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Collaborative Arrangements and Licensing Agreements | 9 Months Ended
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Sep. 30, 2018
Collaborative Arrangements and Licensing Agreements [Abstract] |
Collaborative Arrangements and Licensing Agreements | 6. Collaborative Arrangements and Licensing Agreements Below, we have included all of our significant collaborations because we adopted Topic 606 on January 1, 2018. We have included new disclosures for each of our collaborations as required under Topic 606. 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 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. In December 2017, we entered into a collaboration with Biogen to identify new antisense drugs for the treatment of SMA. Additionally, we and Biogen are currently developing six other drugs to treat neurodegenerative diseases under these collaborations, including IONIS-SOD1Rx for ALS, IONIS-MAPTRx for Alzheimer’s disease, IONIS-C9Rx for ALS, and IONIS-BIIB6Rx, IONIS-BIIB7Rx and IONIS-BIIB8Rx 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 April 2018, we entered into a new strategic collaboration for the treatment of neurological diseases with Biogen. From inception through September 2018, we have received over $1.9 billion from our Biogen collaborations, including $1 billion we received from Biogen in the second quarter of 2018 when we entered into the 2018 strategic neurology collaboration. 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. From inception through September 2018, we earned $717 million in total revenue under our SPINRAZA collaboration, including $281 million in revenue from SPINRAZA royalties and $436 million in R&D revenue. We are receiving tiered royalties ranging from 11 percent to 15 percent 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 pay Cold Spring Harbor Laboratory and the University of Massachusetts a low single digit royalty on sales of SPINRAZA. Biogen is responsible for all further global development, regulatory and commercialization activities and costs for SPINRAZA. Over the course of our SPINRAZA collaboration, we identified two performance obligations, which were to perform R&D services and to deliver the SPINRAZA license to Biogen. As we achieved milestone payments for our R&D services, we included these amounts in our transaction price for our R&D services performance obligation. We recognized revenue for our R&D services performance obligation over our period of performance through December 2016. We recognized the $75 million license fee for SPINRAZA as revenue when we delivered the license to Biogen in July 2016 because Biogen 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 Biogen. We also earned additional milestone payments subsequent to delivering the license to Biogen that we recognized in full in the period each milestone payment became probable because we did not have a performance obligation related to each milestone payment. For example, we received $90 million of milestone payments for the approval of SPINRAZA in the EU and Japan in 2017 and recognized the full amounts into revenue in the period Biogen achieved the milestone events. 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-MAPTRx 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. Over the term of the collaboration, we are eligible to receive up to $210 million in a license fee and milestone payments per program, plus a mark-up on the cost estimate of the Phase 1 and 2 studies. The $210 million per program consists of up to $10 million in development milestone payments, plus a mark-up on the cost estimate of the Phase 1 and 2 studies and up to $130 million in milestone payments if Biogen achieves pre-specified regulatory milestones. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales of any drugs resulting from each of the three programs. From inception through September 2018, we have received $58 million in milestone payments and upfront fees under this collaboration. We will achieve the next payment of $7.5 million if we continue to advance IONIS-MAPTRx. At the commencement of this collaboration, we identified one performance obligation, which was to perform R&D services for Biogen. At inception, we determined the transaction price to be the $30 million upfront payment we received and allocated it to our single performance obligation. As we achieve milestone payments for our R&D services, we include these amounts in our transaction price for our R&D services performance obligation. We are recognizing revenue for our R&D services performance obligation as we perform services based on our effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy our performance obligation in December 2020. From inception through September 2018, we have included $40 million in total payments in the transaction price for our R&D services performance obligation. 