Collaborative Arrangements and Licensing Agreements

12 Months Ended

Dec. 31, 2017

Collaborative Arrangements and Licensing Agreements [Abstract]

Collaborative Arrangements and Licensing Agreements

6. Collaborative Arrangements and Licensing Agreements

Strategic Partnerships

AstraZeneca

Cardiometabolic and Renal Diseases Collaboration

In July 2015, we and AstraZeneca formed a strategic collaboration to discover and develop antisense therapies for treating cardiovascular and metabolic diseases primarily focused on targets in the kidney and renal diseases. As part of the agreement, we granted AstraZeneca an exclusive license to IONIS-AZ4-2.5-L_Rx, a drug we designed to treat cardiovascular disease and our first drug that combines our Generation 2.5 and LIgand-Conjugated Antisense, or LICA, technology. We also granted AstraZeneca the option to license a drug for each additional target advanced under this research collaboration. In February 2018, AstraZeneca licensed a second drug under our collaboration, IONIS-AZ5-2.5_Rx, a drug we designed to treat a genetically associated form of kidney disease. AstraZeneca is responsible for all further global development, regulatory and commercialization activities and costs for IONIS-AZ4-2.5-L_Rx and IONIS-AZ5-2.5_Rx and any other future drug development candidates AstraZeneca accepts.

Under the terms of the agreement, we received a $65 million upfront payment. Since this agreement has multiple elements, we evaluated the deliverables in this arrangement and determined that none of the deliverables have stand-alone value because of the early stage of research for this collaboration. Therefore, we concluded there is one unit of accounting and we are amortizing the $65 million upfront payment through August 2021. We are eligible to receive license fees and substantive milestone payments of up to more than $4 billion as drugs under this collaboration advance, including up to $1.1 billion for the achievement of development milestones and up to $2.9 billion for regulatory milestones. From inception through December 2017, we have received $93 million in upfront fees, milestone payments, and other payments under this cardiometabolic and renal diseases collaboration, including a $25 million milestone payment we received when we moved the first development candidate into preclinical development, IONIS-AZ4-2.5-L_Rx in December 2016. Additionally, in February 2018, we earned $30 million when AstraZeneca licensed IONIS-AZ5-2.5_Rx. We will earn the next milestone payment of $10 million under this collaboration if we advance a drug under our cardiometabolic research program with AstraZeneca. In addition, we are eligible to receive tiered royalties up to the low teens on sales from any product that AstraZeneca successfully commercializes under this collaboration agreement.

Oncology Collaboration

In December 2012, we entered into a collaboration agreement with AstraZeneca to discover and develop antisense drugs to treat cancer. As part of the agreement, we granted AstraZeneca an exclusive license to develop and commercialize IONIS-STAT3-2.5_Rx for the treatment of cancer and an option to license up to three anti-cancer drugs under separate research programs. AstraZeneca is responsible for all global development, regulatory and commercialization activities for IONIS-STAT3-2.5_Rx. We and AstraZeneca have evaluated IONIS-STAT3-2.5_Rx in people with advanced metastatic hepatocellular carcinoma and advanced lymphoma. AstraZeneca is evaluating IONIS-STAT3-2.5_Rx in combination with Imfinzi (durvalumab), AstraZeneca’s programmed death ligand (PD-L1) blocking drug, in people with head and neck cancer. Under the research program, we are responsible for identifying a development candidate for each of the three anti-cancer research programs. AstraZeneca has the option to license drugs resulting from each of the three anti-cancer research programs, and if AstraZeneca exercises its option for a drug, it will be responsible for all further global development, regulatory and commercialization activities and costs for such drug. The first development candidate identified under the anti-cancer research program was IONIS-KRAS-2.5_Rx, which AstraZeneca licensed from us in December 2016. IONIS-KRAS-2.5_Rx is a Generation 2.5 antisense drug we designed to directly target KRAS, one of the most frequently mutated genes in cancer. 

Under the terms of the agreement, we received $31 million in upfront payments. We recorded revenue of $11.5 million upon receipt of these payments and we have amortized $11.9 million into revenue as we have performed development activities under this collaboration. We recognized the remaining $7.6 million related to the option to license three drugs under the research program through February 2018. In January 2016, we and AstraZeneca amended the agreement for the research program. Under the amended terms of the agreement, we can earn an additional $5 million in milestone payments for advancing a drug under our research program.

We are eligible to receive milestone payments and license fees from AstraZeneca as programs advance in development. In addition, we are eligible to receive tiered royalties up to the low to mid-teens on sales from any drugs resulting from these programs. If AstraZeneca successfully develops IONIS-STAT3-2.5_Rx, IONIS-KRAS-2.5_Rx and two other drugs under the research program, we could receive license fees and substantive milestone payments of up to more than $750 million, including up to $226 million for the achievement of development milestones and up to $485 million for the achievement of regulatory milestones. From inception through December 2017, we have received $97.8 million in upfront fees, milestone payments, and other payments under this oncology collaboration. We will earn the next milestone payment of $17.5 million if we advance a drug under our cancer research program with AstraZeneca.

Each of our agreements with AstraZeneca will continue until the expiration of all payment obligations under the applicable agreement. In addition, the agreement, or any program under the applicable agreement, may terminate early under the following situations:

● AstraZeneca may terminate the agreement or any program at any time by providing written notice to us;

● AstraZeneca may terminate the agreement or any program by providing written notice if we undergo a change of control with a third party; and

● Either we or AstraZeneca may terminate the agreement or any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement, or the entire agreement if the other party becomes insolvent.

