IONIS PHARMACEUTICALS, INC. In this Report on Form 10-Q, unless the context requires otherwise, "Ionis,"
"Company," "we," "our," and "us," means
Forward-Looking Statements
In addition to historical information contained in this Report on Form 10-Q, the Report includes forward-looking statements regarding our business and the therapeutic and commercial potential of SPINRAZA (nusinersen), TEGSEDI (inotersen), WAYLIVRA (volanesorsen), eplontersen, olezarsen, donidalorsen, ION363, pelacarsen, tofersen and our technologies and products in development. Any statement describing our goals, expectations, financial or other projections, intentions or beliefs, is a forward-looking statement and should be considered an at-risk statement. Such statements are subject to certain risks and uncertainties, including those related to the impact COVID-19 could have on our business, and including those inherent in the process of discovering, developing and commercializing medicines that are safe and effective for use as human therapeutics, and in the endeavor of building a business around such medicines. Our forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and described in additional detail in our annual report on Form 10-K for the year endedDecember 31, 2021 , which is on file with theU.S. Securities and Exchange Commission and is available from us, and those identified within Part II Item 1A. Risk Factors of this Report. Although our forward-looking statements reflect the good faith judgment of our management, these statements are based only on facts and factors currently known by us. As a result, you are cautioned not to rely on these forward-looking statements.
Overview
We are a leader in RNA-targeted therapeutics. We believe our medicines have the potential to pioneer new markets, change standards of care and transform the lives of people with devastating diseases. We currently have three marketed medicines- SPINRAZA, TEGSEDI and WAYLIVRA. We also have a rich late- and mid-stage pipeline primarily focused on our leading cardiovascular and neurology franchises. We currently have six medicines in Phase 3 development for eight indications. Recently, we reported positive Phase 3 interim analysis data from the NEURO-TTRansform study of eplontersen in patients with polyneuropathy caused by hereditary transthyretin amyloidosis, or ATTRv-PN. As a result, we plan to file a New Drug Application, or NDA, with theU.S. Food and Drug Administration , or FDA, by the end of 2022. Additionally, the FDA recently accepted Biogen's NDA filing of tofersen for the treatment of superoxide dismutase 1 amyotrophic lateral sclerosis, or SOD1-ALS, and granted tofersen priority review. Tofersen's Prescription Drug User Fee Act, or PDUFA, date isApril 25, 2023 . These achievements put us on track to potentially add two new marketed products to our commercial portfolio, if these medicines are approved. In addition, based on recent positive data from the Phase 2b study of bepirovirsen in patients with chronic hepatitis B virus, or HBV, and the Phase 2 study of IONIS-FB-LRx in patients with immunoglobulin A nephropathy, or IgAN, our partners plan to advance these medicines into Phase 3 development, which would expand our late-stage pipeline to eight medicines in Phase 3 development for ten indications. Our multiple sources of revenue and strong balance sheet enable us to invest in our strategic priorities to build our commercial pipeline, expand and diversify our technology and deliver new medicines to the market. By continuing to focus on these priorities, we believe we are well positioned to drive future growth and to deliver increasing value for patients and shareholders.
Marketed Medicines
SPINRAZA is the global market leader for the treatment of patients of all ages with spinal muscular atrophy, or SMA, a progressive, debilitating and often fatal genetic disease. Biogen is our partner responsible for commercializing SPINRAZA worldwide. From inception throughSeptember 30, 2022 , we have earned more than$1.8 billion in revenues from our SPINRAZA collaboration, including more than$1.3 billion in royalties on sales of SPINRAZA. TEGSEDI is a once weekly, self-administered subcutaneous medicine approved in theU.S. ,Europe ,Canada andBrazil for the treatment of patients with polyneuropathy caused by ATTRv-PN. In 2021, we began selling TEGSEDI inEurope through our distribution agreement with Swedish Orphan Biovitrum AB, or Sobi. Additionally, in the second quarter of 2021, Sobi began distributing TEGSEDI in theU.S. andCanada . InLatin America ,PTC Therapeutics International Limited , or PTC, is commercializing TEGSEDI beginning withBrazil . 29
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Index
WAYLIVRA is a once weekly, self-administered, subcutaneous medicine indicated as an adjunct to diet in adult patients with genetically confirmed familial chylomicronemia syndrome, orFCS , and at high risk for pancreatitis. In 2021, we began selling WAYLIVRA inEurope through our distribution agreement with Sobi. Under our exclusive license agreement with PTC, PTC is working to provide access to WAYLIVRA acrossLatin America , beginning inBrazil . In the third quarter of 2021, theNational Health Surveillance Agency (Agência Nacional de Vigilância Sanitária), or ANVISA, approved WAYLIVRA inBrazil . InDecember 2021 , PTC submitted an application to ANVISA for approval of WAYLIVRA for the treatment of familial partial lipodystrophy, or FPL, inBrazil . If approved, Waylivra will be the first approved treatment for patients with FPL inBrazil . Under our distribution agreements with Sobi, we retained the marketing authorizations for TEGSEDI and WAYLIVRA in major markets. We continue to supply commercial product to Sobi and manage regulatory and manufacturing processes, as well as relationships with key opinion leaders. We also continue to lead the TEGSEDI and WAYLIVRA global commercial strategy. In connection with the agreements, we restructured our European operations in the first quarter of 2021, and we restructured our North American TEGSEDI operations in the second quarter of 2021.
