<SEC-DOCUMENT>0001140361-21-001189.txt : 20210224
<SEC-HEADER>0001140361-21-001189.hdr.sgml : 20210224
<ACCEPTANCE-DATETIME>20210114144315
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001140361-21-001189
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20210114

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			IONIS PHARMACEUTICALS INC
		CENTRAL INDEX KEY:			0000874015
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				330336973
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2855 GAZELLE COURT
		CITY:			CARLSBAD
		STATE:			CA
		ZIP:			92010
		BUSINESS PHONE:		7609319200

	MAIL ADDRESS:	
		STREET 1:		2855 GAZELLE COURT
		CITY:			CARLSBAD
		STATE:			CA
		ZIP:			92010

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ISIS PHARMACEUTICALS INC
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
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    <div>
      <div>January 14, 2021</div>
      <div><br>
      </div>
      <div style="color: #000000;">United States Securities and Exchange Commission</div>
      <div style="color: #000000;">Division of Corporate Finance</div>
      <div style="color: #000000;">Office of Life Sciences</div>
      <div style="color: #000000;">Attention: Li Xiao</div>
      <div style="color: #000000;">100 F Street, NE</div>
      <div style="color: #000000;">Washington, D.C. 20549</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z2be23534eead41e191ed83e139415285">

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            <td style="width: 36pt;"><br>
            </td>
            <td style="width: 36pt; vertical-align: top; align: right; color: #000000; font-weight: bold;">Re:</td>
            <td style="width: auto; vertical-align: top;">
              <div style="color: #000000; font-weight: bold;">Ionis Pharmaceuticals, Inc.</div>
            </td>
          </tr>

      </table>
      <div style="margin-left: 72pt; color: #000000; font-weight: bold;">Form 10-K for the Fiscal Year Ended December 31, 2019</div>
      <div style="margin-left: 72pt; color: #000000; font-weight: bold;">Filed March 2, 2020</div>
      <div style="margin-left: 72pt; color: #000000; font-weight: bold;">File No. 000-19125</div>
      <div><br>
      </div>
      <div style="color: #000000;">Dear Ms. Xiao:</div>
      <div><br>
      </div>
      <div style="color: #000000;">On behalf of Ionis Pharmaceuticals, Inc. (the &#8220;Company,&#8221; &#8220;Ionis&#8221; or &#8220;we&#8221;), enclosed for electronic filing via EDGAR pursuant to the Securities Act of 1933, please find responses to your comments in reference to the
        Company&#8217;s Form 10-K for the fiscal year ended December 31, 2019, File No. 000-19125.</div>
      <div><br>
      </div>
      <div style="color: #000000;">As requested by the Staff in your letter, please find below our responses to your comments and our proposed disclosure to be included in future periodic reports.</div>
      <div><br>
      </div>
      <div style="font-weight: bold;">Notes to Consolidated Financial Statements</div>
      <div style="font-weight: bold;">1. Organization and Significant Accounting Policies</div>
      <div style="font-weight: bold;">Inventory Valuation, page F-19</div>
      <div><br>
      </div>
      <div style="font-style: italic;">1. Your disclosure states that inventory is reflected at the lower of cost or market value under the first-in, first-out method. Please revise your future filings to clarify, if true, that your inventory is measured
        at the lower of cost or net realizable value consistent with ASC 330-10-35-1B.</div>
      <div><br>
      </div>
      <div>We respectfully acknowledge the Staff&#8217;s comment and confirm that we measure our inventory at the lower of cost or net realizable value consistent with ASC 330-10-35-1B. We will revise our disclosure in future periodic reports beginning with our
        2020 Form 10-K to clarify that our inventory is measured at the lower of cost or net realizable value under the first-in, first-out method.</div>
      <div><br>
      </div>
      <div style="font-weight: bold;">2. Long-Term Obligations and Commitments</div>
      <div style="font-weight: bold;">Convertible Notes and Call Spread, page F-26</div>
      <div><br>
      </div>
      <div style="font-style: italic;">2. We note your disclosure concerning the call spread transaction that was entered into in conjunction with the December 2019 note exchange. You indicate that <a name="z_Hlk60684971"></a>the amounts paid/received for
        the note hedges/warrants was recorded in additional paid-in capital. Please tell us how you determined the appropriate accounting treatment for this transaction, including your consideration of whether these financial instruments meet the
        definition of a derivative. Please also revise your accounting policy disclosure accordingly in future filings.</div>
      <div><br>
      </div>
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        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">1</font></div>
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      </div>
      <div>We structured our response to this question using the following outline:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zc928c99e97fe4595b908a102b4ca51bd">

          <tr>
            <td style="width: 18pt; vertical-align: top; align: right;">I.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Transaction Background</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z42c37c88b3764888a76a1fc28cf9d65d">

          <tr>
            <td style="width: 18pt; vertical-align: top; align: right;">II.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Accounting Analysis</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z19a00a143beb4b00928ebb10579ae917">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">A.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Evaluation of Freestanding Financial Instruments and Units of Accounting</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z47c6279309a4463390a5e22a2d462a80">

          <tr>
            <td style="width: 45pt;"><br>
            </td>
            <td style="width: 9pt; vertical-align: top; align: right;">i.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Freestanding Financial Instruments</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zebdf55e0602e41f8ad0907f3f0798cd6">

          <tr>
            <td style="width: 45pt;"><br>
            </td>
            <td style="width: 9pt; vertical-align: top;">ii.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Units of Accounting</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z64f99a8cc4e04d82b32f3ae3943bc5f6">

