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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Significant Accounting Policies [Abstract]

Adjustments Made to Adopt New Revenue Accounting Guidance

The following tables summarize the adjustments we were required to make to amounts we originally reported in 2017 to adopt Topic 606 (in thousands, except per share amounts):

Condensed Consolidated Balance Sheet

		At December 31, 2017
		As Previously Reported under Topic 605				Topic 606 Adjustment				As Revised
Current portion of deferred revenue		$	106,465			$	18,871			$	125,336
Long-term portion of deferred revenue		$	72,708			$	35,318			$	108,026
Accumulated deficit		$	(1,187,398	)		$	(53,636	)		$	(1,241,034	)
Noncontrolling interest in Akcea Therapeutics, Inc.		$	87,847			$	(3,580	)		$	84,267
Total stockholders’ equity		$	418,719			$	(53,439	)		$	365,280

Condensed Consolidated Statement of Operations

		Three Months Ended September 30, 2017
		As Previously Reported under Topic 605				Topic 606 Adjustment				As Revised
Revenue:
Commercial revenue:
SPINRAZA royalties		$	32,890			$	—			$	32,890
Licensing and other royalty revenue			879				848				1,727
Total commercial revenue			33,769				848				34,617
Research and development revenue under collaborative agreements			87,142				(3,445	)			83,697
Total revenue		$	120,911			$	(2,597	)		$	118,314
Income (loss) from operations		$	13,909			$	(2,597	)		$	11,312
Net income (loss)		$	(4,896	)		$	(2,597	)		$	(7,493	)
Net income (loss) attributable to Ionis Pharmaceuticals, Inc. common stockholders		$	(976	)		$	(1,635	)		$	(2,611	)
Net income (loss) per share, basic and diluted		$	0.00			$	(0.02	)		$	(0.02	)

		Nine Months Ended September 30, 2017
		As Previously Reported under Topic 605				Topic 606 Adjustment				As Revised
Revenue:
Commercial revenue:
SPINRAZA royalties		$	60,467			$	—			$	60,467
Licensing and other royalty revenue			4,983				656				5,639
Total commercial revenue			65,450				656				66,106
Research and development revenue under collaborative agreements			269,917				10,364				280,281
Total revenue		$	335,367			$	11,020			$	346,387
Income from operations		$	26,227			$	11,020			$	37,247
Net income (loss)		$	(12,636	)		$	11,020			$	(1,616	)
Net income (loss) attributable to Ionis Pharmaceuticals, Inc. common stockholders		$	(8,716	)		$	11,982			$	3,266
Net income (loss) per share, basic		$	0.02			$	0.11			$	0.13
Net income (loss) per share, diluted		$	0.02			$	0.11			$	0.13

Condensed Consolidated Statement of Cash Flows

		Nine Months Ended September 30, 2017
		As Previously Reported under Topic 605				Topic 606 Adjustment				As Revised
Net income (loss)		$	(12,636	)		$	11,020			$	(1,616	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred contract revenue		$	42,091			$	(11,020	)		$	31,071
Cash and cash equivalents at beginning of period		$	84,685			$	—			$	84,685
Cash and cash equivalents at end of period		$	159,184			$	—			$	159,184

The following table summarizes the adjustments we were required to make to our deferred revenue amounts to adopt Topic 606 (in thousands):

	At December 31, 2017
	As Previously Reported under Topic 605				Topic 606 Adjustment				As Revised
Current portion of deferred revenue		$	106,465			$	18,871			$	125,336
Long-term portion of deferred revenue			72,708				35,318				108,026
Total deferred revenue		$	179,173			$	54,189			$	233,362

Basic Net Loss per Share

Our basic net loss per share for the three months ended September 30, 2018, was calculated as follows (in thousands, except per share amounts):

