6. Collaborative Arrangements and Licensing Agreements

Below, we have included our collaborations with substantive changes during the first nine months of 2016 from those included in Note 6 of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015.

Strategic Partnership

Biogen

We have established four strategic collaborations with Biogen focused on using antisense technology to advance the treatment of neurological and neuromuscular disorders. These collaborations combine our expertise in creating antisense drugs with Biogen's expertise in developing therapies for neurological disorders. We and Biogen are currently developing six drugs to treat neurological diseases under these collaborations, including SPINRAZA, IONIS-DMPK-2.5_Rx, IONIS-SOD1_Rx, and three drugs to treat undisclosed neurodegenerative diseases, IONIS-BIIB4_Rx,IONIS-BIIB5_Rx and IONIS-BIIB6_Rx. In addition to these six drugs, we and Biogen are evaluating numerous additional targets for the development of drugs to treat neurological diseases. We have included the following two Biogen collaborations because they had substantive changes during the first nine months of 2016 from those included in Note 6 of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015.

SPINRAZA

In January 2012, we entered into a collaboration agreement with Biogen to develop and commercialize SPINRAZA for the treatment of SMA. SPINRAZA is an RNA-targeted therapy in development for the treatment of infants and children with SMA. SPINRAZA is currently under Priority Review with the FDA and Accelerated Assessment with the EMA for marketing authorization. Recently, a number of positive events have provided evidence for the transformative potential of this drug, including:

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CHERISH, our Phase 3 trial evaluating SPINRAZA in children with later-onset SMA- In November 2016, we announced that SPINRAZA met the primary endpoint at the interim analysis of CHERISH.

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ENDEAR, our Phase 3 trial evaluating SPINRAZA in infants with infantile-onset SMA- In August 2016, we announced that SPINRAZA met the primary endpoint at the interim analysis of ENDEAR.

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License Fee- In July 2016, Biogen exercised its option to SPINRAZA and paid us a $75 million license fee. We are now transitioning all SPINRAZA development activities to Biogen as they are responsible for all development, regulatory and commercialization activities and costs.

Based on the results of these pre-specified interim analyses, we are stopping the CHERISH and ENDEAR studies and participants are transitioning into the SHINE open-label study in which all patients receive SPINRAZA. Additionally, participants enrolled in the sham-controlled arm of EMBRACE, a Phase 2 study which also included infantile-onset patients, will have the opportunity to receive SPINRAZA. The open-label NURTURE study in pre-symptomatic infants with SMA will continue as planned in order to collect the data to demonstrate the safety and efficacy of SPINRAZA in this population. We will complete the Phase 3 studies and we are working with Biogen to transition the clinical programs for SPINRAZA that we are conducting to Biogen.

Under the terms of the agreement, we received an upfront payment of $29 million in January 2012, which we are amortizing through December 2016. Over the term of the collaboration, we are eligible to receive up to an additional $346 million in a license fee and payments, including up to $121 million in substantive milestone and other payments associated with the clinical development of SPINRAZA prior to licensing and up to $150 million in substantive milestone payments if Biogen achieves pre-specified regulatory milestones. We are also eligible to receive tiered royalties up to the mid-teens on any sales of SPINRAZA. We have exclusively in-licensed patents related to SPINRAZA from Cold Spring Harbor Laboratory and the University of Massachusetts. We will pay Cold Spring Harbor Laboratory and the University of Massachusetts nominal amounts when we receive license fees and milestone payments and a low single digit royalty on sales of SPINRAZA.

From inception through September 2016, we have received more than $235 million in payments for advancing SPINRAZA, including the $75 million license fee we received from Biogen when Biogen licensed SPINRAZA, which we recognized as revenue in the third quarter of 2016. In the first nine months of 2016, we earned $11.5 million in milestone payments for advancing SPINRAZA. We will earn the next milestone payment of up to $60 million if Biogen receives regulatory approval for SPINRAZA.