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            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">B.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Whether the note hedges and the warrants are liabilities under ASC 480</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z51fbc00a14b44257bbf2c650657f0982">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">C.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Whether the note hedges and the warrants meet the conditions to be classified in equity</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z1cc301e18b1b40958781f0a5a9528d39">

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            <td style="width: 45pt;"><br>
            </td>
            <td style="width: 9pt; vertical-align: top; align: right;">i.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Note Hedges</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="ze4e03550307145689c100833525d41a6">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">1.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Evaluation of Derivative Definition</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7e1a8382d6a8447d889fa5c26f9088e3">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">2.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Evaluation of Derivative Scope Exception</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z4bae3b04a058485280aebafce6f8cf5e">

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            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">3.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Accounting Treatment Conclusion</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z31048d4a71e94375957186adaba5affa">

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            <td style="width: 45pt;"><br>
            </td>
            <td style="width: 9pt; vertical-align: top;">ii.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Warrants</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd5586268ce7d429cb95186a48ad35118">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">1.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Evaluation of Derivative Definition</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zbfcbbe84684a470289d2a41c894da61e">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">2.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Evaluation of Derivative Scope Exception</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z0b86571d71274c018d2ff68c1ffbb393">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">3.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Accounting Treatment Conclusion</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z3c53c23e669749fe917ae55975e83bb2">

          <tr>
            <td style="width: 18pt; vertical-align: top; align: right;">III.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Accounting Policy Disclosure</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z8365e1c3203540f98a78deaad26c85d2">

          <tr>
            <td style="width: 18pt; vertical-align: top; align: right;">I.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Transaction Background</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 18pt;">In December 2019, we exchanged $375.6 million of our existing 1% Notes for $439.3 million of new 0.125% Notes. In addition, we issued $109.5 million of the 0.125% Notes to new investors. Together, we will refer to
        these transactions as the &#8220;Exchange Transaction.&#8221; We completed the Exchange Transaction to refinance a large portion of our existing 1% Notes with new convertible notes that had a lower interest rate, an extended maturity date and a higher
        conversion price.</div>
      <div><br>
      </div>
      <div style="margin-left: 18pt;">In conjunction with the execution of the Exchange Transaction, we executed a call spread transaction, which was comprised of purchasing note hedges and selling warrants. We entered into the call spread to minimize the
        impact of potential economic dilution upon conversion of our 0.125% Notes by increasing the effective conversion price even further.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z2cf5f6a902224b73a2a686c1cb33991f">

          <tr>
            <td style="width: 18pt; vertical-align: top; align: right;">II.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Accounting Analysis</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z0c892737bb4d40b3b3b126f6826e5859">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">A.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Evaluation of Freestanding Financial Instruments and Units of Accounting</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z68e6234b425b41d8bff07f90a9614882">

          <tr>
            <td style="width: 36pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">i.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Freestanding Financial Instruments</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 54pt;">We began our accounting analysis by first evaluating if the 0.125% Notes, note hedges and warrants are considered freestanding financial instruments using the guidance in ASC 480-10.</div>
      <div><br>
      </div>
      <div style="margin-left: 54pt; font-weight: bold;">ASC 480-10 Freestanding Financial Instrument</div>
      <div><br>
      </div>
      <div style="margin-left: 54pt; font-weight: bold;">A financial instrument that meets either of the following conditions:</div>
      <div><br>
      </div>
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            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It is entered into separately and apart from any of the entity&#8217;s other financial instruments or equity transactions.</div>
            </td>
          </tr>

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      <div><br>
      </div>
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            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It is entered into in conjunction with some other transaction and is legally detachable and separately exercisable.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zeb1d98da0ef3429294f3d6ac9020aad3">

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            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>Since the 0.125% Notes, note hedges and warrants are documented under separate contractual arrangements, which can be transferred independently of each other and are separately exercisable and legally detachable, we concluded each
                instrument should be treated as a freestanding financial instrument.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z9cc6c740852947c0acb0559c8d941c8a">

          <tr>
            <td style="width: 36pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">ii.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Units of Accounting</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 54pt;">Since the 0.125% Notes, note hedges and warrants (each of these is a &#8220;transaction&#8221; for purposes of this section) are separate freestanding financial instruments, we evaluated the appropriate units of accounting using
        the guidance in ASC 815-10-15-9.</div>
      <div><br>
      </div>
      <div style="margin-left: 54pt; font-weight: bold;">The following indicators should be considered in the aggregate and, if present, cause separate transactions to be accounted for as one unit:</div>
      <div><br>
      </div>
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            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The transactions were entered into contemporaneously and in contemplation of each other</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z51d06481b8ea48a195e7213f13ae998d">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>We executed the 0.125% Notes, note hedges and warrants contemporaneously and in contemplation of each other.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z10dfb3f359184464a4381b485057f9dd">

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            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The transactions were executed with the same counterparty (or structured through an intermediary)</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zc195a3545bfb4d94aea31872324df3f7">

