Basic and Diluted Net (Loss) Income Per Share

3 Months Ended

Mar. 31, 2020

Basic and Diluted Net (Loss) Income Per Share

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

In the first quarter of 2019, we purchased inventory from Ionis and the amount paid to Ionis was in excess of Ionis’ carrying value of the related assets acquired. In accordance with accounting guidance for common control transactions, this distribution was treated as a dividend to Ionis; therefore, we have applied the two-class method of net (loss) income per share to reflect the allocation of this distribution to the participating Ionis common shares.

The two-class method is an earnings allocation formula that determines net (loss) income 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 net (loss) income per share under the two-class method, we have allocated the net (loss) income between common stock owned by Ionis and common stock owned by others.

Basic net (loss) income per share for each class of stock is computed by dividing total distributable (losses) income applicable to common stock owned by Ionis and common stock owned by others by the weighted-average number of common shares outstanding during the requisite period.

The following table summarizes the distributable (losses) income for the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020			2019
Net (loss) income	$	(42,850	)	$	27,187
Distributions to Ionis		—			(13,492	)
Distributable (losses) income	$	(42,850	)	$	13,695

The following table summarizes the reconciliation of weighted-average shares outstanding used in the calculation of basic (loss) income per share for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		2019
Determination of shares:
Weighted-average common shares outstanding owned by Ionis		77,094,682		68,581,967
Weighted-average common shares outstanding owned by others		24,010,388		22,126,363
Total weighted-average common shares outstanding		101,105,070		90,708,330

The following table summarizes the calculation of basic (loss) income per share for the three months ended March 31, 2020 and 2019 (in thousands, except share and per share amounts):

	Three Months Ended March 31,
	2020			2019
(Losses) income allocated to Ionis	$	(32,674	)	$	10,354
Plus: Distribution to Ionis		—			13,492
(Losses) income available to Ionis	$	(32,674	)	$	23,846
Weighted-average common shares outstanding owned by Ionis		77,094,682			68,581,967
Basic (loss) income per common share owned by Ionis	$	(0.42	)	$	0.35

(Losses) income allocated to common shares owned by others	$	(10,176	)	$	3,341
Weighted-average common shares outstanding owned by others		24,010,388			22,126,363
Basic loss per common share owned by others	$	(0.42	)	$	0.15

For the three months ended March 31, 2020 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:

•

Options to purchase common stock;

•

Unvested RSUs; and

•

Employee Stock Purchase Plan.

For the three months ended March 31, 2019, we had net income available to our common shareholders. As a result, we computed diluted net income per share using the weighted-average number of common shares owned by Ionis, weighted-average number of common shares owned by others and dilutive common equivalent shares outstanding during the period.

The following table summarizes the reconciliation of weighted-average shares outstanding and diluted common equivalent shares used in the calculation of diluted income per share for the three months ended March 31, 2019:

	Three Months Ended March 31, 2019
Determination of shares:
Weighted-average common shares outstanding owned by Ionis		68,581,967
Weighted-average common shares outstanding owned by others		22,126,363
Shares issuable upon exercise of stock options		3,370,817
Shares issuable upon restricted stock awards issuance		14,813
Shares issuable related to our ESPP		33,982
Weighted-average shares outstanding owned by others, plus assumed conversions		25,545,975
Total weighted-average shares outstanding		94,127,942

The following table summarizes the calculation of diluted income per share for the three months ended March 31, 2019 (in thousands, except per share amounts):

	Three Months Ended March 31, 2019
Income allocated to Ionis	$	9,978
Plus: Distribution to Ionis		13,492
Income available to Ionis	$	23,470
Weighted-average common shares outstanding owned by Ionis		68,581,967
Diluted income per common share owned by Ionis	$	0.34

Income allocated to common shares owned by others, plus assumed conversions	$	3,717
Weighted-average common shares outstanding owned by others, plus assumed conversions		25,545,975
Diluted income per common share owned by others	$	0.15