Three months ended September 30, 2018		Weighted Average Shares Owned in Akcea				Akcea’s Net Income (Loss) Per Share				Ionis’ Portion of Akcea’s Net Loss
Common shares			65,538			$	(0.73	)		$	(47,843	)
Akcea’s net loss attributable to our ownership										$	(47,843	)
Ionis’ stand-alone net income											43,226
Net loss available to Ionis common stockholders										$	(4,616	)
Weighted average shares outstanding											143,314
Basic net loss per share										$	(0.03	)

Basic and Diluted Net Income Per Share

For the nine months ended September 30, 2017, we had net income available to Ionis common stockholders. As a result, we computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during those periods. Diluted common equivalent shares for the nine months ended September 30, 2017 consisted of the following (in thousands except per share amounts):

Nine months ended September 30, 2017		Income (Numerator)				Shares (Denominator)				Per-Share Amount
Net income available to Ionis common stockholders		$	16,321				123,746			$	0.13
Effect of dilutive securities:
Shares issuable upon exercise of stock options			—				1,658
Shares issuable upon restricted stock award issuance			—				430
Shares issuable related to our ESPP			—				24
Income available to Ionis common stockholders, plus assumed conversions		$	16,321				125,858			$	0.13

For the nine months ended September 30, 2017, the calculation excluded the 1 percent and 2¾ percent notes because the effect on diluted earnings per share was anti-dilutive.

Changes in Accumulated Other Comprehensive Income (Loss)

We include unrealized gains and losses on investments, net of taxes, in accumulated other comprehensive income (loss) along with adjustments we make to reclassify realized gains and losses on investments from other accumulated comprehensive income (loss) to our condensed consolidated statement of operations. The following table summarizes changes in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2018 and 2017 (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Beginning balance accumulated other comprehensive loss		$	(32,637	)		$	(30,372	)		$	(31,759	)		$	(30,358	)
Unrealized gains (losses) on securities (1)			133				215				(834	)			610
Amounts reclassified from accumulated other comprehensive loss			—				—				—				(374	)
Currency translation adjustment			(28	)			(42	)			61				(77	)
Net current period other comprehensive income (loss)			105				173				(773	)			159
Ending balance accumulated other comprehensive loss		$	(32,532	)		$	(30,199	)		$	(32,532	)		$	(30,199	)

(1) There was no income tax expense or benefit related to elements of other comprehensive income (loss) for the three and nine months ended September 30, 2018 and 2017.

Weighted-Average Assumptions for Stock Options

We use the Black-Scholes model to estimate the fair value of stock options granted and stock purchase rights under our ESPP. The expected term of stock options granted represents the period of time that we expect them to be outstanding. We estimate the expected term of options granted based on historical exercise patterns. For the nine months ended September 30, 2018 and 2017, we used the following weighted-average assumptions in our Black-Scholes calculations:

Employee Stock Options:

	Nine Months Ended September 30,
	2018			2017
Risk-free interest rate		2.3%			1.8%
Dividend yield		0.0%			0.0%
Volatility		63.1%			66.1%
Expected life		4.6 years			4.5 years

Board of Director Stock Options:

	Nine Months Ended September 30,
	2018			2017
Risk-free interest rate		2.8 %			2.2 %
Dividend yield		0.0 %			0.0 %
Volatility		61.5 %			61.2 %
Expected life		6.6 years			6.6 years

Weighted-Average Assumptions for ESPP

ESPP:

	Nine Months Ended September 30,
	2018			2017
Risk-free interest rate		1.8%			0.8%
Dividend yield		0.0%			0.0%
Volatility		47.3%			59.9%
Expected life		6 months			6 months

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2018 and 2017 (in thousands). Our consolidated non-cash stock-based compensation expense includes $12.7 million and $4.7 million of stock-based compensation expense for Akcea for the three months ended September 30, 2018 and 2017, respectively, and $31.2 million and $11.8 million for the nine months ended September 30, 2018 and 2017, respectively.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018				2017				2018				2017
Research, development and patent		$	18,780			$	16,181			$	57,698			$	48,443
Selling, general and administrative			16,103				5,291				39,512				15,199
Total non-cash stock-based compensation expense		$	34,883			$	21,472			$	97,210			$	63,642

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