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            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The numerous institutional investors who are the holders of 0.125% Notes are not the counterparties of the note hedges and warrants.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zcdfd9f7cf0764459a3d2486bda8ec45d">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The note hedges and warrants have the same counterparties (i.e., three financial institutions).</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z9c4b30523c2b4834a25e44d61054c8bb">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The transactions relate to the same risk</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zf6fb9570e3c8419098579034d2f5a7f8">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The 0.125% Notes and the warrants do not relate to the same risk. The 0.125% Notes contain both interest rate and equity risks while the warrants have only equity risk.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z36ee53730fcf4b768bbf99e34909d953">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The value of the note hedges fluctuates based on option pricing inputs.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zda632c0dde1e49fa91818545610dc749">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There is no apparent economic need, nor substantive business purpose, for structuring the transactions separately that could not also have been accomplished in a single transaction</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zbc1450dae3434d8ca3f3d5912b0f0127">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>We had a substantive business reason to execute the 0.125% Notes, note hedges and warrants separately:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zec29a25b33be4dc5ab0f6b5ca4b11a3a">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>We issued the 0.125% Notes to refinance our existing convertible notes with new convertible notes that had a lower interest rate and an extended maturity date.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z33fd40caccb641248bab6c6679ba9b08">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>Without the issuance of the 0.125% Notes, we wouldn&#8217;t have entered into the note hedges and warrants. However, there were substantive business reasons to structure the note hedges and warrants separately from the 0.125% Notes and from
                each other:</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">3</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z785ae40ec8314a66b0c4f1edeccfc236">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; font-size: 8pt;">&#9632;</td>
            <td style="width: auto; vertical-align: top;">
              <div>We issued the note hedges to synthetically raise the conversion price of the 0.125% Notes.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z17674289fba840c889b204c0f209e1a8">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; font-size: 8pt;">&#9632;</td>
            <td style="width: auto; vertical-align: top;">
              <div>We integrated the premiums we paid for the warrants with the proceeds we received from the 0.125% Notes for tax purposes and used the premium we received from the warrants to finance the purchase of the note hedges.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 54pt;">Since each of the instruments relate to different risks, had unique business purposes and different counterparties, we concluded that each of the instruments should be accounted for separately.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd0e9a2f9ded54fc188ddc779f04875e2">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">B.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Whether the note hedges and warrants are liabilities under ASC 480</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 36pt;">The next part of our accounting analysis was to determine whether the note hedges and/or warrants are liabilities. We evaluated the note hedges and warrants using the guidance in ASC 480-10, which requires that an
        issuer classify a freestanding financial instrument that is within its scope as a liability (or an asset).</div>
      <div><br>
      </div>
      <div style="margin-left: 36pt;">The following instruments are classified as liabilities pursuant to ASC 480-10:</div>
      <div><br>
      </div>
      <div>
        <div>
          <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" id="zdb7d44c8382b49f7b8c6d62418727dfa">

              <tr>
                <td style="width: 36pt;"><br>
                </td>
                <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
                <td style="width: 126pt; vertical-align: top; align: right; font-weight: bold;"><u>ASC 480-10-25-4</u></td>
                <td style="width: auto; vertical-align: top; font-weight: bold;">A mandatorily redeemable financial instrument, issued in the form of shares, embodied by an unconditional obligation requiring the issuer to redeem the instrument by
                  transferring its assets at a specified or determinable date (or dates) or upon an event certain to occur shall be classified as a liability unless the redemption is required to occur only upon the liquidation or termination of the
                  reporting entity.</td>
              </tr>

          </table>
        </div>
      </div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7c2f2bd0effb4b9b8e5be0e9021d8395">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 13.5pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>ASC 480-10-25-4 is not applicable because the note hedges and warrants are not in the form of outstanding shares.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div>
        <div>
          <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" id="z51ac0c51859b4a079d485915eadc4f28">

              <tr>
                <td style="width: 36pt;"><br>
                </td>
                <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
                <td style="width: 126pt; vertical-align: top; align: right; font-weight: bold;"><u>ASC 480-10-25-8</u></td>
                <td style="width: auto; vertical-align: top; font-weight: bold;">Any financial instrument, other than an outstanding share, that, at inception, has both of the following characteristics:</td>
              </tr>

          </table>
        </div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7f6f23d742e94ad8a222b8057cd81eec">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It embodies an obligation to repurchase the issuer&#8217;s equity shares or is indexed to such an obligation.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z42c02c06ee4342679b6f8ddc2cd2ee90">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It requires or may require the issuer to settle the obligation by transferring assets.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z0acce8535c9c42fdb1e983ca70b0c821">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 13.5pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The criteria for ASC 480-10-25-8 are not applicable because:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zcfa1de231abc459bbb94c3a012fb95d1">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>The warrants do not embody an obligation of Ionis to repurchase its shares by transferring assets pursuant to ASC 480-10-25-8 because:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z75d108fcad4e4a4b82b0b092c62d1ed8">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; font-size: 8pt;">&#9632;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The counterparties to the warrants cannot put the warrants back to Ionis.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7e9071dc4b4d486b909d00d92d3fed55">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; font-size: 8pt;">&#9632;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The underlying shares that Ionis would be required to issue under the warrants are not redeemable.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z30c932bb1e454ed294320f0cf8b3a384">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>These criteria are not applicable for the note hedges because the note hedges represent a right for Ionis to receive cash or shares, not an obligation to issue or repurchase shares.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">4</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <div>
        <div>
          <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" id="z866502c82d7e46c8a0445ff0aad84064">

              <tr>
                <td style="width: 36pt;"><br>
                </td>
                <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
                <td style="width: 126pt; vertical-align: top; align: right; font-weight: bold;"><u>ASC 480-10-25-14</u></td>
                <td style="width: auto; vertical-align: top; font-weight: bold;">A financial instrument that embodies an unconditional obligation outside of the Company&#8217;s control, or a financial instrument other than an outstanding share that embodies a
                  conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is
                  based solely or predominantly on any one of the following:</td>
              </tr>