During 2017, 2016 and 2015 we earned revenue of $13.8 million, $64.9 million and $6.4 million, respectively, from our relationship with AstraZeneca, which represented three percent, 19 percent and two percent, respectively, of our total revenue for those periods. Our balance sheets at December 31, 2017 and 2016 included deferred revenue of $41.8 million and $51.5 million, respectively, related to our relationship with AstraZeneca.

Biogen

We have several strategic collaborations with Biogen focused on using antisense technology to advance the treatment of neurological disorders. These collaborations combine our expertise in creating antisense drugs with Biogen's expertise in developing therapies for neurological disorders. We developed and licensed to Biogen SPINRAZA, our approved drug to treat people with spinal muscular atrophy, or SMA. Additionally, we and Biogen are currently developing six other drugs to treat neurodegenerative diseases under these collaborations, including IONIS-SOD1_Rx for ALS, IONIS-MAPT_Rx (formerly IONIS-BIIB4_Rx) for Alzheimer’s disease and IONIS-C9_Rx (formerly IONIS-BIIB5_Rx), IONIS-BIIB6_Rx, IONIS-BIIB7_Rx and IONIS-BIIB8_Rx to treat undisclosed neurodegenerative diseases. In addition to these drugs, we and Biogen are evaluating numerous additional targets to develop drugs to treat neurological diseases. Most recently, in December 2017 we entered into a collaboration with Biogen to identify new antisense drugs for the treatment of SMA. From inception through December 2017, we have received nearly $745 million from our Biogen collaborations.

SPINRAZA

In January 2012, we entered into a collaboration agreement with Biogen to develop and commercialize SPINRAZA, an RNA-targeted therapy for the treatment of SMA. In December 2016, the FDA approved SPINRAZA for the treatment of SMA in pediatric and adult patients. In January 2018, Biogen reported that SPINRAZA was available in over 30 global markets.

Our 2017 revenue included $112.5 million in commercial revenue from SPINRAZA royalties. In addition to SPINRAZA royalties, from inception through December 2017, we have received $436 million in payments for advancing SPINRAZA, including $90 million of milestone payments for the approval of SPINRAZA in the EU and Japan we earned during 2017. We are receiving 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 paid Cold Spring Harbor Laboratory and the University of Massachusetts nominal amounts for license fees and milestone payments we received in 2017. We also pay a low single digit royalty on sales of SPINRAZA. Additionally, we owe a low single digit royalty on future sales of SPINRAZA. Biogen is responsible for all further global development, regulatory and commercialization activities and costs for SPINRAZA.

New antisense drugs for the treatment of SMA

In December 2017, we entered into a collaboration agreement with Biogen to identify new antisense drugs for the treatment of SMA. Biogen will have the option to license therapies arising out of this collaboration following the completion of preclinical studies. Upon licensing, Biogen will be responsible for all further global development, regulatory and commercialization activities and costs for such therapies. Under the collaboration agreement, we received a $25 million upfront payment in December 2017, which we plan to amortize through December 2019. We will earn development and regulatory substantive milestone payments from Biogen if new drugs advance towards marketing approval. In total over the term of our collaboration, we are eligible to receive up to $1.2 billion in license fees, substantive milestone payments and other payments, including up to $80 million for the achievement of development milestones, up to $180 million for the achievement of commercialization milestones and $800 million for the achievement of sales milestones. In addition, we are eligible to receive tiered royalties from the mid-teens to mid-20 percent range on net sales. We will earn the next milestone payment of up to $45 millionfor the initiation of a Phase 3 study for a drug under this collaboration.

Neurology

In December 2012, we and Biogen entered into a collaboration agreement to develop and commercialize novel antisense drugs to up to three targets to treat neurodegenerative 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-MAPT_Rx (formerly IONIS-BIIB4_Rx) for Alzheimer’s disease under this collaboration. If Biogen exercises its option for a drug, it will assume all further global development, regulatory and commercialization responsibilities and costs 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 $210 million in a license fee and substantive milestone payments per program, plus a mark-up of the cost estimate of the Phase 1 and 2 studies. We are eligible to receive up to $10 million in development milestone payments to support research and development of each program, plus a mark-up of the cost estimate of the Phase 1 and 2 studies. 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 December 2017, we have received $56 million in milestone payments and upfront fees under this collaboration, including $10 million milestone payment we received in 2017 for the initiation of a Phase 1/2a study of IONIS-MAPT_Rx. We will earn the next milestone payment of $7.5 million if we continue to advance IONIS-MAPT_Rx.

Strategic Neurology

In September 2013, we and Biogen entered into a long-term strategic relationship focused on applying antisense technology to advance the treatment of neurodegenerative diseases. As part of the collaboration, Biogen gained exclusive rights to the use of our antisense technology to develop therapies for neurological diseases and has the option to license drugs resulting from this collaboration. The exclusivity for neurological diseases will last through September 2019, and may be extended for any drug development programs Biogen is pursuing under the collaboration. We will usually be responsible for drug discovery and early development of antisense drugs and Biogen will have the option to license antisense drugs after Phase 2 proof of concept. In October 2016, we expanded our collaboration to include additional research activities we will perform. If Biogen exercises its option for a drug, it will assume all further global development, regulatory and commercialization responsibilities and costs for that drug. We are currently advancing five drugs, IONIS-SOD1_Rx, IONIS-C9_Rx (formerly IONIS-BIIB5_Rx), IONIS-BIIB6_Rx, IONIS-BIIB7_Rx and IONIS-BIIB8_Rx under this collaboration. Biogen will be responsible for all of the drug discovery and development activities for drugs using other modalities.

