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Collaborative Arrangements and Licensing Agreements | 9 Months Ended
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Sep. 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 nine 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. We and Biogen are currently developing eight medicines under collaborations, including medicines to treat people with ALS, Alzheimer’s disease and Parkinson’s disease. In addition to these medicines, our collaborations with Biogen include a substantial research pipeline that addresses a broad range of neurological diseases. From inception through September 2019, we have received $2.3 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 nine months ended September 30, 2019 and 2018, 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, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
SPINRAZA royalties (commercial revenue) |  | $ | 81.7 |  |  | $ | 70.0 |  |  | $ | 211.9 |  |  | $ | 167.7 |
R&D revenue |  |  | 25.5 |  |  |  | 34.8 |  |  |  | 81.9 |  |  |  | 66.9 |
Total revenue from our relationship with Biogen |  | $ | 107.2 |  |  | $ | 104.8 |  |  | $ | 293.8 |  |  | $ | 234.6 |
Percentage of total revenue |  |  | 64 | % |  |  | 72 | % |  |  | 47 | % |  |  | 58 | %
Neurology Collaborations 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 this 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 September 2019, we have included $582 million in payments in the transaction price for our R&D services performance obligation under this collaboration. 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 this collaboration. 2013 Strategic Neurology In the third quarter of 2019, we achieved an $8 million milestone payment when Biogen initiated a Phase 1/2 study of ION859 (IONIS-LRRK2Rx) for the treatment of people with Parkinson’s disease under this collaboration. We concluded that this milestone payment was not related to our R&D services performance obligation. Therefore, we recognized the $8 million milestone payment in full in the third quarter of 2019 because we do not have any performance obligations related to this payment. From inception through September 2019, we have included $145 million in total payments in the transaction price for our R&D services performance obligation under this collaboration that we are recognizing over our estimated period of performance. We are recognizing revenue as we perform services based on our effort to satisfy our performance obligation relative to the total effort expected to satisfy our performance obligation. In the third quarter of 2019, we updated our estimate of the total effort we expect to expend to satisfy our performance obligation. As of September 30, 2019, we have completed a significant portion of the research and development services. We expect to complete the remainder of our services in 2020. As a result, we recorded a cumulative catch up adjustment of $16.5 million to decrease revenue in the third quarter of 2019. We will recognize this amount over the estimated remaining period we will perform services. 2012 Neurology In the second quarter of 2019, we achieved a $7.5 million milestone payment from Biogen when we advanced IONIS-MAPTRx for Alzheimer’s disease under this collaboration. This milestone payment did not create a new performance obligation because it is part of our performance obligation to conduct development of IONIS-MAPTRx. Therefore, we included the $7.5 million milestone payment in our transaction price for our IONIS-MAPTRx development performance obligation. We are recognizing revenue for our IONIS-MAPTRx development performance obligation based on the percentage of completion. From inception through September 2019, we have included $25.5 million in the transaction price for our IONIS-MAPTRx development performance obligation. We currently estimate we will satisfy our performance obligation in September 2020. We also have a separate performance obligation to perform R&D services under this collaboration. We have allocated $40 million in total payments to the transaction price for our R&D services performance obligation. In the third quarter of 2019, we completed our R&D services performance obligation when we designated a development candidate and Biogen accepted the development candidate. Biogen’s decision to accept the development candidate was not within our control. We were recognizing revenue as we performed services based on our effort to satisfy our performance obligation relative to the total effort expected to satisfy our performance obligation. Because Biogen accepted the development candidate, we recognized $6.3 million of accelerated revenue in the third quarter of 2019. We will achieve the next payment of up to $10 million if we advance a program under this collaboration. During the nine months 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, except as noted above. Our condensed consolidated balance sheet at September 30, 2019 and December 31, 2018 included deferred revenue of $532.4 million and $580.9 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 our programs targeting FXI for the treatment of clotting disorders. In October 2019, Bayer decided it would advance IONIS-FXI-LRx following positive clinical results and we earned a $10 million milestone payment. At September 30, 2019, we determined that it was not probable that we could earn this milestone payment. As such, we did not recognize any revenue associated with it during the third quarter of 2019. Bayer is now responsible for all global development, regulatory and commercialization activities and costs for the FXI program. From inception through September 2019, we have received over $175 million from our Bayer collaboration, not including the $10 million milestone payment we earned in the fourth quarter of 2019. We will achieve the next payment of $20 million when Bayer initiates a Phase 3 study under the FXI program. 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. Our collaboration with GSK includes two drugs targeting hepatitis B virus, or HBV: IONIS-HBVRx and IONIS-HBV-LRx, which we designed to reduce the production of viral proteins associated with HBV infection. In the third quarter of 2019, following positive Phase 2 results, GSK licensed our HBV program, for which we earned a $25 million license fee. From inception through September 2019, we have received more than $164 million in payments under our collaboration with GSK, not including the $25 million license fee, which we expect to receive in the fourth quarter of 2019. We will achieve the next payment of $15 million when GSK initiates a Phase 3 study for a drug under this program. We identified a new performance obligation when we granted GSK the license of the HBV program and assignment of related intellectual property rights in the third quarter of 2019 because the license is distinct from our other performance obligations. We recognized the $25 million license fee for the HBV program as revenue at that time because GSK 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 GSK. During the three and nine months ended September 30, 2019 and 2018, 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, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