          </table>
        </div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z1be658188e6a4e3a9bf2a5b95ea6ab82">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">A fixed monetary amount known at inception (for example, a payable settleable with a variable number of the issuer&#8217;s equity shares)</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zba3d1ae10bde4f49b46fe153f3377fd6">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Variations in something other than the fair value of the issuer&#8217;s equity shares (for example, a financial instrument indexed to the Standard and Poor's S&amp;P 500 Index and settleable with a variable number of
                the issuer&#8217;s equity shares)</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zbb746fc6c74a446aa45db56c8201a88e">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Variations inversely related to changes in the fair value of the issuer&#8217;s equity shares.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z8bac8cce99734e26b40e1f686f8887bf">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 13.5pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The criteria for ASC 480-10-25-14 are not applicable because:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd871b02fd23944c09f2c076226e9a899">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>Although Ionis is contingently obligated to issue a variable number of shares to net settle the warrants, Ionis&#8217; obligation is:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zc266ac0b741349cbbb037cbf46ea163e">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; font-size: 8pt;">&#9632;</td>
            <td style="width: auto; vertical-align: top;">
              <div>Not predominately fixed;</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z9c097e4f5222461cab8443c835a9c381">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; font-size: 8pt;">&#9632;</td>
            <td style="width: auto; vertical-align: top;">
              <div>Directly related to the value of Ionis&#8217; stock price (i.e., as Ionis&#8217; stock price increases, the monetary value of the obligation and the number of shares to deliver increases); and</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z74fca5d640d84d23a138290206629337">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; font-size: 8pt;">&#9632;</td>
            <td style="width: auto; vertical-align: top;">
              <div>Not inversely related to the underlying stock price or based on something other than Ionis&#8217; stock price.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z1fa8828f36c048b990d9bb9ce8cba383">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>These criteria are not applicable for the note hedges because the note hedges represent a right for Ionis to receive cash or shares, not an obligation to issue or repurchase shares.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 36pt;">Based on the above criteria, we concluded that the note hedges and warrants are not in the scope of ASC 480 and should not be classified as liabilities (or assets) under that guidance. The next step in our accounting
        analysis was to evaluate the note hedges and warrants using the guidance in ASC 815.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zf189abcb5fc84aa799f180b4789be5a1">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">C.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Whether the note hedges and the warrants meet the conditions to be classified in equity</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z405bacced12c4711a2e0ae3c3fe64c8d">

          <tr>
            <td style="width: 40.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">i.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Note Hedges</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="za305c10d8d714825bf3bf4e98b8b3c1a">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">1.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Evaluation of Derivative Definition</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">The next part of the accounting analysis for the note hedges required us to determine if the note hedges met the definition of a derivative. We used the guidance in ASC 815-10-15-83, which defines a derivative
        instrument as a financial instrument or other contract with all of the following characteristics:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zcf8c189730d24e5b980c44d5a868082d">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Underlying, notional amount, payment provision. The contract has both of the following terms, which determine the amount of the settlement or settlements, and, in some cases, whether or not a settlement is
                required:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z32af63d01c264ffcba3f88a5c58b4d9f">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">One or more underlyings</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z92881c6c7ece4b20a95d66228363ff74">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">One or more notional amounts or payment provisions or both.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd774abd1e42e4a33a7fb6a61e1b802a8">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The note hedges met this criterion because:</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z9055cae37ddb4ae0940c1641d4618369">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>The underlying of the note hedges is Ionis&#8217; common stock.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">5</font></div>
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          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zb1a745c1ebaa4e68af3a6fe77c0d4b8d">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>The notional of the note hedges is a specified number of shares of Ionis&#8217; common stock and/or cash we would receive from the counterparties to the note hedges.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z8790c64ae5334cdbb5c4e3573260f072">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Initial net investment. The contract requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar
                response to changes in market factors.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z323e161029d3485d8b92f870063f2a9f">

          <tr>
            <td style="width: 94.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The note hedges met this criterion because the premium we paid for the note hedges was less by more than a nominal amount than investing in the underlying shares. As such, the premium we paid for the note hedges represented a minimal
                initial net investment.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd0af82743a3641b2b44453c9ff487a8b">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Net settlement. The contract can be settled net by any of the following means:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z6419ae69bb774f179279ca1ea10518ef">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Its terms implicitly or explicitly require or permit net settlement.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zc74248d9ace142b78c753804cec3ad36">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It can readily be settled net by a means outside the contract.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd3ec7c9280ff4bcfb1fbb24ee2488470">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z022c8bf1ce234394b7c3f5b965ff6d2f">