Medicines in Phase 3 Studies
We currently have six medicines in Phase 3 studies for eight indications, which include:
? Eplontersen: our medicine in development for transthyretin amyloidosis, or ATTR
o We are currently conducting the Phase 3 NEURO-TTransform study in patients with
ATTRv-PN, the Phase 3 CARDIO-TTransform study in patients with ATTR
cardiomyopathy, or ATTR-CM, and additional studies supporting our ATTR
development program
? In
the Phase 3 NEURO-TTRansform study of eplontersen in patients with ATTRv-PN at
the International Symposium on Amyloidosis
? In the fourth quarter of 2022, we expanded enrollment in the Phase 3
CARDIO-TTRansform study of eplontersen in patients with ATTR cardiomyopathy, or
ATTR-CM
? Eplontersen was granted orphan drug designation by the FDA for the treatment of
patients with ATTR
? Tofersen: our medicine in development for SOD1-ALS
o Biogen is developing tofersen for the treatment of SOD-1 ALS, including
conducting the ongoing Phase 3 VALOR open label extension, or OLE, study in
patients with SOD1-ALS and the ongoing Phase 3 ATLAS study in presymptomatic
SOD-1 patients
? Tofersen is currently under priority review with the FDA and has a PDUFA action
date of
? In
European Network to Cure ALS meeting. These data were included in the NDA
filing
? Olezarsen: our medicine in development for
or SHTG
o We are currently conducting a broad development program for olezarsen that
includes the BALANCE study in patients with
supporting development for the treatment of SHTG, CORE, CORE2 and ESSENCE
? In
patients with
? In the third quarter of 2022, we initiated CORE2, a confirmatory Phase 3 study
of olezarsen in patients with SHTG
? In the fourth quarter of 2022, we initiated ESSENCE, a supporting Phase 3 study
of olezarsen in patients with SHTG or hypertriglyceridemia and atherosclerotic
cardiovascular disease
? Pelacarsen: our medicine in development for lipoprotein(a), or Lp(a), driven
cardiovascular disease
o Novartis is developing pelacarsen, including conducting the ongoing Lp(a)
HORIZON Phase 3 cardiovascular outcome study in patients with established
cardiovascular disease and elevated Lp(a)
? In
cardiovascular outcome study
? Donidalorsen: our medicine in development for hereditary angioedema, or HAE
o We are currently conducting the OASIS study in patients with HAE and OASIS Plus
supportive study for HAE patients previously treated with other prophylactic
therapies
? We plan to present new efficacy and safety results from the Phase 2 OLE study
of donidalorsen in HAE patients treated for one year at the
Allergy, Asthma and Immunology Annual Scientific Meeting in
? ION363: our medicine in development for amyotrophic lateral sclerosis, or ALS,
with mutations in the fused in sarcoma gene, or FUS. FUS-ALS is the most common
cause of juvenile-onset ALS
o We are currently conducting a Phase 3 study of ION363 in juvenile and adult
patients with FUS-ALS and enrollment is ongoing
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Index
Third Quarter 2022 and Recent Updates on Certain Mid-Stage Pipeline Medicines
? GSK presented positive end of study data from the Phase 2b B-Clear study of
bepirovirsen demonstrating potential for functional cures in patients with
chronic hepatitis B; GSK plans to advance bepirovirsen into Phase 3 development
in the first half of 2023
? We presented positive data from the Phase 2 study of IONIS-FB-LRx in patients
with IgAN; Roche plans to advance IONIS-FB-LRx into Phase 3 development in the
first half of 2023
? Bayer presented positive data from the Phase 2b study of fesomersen in patients
with end-stage renal disease; we regained rights to fesomersen from Bayer and
are assessing next steps
? Roche presented the Phase 2 GENERATION HD2 study design of tominersen in
Huntington's disease, or HD, patients; Roche plans to begin enrollment in early
2023
? We reported ION449 (AZD8233) targeting PCSK9 met the primary endpoint in Phase
2b
efficacy criteria, AstraZeneca is not advancing ION449
COVID-19
As a company focused on improving the health of people around the world, our priority during the COVID-19 pandemic is the safety of our employees, their families, the healthcare workers who work with us and the patients who rely on our medicines. We are also focused on maintaining the quality of our studies and minimizing the impact to timelines. While the COVID-19 pandemic has impacted some areas of our business, we believe our mitigation efforts and financial strength will enable us to continue to manage through the pandemic and execute on our strategic initiatives. Because the situation is extremely fluid, we are continuing to monitor the impact COVID-19 could have on our business, including the impact on our commercial products and the medicines in our pipeline.