Neurology

In December 2012, we and Biogen entered into a third and separate collaboration agreement to develop and commercialize novel antisense drugs to up to three targets to treat neurological or neuromuscular diseases. We are responsible for the development of each of the drugs through the completion of the initial Phase 2 clinical study for such drug. Biogen has the option to license a drug from each of the three programs through the completion of the first Phase 2 study for each program. We are currently advancing IONIS-BIIB4_Rx under this collaboration. If Biogen exercises its option for a drug, it will assume all further global development, regulatory and commercialization responsibilities for that drug. Under the terms of the agreement, we received an upfront payment of $30 million, which we are amortizing through December 2020. Over the term of the collaboration, we are eligible to receive up to an additional $259 million in a license fee and substantive milestone payments per program. We are eligible to receive up to $59 million in development milestone payments to support research and development of each program, including amounts related to the cost of clinical trials. We are also eligible to receive up to $130 million in milestone payments per program if Biogen achieves pre-specified regulatory milestones. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any drugs resulting from each of the three programs. From inception through September 2016, we have received $43 million in payments under this collaboration. In February 2016, we earned a $3 million milestone payment for further advancing IONIS-BIIB4_Rx. We will earn the next milestone payment of up to $10 million for the continued development of IONIS-BIIB4_Rx.

During the three and nine months ended September 30, 2016, we earned revenue of $90.2 million and $120.9 million, respectively from our relationship with Biogen. This revenue represented 81 percent and 65 percent of our total revenue for the three and nine months ended September 30, 2016, respectively. In comparison, we earned revenue of $18.1 million and $75.1 million for the same periods in 2015, respectively, which represented 37 percent and 32 percent of our total revenue for those periods, respectively. Our condensed consolidated balance sheet at September 30, 2016 included deferred revenue of $73.1 million related to our relationship with Biogen.

Research, Development and Commercialization Partners

GSK

In March 2010, we entered into an alliance with GSK using our antisense drug discovery platform to discover and develop new drugs against targets for rare and serious diseases, including infectious diseases and some conditions causing blindness. Our alliance currently comprises five drugs in development, including our Phase 3 drug IONIS-TTR_Rx. We are responsible for completing the Phase 3 study we are currently conducting for IONIS-TTR_Rx. GSK has the option to license IONIS-TTR_Rx. If GSK exercises its option it will pay us a license fee. GSK has the exclusive option to license the other drugs resulting from this alliance at Phase 2 proof-of-concept for a license fee. If GSK exercises its exclusive option for any drugs resulting from this alliance, it will be responsible for all further global development, regulatory and commercialization activities and costs for such drug. Under the terms of the agreement, we received $38 million in upfront and expansion payments, which we are amortizing through September 2017.

In October 2012, we and GSK amended the original agreement to reflect an accelerated clinical development plan for IONIS-TTR_Rx. We have completed enrollment in the Phase 3 study we are conducting in patients with TTR familial amyloid polyneuropathy, or FAP. From inception through September 2016, we have earned $60 million from GSK related to the development of IONIS-TTR_Rx, primarily in milestone payments. In addition, under the amended agreement, we and GSK increased the regulatory and commercial milestone payments we can earn should IONIS-TTR_Rx receive marketing authorization and meet pre-agreed sales targets.

In addition to IONIS-TTR_Rx, we have four drugs in development with GSK. We are developing two antisense drugs we designed to reduce the production of viral proteins associated with hepatitis B virus, or HBV infection; IONIS-HBV_Rx and IONIS-HBV-L_Rx, a follow-on drug using our LICA technology. We are also developing IONIS-GSK4-L_Rx and IONIS-RHO-2.5_Rx, which are antisense drugs we designed to treat ocular diseases. In March 2016, we and GSK amended the development plan for IONIS-HBV_Rx to allow GSK to conduct all further development activities for this program.