          <tr>
            <td style="width: 94.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The note hedges met these criteria because the note hedges are net share settleable by contract.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">Based on the above criteria, we concluded that the note hedges met the definition of a derivative.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z568d59ce9740486ea43685d4cc7bc715">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">2.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Evaluation of Derivative Scope Exception</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">We next evaluated if the note hedges met the requirements for a derivative scope exception using the guidance in ASC 815-10-15-74(a):</div>
      <div><br>
      </div>
      <div style="margin-left: 72pt; font-weight: bold;">Notwithstanding the conditions of ASC 815-10-15-13 through 15-139, the reporting entity shall not consider the following contracts to be derivative instruments for purposes of this Subtopic.
        Contracts issued or held by that reporting entity that are both: (i) indexed to its own stock and (ii) classified in stockholders&#8217; equity in its statement of financial position:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd75d25ce4cad4417ba4928a36120c8f6">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">i.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Indexed to its own stock</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt;">To evaluate whether an instrument is considered indexed to an entity&#8217;s own stock, we used the guidance in ASC 815-40-15-7:</div>
      <div><br>
      </div>
      <div style="margin-left: 90pt; font-weight: bold;">An entity shall evaluate whether an equity-linked financial instrument (or embedded feature), as discussed in ASC 815-40-15-5 through 15-8 is considered indexed to its own stock within the meaning of
        this Subtopic and ASC 815-10-15-74(a) using the following two-step approach:</div>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">6</font></div>
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          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">1.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Step 1: Evaluate the instrument&#8217;s contingent exercise provisions, if any.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 108pt; font-weight: bold;">ASC 815-40-15-7A states that an exercise contingency shall not preclude an instrument (or embedded feature) from being considered indexed to an entity&#8217;s own stock provided that it is not based on
        either of the following:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="za0c1232d1d5544969d51c143f3b84ee0">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">An observable market, other than the market for the issuer&#8217;s stock (if applicable).</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z31ea308a1da246f9980ddcc7eae9bfd2">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">An observable index, other than an index calculated or measured solely by reference to the issuer&#8217;s own operations (for example, sales revenue of the issuer; earnings before interest, taxes, depreciation, and
                amortization of the issuer; net income of the issuer; or total equity of the issuer).</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z1e5722a1d76b42d4bd08e129137be0e2">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>We concluded that Step 1 of this evaluation did not preclude the note hedges from being considered indexed to Ionis&#8217; stock because the contingent exercise provisions of the note hedges are not based on an observable market or index that
                is not based on Ionis&#8217; stock or operations.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z90ffd1c728e8485591f69b4c0142d70a">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">2.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Step 2: Evaluation of Settlement Provisions. ASC 815-40-15-7C states an instrument (or embedded feature) shall be considered indexed to an entity&#8217;s own stock if its settlement amount will equal the difference
                between the following:</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z72b52ea1324949d68fd225be337c4e76">

          <tr>
            <td style="width: 112.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The fair value of a fixed number of the entity&#8217;s equity shares.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z14f7ff372fa340749117b11e3c80a345">

          <tr>
            <td style="width: 112.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">A fixed monetary amount or a fixed amount of a debt instrument issued by the entity.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z841db7d349c24eae801417fd5169b4f6">

          <tr>
            <td style="width: 135pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>We concluded the note hedges met the Step 2 criteria to be indexed to Ionis&#8217; stock because we can exercise the note hedges on a net-share basis for a fixed number of shares for a fixed amount. However, the note hedges allow for
                adjustments to the settlement amount in certain instances to protect the parties to the note hedges from dilution and other extraordinary events. These adjustments are appropriately designed in a commercially reasonable manner to maintain
                the fair value of the note hedges both before and after such events and to allow the counterparties to the note hedges to maintain a standard hedge position. There are no adjustment provisions that provide down round or other inappropriate
                price protections.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt;">We concluded that the note hedges were indexed to Ionis&#8217; stock.</div>
      <div style="margin-left: 90pt;"><a name="z_Hlk61269572"></a><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zead41a48856d4752a11a240c1001d4d5">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">ii.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Classified in stockholders&#8217; equity in its statement of financial position</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt; font-weight: bold;">Contracts shall be initially classified as equity in both of the following situations:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z3f3d7f86247c4a358c1d473c2691c775">

          <tr>
            <td style="width: 94.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Contracts that require physical settlement or net share settlement</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z2e359c529e1c4b88a5f7c17255a07913">

          <tr>
            <td style="width: 94.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Contracts that give the entity a choice of net cash settlement or settlement in its own shares (physical settlement or net share settlement), assuming that all the criteria set forth in paragraphs 815-40-25-7
                through 25-35 have been met.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">7</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
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      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z5029fbb4baff44ce952b66d085d2ee33">