Financial Highlights
The following is a summary of our financial results (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Total revenue $ 159.8 $ 133.1 $ 435.5 $ 370.5
Total operating expenses $ 218.9 $ 218.9 $ 637.7 $ 621.2
Loss from operations $ (59.2 ) $ (85.8 ) $ (202.2 ) $ (250.8 )
Net loss $ (47.0 ) $ (82.5 ) $ (217.3 ) $ (253.2 ) ? Revenue increased 20 percent for the third quarter of 2022 and 18 percent on a
year-to-date basis compared to the same periods in 2021 driven by significant
partner payments earned across multiple programs
? Operating expenses were flat for the three months ended
compared to the same period in 2021 and increased 3 percent for the nine months
ended
discussions on period-over-period changes for the various components of
operating expenses
? As of
investments. Subsequent to
real-estate transactions, which increased our cash balance. Refer to the
section titled, Liquidity and Capital Resources, for further details on these
real-estate transactions.
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Index
Eplontersen Collaboration with AstraZeneca
Our financial results for the nine months endedSeptember 30, 2022 reflected the cost-sharing provisions related to our eplontersen collaboration with AstraZeneca to develop and commercialize eplontersen for the treatment of ATTR. Under the terms of the collaboration agreement, AstraZeneca is paying 55 percent of the costs associated with the ongoing global Phase 3 development program. Because we are leading the Phase 3 development program, we are recognizing as research and development, or R&D, revenue the 55 percent of cost-share funding AstraZeneca is responsible for, net of our share of AstraZeneca's development expenses, in the same period we incur the related development expenses. In the nine months endedSeptember 30, 2022 , we have earned$55 million in joint development revenue under this collaboration. As AstraZeneca is responsible for the majority of the medical affairs and commercial costs in theU.S. and all costs associated with bringing eplontersen to market outside theU.S. , we are recognizing cost-share funding we receive from AstraZeneca related to these activities as a reduction of our medical affairs and commercialization expenses, which we classify as R&D and selling, general and administrative, or SG&A, expenses, respectively. In the nine months endedSeptember 30, 2022 , we recognized$1.4 million and$1.5 million of medical affairs expenses and commercialization expenses for eplontersen, respectively, net of cost-share funding from AstraZeneca. We expect our medical affairs and commercialization expenses to increase as our collaboration with AstraZeneca progresses.
The following is a summary of the financial impacts on our statement of
operations for the nine months ended
Collaboration Financial Impact of Cost-Sharing Provisions on our
Activities Statement Line Statement of Operations
Eplontersen 55% of Ionis' Phase 3 development
Joint expenses, including internal+external
Phase 3 Development $55M costs & CMC costs, net of our share
Development: Revenue of AstraZeneca's Phase 3 development
Ionis leads and (R&D Revenue) expenses
conducts
Development 100% of Ionis' Phase 3 development
Expenses (R&D $107M expenses
expenses)
Critical Accounting Estimates
We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in theU.S. As such, we make certain estimates, judgments and assumptions that we believe are reasonable, based upon the information available to us. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our quarterly or annual results of operations and financial condition. Each quarter, our senior management reviews the development, selection and disclosure of such estimates with the audit committee of our board of directors. The following are our significant accounting estimates, which we believe are the most critical to aid in fully understanding and evaluating our reported financial results:
? Assessing the propriety of revenue recognition and associated deferred revenue;
and
? Determining the appropriate cost estimates for unbilled preclinical studies and
clinical development activities.