Under the terms of the agreement, we received an upfront payment of $100 million and are eligible to receive milestone payments, license fees and royalty payments for all drugs developed through this collaboration, with the specific amounts dependent upon the modality of the molecule advanced by Biogen. If we have a change of control during the first six years of the collaboration, we may be required to refund Biogen a portion of the $100 million upfront payment, with the amount of the potential refund decreasing ratably as we progress through the initial six-year term of the collaboration. We are amortizing the $100 million upfront payment through September 2019. Because the amortization period for the upfront payment will never be less than the initial six-year term of the collaboration, the amount of revenue we recognize from the upfront payment will never exceed the amount that Biogen could potentially require us to refund.

For each antisense molecule that is chosen for drug discovery and development under this collaboration, we are eligible to receive up to approximately $260 million in a license fee and substantive milestone payments. We are eligible to receive up to approximately $60 million for the achievement of research and development milestones, including amounts related to the cost of clinical trials, and up to $130 million for the achievement of regulatory milestones. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any antisense drugs developed under this collaboration. If other modalities are chosen, such as small molecules or monoclonal antibodies, we are eligible to receive up to $90 million in substantive milestone payments, including up to $35 million for the achievement of research and development milestones and up to $55 million for the achievement of regulatory milestones. In addition, we are eligible to receive tiered single-digit royalties on sales from any drugs using non-antisense modalities developed under this collaboration. From inception through December 2017, we have received $165 million in upfront fees, milestone payments and other payments under this collaboration, including $15 million in milestone payments we received in 2017 for validating two undisclosed neurological disease targets. We will earn the next milestone payment of up to $10 million if we advance a program under this collaboration.

Each of our agreements with Biogen will continue until the earlier of the date all of Biogen's options to obtain the exclusive licenses under the applicable agreement expire unexercised or, if Biogen exercises its option, until the expiration of all payment obligations under the applicable agreement. In addition, each agreement, or any program under an agreement, may terminate early under the following situations:

● Biogen may terminate the agreement or any program at any time by providing written notice to us;

● Under specific circumstances, if we are acquired by a third party with a product that directly competes with a compound being developed under the agreement, Biogen may terminate the affected program by providing written notice to us;

● If, within a specified period of time, any required clearance of a transaction contemplated by an agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is not received, then either we or Biogen may terminate the affected program by providing written notice to the other party; and

● Either we or Biogen may terminate any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement with respect to the affected program, or the entire agreement if the other party becomes insolvent.

During 2017, 2016 and 2015, we earned revenue of $259.8 million, $207.9 million and $106.2 million, respectively, from our relationship with Biogen, which represented 51 percent, 60 percent and 37 percent, respectively, of our total revenue for those periods. Our balance sheets at December 31, 2017 and 2016 included deferred revenue of $69.3 million and $67.5 million, respectively, related to our relationship with Biogen.

Research, Development and Commercialization Partners

Bayer

In May 2015, we entered into an exclusive license agreement with Bayer to develop and commercialize IONIS-FXI_Rx for the prevention of thrombosis. We were responsible for completing a Phase 2 study of IONIS-FXI_Rx in people with end-stage renal disease on hemodialysis. Under the terms of the agreement, we received a $100 million upfront payment in the second quarter of 2015. We recorded revenue of $91.2 million related to the license for IONIS-FXI_Rx in June 2015 and we recognized the majority of the remaining amount related to development activities for IONIS-FXI_Rx through November 2016.

In February 2017, we amended our agreement with Bayer to advance IONIS-FXI_Rx and to initiate development of IONIS-FXI-L_Rx, which Bayer licensed. In conjunction with the decision to advance these programs, we received a $75 million payment from Bayer. We recorded revenue of $64.9 million related to the license for IONIS-FXI-L_Rx in February 2017, and we are recognizing the remaining amount over the period we are performing the ongoing development activities for IONIS-FXI-L_Rx and IONIS-FXI_Rx through May 2019. We are conducting a Phase 2b study evaluating IONIS-FXI_Rx in people with end-stage renal disease on hemodialysis to finalize dose selection. Additionally, we plan to develop IONIS-FXI-L_Rx through Phase 1. Following these studies and Bayer's decision to further advance these programs, Bayer will be responsible for all global development, regulatory and commercialization activities and costs for both drugs. We are eligible to receive additional milestone payments as each drug advances toward the market. In total over the term of our collaboration, we are eligible to receive up to $385 million in license fees, substantive milestone payments and other payments, including up to $125 million for the achievement of development milestones and up to $110 million for the achievement of commercialization milestones. In addition, we are eligible to receive tiered royalties in the low to high 20 percent range on gross margins of both drugs combined. From inception through December 2017, we have received over $175 million from our Bayer collaboration. We will earn the next milestone payment of $10 million if we advance a program under this collaboration.

Our agreement with Bayer will continue until the expiration of all payment obligations under the agreement. In addition, the agreement, or any program under the agreement, may terminate early under the following situations:

● Bayer may terminate the agreement or any program at any time by providing written notice to us;

● Either we or Bayer may terminate the agreement or any program by providing written notice to the other party upon the other party’s uncured failure to perform a material obligation under the agreement, or the entire agreement if the other party becomes insolvent.