          <tr>
            <td style="width: 94.5pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>Ionis has the ability to elect net cash settlement or net settlement in shares for the note hedges. Therefore, we evaluated the criteria in ASC 815-40-25-7 through 25-43:</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z21bc5b7af9ab4ca7b089a2c44170de2a">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The contracts cannot include any provisions that could require net-cash settlement, other than if the cash payment is only required upon the final liquidation of the Company. [ASC 815-40-25-7 through 10].</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z3f10e84786984eb4bb355deabfcc00a6">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The default contractual settlement method for the note hedges is net share settlement. The company has the option in certain cases to require settlement in cash, but the counterparties cannot require cash settlement.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z26d18af0cd6f4409860fd929ab13a6ac">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The contract must permit the Company to settle in unregistered shares. [ASC 815-40-25-11 through 16]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z4a93bd68bb66491da79eff97e3b5dc15">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable for the note hedges because Ionis will never be required to deliver shares to the counterparties.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7d264429126f49d8bd6e1e47b8c36446">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The Company must have sufficient authorized and unissued shares available to settle the contract after considering all other commitments that may require the issuance of stock during the maximum period the
                derivative contract could remain outstanding. [ASC 815-40-25-19 through 24]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z2bd553f4d1f84f00bf3b5253e69c4941">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable for the note hedges because Ionis will never be required to deliver shares to the counterparties.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="za9b3f9a8326242418c4f0a919cffe308">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The contract contains an explicit limit on the number of shares to be delivered in a share settlement. [ASC 815-40-25-26 through 28]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z421a9ba6728842e78a6dbc785e9723e1">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable for the note hedges because Ionis will never be required to deliver shares to the counterparties.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z48569e125b7442afa14aa79e5665afa1">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There are no required cash payments to the counterparty in the event the Company fails to make timely filings with the SEC. [ASC 815-40-25-29]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd5844f754a804c629dc91fc464bf7db7">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable to the note hedges because there is no such provision in the note hedges.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">8</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z938b34c6ed7c47dfa066ca5ead8f7081">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There are no required cash payments to the counterparty if the shares initially delivered upon settlement are subsequently sold by the counterparty and the sales proceeds are insufficient to provide the
                counterparty with full return of the amount due (that is, there are no cash settled "top-off" or "make-whole" provisions). [ASC 815-40-25-30]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z047f93746e714b1a968bc051d4b82749">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable for the note hedges because the note hedges do not contain this term.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z72b7774830384a928dc11e3e962fbe04">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There are no provisions in the contract that indicate that the counterparty has rights that rank higher than those of a shareholder of the stock underlying the contract. [ASC 815-40-25-31 through 34]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd2562dfbed324a239e1c7195bcc27ce2">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable for the note hedges because the note hedges do not contain this or similar terms.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z4fb12778335348b0bb33b215e15fe868">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There is no requirement in the contract to post collateral at any point or for any reason. [ASC 815-40-25-35]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z11f44cc4dd7044d6bc9bd59a579e5062">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The note hedges explicitly state that Ionis is not required to post any collateral.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt;">Based on the above facts, we concluded that the note hedges met the criteria for classification in stockholders&#8217; equity.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z042fad0bde44451cbf5c677e15821389">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">3.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Accounting Treatment Conclusion</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">Since we concluded that the note hedges met the above qualifications for a derivative scope exception (i.e., the note hedges were indexed to Ionis&#8217; stock and met the criteria for classification in stockholders&#8217;
        equity), we classified the amount we paid as additional paid in capital.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z3e2459cdaedb497d93ed3eddc41e04fe">

          <tr>
            <td style="width: 45pt;"><br>
            </td>
            <td style="width: 27pt; vertical-align: top; align: right;">ii.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Warrants</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zc4c9fea8e37448ad8c7775c733a51c92">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">1.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Evaluation of Derivative Definition</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">The next part of the analysis for the warrants required us to determine if the warrants met the definition of a derivative. We used the guidance in ASC 815-10-15-83, which defines a derivative instrument as a financial
        instrument or other contract with all of the following characteristics:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7594bef4333946efa15baa1a568a5981">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Underlying, notional amount, payment provision. The contract has both of the following terms, which determine the amount of the settlement or settlements, and, in some cases, whether or not a settlement is
                required:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z729be92490844c7286d6a9c1ee63f313">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">One or more underlyings</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z0c40877f61e0410aba34f07c95bc897d">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">One or more notional amounts or payment provisions or both.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z10593b00ffa74ae28bf58d9578c70b5b">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The warrants met this criterion because:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z986588a3109e405b8aa244c7476eec45">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>The underlying of the warrants is Ionis&#8217; common stock.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zb5ee077465ac42f68f248a6112b20202">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>The notional of the warrants is a specified number of shares of Ionis&#8217; common stock we would issue to the counterparties to the warrants.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">9</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z6afaeaea79da41fcb02450e6f7fef84f">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Initial net investment. The contract requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar
                response to changes in market factors.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zce1328f71b404bb9bb0992d770f3720f">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The warrants met this criterion because the premium the counterparties paid for the warrants was less by more than a nominal amount than investing in the underlying shares. As such, the premium the counterparties paid for the warrants
                represented a minimal initial net investment.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z2c9ea96220d44ef786657da5d1855aab">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Net settlement. The contract can be settled net by any of the following means:</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="ze2a5d4ba1fec49128a0a965967b8777b">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Its terms implicitly or explicitly require or permit net settlement.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zb893a35e7d0b4917bac36f6f92302bd9">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It can readily be settled net by a means outside the contract.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zaf5bdfee614d4c4b81502ddb57356d93">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">It provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z4387fa342ff44f0f96ad75c357217dbf">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The warrants met these criteria because the warrants are net share settleable by contract.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">Based on the above criteria, we concluded that the warrants met the definition of a derivative.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z4096afc02a5f48b6aeca64fbc9d80785">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">2.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Evaluation of Derivative Scope Exception</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">We next evaluated if the warrants met the requirements for a derivative scope exception using the guidance in ASC 815-10-15-74(a):</div>
      <div><br>
      </div>
      <div style="margin-left: 72pt; font-weight: bold;">Notwithstanding the conditions of paragraphs 815-10-15-13 through 15-139, the reporting entity shall not consider the following contracts to be derivative instruments for purposes of this Subtopic.
        Contracts issued or held by that reporting entity that are both: (i) indexed to its own stock and (ii) classified in stockholders&#8217; equity in its statement of financial position:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z4d99ac8019134a0f976c5c7c63a9f5fe">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">i.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Indexed to its own stock</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt;">To evaluate whether an instrument is considered indexed to an entity&#8217;s own stock, we used the guidance in ASC 815-40-15-7:</div>
      <div><br>
      </div>
      <div style="margin-left: 90pt; font-weight: bold;">An entity shall evaluate whether an equity-linked financial instrument (or embedded feature), as discussed in ASC 815-40-15-5 through 15-8 is considered indexed to its own stock within the meaning of
        this Subtopic and ASC 815-10-15-74(a) using the following two-step approach:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zc9278cbfe7dd46aba2aae7bde0b07d91">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">1.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Step 1: Evaluate the instrument&#8217;s contingent exercise provisions, if any.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 108pt; font-weight: bold;">ASC 815-40-15-7C states that an exercise contingency shall not preclude an instrument (or embedded feature) from being considered indexed to an entity&#8217;s own stock provided that it is not based on
        either of the following:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zddae2c1fe2a24224b1dbeffce4cf10b1">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">An observable market, other than the market for the issuer&#8217;s stock (if applicable).</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z6bda12bb7793466ca9f1a47874317b3c">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">An observable index, other than an index calculated or measured solely by reference to the issuer&#8217;s own operations (for example, sales revenue of the issuer; earnings before interest, taxes, depreciation, and
                amortization of the issuer; net income of the issuer; or total equity of the issuer).</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">10</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <div style="margin-left: 144pt;">We concluded that Step 1 of this evaluation did not preclude the warrants from being considered indexed to Ionis&#8217; stock because the contingent exercise provisions of the warrants are not based on an observable market
        or index that is not based onIonis&#8217; stock or operations.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z6a9c490754a3465aa262ef45efb74f08">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">2.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Step 2: Evaluation of Settlement Provisions. ASC 815-40-15-7C states an instrument (or embedded feature) shall be considered indexed to an entity&#8217;s own stock if its settlement amount will equal the difference
                between the following:</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7502fe405f4344419bb6031734bc1878">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The fair value of a fixed number of the entity&#8217;s equity shares.</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z30d8fea5be434e1983ceb1148286b674">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">A fixed monetary amount or a fixed amount of a debt instrument issued by the entity.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z00f5778c95ae49cbb28203a1b2d465b7">