2013 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-SOD1Rx, IONIS-C9Rx, IONIS-BIIB6Rx, IONIS-BIIB7Rx and IONIS-BIIB8Rx 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. 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 milestone payments per program. The $260 million per program consists of approximately $60 million in development milestones, including amounts related to the cost of clinical trials, and up to $130 million in milestone payments 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 antisense drugs developed under this collaboration. If Biogen chooses to advance drugs using other modalities, such as small molecules or monoclonal antibodies, we are eligible to receive up to $90 million in milestone payments per program. The $90 million per program consists of up to $35 million in development milestone payments and up to $55 million in milestone payments if Biogen achieves pre-specified 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 September 2018, we have received over $170 million in upfront fees, milestone payments and other payments under this collaboration, not including a $10 million milestone payment we earned in the third quarter of 2018 for Biogen’s initiation of a Phase 1 study for IONIS-C9Rx which we received in the fourth quarter of 2018. We will achieve the next payment of up to $10 million if we advance a program under this collaboration. At the commencement of our strategic neurology collaboration, we identified one performance obligation, which was to perform R&D services for Biogen. At inception, we determined the transaction price to be the $100 million upfront payment we received and allocated it to our single performance obligation. As we achieve milestone payments for our R&D services, we include 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 our effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy our performance obligation in September 2019. From inception through September 2018, we have included $145 million in total payments in the transaction price for our R&D services performance obligation. In the third quarter of 2018, we earned a $10 million milestone payment when Biogen initiated a Phase 1 study of IONIS-C9Rx. We recognized this milestone payment in full in the third quarter because we do not have any performance obligations related to this milestone payment. Additionally, we concluded that the payment is not related to our R&D services performance obligation. 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. We will receive development and regulatory 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, 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 up to $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 achieve the next payment of up to $60 million for the license of a drug under this collaboration. At the commencement of this collaboration, we identified one performance obligation, which was to perform R&D services for Biogen. We determined the transaction price to be the $25 million upfront payment we received when we entered into the collaboration. We allocated the transaction price to our single performance obligation. We are recognizing revenue for our R&D services performance obligation as we perform services based on our effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy our performance obligation in December 2020. 2018 Strategic Neurology Collaboration In April 2018, we and Biogen entered into a new strategic collaboration to develop novel antisense drugs for a broad range of neurological diseases and entered into a SPA. As part of the collaboration, Biogen gained exclusive rights to the use of our antisense technology to develop therapies for these diseases for 10 years. We are responsible for the identification of antisense drug candidates based on selected targets, while Biogen will have the option to license therapies arising out of this collaboration and will be responsible for and pay for non-clinical studies, clinical development, manufacturing, and commercialization. In the second quarter of 2018, we received $1 billion from Biogen, comprised of $625 million to purchase our stock at a 25 percent cash premium and $375 million in an upfront payment. We are eligible to receive up to $270 million for each drug that achieves marketing approval. In addition, we are eligible to receive tiered royalties up to the 20 percent range on net sales. We will achieve the next payment of $7.5 million if Biogen designates a target under this collaboration. At the commencement of this collaboration, we identified one performance obligation, which was to perform R&D services for Biogen. We determined our transaction price to be $552 million, comprised of $375 million from the upfront payment and $177 million for the premium paid by Biogen for its purchase of our common stock. We determined the fair value of the premium we received by using the stated premium in the SPA and applying a lack of marketability discount. We included a lack of marketability discount in our valuation of the premium because Biogen received restricted shares. We allocated the transaction price to our single performance obligation. We are recognizing revenue for our R&D services performance obligation as we perform services based on our effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy our performance obligation in June 2028. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with Biogen (in millions, except percentage amounts):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