During 2017, 2016 and 2015 we earned revenue of $69.2 million, $5.4 million and $93.4 million, respectively, from our relationship with Bayer, which represented 14 percent, two percent and 33 percent, respectively, of our total revenue for those periods. Our consolidated balance sheet at December 31, 2017 and 2016 included deferred revenue of $7.3 million and $1.4 million, respectively, related to our relationship with Bayer.

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. Under the terms of the agreement, we received $38 million in upfront and expansion payments, which we amortized through September 2017.

In August 2017, as part of a reprioritization of its pipeline and strategic review of its Rare Diseases business, GSK declined its options for inotersen, our Phase 3 drug to treat people with TTR amyloidosis and IONIS-FB-L_Rx (formerly IONIS-GSK4-L_Rx), an antisense drug to treat complement-mediated diseases. We are continuing to advance each of these drugs independently.

GSK, consistent with its focus on treatments for infectious diseases, continues to advance two drugs targeting hepatitis B virus, or HBV, under our collaboration: IONIS-HBV_Rx and IONIS-HBV-L_Rx. GSK is currently conducting Phase 2 studies for both of these drugs, which we designed to reduce the production of viral proteins associated with HBV infection. 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. GSK has the exclusive option to license the drugs resulting from this alliance at Phase 2 proof-of-concept for a license fee.

Under our agreement, if GSK successfully develops these drugs and achieves pre-agreed sales targets, we could receive license fees and substantive milestone payments of $262 million, including up to $47.5 million for the achievement of development milestones, up to $120 million for the achievement of regulatory milestones and up to $70 million for the achievement of commercialization milestones. From inception through December 2017, we have received more than $162 million in payments under this alliance with GSK. We will earn the next milestone payment of up to $15 million for the initiation of a Phase 3 study for the HBV program. 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.

Our alliance with GSK will continue until the earlier of the date that all of GSK's options to obtain the exclusive licenses under the agreement expire unexercised or, if GSK exercises its option, until the expiration of all payment obligations under the agreement. In addition, the agreement, or any program under the agreement, may terminate early under the following situations:

● GSK may terminate any program, at any time by providing written notice to us; and

● Either we or GSK may terminate any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement with respect to the affected program, or the entire agreement if the other party becomes insolvent.

During 2017, 2016 and 2015, we earned revenue of $8.6 million, $12.3 million and $33.3 million respectively, from our relationship with GSK, which represented two percent, four percent and 12 percent, respectively, of our total revenue for those years. Our balance sheet at December 31, 2016 included deferred revenue of $2.1 million, related to our relationship with GSK.

Janssen Biotech, Inc.

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 amortized through November 2017. We are eligible to receive up to more than $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 $440 million for the achievement of regulatory milestones and up to $180 million for the achievement of commercialization milestones. From inception through December 2017, we have received $61.8 million, including $15 million in license fees when Janssen licensed IONIS-JBI1-2.5_Rx and IONIS-JBI2-2.5_Rx from us in 2016 and 2017, respectively. We also received $5 million in January 2018 for the initiation of a Phase 1 study of IONIS-JBI1-2.5_Rx in late 2017. In addition, we are eligible to receive tiered royalties up to the near teens on sales from any drugs resulting from this collaboration. We will earn the next milestone payment of $5 million if Janssen chooses another target to advance under this collaboration.

Our agreement with Janssen will continue until the earlier of the date that all of Janssen’s options to obtain the exclusive licenses under the agreement expire unexercised or, if Janssen exercises its option, until the expiration of all payment obligations under the agreement. In addition, the agreement, or any program under the agreement, may terminate early under the following situations:

● Janssen may terminate the agreement or any program at any time by providing written notice to us; and

● Either we or Janssen may terminate any program by providing written notice to the other party upon the other party’s uncured failure to perform a material obligation under the agreement, or the entire agreement if the other party becomes insolvent.

During 2017, 2016 and 2015 we earned revenue of $33.5 million, $27.3 million and $8.9 million, respectively, from our relationship with Janssen. Our balance sheet at December 31, 2016 included deferred revenue of $17.5 million related to our relationship with Janssen.

Novartis

In January 2017, we and Akcea initiated a collaboration with Novartis to develop and commercialize AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. Under the collaboration agreement, Novartis has an exclusive option to develop and commercialize AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. Akcea is responsible for completing a Phase 2 program, conducting an end-of-Phase 2 meeting with the FDA and providing API for each drug. If Novartis exercises an option for one of these drugs, Novartis will be responsible for all further global development, regulatory and commercialization activities and costs for such drug.

Akcea received a $75 million upfront payment in the first quarter of 2017, of which it retained $60 million and paid us $15 million as a sublicense fee. If Novartis exercises its option for a drug, Novartis will pay Akcea a license fee equal to $150 million for each drug it licenses. In addition, for AKCEA-APO(a)-L_Rx, Akcea is eligible to receive up to $600 million in substantive milestone payments, including $25 million for the achievement of a development milestone, up to $290 million for the achievement of regulatory milestones and up to $285 million for the achievement of commercialization milestones. In addition, for AKCEA-APOCIII-L_Rx, Akcea is eligible to receive up to $530 million in substantive milestone payments, including $25 million for the achievement of a development milestone, up to $240 million for the achievement of regulatory milestones and up to $265 million for the achievement of commercialization milestones. Akcea plans to co-commercialize any licensed drug commercialized by Novartis in selected markets, under terms and conditions that it plans to negotiate with Novartis in the future, through the specialized sales force Akcea is building to commercialize volanesorsen. Following Novartis’ exercise of its option for either drug, Akcea will earn the next milestone payment of $25 million if Novartis advances the Phase 3 study for either drug. Akcea is also eligible to receive tiered royalties in the mid-teens to low 20 percent range on net sales of AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx. Akcea will pay 50 percent of these license fees, milestone payments and royalties to us as a sublicense fee.