          <tr>
            <td style="width: 126pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">o</td>
            <td style="width: auto; vertical-align: top;">
              <div>We concluded the warrants met the Step 2 criteria to be indexed to Ionis&#8217; stock because the counterparties can exercise the warrants on a net-share basis for a fixed number of shares for a fixed amount. However, the warrants allow for
                adjustments to the settlement amount in certain instances to protect the parties to the warrants from dilution and other extraordinary events. These adjustments are appropriately designed in a commercially reasonable manner to maintain the
                fair value of the warrants both before and after such events and to allow the counterparties to the warrants to maintain a standard hedge position. There are not adjustment provisions that provide down round or other inappropriate price
                protections.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt;">We concluded that the warrants were indexed to Ionis&#8217; stock.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zf79d0470333740c1b69d38e642a5cc41">

          <tr>
            <td style="width: 72pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right; font-weight: bold;">iii.</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Classified in stockholders&#8217; equity in its statement of financial position</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt; font-weight: bold;">Contracts shall be initially classified as equity in both of the following situations:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z93b390fcc5424cc89bf388e4805a422f">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Contracts that require physical settlement or net share settlement</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7e61f15977b24f4b93e51e1b9c855c41">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">Contracts that give the entity a choice of net cash settlement or settlement in its own shares (physical settlement or net share settlement), assuming that all the criteria set forth in paragraphs 815-40-25-7
                through 25-35 have been met.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt;">Ionis has the ability to elect net cash settlement or net settlement in shares for the warrants. Therefore, we evaluated the criteria in ASC 815-40-25-7 through 25-43:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z60046e7245194058b2567b3a49ad7f2a">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The contracts cannot include any provisions that could require net-cash settlement, other than if the cash payment is only required upon the final liquidation of the Company. [ASC 815-40-25-7 through 10].</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">11</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z2ee008e3ae3a4884bd7fede6401c33ae">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The default contractual settlement method for the warrants is net share settlement. Ionis has the option to settle in cash, but the counterparties cannot require cash settlement.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="za8df986460a340458bb98393bec49cc6">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The contract must permit the Company to settle in unregistered shares. [ASC 815-40-25-11 through 16]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zfa896b52c1f8405e9457cb3109f3be89">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The warrants allow Ionis to settle in unregistered shares.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z410a7017fdf249c6aa3d28918929a0b8">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The Company must have sufficient authorized and unissued shares available to settle the contract after considering all other commitments that may require the issuance of stock during the maximum period the
                derivative contract could remain outstanding. [ASC 815-40-25-19 through 24]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zb7219d049f6b4013bbb311ef367fe5e5">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>Ionis has sufficient authorized and unissued shares available to settle the warrants. Prior to executing the transactions in December 2019, Ionis had 300 million shares of common stock authorized with 175 million shares of common stock
                that were outstanding or reserved for future issuance. The maximum number of shares of common stock Ionis would issue for the conversion of 0.125% Notes and the exercise of the warrants is approximately 22 million shares of common stock.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z3bf71751caff4aff8aab92fc32d7033c">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">The contract contains an explicit limit on the number of shares to be delivered in a share settlement. [ASC 815-40-25-26 through 28]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="za43a39ef100f436191ee28223cf6631b">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The warrants contain an explicit limit on the number of shares to be delivered.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z0076c1b9374f41c1b5f9f7ce40d231a3">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There are no required cash payments to the counterparty in the event the Company fails to make timely filings with the SEC. [ASC 815-40-25-29]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zb2f34802cc374255bc7d6ca3e3bf3bb3">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable to the warrants because there is no such provision in the warrants.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z6169c0680192483c910cb9a17b3f1a31">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There are no required cash payments to the counterparty if the shares initially delivered upon settlement are subsequently sold by the counterparty and the sales proceeds are insufficient to provide the
                counterparty with full return of the amount due (that is, there are no cash settled "top-off" or "make-whole" provisions). [ASC 815-40-25-30]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z5623e0ba2fbd41739476774a13ebd247">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable to the warrants because the warrants do not contain this or similar terms.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
        <div id="DSPFPageFooter"></div>
        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">12</font></div>
        <div style="page-break-after:always;" id="DSPFPageBreak">
          <hr noshade="noshade" style="margin: 4px 0px; width: 100%; border-width: 0; height: 2px; color: #000000; background-color: #000000; clear: both;"></div>
        <div id="DSPFPageHeader"></div>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z19e3dc63c0a14933b106ca8aa0d02381">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There are no provisions in the contract that indicate that the counterparty has rights that rank higher than those of a shareholder of the stock underlying the contract. [ASC 815-40-25-31 through 34]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zdd33e53ccb624a488c31d2a9d4253f0c">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>This is not applicable to the warrants because the warrants do not contain this or similar terms.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z7ee625c83c8a40bab2f2de411b776d25">