There have been no other material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 32
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Index Results of Operations Revenue Total revenues for the three and nine months endedSeptember 30, 2022 were$159.8 million and$435.5 million , respectively, compared to$133.1 million and$370.5 million for the same periods in 2021 and were comprised of the following (amounts in millions): Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Revenue: Commercial revenue: SPINRAZA royalties$ 61.6 $ 66.6 $ 175.1 $ 198.7 TEGSEDI and WAYLIVRA revenue, net 5.9 15.5 22.5 46.9 Licensing and other royalty revenue 4.9 2.7 25.3 9.5 Total commercial revenue 72.4 84.8 222.9 255.1 R&D revenue: Amortization from upfront payments 18.1 16.7 54.0 56.8 Milestone payments 14.9 28.4 59.7 48.5 License fees 35.0 - 37.0 - Other services 1.3 3.2 6.6 10.1 Collaborative agreement revenue 69.3 48.3 157.3 115.4 Eplontersen joint development revenue 18.1 - 55.3 - Total R&D revenue 87.4 48.3 212.6 115.4 Total revenue$ 159.8 $ 133.1 $ 435.5 $ 370.5 Our revenue for the three and nine months endedSeptember 30, 2022 increased 20 percent and 18 percent compared to the same periods in 2021, respectively. The increase was driven by significant partner payments we earned across multiple partnered programs, including$85 million from Biogen for advancing several neurology disease programs,$63 million from Roche for advancing and licensing IONIS-FB-LRx and$55 million from AstraZeneca for its share of the global Phase 3 development costs for eplontersen. Our commercial revenue for the three and nine months endedSeptember 30, 2022 decreased 15 percent and 13 percent compared to the same periods in 2021, respectively. SPINRAZA royalties for the three and nine months endedSeptember 30, 2022 decreased 7 percent and 12 percent compared to the same periods in 2021, respectively. In theU.S. , SPINRAZA sales were flat in the first nine months of 2022 compared to the same period in 2021. Outside of theU.S. , SPINRAZA royalties decreased in the first nine months of 2022 compared to the same period in 2021 due to lower SPINRAZA product sales primarily due to decreased pricing, foreign currency exchange and competition. TEGSEDI and WAYLIVRA revenue decreased primarily due to the shift to distribution fees in 2021. Operating Expenses
Our operating expenses were as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Operating expenses, excluding non-cash
compensation expense related to equity
awards $ 195.1 $ 185.5 $ 563.1 $ 498.3
Restructuring expenses - 2.8 - 24.4
Total operating expenses, excluding
non-cash compensation expense related to
equity awards 195.1 188.3 563.1 522.7
Non-cash compensation expense related to
equity awards 23.8 30.6 74.6 98.5
Total operating expenses $ 218.9 $ 218.9 $ 637.7 $ 621.2
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Index
Our operating expenses, excluding non-cash compensation expense related to equity awards, increased for the three and nine months endedSeptember 30, 2022 compared to the same periods in 2021. For both periods, our R&D expenses increased due to our investments in advancing our late-stage pipeline, including our expanding number of Phase 3 studies, which doubled over the course of 2021 from three to six studies. Our SG&A expenses increased for the three months endedSeptember 30, 2022 compared to the same period in 2021 due to our go-to-market activities for eplontersen, donidalorsen and olezarsen. Our SG&A expenses decreased for the nine months endedSeptember 30, 2022 compared to the same period in 2021 as a result of savings we realized from integrating Akcea and restructuring our commercial operations for TEGSEDI and WAYLIVRA, partially offset by the increase in expenses related to our go-to-market activities in the third quarter of 2022. We expect our operating expenses, excluding non-cash compensation expense related to equity awards, to increase during the fourth quarter of 2022 compared to the same period in 2021 as we continue to advance our late- and mid-stage pipeline, invest in expanding and diversifying our technology and advance our go-to-market activities.
Our non-cash compensation expense related to equity awards decreased in the
three and nine months ended
To analyze and compare our results of operations to other similar companies, we believe it is important to exclude non-cash compensation expense related to equity awards from our operating expenses. We believe non-cash compensation expense related to equity awards is not indicative of our operating results or cash flows from our operations. Further, we internally evaluate the performance of our operations excluding it.
Cost of Sales
Our cost of sales is comprised of costs related to our commercial revenue, which consisted of manufacturing costs, including certain fixed costs, transportation and freight, indirect overhead costs associated with the manufacturing and distribution of TEGSEDI and WAYLIVRA and certain associated period costs.