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:

● Novartis may terminate the agreement as a whole or with respect to any drug at any time by providing written notice to us;

● Either we or Novartis may terminate the agreement with respect to any drug by providing written notice to the other party in good faith that we or Novartis has determined that the continued development or commercialization of the drug presents safety concerns that pose an unacceptable risk or threat of harm in humans or would violate any applicable law, ethical principles, or principles of scientific integrity;

● Either we or Novartis may terminate the agreement for a drug by providing written notice to the other party upon the other party’s uncured failure to perform a material obligation related to the drug under the agreement, or the entire agreement if the other party becomes insolvent; and

● We may terminate the agreement if Novartis disputes or assists a third party to dispute the validity of any of our patents.

In conjunction with this collaboration, we and Akcea entered into a SPA with Novartis. As part of the SPA, Novartis purchased 1.6 million shares of our common stock for $100 million in the first quarter of 2017. As part of the SPA, Novartis was required to purchase $50 million of Akcea’s common stock at the IPO price or our common stock at a premium if an IPO did not occur by April 2018.

To determine the amount of revenue to recognize under our agreements with Novartis, we first concluded that we would account for the collaboration and SPA agreements as a single multiple element arrangement. We next identified four separate units of accounting under the arrangement, each with stand-alone value:

● Development services for AKCEA-APO(a)-L_Rx;

● Development services for AKCEA-APOCIII-L_Rx;

● API for AKCEA-APO(a)-L_Rx; and

● API for AKCEA-APOCIII-L_Rx.

We then determined the total consideration under the arrangement was $180.0 million, which included the following:

● $75 million from the upfront payment;

● $100 million from our common stock Novartis purchased under the SPA, including $28.4 million for the premium paid by Novartis for its purchase of our common stock at a premium in the first quarter of 2017; and

● $5.0 million for the potential premium Novartis would have paid if they purchased our common stock in the future.

We first allocated $71.6 million of the consideration to equity based on the fair value of our common stock Novartis purchased. Next, we allocated the remaining consideration of $108.4 million based on the relative stand-alone selling price of each unit of accounting as follows:

● $64.0 million for the development services for AKCEA-APO(a)-L_Rx;

● $40.1 million for the development services for AKCEA-APOCIII-L_Rx;

● $1.5 million for the delivery of AKCEA-APO(a)-L_Rx API; and

● $2.8 million for the delivery of AKCEA-APOCIII-L_Rx API.

We are recognizing the amount attributed to the development services for AKCEA-APO(a)-L_Rx and AKCEA-APOCIII-L_Rx over the period of time we are performing the services, currently estimated to be through November 2018 and June 2019, respectively. We recognized the amount attributed to the API supply for AKCEA-APOCIII-L_Rx when we delivered it to Novartis in 2017. We will recognize the amount attributed to the API supply for AKCEA-APO(a)-L_Rx as we deliver it to Novartis. We determined at the inception that all milestones under its Novartis collaboration are substantive milestones and we will recognize any future exercise of an option to license a drug under the Novartis agreement in full in the period the option is exercised. Akcea is responsible for the development activities under this collaboration. As such, Akcea is recognizing the associated revenue in its statement of operations. Akcea pays us sublicense fees for payments that it receives under the collaboration and we recognize those fees as revenue and Akcea recognizes the fees as R&D expense. On a consolidated basis, we eliminate the sublicense fees.

During 2017, we earned revenue of $55.2 million from our relationship with Novartis, which represented 11 percent of our total revenue for 2017. Our balance sheet at December 31, 2017 included deferred revenue of $58.9 million related to our relationship with Novartis.

Roche

In April 2013, we formed an alliance with Hoffman-La Roche Inc. and F. Hoffmann-La Roche Ltd., collectively Roche, to develop treatments for Huntington's disease, or HD, based on our antisense technology. Roche has the option to license the drugs from us through the completion of the first Phase 1 trial. Under the agreement, we are responsible for the discovery and development of an antisense drug targeting huntingtin, or HTT, protein. We evaluated a drug targeting HTT, IONIS-HTT_Rx, in a Phase 1/2a clinical study in people with early stage HD.

In December 2017, upon completion of the Phase 1/2a study, Roche exercised its option to license IONIS-HTT_Rx and is now responsible for the global development, regulatory and commercialization activities for IONIS-HTT_Rx. Under the terms of the agreement, we received an upfront payment of $30 million in April 2013, which we amortized through September 2017. In December 2016, we updated development activities for IONIS-HTT_Rx and as a result we are eligible for an additional $3 million payment, which we earned in 2017. We are eligible to receive up to $365 million in a license fee and substantive milestone payments including up to $70 million for the achievement of development milestones, up to $170 million for the achievement of regulatory milestones and up to $80 million for the achievement of commercialization milestones. In addition, we are eligible to receive up to $136.5 million in milestone payments for each additional drug successfully developed. We are also eligible to receive tiered royalties up to the mid-teens on any sales of any product resulting from this alliance. From inception through December 2017, we have received $60 million in milestone payments and upfront fees under this alliance with Roche, not including the $45 million license fee we received in January 2018 for IONIS-HTT_Rx, which we recognized into revenue in 2017. We will earn the next milestone payment of $10 million if Roche initiates a Phase 2 trial for IONIS-HTT_Rx.