          <tr>
            <td style="width: 90pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div style="font-weight: bold;">There is no requirement in the contract to post collateral at any point or for any reason. [ASC 815-40-25-35]</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z925b47064605419e8f124f07224c0238">

          <tr>
            <td style="width: 108pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#10146;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The warrants explicitly state that Ionis is not required to post any collateral.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 90pt;">Based on the above facts, we concluded that the warrants met the criterion for classification in stockholders&#8217; equity.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z9d8a668dc74a4ec998e2602a24b9f767">

          <tr>
            <td style="width: 54pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">3.</td>
            <td style="width: auto; vertical-align: top;">
              <div><u>Accounting Treatment Conclusion</u></div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 72pt;">Since we concluded that the warrants met the above qualifications for a derivative scope exception (i.e., the warrants were indexed to Ionis&#8217; stock and met the criteria for classification in stockholders&#8217; equity), we
        classified the amount we received from the counterparties as additional paid in capital.</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="za32c1a5f66634f9a8c43cd1f48ad026c">

          <tr>
            <td style="width: 18pt; vertical-align: top; align: right;">IV.</td>
            <td style="width: auto; vertical-align: top;">
              <div>Accounting Policy Disclosure</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="margin-left: 18pt;">In response to the Staff&#8217;s request, we will include the following accounting policy disclosure in future periodic reports:</div>
      <div><br>
      </div>
      <div style="margin-left: 36pt; font-weight: bold;">Call Spread</div>
      <div><br>
      </div>
      <div style="margin-left: 36pt;">In conjunction with the issuance of our 0.125% Notes, we entered into a call spread transaction, which was comprised of purchasing note hedges and selling warrants. We account for the note hedges and warrants as
        separate freestanding financial instruments and treat each instrument as a separate unit of accounting. We determined that the note hedges and warrants do not meet the definition of a liability using the guidance contained in ASC Topic 480,
        therefore we account for the note hedges and warrants using the Derivatives and Hedging &#8211; Contracts in Entity&#8217;s Own Equity accounting guidance contained in ASC Topic 815. We determined that the note hedges and warrants meet the definition of a
        derivative, are indexed to our stock and meet the criteria to be classified in shareholders&#8217; equity. We recorded the aggregate amount paid for the note hedges and the aggregate amount received for the warrants as additional paid-in capital in our
        consolidated balance sheet. We reassess our ability to continue to classify the note hedges and warrants in shareholders&#8217; equity at each reporting period.</div>
      <div><br>
      </div>
      <div style="text-align: center;">****</div>
      <div><br>
      </div>
      <div>In connection with this response, we acknowledge the following:</div>
      <div><br>
      </div>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z0f02d5ea6ed041ea946c5eda5445f94e">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The company is responsible for the adequacy and accuracy of the disclosure in the filings;</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="zd7e8f65598e34f7a8b80d2a6978ef122">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div>Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filings; and</div>
            </td>
          </tr>

      </table>
      <table cellspacing="0" cellpadding="0" style="font-family: 'Times New Roman'; font-size: 10pt; width: 100%; text-align: left; color: #000000;" class="DSPFListTable" id="z45c2d07ef68f431ba24cc24a6a815fcd">

          <tr>
            <td style="width: 18pt;"><br>
            </td>
            <td style="width: 18pt; vertical-align: top; align: right;">&#8226;</td>
            <td style="width: auto; vertical-align: top;">
              <div>The company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.</div>
            </td>
          </tr>

      </table>
      <div><br>
      </div>
      <div style="clear: both; margin-top: 10pt; margin-bottom: 10pt;" id="DSPFPageBreakArea">
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        <div id="DSPFPageNumberArea" style="text-align: right;"><font id="DSPFPageNumber" style="font-size: 8pt; font-weight: normal; font-style: normal;">13</font></div>
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      <div>Should you have any questions regarding our responses or require any additional information, please contact me at (760) 603-2492.</div>
      <div><br>
      </div>
      <div>Sincerely,</div>
      <div><br>
      </div>
      <div style="font-style: italic;">/s/ Elizabeth L. Hougen</div>
      <div><br>
      </div>
      <div>Elizabeth L. Hougen</div>
      <div>Exec Vice President, Finance and CFO</div>
      <div> <br>
      </div>
      <div><br>
      </div>
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</DOCUMENT>
</SEC-DOCUMENT>
