Collaborative Arrangements and Licensing Agreements

6 Months Ended

Jun. 30, 2019

Collaborative Arrangements and Licensing Agreements [Abstract]

Collaborative Arrangements and Licensing Agreements

7.  Collaborative Arrangements and Licensing Agreements

Below, we have included our collaborations with substantive changes during the first six months of 2019 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, 2018.

Strategic Partnership

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 medicines with Biogen’s expertise in developing therapies for neurological disorders. We developed and licensed to Biogen SPINRAZA, our approved medicine to treat people with spinal muscular atrophy, or SMA. In December 2017, we entered into a collaboration with Biogen to identify new antisense medicines for the treatment of SMA. Additionally, we and Biogen are currently developing six other medicines to treat neurodegenerative diseases under these collaborations, including tofersen (formerly IONIS-SOD1_Rx) for ALS patients with SOD1 mutations, or SOD1-ALS, which Biogen moved into a Phase 3 study in the first quarter of 2019, IONIS-MAPT_Rx for Alzheimer’s disease_, IONIS-C9_Rx for ALS patients with C9ORF72 mutations, and IONIS-BIIB6_Rx, IONIS-BIIB7_Rx and IONIS-BIIB8_Rx to treat undisclosed neurodegenerative diseases. In addition to these medicines, we and Biogen are evaluating numerous additional targets to develop medicines to treat neurological diseases. From inception through June 2019, we have received $2.2 billion from our Biogen collaborations, including $1 billion we received from Biogen in the second quarter of 2018 for our 2018 strategic neurology collaboration.

During the three and six months ended June 30, 2019 and 2018, we earned the following revenue from our relationship with Biogen (in millions, except percentage amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
SPINRAZA royalties (commercial revenue)	$	70.5		$	56.7		$	130.2		$	97.7
R&D revenue		31.9			21.3			56.4			32.2
Total revenue from our relationship with Biogen	$	102.4		$	78.0		$	186.6		$	129.9
Percentage of total revenue		63	%		66	%		41	%		50	%

2018 Strategic Neurology

In the second quarter of 2019, we achieved two $7.5 million milestone payments from Biogen when we advanced two new targets for unidentified neurological diseases under the 2018 strategic neurology collaboration. These milestone payments did not create new performance obligations because they are part of our original R&D services performance obligation. Therefore, we included these amounts in our transaction price for our R&D services performance obligation. We are recognizing revenue for our R&D services performance obligation based on the percentage of completion. From inception through June 2019, we have included $582 million in payments in the transaction price for our R&D services performance obligation under our 2018 strategic neurology collaboration with Biogen. We currently estimate we will satisfy our performance obligation in June 2028.

We will achieve the next payment of $7.5 million if Biogen designates another target under our 2018 strategic neurology collaboration.

2012 Neurology

In the second quarter of 2019, we achieved a $7.5 million milestone payment from Biogen when we advanced IONIS-MAPT_Rx under the 2012 neurology collaboration. This milestone payment did not create a new performance obligation because it is part of our performance obligation to conduct development of IONIS-MAPT_Rx. Therefore, we included the amount in our transaction price for our IONIS-MAPT_Rx development performance obligation. We are recognizing revenue for our IONIS-MAPT_Rx development performance obligation based on the percentage of completion. From inception through June 2019, we have included $25.5 million in the transaction price for our IONIS-MAPT_Rx development performance obligation under our neurology collaboration with Biogen. We currently estimate we will satisfy our performance obligation in September 2020.

We will achieve the next payment of up to $10 million if we advance a program under our 2012 neurology collaboration.

During the first half of 2019, we did not have any changes to our performance obligations or the timing in which we expect to recognize revenue under our Biogen collaborations.

Our condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 included deferred revenue of $540.8 million and $580.9 million, respectively, related to our relationship with Biogen.

