during the period		(150	)
Amounts paid during the period		(1,696	)
Restructuring reserve ending balance	$	43

	September 30, 2017
	(as revised)
Net loss	$	(17,637	)
Preferred stock dividend		(1,791	)
Distributable losses	$	(19,428	)