R&D revenue |  | $ | 25.1 |  |  | $ | 0.1 |  |  | $ | 25.3 |  |  | $ | 1.5 |
Percentage of total revenue |  |  | 15 | % |  |  | 0 | % |  |  | 4 | % |  |  | 0 | %
We did not have any deferred revenue from our relationship with GSK at September 30, 2019 or December 31, 2018. Roche We have two collaborations with Roche, one to develop treatments for Huntington's disease, or HD, and one to develop IONIS-FB-LRx for the treatment of complement-mediated diseases. In December 2017, upon completion of the Phase 1/2 study of IONIS-HTTRx, Roche exercised its option to license IONIS-HTTRx and is now responsible for the global development, regulatory and commercialization activities for IONIS-HTTRx. 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 plan to evaluate the medicine for 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. 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-HTTRx. We will achieve the next payment of $15 million if Roche advances IONIS-HTTRx. During the three and nine months ended September 30, 2019 and 2018, 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, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
R&D revenue |  | $ | 4.7 |  |  | $ | 1.8 |  |  | $ | 52.3 |  |  | $ | 5.4 |
Percentage of total revenue |  |  | 3 | % |  |  | 1 | % |  |  | 8 | % |  |  | 1 | %
Our revenue in the first nine months of 2019 included $35 million of milestone payments we earned when Roche dosed the first patient in the Phase 3 study of IONIS-HTTRx 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-HTTRx. During the first nine months 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 September 30, 2019 and December 31, 2018 included deferred revenue of $56.7 million and $72.6 million, respectively, related to our relationship with Roche. 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 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)-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 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)-LRx. Novartis is responsible for conducting and funding all future development, regulatory and commercialization activities for AKCEA-APO(a)-LRx, including a global pivotal cardiovascular outcomes study, for which planning and initiation activities are underway. From inception through September 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)-LRx. 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)-LRx 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)-LRx 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. Novartis has the option to purchase additional API of AKCEA-APO(a)-LRx in the future at agreed upon terms and conditions under our collaboration agreement. We identified a new performance obligation when we delivered additional AKCEA-APO(a)-LRx API to Novartis in the third quarter of 2019 because the delivery of the API is distinct from our other performance obligations. We recognized $5.5 million in revenue for the API we sold to Novartis in the third quarter of 2019. 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 nine months ended September 30, 2019 and 2018, 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, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
R&D revenue |  | $ | 8.5 |  |  | $ | 7.2 |  |  | $ | 176.3 |  |  | $ | 42.7 |
Percentage of total revenue |  |  | 5 | % |  |  | 5 | % |  |  | 28 | % |  |  | 10 | %
During the first nine months 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 September 30, 2019 and December 31, 2018 included deferred revenue of $10.8 million and $28.8 million, respectively, related to our relationship with Novartis. Pfizer In October 2019, Akcea initiated a collaboration with Pfizer for the license of AKCEA-ANGPTL3-LRx to treat people with cardiovascular and metabolic diseases. Akcea is currently conducting a Phase 2 study of AKCEA-ANGPTL3-LRx for the treatment of non-alcoholic fatty liver disease, or NAFLD. Pfizer is responsible for all development and regulatory activities and costs beyond those associated with the ongoing Phase 2 study. Under the terms of the agreement, Akcea will receive a $250 million upfront license fee, upon closing the transaction, including receiving Hart-Scott Rodino clearance. Akcea is also eligible to receive development, regulatory and sales milestone payments of up to $1.3 billion and tiered royalties in the mid-teens to low-20 percent range on annual worldwide net sales. Akcea has retained the rights to co-commercialize AKCEA-ANGPTL3-LRx in the U.S. and certain additional markets. The license fee, milestone payments and royalties will be split equally between us and Akcea. Upon receipt of the upfront payment from Pfizer, Akcea expects to pay us its $125 million sublicense fee in 6.9 million shares of Akcea common stock. In October 2019, Akcea initiated a collaboration with Pfizer for the license of AKCEA-ANGPTL3-LRx to treat people with cardiovascular and metabolic diseases. Under the terms of the agreement, Akcea will receive a $250 million upfront license fee, upon closing the transaction, including receiving Hart-Scott Rodino clearance. Akcea is also eligible to receive development, regulatory and sales milestone payments of up to $1.3 billion and tiered royalties in the mid-teens to low-20 percent range on annual worldwide net sales. Akcea will pay us 50 percent of the license fee, milestone payments and royalties. Pfizer is responsible for all development and regulatory activities and costs beyond those associated with the ongoing Phase 2 study. Upon receipt of the upfront payment from Pfizer, Akcea expects to pay us its $125 million sublicense fee in 6.9 million shares of Akcea common stock.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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