SPINRAZA royalties (commercial revenue) |  | $ | 70.0 |  |  | $ | 32.9 |  |  | $ | 167.7 |  |  | $ | 60.5 |
R&D revenue |  |  | 34.8 |  |  |  | 54.9 |  |  |  | 66.9 |  |  |  | 137.1 |
Total revenue from our relationship with Biogen |  |  | 104.8 |  |  |  | 87.8 |  |  |  | 234.6 |  |  |  | 197.6 |
Percentage of total revenue |  |  | 72 | % |  |  | 74 | % |  |  | 58 | % |  |  | 57 | %
Our condensed consolidated balance sheet at September 30, 2018 and December 31, 2017 included deferred revenue of $593.6 million and $93.6 million, respectively, related to our relationship with Biogen. Research, Development and Commercialization Partners AstraZeneca Cardiac, Renal and Metabolic Diseases Collaboration In July 2015, we and AstraZeneca formed a collaboration to discover and develop antisense therapies for treating cardiac, renal and metabolic diseases. Under our collaboration AstraZeneca has licensed three drugs from us. As part of the agreement, we granted AstraZeneca an exclusive license to IONIS-AZ4-2.5-LRx, 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-AZ5-2.5Rx, a drug we designed to treat a genetically associated form of kidney disease. In March 2018, AstraZeneca licensed a third drug under our collaboration, IONIS-AZ6-2.5-LRx, a drug we designed to inhibit an undisclosed target to treat patients with nonalcoholic steatohepatitis, or NASH. AstraZeneca is responsible for all further global development, regulatory and commercialization activities and costs for IONIS-AZ4-2.5-LRx, IONIS-AZ5-2.5Rx and IONIS-AZ6-2.5-LRx and any other future drugs AstraZeneca licenses. Under the terms of the agreement, we received a $65 million upfront payment. We are eligible to receive license fees and 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. 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. From inception through September 2018, we have received over $165 million in upfront fees, license fees, milestone payments, and other payments under this collaboration, including a $10 million milestone payment we earned in the third quarter of 2018 when AstraZeneca initiated a Phase 1 trial for IONIS-AZ4-2.5-LRx. We will achieve the next payment of $10 million under this collaboration if we advance a drug under this collaboration. At the commencement of this collaboration, we identified one performance obligation, which was to perform R&D services for AstraZeneca. We determined the transaction price to be the $65 million upfront payment we received and we allocated it to our single performance obligation. We are recognizing revenue for our R&D services performance obligation as we perform services based on our effort to satisfy this performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy this performance obligation in August 2021. As we achieve milestone payments for our R&D services, we include these amounts in our transaction price for our R&D services performance obligation. From inception through September 2018, we have included $90 million in payments in the transaction price for our R&D services performance obligation. We identified separate performance obligations upon AstraZeneca’s license of IONIS-AZ5-2.5Rx and IONIS-AZ6-2.5-LRx in the first quarter of 2018 because the licenses are distinct from our other performance obligation and each other. We recognized each $30 million license fee in the first quarter of 2018 because AstraZeneca had full use of the licenses without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the licenses after we delivered them to AstraZeneca. In the third quarter of 2018, we earned a $10 million milestone payment when AstraZeneca initiated a Phase 1 study of IONIS-AZ4-2.5-LRx. We recognized this milestone payment in full in the third quarter because we do not have any performance obligations related to this milestone payment. Additionally, we concluded that the payment is not related to our R&D services performance obligation. 