Our cost of sales were as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Cost of sales, excluding non-cash
compensation expense related to equity
awards $ 1.3 $ 3.0 $ 9.9 $ 8.3
Non-cash compensation expense related to
equity awards 0.2 0.1 0.5 0.3
Total cost of sales $ 1.5 $ 3.1 $ 10.4 $ 8.6 Research, Development and Patent Expenses
Our research, development and patent expenses consist of expenses for antisense drug discovery, antisense drug development, manufacturing and development chemistry and R&D support expenses.
The following table sets forth information on research, development and patent
expenses (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Research, development and patent
expenses, excluding non-cash
compensation expense related to equity
awards $ 165.3 $ 159.6 $ 469.6 $ 383.9
Restructuring expenses - 1.8 - 8.0
Total research, development and patent
expenses, excluding non-cash
compensation expense related to equity
awards 165.3 161.4 469.6 391.9
Non-cash compensation expense related to
equity awards 17.7 23.4 55.3 72.0
Total research, development and patent
expenses $ 183.0 $ 184.8 $ 524.9 $ 463.9
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Index Antisense Drug Discovery We use our proprietary antisense technology to generate information about the function of genes and to determine the value of genes as drug discovery targets. We use this information to direct our own antisense drug discovery research, and that of our partners. Antisense drug discovery is also the function that is responsible for advancing our antisense core technology. This function is also responsible for making investments in complementary technologies to expand the reach of antisense technology.
Our antisense drug discovery expenses were as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Antisense drug discovery expenses,
excluding non-cash compensation expense
related to equity awards $ 25.0 $ 55.9 $ 68.6 $ 105.7
Non-cash compensation expense related to
equity awards 4.2 5.9 12.8 17.5
Total antisense drug discovery expenses
Antisense drug discovery expenses, excluding non-cash compensation expense related to equity awards, decreased in the three and nine months endedSeptember 30, 2022 compared to the same periods in 2021. In the first nine months of 2021, we incurred certain non-recurring licensing expenses, including$35 million for licensingBicycle Therapeutics' peptide technology. These non-recurring licensing expenses resulted in higher antisense drug discovery expenses in the three and nine months endedSeptember 30, 2021 .
Antisense Drug Development
The following table sets forth drug development expenses, including expenses for our marketed medicines and those in Phase 3 development for which we have incurred significant costs (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
TEGSEDI and WAYLIVRA $ 3.9 $ 3.3 $ 9.4 $ 4.7
Eplontersen 24.5 23.0 75.8 52.2
Olezarsen 18.3 4.9 39.7 10.4
Donidalorsen 5.5 2.0 9.1 4.6
ION363 2.3 1.8 5.8 5.5
Other antisense development projects 31.6 25.1 91.7 70.9
Development overhead expenses 22.5 18.6 63.3 55.1
Restructuring expenses - 1.5 - 7.2
Total antisense drug development,
excluding non-cash compensation expense
related to equity awards 108.6 80.2 294.8 210.6
Non-cash compensation expense related to
equity awards 7.6 9.7 15.6 31.3
Total antisense drug development
expenses $ 116.2 $ 89.9 $ 310.4 $ 241.9
Our development expenses, excluding non-cash compensation expense related to
equity awards, increased for the three and nine months ended September 30, 2022
compared to the same periods in 2021 primarily due to our advancing late-stage
pipeline, including our expanding number of Phase 3 studies, which doubled over
the course of 2021 from three to six studies. Non-cash compensation expense
related to equity awards decreased in 2022 compared to 2021 due to reduced
headcount of longer-tenured employees as a result of our restructured commercial
operations.
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Index
We may conduct multiple clinical trials on a drug candidate, including multiple clinical trials for the various indications we may be studying. Furthermore, as we obtain results from trials, we may elect to discontinue clinical trials for certain drug candidates in certain indications in order to focus our resources on more promising drug candidates or indications. Our Phase 1 and Phase 2 programs are clinical research programs that fuel our Phase 3 pipeline. When our medicines are in Phase 1 or Phase 2 clinical trials, they are in a dynamic state in which we may adjust the development strategy for each medicine. Although we may characterize a medicine as "in Phase 1" or "in Phase 2," it does not mean that we are conducting a single, well-defined study with dedicated resources. Instead, we allocate our internal resources on a shared basis across numerous medicines based on each medicine's particular needs at that time. This means we are constantly shifting resources among medicines. Therefore, what we spend on each medicine during a particular period is usually a function of what is required to keep the medicines progressing in clinical development, not what medicines we think are most important. For example, the number of people required to start a new study is large, the number of people required to keep a study going is modest and the number of people required to finish a study is large. However, such fluctuations are not indicative of a shift in our emphasis from one medicine to another and cannot be used to accurately predict future costs for each medicine. And, because we always have numerous medicines in preclinical and early stage clinical research, the fluctuations in expenses from medicine to medicine, in large part, offset one another. If we partner a medicine, it may affect the size of a trial, its timing, its total cost and the timing of the related costs. Medical Affairs
Our medical affairs function is responsible for communicating scientific and clinical information to healthcare providers, medical professionals and patients.