Under our agreement, if GSK successfully develops all five drugs for one or more indications and achieves pre-agreed sales targets, we could receive license fees and substantive milestone payments of more than $1.0 billion, including up to $168.5 million for the achievement of development milestones, up to $363.5 million for the achievement of regulatory milestones and up to $338 million for the achievement of commercialization milestones. Through September 2016, we have received more than $154 million in payments under this alliance with GSK. In the first quarter of 2016, we earned a $1.5 million milestone payment when GSK initiated a Phase 1 study of IONIS-HBV-L_Rx. We will earn the next milestone payment of up to $1.5 million if we further advance a program under this collaboration. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any product that GSK successfully commercializes under this alliance.

During the three and nine months ended September 30, 2016, we earned revenue of $1.2 million, and $8.2 million, respectively, from our relationship with GSK, which represented one percent and four percent, respectively, of our total revenue for those periods. In comparison, we earned revenue of $1.6 million and $22.4 million for the same periods in 2015, respectively, which represented three percent and ten percent of our total revenue for those periods, respectively. Our condensed consolidated balance sheet at September 30, 2016 included deferred revenue of $4.7 million related to our relationship with GSK.

Janssen Biotech, Inc., a pharmaceutical company of Johnson & Johnson

In December 2014, we entered into a collaboration agreement with Janssen Biotech, Inc. to discover and develop antisense drugs that can be locally administered, including oral delivery, to treat autoimmune disorders of the gastrointestinal tract. Janssen has the option to license drugs from us through the designation of a development candidate for up to three programs. Prior to option exercise we are responsible for the discovery activities to identify a development candidate. If Janssen exercises an option for one of the programs, it will be responsible for the global development, regulatory and commercial activities under that program. Under the terms of the agreement, we received $35 million in upfront payments, which we are amortizing through December 2018. We are eligible to receive an additional up to nearly $800 million in license fees and substantive milestone payments for these programs, including up to $175 million for the achievement of development milestones, up to $420 million for the achievement of regulatory milestones and up to $180 million for the achievement of commercialization milestones. In addition, we are eligible to receive tiered royalties up to the near teens on sales from any drugs resulting from this collaboration.

From inception through September 2016, we received nearly $47 million in payments under this collaboration with Janssen, including the $10 million license fee we earned in July 2016 when Janssen licensed IONIS-JBI1-2.5_Rx from us, which we recognized as revenue in the third quarter of 2016. We will earn the next milestone payment of $5 million if Janssen chooses another target to advance under this collaboration.

During the three and nine months ended September 30, 2016, we earned revenue of $12.2 million and $16.6 million, respectively, from our relationship with Janssen, which represented 11 percent and nine percent, respectively, of our total revenue for those periods. In comparison, we earned revenue of $2.2 million and $6.6 million for the same periods in 2015, respectively, which represented four percent and three percent, respectively, of our total revenue for those periods. Our condensed consolidated balance sheet at September 30, 2016 included deferred revenue of $21.6 million related to our relationship with Janssen.

Kastle Therapeutics

In May 2016, we entered into an agreement with Kastle under which Kastle acquired the global rights to develop and commercialize Kynamro. Kynamro is approved in the United States for use in patients with homozygous familial hypercholesterolemia to reduce low density lipoprotein-cholesterol, apolipoprotein B, total cholesterol and non-high density lipoprotein-cholesterol as an adjunct to lipid lowering medications and diet. Under the terms of the agreement, we are eligible to receive up to $95 million, which includes the $15 million up-front payment we received in May 2016, a $10 million payment in May 2019 and up to $70 million in sales milestones. Beginning in 2017, we are eligible to earn tiered royalties on global sales of Kynamro that average in the mid to low teens. In addition, we also received a 10 percent common equity position in Kastle. Because realization of our equity position is uncertain, we recorded a full valuation allowance. Sanofi Genzyme will earn a three percent royalty on sales of Kynamro and three percent of non-royalty cash payments we receive from Kastle.

During the nine months ended September 30, 2016, we earned revenue of $15 million from our relationship with Kastle, which represented eight percent of our total revenue for that period.