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 danvatirsen (formerly IONIS-STAT3-2.5Rx) for the treatment of cancer. AstraZeneca is now responsible for all global development, regulatory and commercialization activities for danvatirsen. We and AstraZeneca have evaluated danvatirsen in people with head and neck cancer, advanced lymphoma and advanced metastatic hepatocellular carcinoma. AstraZeneca is evaluating danvatirsen in combination with Imfinzi (durvalumab), AstraZeneca’s programmed death ligand, or PD-L1, blocking drug, in people with head and neck cancer, metastatic bladder cancer and metastatic non-small cell lung cancer. In addition, we and AstraZeneca established an oncology research program. AstraZeneca has the option to license drugs resulting from the program, 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. Under the terms of this agreement, we received $31 million in upfront payments. We are eligible to receive milestone payments and license fees from AstraZeneca as programs advance in development. If AstraZeneca successfully develops danvatirsen and another drug under the research program, we could receive license fees and milestone payments of up to more than $450 million, including up to $152 million for the achievement of development milestones and up to $275 million for the achievement of regulatory milestones. 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. From inception through September 2018, we have received $97.8 million in upfront fees, milestone payments, and other payments under this oncology collaboration, not including nearly $30 million in milestone payments we achieved when AstraZeneca advanced two programs in the fourth quarter of 2018. We will achieve the next payment of up to $25.0 million if we advance a drug under our cancer research program with AstraZeneca. At the commencement of this collaboration, we identified four performance obligations. We determined the transaction price to be the $31 million in upfront payments we received. We allocated the transaction price based on the estimated stand-alone selling price of each of our performance obligations and recognized the associated revenue over the period of our performance. We recognized revenue for three of our obligations over our period of performance, concluding in March 2014. Our remaining performance obligation was to perform R&D services. We allocated $7.6 million to this performance obligation and recognized the associated revenue over the period of our performance, which ended in February 2018. As we achieved milestone payments for our R&D services, we included these amounts in our transaction price for our R&D services performance obligation. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with AstraZeneca (in millions, except percentage amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2018 |  | 2017 |  | 2018 |  | 2017 |
R&D revenue |  | $ | 14.2 |  |  | $ | 4.8 |  |  | $ | 86.5 |  |  | $ | 14.8 |
Percentage of total revenue |  |  | 10 | % |  |  | 4 | % |  |  | 21 | % |  |  | 4 | %
Our condensed consolidated balance sheet at September 30, 2018 and December 31, 2017 included deferred revenue of $44.9 million and $57.7 million, respectively, related to our relationship with AstraZeneca. Bayer In May 2015, we entered into an exclusive license agreement with Bayer to develop and commercialize IONIS-FXIRx for the prevention of thrombosis. We were responsible for completing a Phase 2 study of IONIS-FXIRx 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. In February 2017, we amended our agreement with Bayer to advance IONIS-FXIRx and to initiate development of IONIS-FXI-LRx, which Bayer licensed. In conjunction with the decision to advance these programs, we received a $75 million payment from Bayer. We are conducting a Phase 2b study evaluating IONIS-FXIRx in people with end-stage renal disease on hemodialysis to finalize dose selection. Additionally, we plan to develop IONIS-FXI-LRx 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 this collaboration, we are eligible to receive up to $385 million in license fees, 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 September 2018, we have received over $175 million from our Bayer collaboration. We will achieve the next payment of $10 million if a program advances under this collaboration. At the commencement of this collaboration, we identified three performance obligations. We determined the transaction price to be the $100 million in upfront payment we received. We allocated the transaction price based on the relative stand-alone selling prices of each of our performance obligations and recognized the associated revenue as follows:
| ● | We recognized $91.2 million for the exclusive license of IONIS-FXIRx in May 2015 because Bayer had full use of the license without any continuing involvement from us.
| ● | We recognized $4.3 million for the R&D services for IONIS-FXIRx over the period of our performance, which ended in November 2016.
| ● | We allocated $4.5 million for API, which we are recognizing into revenue as we deliver the API.