Our medical affairs expenses were as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Medical affairs expenses, excluding
non-cash compensation expense related to
equity awards $ 3.8 $ 2.5 $ 11.4 $ 8.9
Non-cash compensation expense related to
equity awards 0.6 0.5 1.3 1.1
Total medical affairs expenses $ 4.4 $ 3.0 We expect medical affairs expenses to continue increasing as we advance our late-stage pipeline.
Manufacturing and Development Chemistry
Expenditures in our manufacturing and development chemistry function consist
primarily of personnel costs, specialized chemicals for oligonucleotide
manufacturing, laboratory supplies and outside services. Our manufacturing and
development chemistry function is responsible for providing drug supplies to
antisense drug development and our collaboration partners. Our manufacturing
procedures include testing to satisfy good laboratory and good manufacturing
practice requirements.
Our manufacturing and development chemistry expenses were as follows (in
millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Manufacturing and development chemistry
expenses, excluding non-cash
compensation expense related to equity
awards $ 14.0 $ 10.9 $ 53.4 $ 31.3
Restructuring expenses - 0.2 - 0.8
Total manufacturing and development
chemistry expenses, excluding non-cash
compensation expense related to equity
awards 14.0 11.1 53.4 32.1
Non-cash compensation expense related to
equity awards 2.3 2.9 7.6 9.1
Total manufacturing and development
chemistry expenses $ 16.3 $ 14.0 $ 61.0 $ 41.2 Manufacturing and development chemistry expenses, excluding non-cash
compensation expense related to equity awards, increased in the three and nine
months ended
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Index
R&D Support
In our research, development and patent expenses, we include support costs such
as rent, repair and maintenance for buildings and equipment, utilities,
depreciation of laboratory equipment and facilities, amortization of our
intellectual property, informatics costs, procurement costs and waste disposal
costs. We call these costs R&D support expenses.
The following table sets forth information on R&D support expenses (in
millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Personnel costs $ 5.3 $ 4.7 $ 15.4 $ 13.2
Occupancy 4.1 3.2 12.3 9.6
Patent expenses 0.9 1.0 3.1 3.1
Insurance 1.0 0.8 2.8 2.4
Computer software and licenses 0.1 0.3 1.1 1.4
Other 2.5 1.6 6.7 4.8
Restructuring expenses - 0.1 - 0.1
Total R&D support expenses, excluding
non-cash compensation expense related to
equity awards 13.9 11.7 41.4 34.6
Non-cash compensation expense related to
equity awards 3.0 4.4 10.4 13.0
Total R&D support expenses $ 16.9 $ 16.1 $ 51.8 $ 47.6
R&D support expenses, excluding non-cash compensation expense related to equity
awards, for the three and nine months ended September 30, 2022 increased
compared to the same periods in 2021. The increase was primarily related to
increased occupancy and personnel costs to support advancing our pipeline and
our technology. In October 2022 , we executed a sale and leaseback transaction
for our headquarters in Carlsbad, California . As a result, our occupancy costs
will increase beginning in the fourth quarter of 2022 because we will begin
incurring rent expense for these facilities.
Selling, General and Administrative Expenses
Selling, general and administrative, or SG&A, expenses include personnel and outside costs associated with the pre-commercialization and commercialization activities for our medicines and costs to support our company, our employees and our stockholders including, legal, human resources, investor relations, and finance. Additionally, we include in selling, general and administrative expenses such costs as rent, repair and maintenance of buildings and equipment, depreciation and utilities costs that we need to support the corporate functions listed above. We also include fees we owe under our in-licensing agreements related to SPINRAZA.