Our alliance with Roche will continue until the earlier of the date Roche's option to obtain the exclusive license under the agreement expires unexercised or, if Roche exercises its option, until the expiration of all payment obligations under the agreement. In addition, the agreement may terminate early under the following situations:

● Roche may terminate the agreement at any time by providing written notice to us; and

● Either we or Roche may terminate the agreement by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement or if the other party becomes insolvent.

During 2017, 2016 and 2015, we earned revenue of $53.0 million, $7.1 million and $31.2 million, respectively from our relationship with Roche, which represented 10 percent, two percent and 11 percent, respectively, of our total revenue for those years. Our balance sheet at December 31, 2016 included deferred revenue of $1.7 million related to our relationship with Roche.

Satellite Company Partnerships

Achaogen, Inc.

In 2006, we exclusively licensed to Achaogen, Inc. specific know-how, patents and patent applications relating to aminoglycosides. In connection with the license, Achaogen issued to us $1.5 million of Achaogen stock. Achaogen is developing plazomicin, an aminoglycoside Achaogen discovered based on the technology we licensed to Achaogen. If Achaogen successfully develops and commercializes two drugs under our agreement, we will receive payments totaling up to $49.3 million for the achievement of key clinical, regulatory and sales events. The FDA set a Prescription Drug User Fee Act, or PDUFA, date of June 25, 2018 for plazomicin. Achaogen also plans to submit an MAA to the EMA in 2018. From inception through December 2017, we have earned $7 million in milestone payments from Achaogen. We will earn the next milestone payment of $7.5 million if Achaogen obtains regulatory approval for plazomicin in a major market. We are also eligible to receive low single digit royalties on sales of drugs resulting from the program. Achaogen is solely responsible for the continued development, regulatory and commercialization activities of plazomicin.

During 2017, 2016 and 2015, we did not earn any revenue from our relationship with Achaogen.

Alnylam Pharmaceuticals, Inc.

In March 2004, we entered into an alliance with Alnylam to develop and commercialize RNAi therapeutics. Under the terms of the agreement, we exclusively licensed to Alnylam our patent estate relating to antisense motifs and mechanisms and oligonucleotide chemistry for double-stranded RNAi therapeutics in exchange for a $5 million technology access fee, participation in fees from Alnylam’s partnering programs, as well as future milestone and royalty payments from Alnylam. For each drug Alnylam develops under this alliance, we may receive up to $3.4 million in milestone payments, including up to $1.1 million for the achievement of development milestones and $2.3 million for regulatory milestones. We will earn the next milestone payment of $0.8 million if Alnylam advances a drug in its pipeline. We also have the potential to earn royalties on drug sales and a portion of payments that Alnylam receives from licenses of our technology it grants to its partners, plus royalties. We retained rights to a limited number of double-stranded RNAi therapeutic targets and all rights to single-stranded RNAi, or ssRNAi, therapeutics.

In turn, Alnylam nonexclusively licensed to us its patent estate relating to antisense motifs and mechanisms and oligonucleotide chemistry to research, develop and commercialize single-stranded antisense therapeutics, ssRNAi therapeutics, and to research double-stranded RNAi compounds. We also received a license to develop and commercialize double-stranded RNAi drugs targeting a limited number of therapeutic targets on a nonexclusive basis. If we develop or commercialize an RNAi-based drug using Alnylam’s technology, we will pay Alnylam up to $3.4 million in milestone payments for specified development and regulatory events, plus royalties. To date, we do not have an RNAi-based drug in development.

In 2015, we and Alnylam entered into an alliance in which we formed an intellectual property cross-license under which we and Alnylam each obtained exclusive license rights to four therapeutic programs. Alnylam granted us an exclusive, royalty-bearing license to its chemistry, RNA targeting mechanism and target-specific intellectual property for oligonucleotides against four targets, including FXI and Apo(a) and two other targets. In exchange, we granted Alnylam an exclusive, royalty-bearing license to our chemistry, RNA targeting mechanism and target-specific intellectual property for oligonucleotides against four other targets. Alnylam also granted us a royalty-bearing, non-exclusive license to new platform technology arising from May 2014 through April 2019 for single-stranded antisense therapeutics. In turn, we granted Alnylam a royalty-bearing, non-exclusive license to new platform technology arising from May 2014 through April 2019 for double-stranded RNAi therapeutics. From inception through December 2017, we have received over $70 million from Alnylam.

During 2017, 2016 and 2015, we earned revenue from our relationship with Alnylam totaling $3.3 million, $1.1 million and $1.3 million, respectively.

Antisense Therapeutics Limited

In 2001, we licensed ATL1102 and ATL1103 to ATL, an Australian company publicly traded on the Australian Stock Exchange. ATL completed a Phase 2a efficacy and safety trial and has also completed a chronic toxicology study in primates to support a potential Phase 2b trial of ATL1102 in people with multiple sclerosis, or MS. In addition, ATL is currently developing ATL1103 for growth and sight disorders. We are eligible to receive royalties on sales of ATL1102 and ATL1103. We may also receive a portion of the fees ATL receives if it licenses ATL1102 or ATL1103. At December 31, 2017 and 2016, we owned less than 10 percent of ATL’s equity. During 2017, 2016 and 2015, we did not earn any revenue from our relationship with ATL. 