In February 2017, when we amended our collaboration with Bayer, we identified two new performance obligations, one for the license of IONIS-FXI-LRx and one for R&D services. We determined the transaction price to be the $75 million payment. We allocated $64.9 million to the license of IONIS-FXI-LRx based on its estimated stand-alone selling price and recognized the associated revenue upon our delivery of the license in the first quarter of 2017. We allocated $10.1 million to our R&D services performance obligation based on an estimated stand-alone selling price. We are recognizing revenue for our R&D services performance obligation as we perform services based on our effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy our R&D services performance obligation in May 2019. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with Bayer (in millions, except percentage amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2018 |  | 2017 |  | 2018 |  | 2017 |
R&D revenue |  | $ | 1.9 |  |  | $ | 0.4 |  |  | $ | 3.3 |  |  | $ | 66.0 |
Percentage of total revenue |  |  | 1 | % |  |  | 0 | % |  |  | 1 | % |  |  | 19 | %
Our condensed consolidated balance sheet at September 30, 2018 and December 31, 2017 included deferred revenue of $6.0 million and $9.3 million, respectively, related to our relationship with Bayer. 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. We are eligible to receive up to more than $800 million in license fees and 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 September 2018, we have received $75 million, including $15 million in license fees when Janssen licensed IONIS-JBI1-2.5Rx and IONIS-JBI2-2.5Rx 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-JBI1-2.5Rx 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 achieve the next payment of $5 million if Janssen continues to advance a target under this collaboration. At the commencement of this collaboration, we identified one performance obligation, which was to perform R&D services for Janssen. We determined the transaction price to be the $35 million upfront payments we received. We allocated the $35 million to our single performance obligation. As we achieved milestone payments for our R&D services, we included these amounts in our transaction price for our R&D services performance obligation. We recognized revenue for our R&D services performance obligation over our period of performance, through November 2017. We identified separate performance obligations each time Janssen licensed one of our drugs under our collaboration because the licenses we granted to Janssen were distinct from our other performance obligations. We recognized the $10 million license fee for IONIS-JBI1-2.5Rx in July 2016 and $5 million for the license of IONIS-JBI2-2.5Rx in November 2017, because Janssen had full use of the licenses without any continuing involvement from us. Additionally, we did not have any further performance obligations related to the licenses after we delivered them to Janssen. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with Janssen (in millions, except percentage amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2018 |  | 2017 |  | 2018 |  | 2017 |
R&D revenue |  | $ | 0.9 |  |  | $ | 3.4 |  |  | $ | 6.6 |  |  | $ | 18.1 |
Percentage of total revenue |  |  | 1 | % |  |  | 3 | % |  |  | 2 | % |  |  | 5 | %
We did not have any deferred revenue from our relationship with Janssen at September 30, 2018 or December 31, 2017. Roche Huntington's Disease 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 had 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-HTTRx, 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-HTTRx and is now responsible for the global development, regulatory and commercialization activities for IONIS-HTTRx. Under the terms of the agreement, we received an upfront payment of $30 million in April 2013. In December 2016, we updated development activities for IONIS-HTTRx and as a result we were eligible for an additional $3 million payment, which we achieved in 2017. We are eligible to receive up to $365 million in a license fee and 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 September 2018, we have received over $110 million in upfront fees, milestone payments and license fees for advancing IONIS-HTTRx, including the $45 million license fee we received in January 2018 for IONIS-HTTRx. We will achieve the next payment of $35 million if Roche initiates a pivotal study for IONIS-HTTRx. At the commencement of this collaboration, we identified one performance obligation, which was to perform R&D services for Roche. We determined the transaction price to be the $30 million upfront payment we received and allocated it to our single performance obligation. As we achieved milestone payments for our R&D services, we included these amounts in our transaction price for our R&D services performance obligation. We recognized revenue for our R&D services performance obligation over our period of performance, through September 2017. We identified a second performance obligation upon Roche’s license of IONIS-HTTRx in the fourth quarter of 2017 because the license we granted to Roche is distinct from our other performance obligation. We recognized the $45 million license fee for IONIS-HTTRx as revenue at that time because Roche 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 Roche. We do not have any remaining performance obligations related to IONIS-HTTRx under this collaboration