The following table sets forth information on SG&A expenses (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Selling, general and administrative
expenses, excluding non-cash
compensation expense related to equity
awards $ 28.5 $ 23.0 $ 83.6 $ 106.1
Restructuring expenses - 1.0 - 16.4
Total selling, general and
administrative expenses, excluding
non-cash compensation related to equity
awards 28.5 24.0 83.6 122.5
Non-cash compensation expense related to
equity awards 5.9 7.1 18.8 26.2
Total selling, general and
administrative expenses $ 34.4 $ 31.1 $ 102.4 $ 148.7
SG&A expenses, excluding non-cash compensation expense related to equity awards,
increased for the three months ended September 30, 2022 compared to the same
period in 2021 due to our go-to-market activities for eplontersen, donidalorsen
and olezarsen. SG&A expenses, excluding non-cash compensation expense related to
equity awards, for the nine months ended September 30, 2022 decreased compared
to the same period in 2021 due to operating efficiencies achieved from the Akcea
Merger and restructuring our commercial operations for TEGSEDI and WAYLIVRA,
partially offset by increased expenses for our go-to-market preparations for our
near-term commercial opportunities. Non-cash compensation expense related to
equity awards decreased in the three and nine months ended September 30, 2022
compared to the same periods in 2021 due to reduced headcount as a result of the
Akcea Merger and our restructured commercial operations.
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Index
Investment Income
The following table sets forth information on investment income (in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021Investment income $ 7.5 $ 0.9 $ 13.4 $ 8.2 Our investment income increased for the three and nine months endedSeptember 30, 2022 due to higher interest rates in the nine months endedSeptember 30, 2022 compared to the same period in 2021.
Interest Expense
The following table sets forth information on interest expense (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Convertible notes:
Non-cash amortization of debt issuance
costs $ 1.3 $ 1.4 $ 4.0 $ 3.5
Interest expense payable in cash 0.2 0.3 0.5 1.7
Interest on mortgages for primary R&D
and manufacturing facilities 0.6 0.6 1.9 1.9
Total interest expense $ 2.1 $ 2.3 $ 6.4 $ 7.1
Gain (Loss) on Investments
The following table sets forth information on gain (loss) on investments (in millions):
Three Months Ended September
30, Nine Months Ended
2022 2021 2022 2021
Gain (loss) on investments $ 2.3 $ 4.0 $ (10.6 ) $ 4.9 The period-over-period fluctuations in our gain (loss) on investments were primarily driven by changes in fair value of our investments in publicly held biotechnology companies.
Other Expense In the second quarter of 2022, we recorded a non-operating expense of$12.5 million related to a settlement agreement for a litigation claim that we determined to be probable and estimable as ofJune 30, 2022 . In the third quarter of 2022, we received insurance contributions toward the settlement in the amount of$4.8 million from our insurance carriers. We recorded the insurance contributions as a reduction to the litigation settlement expense in the third quarter of 2022. Refer to Note 8, Legal Proceedings, for further details regarding the litigation. InApril 2021 , as a result of a debt offering and debt repurchase, we recorded an$8.6 million loss on early retirement of debt, reflecting the early retirement of a portion of our 1% Notes, in the second quarter of 2022. The loss on the early retirement of our debt is the difference between the amount we paid to retire our 1% Notes and the net carrying balance of the liability at the time that we retired the debt. Income Tax Expense Beginning in 2022, the Tax Cuts and Jobs Act of 2017, or TCJA, requires taxpayers to amortize research and development expenditures over five years pursuant to IRC Section 174. Although theU.S. Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified. Since we expect taxable income in 2022, we recorded income tax expense of$0.3 million and$3.6 million for the three and nine months endedSeptember 30, 2022 , respectively, compared to income tax benefit of$1.3 million and$0.9 million for the same periods in 2021. 38
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Net Loss and Net Loss per Share
We had a net loss of$47.0 million and$217.3 million for the three and nine months endedSeptember 30, 2022 , respectively. We had a net loss of$82.5 million and$253.2 million for the same periods in 2021. Our net loss decreased for the three and nine months endedSeptember 30, 2022 compared to the same period in 2021 primarily due to increased revenue, partially offset by increased expenses year-over-year, as discussed in the revenue and expense sections, respectively. Basic and diluted net loss per share for the three and nine months endedSeptember 30, 2022 were$0.33 and$1.53 , respectively, compared to$0.58 and$1.80 for the same periods in 2021.
Liquidity and Capital Resources
We have financed our operations primarily from research and development collaborative agreements. We also finance our operations from commercial revenue from SPINRAZA royalties and TEGSEDI and WAYLIVRA commercial revenue. From our inception throughSeptember 30, 2022 , we have earned approximately$6.3 billion in revenue. We have also financed our operations through the sale of our equity securities and the issuance of long-term debt. From the time we were founded throughSeptember 30, 2022 , we have raised net proceeds of approximately$2.0 billion from the sale of our equity securities. Additionally, from our inception throughSeptember 30, 2022 , we have borrowed approximately$2.1 billion under long-term debt arrangements to finance a portion of our operations.