Atlantic Pharmaceuticals Limited

In March 2007, we licensed alicaforsen to Atlantic Pharmaceuticals, a UK-based specialty pharmaceutical company founded in 2006. Atlantic Pharmaceuticals is developing alicaforsen for the treatment of ulcerative colitis, or UC, and other inflammatory diseases. Atlantic Pharmaceuticals is initially developing alicaforsen for pouchitis, a UC indication, followed by UC and other inflammatory diseases. In 2017, under a rolling submission agreement with the FDA, Atlantic Pharmaceuticals filed the nonclinical data package of its NDA for alicaforsen to treat pouchitis. Alicaforsen has also been granted FDA Fast-Track designation, plus U.S. and European Orphan Drug designations for this indication. In exchange for the exclusive, worldwide license to alicaforsen, we received a $2 million upfront payment from Atlantic Pharmaceuticals in the form of equity. Under the agreement, we could receive milestone payments totaling up to $1.4 million for the achievement of regulatory milestones for multiple indications. We will earn the next milestone payment of $0.6 million when Atlantic Pharmaceuticals completes its NDA submission for alicaforsen with the FDA. In 2010, Atlantic Pharmaceuticals began supplying alicaforsen under international named patient supply regulations for people with inflammatory bowel disease, or IBD, for which we receive royalties.

In 2010, 2013 and 2016, we agreed to sell Atlantic Pharmaceuticals alicaforsen drug substance in return for shares of Atlantic Pharmaceuticals’ common stock. Additionally, in 2013 we received an advance payment in the form of equity for the initial royalties that we will earn from Atlantic Pharmaceuticals. We recorded a full valuation allowance for all of the equity we received from Atlantic Pharmaceuticals, including the upfront payment, because realization of value from the equity is uncertain. At December 31, 2017 and 2016, we owned approximately 9 percent, respectively, of Atlantic Pharmaceuticals’ equity. Because the payments were made in equity, we did not record any revenue. During 2017 and 2016, we did not earn any revenue and during 2015, our revenue was negligible from our relationship with Atlantic Pharmaceuticals.

Dynacure, SAS

In October 2016, we entered into a collaboration with Dynacure to discover, develop and commercialize an antisense drug for the treatment of neuromuscular diseases. We and Dynacure shared research responsibilities and to identify a drug candidate. In November 2017, Dynacure licensed IONIS-DNM2-2.5_Rx, a drug targeting dynamin 2 for the treatment of centronuclear myopathy, from us. Upon licensing, Dynacure assumed all responsibility for development and commercialization for IONIS-DMN2-2.5_Rx. Under the terms of the agreement, we obtained a 15 percent equity ownership in Dynacure upon the initiation of the collaboration. We received additional equity and convertible notes in Dynacure for the license of IONIS-DMN2-2.5_Rx in 2017. We recorded a full valuation allowance for all of the equity and convertible debt we received from Dynacure, because realization of value from the equity is uncertain. If Dynacure advances a target under this collaboration, we could receive cash or equity up to more than $210 million in a license fee and substantive milestone payments including up to $34.5 million for the achievement of development milestones, up to $111 million for the achievement of regulatory milestones and up to $60 million for the achievement of commercialization milestones. In addition, we are eligible to receive royalties on future product sales of the drug under this collaboration. We will receive additional equity or convertible notes in Dynacure if Dynacure initiates a Phase 1 study for a target under this collaboration. During 2017 and 2016, we did not earn any revenue from our relationship with Dynacure.

Regulus Therapeutics Inc.

In September 2007, we and Alnylam established Regulus as a company focused on the discovery, development and commercialization of microRNA-targeting therapeutics. We and Alnylam retain rights to develop and commercialize, on pre-negotiated terms, microRNA therapeutic products that Regulus decides not to develop either by itself or with a partner. Regulus is addressing therapeutic opportunities that arise from alterations in microRNA expression. Since microRNAs may act as master regulators of the genome, affecting the expression of multiple genes in a disease pathway, microRNA therapeutics define a new platform for drug discovery and development. MicroRNAs may also prove to be an attractive new tool for characterizing diseases. Regulus’ focus is on drug discovery and development efforts for diseases with significant unmet medical need in organs to which we have been able to preferentially deliver oligonucleotide therapeutics effectively, such as the liver and kidney. Regulus currently has two drugs in clinical development. In September 2017, Regulus initiated a Phase 2 study of RG-012, a drug to treat people with Alport syndrome. Regulus is studying RGLS4326 in a Phase 1 single ascending dose study designed to investigate the safety, tolerability, pharmacokinetics and pharmacodynamics of RGLS4326 administered subcutaneously in healthy volunteers. We are eligible to receive royalties on any future product sales of these drugs.

During 2017, 2016 and 2015, we did not earn any revenue from our relationship with Regulus. During 2015, we sold a portion of our Regulus stock, resulting in a gain of $20.2 million, and proceeds of $25.5 million. During 2016, we sold a portion of our Regulus stock for proceeds of $4.5 million. In January 2017, we sold our remaining investment in Regulus for proceeds of $2.5 million.

Suzhou Ribo Life Science Co., Ltd.