with Roche, however we can still earn additional payments and royalties as Roche advances IONIS-HTTRx. IONIS-FB-LRx for Complement-Mediated Diseases In October 2018, we entered into a collaboration agreement with Roche to develop IONIS-FB-LRx 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 are exploring the drug in a severe and rare renal indication. Roche has the option to license IONIS-FB-LRx at the completion of these studies. Upon licensing, Roche will be responsible for all further global development, regulatory and commercialization activities and costs. Under this new collaboration agreement, we received a $75 million upfront payment in October 2018. We are eligible to receive up to $684 million in development, regulatory and sales milestone payments and license fees. In addition, we are also eligible to receive tiered royalties from the high teens to twenty percent on net sales. We will achieve the next payment of $20 million when we advance the Phase 2 study in patients with dry AMD. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with Roche (in millions, except percentage amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2018 |  | 2017 |  | 2018 |  | 2017 |
R&D revenue |  | $ | 1.8 |  |  | $ | 4.5 |  |  | $ | 5.4 |  |  | $ | 5.9 |
Percentage of total revenue |  |  | 1 | % |  |  | 4 | % |  |  | 1 | % |  |  | 2 | %
We did not have any deferred revenue from our relationship with Roche at September 30, 2018 or December 31, 2017. 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 upfront payments of $35 million. GSK is advancing two drugs targeting hepatitis B virus, or HBV, under our collaboration: IONIS-HBVRx and IONIS-HBV-LRx. 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-HBVRx 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 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. 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. From inception through September 2018, we have received more than $162 million in payments under this alliance with GSK. We will achieve the next payment of up to $25 million if GSK licenses a drug under this program. At the commencement of this collaboration, we identified one performance obligation, which was to perform R&D services for GSK. We determined the transaction price to be the $35 million upfront payment we received and allocated it to our single performance obligation. As we achieved milestone payments for our R&D services, we included these amounts in our transaction price for our R&D services performance obligation. We recognized revenue for our R&D services performance obligation over our period of performance, through March 2015. We do not have any remaining performance obligations under our collaboration with GSK, however we can still earn additional payments and royalties as GSK advances these drugs. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with GSK (in millions, except percentage amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2018 |  | 2017 |  | 2018 |  | 2017 |
R&D revenue |  | $ | 0.1 |  |  | $ | 4.6 |  |  | $ | 1.5 |  |  | $ | 14.4 |
Percentage of total revenue |  |  | 0 | % |  |  | 4 | % |  |  | 0 | % |  |  | 4 | %
Our revenue for the nine months ended September 30, 2017, was from our work on the programs under our collaboration with GSK. We did not have any deferred revenue from our relationship with GSK at September 30, 2018 or December 31, 2017. Akcea Collaborations The following collaboration agreements relate to Akcea, our majority owned affiliate. Our consolidated results include all the revenue earned and cash received under these collaboration agreements. 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)-LRx and AKCEA-APOCIII-LRx. Under the collaboration agreement, Novartis has an exclusive option to further develop and commercialize AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx. 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 drug. If Novartis exercises an option for one of these drugs, Novartis will be responsible for all further global development, regulatory and co-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)-LRx, Akcea is eligible to receive up to $600 million in 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-LRx, Akcea is eligible to receive up to $530 million in 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 is also eligible to receive tiered royalties in the mid-teens to low 20 percent range on net sales of AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx. Novartis will reduce these royalties upon the expiration of certain patents or if a generic competitor negatively impacts the product in a specific country. Akcea will pay 50 percent of these license fees, milestone payments and royalties to us as a sublicense fee. Akcea plans to co-commercialize any licensed drug commercialized by Novartis in selected markets under terms and conditions that we plan to negotiate with Novartis in the future, through its specialized sales force. 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. Under the SPA, in July 2017, Novartis purchased $50 million of Akcea’s common stock in a separate private placement concurrent with the completion of its IPO at a price per share equal to the IPO price. At the commencement of this collaboration, we identified four separate performance obligations:
| ● | R&D services for AKCEA-APO(a)-LRx;
| ● | R&D services for AKCEA-APOCIII-LRx;
| ● | API for AKCEA-APO(a)-LRx; and
| ● | API for AKCEA-APOCIII-LRx.