Research, Development and Commercialization Partners

Roche

We have two collaborations with Roche, one to develop treatments for Huntington's disease, or HD, and one to develop IONIS-FB-L_Rx for the treatment of complement-mediated diseases. In December 2017, upon completion of the Phase 1/2 study of IONIS-HTT_Rx, 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. In October 2018, we entered into a collaboration agreement with Roche to develop IONIS-FB-L_Rx for the treatment of complement-mediated diseases. The first indication we plan to pursue is the treatment of patients with geographic atrophy, or GA, the advanced stage of dry age-related macular degeneration, or AMD. We are responsible for conducting a Phase 2 study in patients with dry AMD. In addition, we plan to evaluate the medicine for a severe and rare renal indication. Roche has the option to license IONIS-FB-L_Rx at the completion of these studies. Upon licensing, Roche will be responsible for all further global development, regulatory and commercialization activities and costs. From inception through June 2019, we have received over $220 million from our Roche collaborations, including $35 million in milestone payments we earned in the first quarter of 2019 when Roche dosed the first patient in a Phase 3 study for IONIS-HTT_Rx. We will achieve the next payment of $15 million if Roche advances IONIS-HTT_Rx.

During the three and six months ended June 30, 2019 and 2018, we earned the following revenue from our relationship with Roche (in millions, except percentage amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
R&D revenue	$	6.4		$	1.7		$	47.6		$	3.6
Percentage of total revenue		4	%		1	%		10	%		1	%

Our revenue in the first half of 2019 included $35 million of milestone payments we earned when Roche dosed the first patient in the Phase 3 study of IONIS-HTT_Rx in the first quarter of 2019. We recognized these milestone payments in full in the first quarter of 2019 because we do not have any performance obligations related to these milestone payments, as Roche is conducting the Phase 3 study of IONIS-HTT_Rx.

During the first half of 2019, we did not have any changes to our performance obligations or the timing in which we expect to recognize revenue under our Roche collaborations.

Our condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 included deferred revenue of $61.2 million and $72.6 million, respectively, related to our relationship with Roche.

Akcea Collaboration

The following collaboration agreement relates to Akcea, our majority owned affiliate. Our consolidated results include all the revenue earned and cash received under this collaboration agreement. We reflect the noncontrolling interest attributable to other owners of Akcea’s common stock in a separate line on the statement of operations and a separate line within stockholders’ equity in our condensed consolidated balance sheet.

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 further 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 initial quantities of API for each medicine. If Novartis exercises an option for either of these medicines, Novartis will be responsible for all further global development, regulatory and co-commercialization activities and costs for such medicine. In the first quarter of 2019, Novartis licensed AKCEA-APO(a)-L_Rx. Novartis is responsible for conducting and funding all future development, regulatory and commercialization activities for AKCEA-APO(a)-L_Rx, including a global pivotal cardiovascular outcomes study, for which planning and initiation activities are underway. From inception through June 2019, we have received over $343 million from our Novartis collaboration, including $150 million we earned from Novartis in the first quarter of 2019 for the license of AKCEA-APO(a)-L_Rx. Akcea paid us $75 million as a sublicense fee in 2.8 million shares of Akcea common stock.

We identified a new performance obligation when we granted Novartis the license of AKCEA-APO(a)-L_Rx in the first quarter of 2019 because the license is distinct from our other performance obligations. We recognized the $150 million license fee for AKCEA-APO(a)-L_Rx as revenue at that time because Novartis had full use of the license without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the license after we delivered it to Novartis.

Akcea is responsible for the development activities under this collaboration. As such, Akcea is recognizing the associated revenue in its statement of operations, and we reflect all of Akcea’s revenue in our consolidated results. Akcea pays us sublicense fees for payments that it receives under the collaboration and we recognize those fees as revenue in our Ionis Core operating segment results and Akcea recognizes the fees as R&D expense. In our consolidated results, we eliminate this sublicense revenue and expense. Any cash Akcea receives is included in our condensed consolidated balance sheet.

During the three and six months ended June 30, 2019 and 2018, we earned the following revenue from our relationship with Novartis (in millions, except percentage amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
R&D revenue	$	10.7		$	18.3		$	167.8		$	35.4
Percentage of total revenue		7	%		16	%		36	%		14	%

During the first half of 2019, we did not have any changes to our performance obligations, except as noted above, or the timing in which we expect to recognize revenue under our Novartis collaboration.

Our condensed consolidated balance sheet at June 30, 2019 and December 31, 2018 included deferred revenue of $15.8 million and $28.8 million, respectively, related to our relationship with Novartis.