Collaboration and License Agreement with PTC Therapeutics

9 Months Ended

Sep. 30, 2019

Collaboration And License Agreement [Abstract]

Collaboration and License Agreement with PTC Therapeutics

9. Collaboration and License Agreement with PTC Therapeutics

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 sublicense fee related to the TTR License Agreement. We received a $6.0 million payment from PTC Therapeutics in the second quarter of 2019 as a result of WAYLIVRA approval by the EC, of which we paid Ionis $3.0 million as a sublicense fee related to the Cardiometabolic License Agreement and was recorded as cost of license in the condensed consolidated statement of operations. 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. 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 priced similar to other manufacturing options with similar customers and is therefore not considered a material right. We determined the transaction price for the PTC License Agreement to be $12.0 million comprised of the upfront payment we received. None of the regulatory milestones were included in the transaction price determined in August 2018, as all payments were fully constrained. As there were no remaining unsatisfied performance obligations as of September 30, 2018, the $12.0 million upfront payment was recognized as licensing revenue upon contract execution in the third quarter of 2018. The option to purchase supply from us is subject to the terms of a supply agreement we entered into with PTC Therapeutics in April 2019. In May 2019, we received $6.0 million of consideration from PTC Therapeutics as a result of WAYLIVRA approval by the EC and we paid $3.0 million to Ionis as a sublicense fee. Since the constraint on the regulatory approval was resolved, we updated the transaction price to include this consideration, and accordingly, we recognized the $6.0 million as licensing revenue during the second quarter of 2019. As part of our evaluation of the constraint as of September 30, 2019, we considered numerous factors, including that regulatory approvals are not within our control and accordingly the remaining milestones are fully constrained and excluded from the arrangement consideration until such regulatory approvals are received. We will continue to 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. Any consideration related to sales-based royalties will be recognized when the related sales occur.