We determined that the R&D services for each drug and the API for each drug were distinct from our other performance obligations. We determined our transaction price to be $108.4 million, comprised of the following:
| ● | $75 million from the upfront payment;
| ● | $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 allocated the transaction price based on the estimated stand-alone selling price of each performance obligation as follows:
| ● | $64.0 million for the R&D services for AKCEA-APO(a)-LRx;
| ● | $40.1 million for the R&D services for AKCEA-APOCIII-LRx;
| ● | $1.5 million for the delivery of AKCEA-APO(a)-LRx API; and
| ● | $2.8 million for the delivery of AKCEA-APOCIII-LRx API.
We are recognizing revenue related to the R&D services for the AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx performance obligations as we perform services based on our effort to satisfy our performance obligation relative to our total effort expected to satisfy our performance obligation. We currently estimate we will satisfy the significant portion of our performance obligation for AKCEA-APO(a)-LRx by December 2018 with the remainder by the end of March 2019. We currently estimate we will satisfy the significant portion of our performance obligation for AKCEA-APOCIII-LRx by June 2019 with the remainder by the end of December 2019. We recognized the amount attributed to the API supply for AKCEA-APO(a)-LRx when we delivered it to Novartis in 2017. We recognized the amount attributed to the API supply for AKCEA-APOCIII-LRx when we delivered it to Novartis in May 2018. 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 consolidated balance sheet. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with Novartis (in millions, except percentage amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2018 |  | 2017 |  | 2018 |  | 2017 |
R&D revenue |  | $ | 7.2 |  |  | $ | 9.9 |  |  | $ | 42.7 |  |  | $ | 21.7 |
Percentage of total revenue |  |  | 5 | % |  |  | 8 | % |  |  | 10 | % |  |  | 6 | %
Our condensed consolidated balance sheet at September 30, 2018 and December 31, 2017 included deferred revenue of $34.8 million and $70.7 million, respectively, related to our relationship with Novartis. PTC Therapeutics In August 2018, Akcea entered into an exclusive license agreement with PTC Therapeutics to commercialize TEGSEDI and WAYLIVRA in Latin America. Under the license agreement, Akcea will receive up to $26 million of payments, including $12 million which it received in the third quarter of 2018, $6 million upon the earlier of FDA or EMA approval of WAYLIVRA and up to $8 million of regulatory milestone payments. Akcea will receive royalties from PTC in the mid-20 percent range on net sales in Latin America for each drug. PTC's obligation to pay Akcea royalties begins on the earlier of 12 months after the first commercial sale of a product in Brazil or the date that PTC recognizes revenue of at least $10 million in Latin America. These royalties may be reduced upon expiration of certain patents or if a generic competitor negatively impacts PTC’s market share. Consistent with the agreements between Ionis and Akcea, the companies will share all payments, including royalties. At the commencement of this collaboration, we identified two performance obligations, which were the licenses Akcea granted to PTC to commercialize TEGSEDI and WAYLIVRA in Latin America in the third quarter of 2018. Akcea recognized $12 million in license fee revenue at that time because PTC had full use of both licenses without any continuing involvement from Akcea. Akcea does not have any remaining performance obligations under its collaboration with PTC. Akcea can still earn additional payments and royalties as PTC commercializes the drugs. Akcea is responsible for the 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 SG&A expense. For example, during the third quarter of 2018, we recognized $7.2 million of sublicense revenue in our Ionis Core operating segment results related to our portion of the PTC license fee Akcea paid us. In our consolidated results, we eliminate this sublicense revenue and expense. Any cash Akcea receives is included in our consolidated balance sheet. During the three and nine months ended September 30, 2018 and 2017, we earned the following revenue from our relationship with PTC (in millions, except percentage amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2018 |  | 2017 |  | 2018 |  | 2017 |
R&D revenue |  | $ | 12.0 |  |  | $ | 0.0 |  |  | $ | 12.0 |  |  | $ | 0.0 |
Percentage of total revenue |  |  | 8 | % |  |  | — |  |  |  | 3 | % |  |  | — |
Our condensed consolidated balance sheet at September 30, 2018 and December 31, 2017 did not include any deferred revenue related to our relationship with PTC.

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- Definition The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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