In April 2017, we entered into a collaboration with Ribo to develop and commercialize RNA-targeted therapeutics in China. We licensed IONIS-AR-2.5_Rx, IONIS-GCGR_Rx and IONIS-EZH2-2.5_Rx to Ribo under our collaboration to develop and commercialize these drugs in China. In addition, Ribo will be responsible for conducting a multi-year research and drug discovery program to identify drugs that utilize our ssRNAi technology. Following the identification of a development candidate, Ribo may exercise its option to license each drug by paying us a license fee. For each drug that Ribo licenses, Ribo will be responsible for all development and commercialization activities and costs in China. We retained the rights to develop and commercialize ssRNAi technology and all drugs under the collaboration outside of China. Ribo will provide us a royalty-free license to the data and intellectual property created under the collaboration. 

Under the agreement, we received an up-front payment of $2 million, which we are amortizing through April 2020. We also obtained approximately nine percent equity ownership in Ribo. We are eligible to receive up to $152.9 million in substantive milestone and other payments, including $13.3 million for the achievement of development milestones and $138.4 million for the achievement of commercialization milestones. In addition, we are eligible to receive tiered royalties up to the mid-twenty percent range on sales from any drugs resulting from this collaboration. From inception through December 2017, we have received $2 million in milestone payments and upfront fees under this collaboration with Ribo. We will earn the next milestone payment of $3.3 million if Ribo advances a drug under this collaboration.

During 2017, we earned revenue of $0.7 million from our relationship with Ribo. Our balance sheet at December 31, 2017 included deferred revenue of $1.7 million related to our relationship with Ribo.

The University of Texas MD Anderson Cancer Center

In May 2016, we entered into a collaboration agreement with the University of Texas MD Anderson Cancer Center to identify cancer targets and create novel antisense drugs to treat cancer together. In the collaboration, we and MD Anderson are working together to validate novel “undruggable” cancer targets selected based on human genomic data. We are leading the drug discovery efforts against mutually agreed upon novel targets and MD Anderson is leading development activities through clinical proof of concept. Following clinical proof of concept, we and MD Anderson plan to identify a partner to complete development and to commercialize each drug with us leading business development efforts. Under the five-year collaboration, we and MD Anderson will evenly share costs specific to our collaboration.

External Project Funding

CHDI Foundation, Inc.

Starting in November 2007, CHDI provided financial and scientific support to our Huntington’s disease drug discovery program through our development collaboration. In April 2013, we formed an alliance with Roche to develop treatments for Huntington’s disease. Under the terms of our agreement with CHDI, we will reimburse CHDI for a portion of its support of our Huntington’s disease program out of the payments we receive from Roche. From inception through December 2017, we have made payments of $19.3 million to CHDI, associated with the progression of our Huntington’s disease program.

During 2017 and 2016, we did not earn any revenue from our relationship with CHDI. During 2015, our revenue earned from our relationship with CHDI was negligible.

Cystic Fibrosis Foundation

In August 2016, we entered into a collaboration agreement with the Cystic Fibrosis Foundation to discover and advance a drug for the treatment of Cystic Fibrosis. Under this agreement, we received upfront payments of $1 million, which we are amortizing through March 2018. We are eligible to receive additional milestone payments of up to $2 million. Under the agreement, we and the Cystic Fibrosis Foundation will evenly share the first $3 million of costs specific to our collaboration. We will pay the Cystic Fibrosis Foundation up to $18 million in payments upon achieving specific regulatory and sales events if we advance a drug under our collaboration. We will earn the next milestone payment of $0.8 million if we further advance IONIS-ENAC-2.5_Rx. From inception through December 2017, we have received $2.7 million in milestone payments, upfront fees and other payments under this collaboration, including $1 million we received in 2017 for advancing IONIS-ENAC-2.5_Rx.

During 2017 and 2016 we earned $1.9 million and $0.6 million, respectively, from our relationship with the Cystic Fibrosis Foundation.

The Ludwig Institute; Center for Neurological Studies

In October 2005, we entered into a collaboration agreement with the Ludwig Institute, the Center for Neurological Studies and researchers from these institutions to discover and develop antisense drugs for amyotrophic lateral sclerosis, or ALS, and other neurological diseases. Under this agreement, we agreed to pay the Ludwig Institute and Center for Neurological Studies modest milestone payments and royalties on any antisense drugs resulting from the collaboration.

In-Licensing Agreements

University of Massachusetts

We have a license agreement with the University of Massachusetts under which we acquired an exclusive license to the University of Massachusetts’ patent rights related to SPINRAZA. We paid the University of Massachusetts nominal amounts for license fees and milestone payments we received. We also pay a low single digit royalty on sales of SPINRAZA. During 2017 and 2016, we paid the University of Massachusetts $9.7 million and $0.4 million, respectively. The University of Massachusetts believes we owe them an additional amount pertaining to the license fees and milestones we received. At December 31, 2017, we had an accrued liability of $12.9 million, which reflects our estimate of the additional amount we could pay the University of Massachusetts for the license fees and milestones we received, assuming we reach agreement with the University of Massachusetts regarding the appropriate calculation of these sublicense fees.

Cold Spring Harbor Laboratory

We have a collaboration and license agreement with the Cold Spring Harbor Laboratory under which we acquired an exclusive license to the Cold Spring Harbor Laboratory’s patent rights related to SPINRAZA. We paid Cold Spring Harbor Laboratory nominal amounts for license fees and milestone payments we received in 2017 and a low single digit royalty on sales of SPINRAZA. Additionally, we owe a low single digit royalty on future sales of SPINRAZA. During 2017 and 2016, we paid Cold Spring Harbor Laboratory $13.1 million and $3.4 million, respectively.