Our cash, cash equivalents and short-term investments, debt obligations and
working capital did not change significantly from
The following table summarizes our contractual obligations as ofSeptember 30, 2022 . The table provides a breakdown of when obligations become due. We provide a more detailed description of the major components of our debt in the paragraphs following the table: Contractual Obligations Payments Due by Period (in millions) More than (selected balances described below) Total Less than 1 year 1 year 0% Notes (principal payable)$ 632.5 $ -$ 632.5 0.125% Notes (principal and interest payable) 550.6 0.7 549.9
Building mortgage payments (principal and interest payable)
71.5 3.4 68.1
Operating leases 25.3 4.4 20.9
Other obligations (principal and interest payable) 0.8 0.1 0.7
Total $ 1,280.7 $ 8.6 $ 1,272.1
Our contractual obligations consist primarily of our convertible debt. In
addition, we also have facility mortgages, facility leases, equipment financing
arrangements and other obligations. Due to the uncertainty with respect to the
timing of future cash flows associated with our unrecognized tax benefits, we
are unable to make reasonably reliable estimates of the period of cash
settlement with the respective taxing authorities. Therefore, we have excluded
our gross unrecognized tax benefits from our contractual obligations table
above. We have not entered into, nor do we currently have, any off-balance sheet
arrangements (as defined under SEC rules).
In October 2022 , we entered into a build-to-suit lease in which the lessor will
construct a new development chemistry and manufacturing facility to support our
continued our continued growth. In addition, we entered into a sale and
leaseback agreement for our headquarters location in October 2022 . The table
above does not include the lease obligations related to these transactions or
the extinguishment of the mortgage because they closed subsequent to September
30, 2022 .
Convertible Debt and Call Spread
Refer to our Convertible Debt and Call Spread accounting policies in Note 2,
Significant Accounting Policies, and Note 7, Convertible Debt, in the Notes to
our condensed consolidated financial statements for the significant terms of
each convertible debt instrument.
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Index Operating Facilities InJuly 2017 , we purchased the building that houses our primary R&D facility for$79.4 million and our manufacturing facility for$14.0 million . We financed the purchase of these two facilities with mortgage debt of$60.4 million in total. Our primary R&D facility mortgage has an interest rate of 3.88 percent. Our manufacturing facility mortgage has an interest rate of 4.20 percent. During the first five years of both mortgages, we were only required to make interest payments. Both mortgages mature inAugust 2027 . InOctober 2022 , we concurrently entered into two purchase and sale agreements with a real estate investor. Under the agreements, we sold and leased back the facilities at our headquarters location inCarlsbad, California and will sell, subject to meeting certain closing conditions, two lots of undeveloped land adjacent to our headquarters. We sold the facilities at our headquarters for a total purchase price of$263.4 million and we expect to receive total proceeds of$33.0 million upon the close of the sale of the two lots. We used a portion of the sale proceeds to extinguish our mortgage debt on our headquarters facilities of$51.3 million . The initial lease term for our headquarters facilities is 15 years with options to extend the lease for two additional terms of five years each. In connection with the sale of our two undeveloped lots, we will enter into a build-to-suit lease agreement with the same real estate investor who will build a new R&D facility for us on those lots. Once this new facility is completed, our lease will commence. InOctober 2022 , we entered into a build-to-suit lease agreement to lease a development chemistry and manufacturing facility inOceanside, California . The lessor will develop and construct a 217,000-square-foot building, composed of manufacturing space, office space, research and development space and warehouse space. We will design and construct tenant improvements to customize the facility's interior space. We will lease the facility for an initial term of 20 years and 3 months with options to extend the lease for two additional terms of 10 years each. The lease will commence when the lessor's construction is complete and we are able to occupy the facility.
Other Obligations
In addition to contractual obligations, we had outstanding purchase orders as ofSeptember 30, 2022 for the purchase of services, capital equipment and materials as part of our normal course of business. We may enter into additional collaborations with partners which could provide for additional revenue to us and we may incur additional cash expenditures related to our obligations under any of the new agreements we may enter into. We currently intend to use our cash, cash equivalents and short-term investments to finance our activities. However, we may also pursue other financing alternatives, like issuing additional shares of our common stock, issuing debt instruments, refinancing our existing debt, or securing lines of credit. Whether we use our existing capital resources or choose to obtain financing will depend on various factors, including the future success of our business, the prevailing interest rate environment and the condition of financial markets generally. 40
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