Akcea Acquisition

12 Months Ended

Dec. 31, 2020

7. Akcea Acquisition

Purchase Price and Direct Transaction Costs Accounting for the Akcea Acquisition

In October 2020, we acquired the shares of Akcea’s common stock we did not own, increasing our ownership from 76 percent to 100 percent. Under the purchase agreement, we purchased 24.8 million shares at $18.15 per share, resulting in a total purchase price of $450.6 million.

To reflect our 100 percent ownership, we accounted for the increase in our ownership by eliminating the noncontrolling interest adjustment in stockholders’ equity in accordance with the Consolidation accounting guidance (ASC Topic 810). We recognized the difference between the purchase price and the adjustment to noncontrolling interest in stockholders’ equity as additional-paid-in capital. Refer to our Statement of Stockholders’ Equity for detailed amounts.

We accounted for the transaction costs related to the Akcea Acquisition as a direct charge to stockholders’ equity. We incurred $40.6 million of direct transaction costs from the Akcea Acquisition, primarily comprised of banking and legal fees.

Equity Award Payouts related to the Akcea Acquisition

In October 2020, as part of the Akcea Acquisition, Ionis cancelled all of Akcea’s equity awards. In exchange for the cancelled awards, if eligible under the terms of the Acquisition, we paid holder’s a cash payment. We paid $18.15 for each outstanding RSU. For each outstanding option with an exercise price less than $18.15, we paid $18.15 less the exercise price. As a result, we paid out $53.4 million in the fourth quarter of 2020 related to Akcea’s cancelled equity awards. We accounted for these payments as part of the transaction costs recorded to stockholders’ equity in the fourth quarter of 2020. Because we did not replace the Akcea awards, we recognized all unrecognized non-cash stock-based compensation ($59.3 million) under Akcea’s Plan in our statement of operations in the post-acquisition period in the fourth quarter of 2020.

Severance and Retention Costs related to the Akcea Acquisition

As a result of the Akcea Acquisition, we expect to incur severance expenses of up to $9.3 million and retention expenses of up to $19.2 million. During the fourth quarter of 2020, we recorded $15.3 million of severance and retention related costs in operating expenses. We will recognize the remaining severance and retention costs through October 2021.

The following table summarizes the costs by category related to the Akcea Acquisition (in millions):

	Three Months Ended December 31, 2020
R&D expenses	$	3.9
SG&A expenses		11.4
Total	$	15.3

The following table summarizes the severance and retention reserve included in accrued compensation for the period indicated related to Akcea Acquisition (in millions):

	Three Months Ended December 31, 2020
Severance & retention reserve beginning balance	$	—
Severance & retention expensed during period		15.3
Amounts paid during the period		(0.6	)
Severance & retention reserve ending balance	$	14.7