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Significant Accounting Policies

Revenue Recognition

We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue. In the instances in which we have received payment from our customers in advance of recognizing revenue, we include the amounts in deferred revenue on our consolidated condensed balance sheet.

Arrangements with multiple deliverables

Our collaboration agreements typically contain multiple elements, or deliverables, including technology licenses or options to obtain technology licenses, research and development services, and in certain cases manufacturing services, and we allocate the consideration to each unit of accounting based on the relative selling price of each deliverable.

Identifying deliverables and units of accounting

We evaluate the deliverables in our collaboration agreements to determine whether they meet the criteria to be accounted for as separate units of accounting or whether they should be combined with other deliverables and accounted for as a single unit of accounting. When the delivered items in an arrangement have "stand-alone value" to our customer, we account for the deliverables as separate units of accounting. Delivered items have stand-alone value if they are sold separately by any vendor or the customer could resell the delivered items on a stand-alone basis. For example, in May 2015, we entered into an exclusive license agreement with Bayer to develop and commercialize IONIS-FXI_Rx for the prevention of thrombosis. As part of the agreement, Bayer paid us a $100 million upfront payment in the second quarter of 2015. We are also eligible to receive milestone payments and tiered royalties on gross margins of IONIS-FXI_Rx. We are responsible for completing the ongoing development services for IONIS-FXI_Rxand for providing an initial supply of active pharmaceutical ingredient, or API. Bayer is responsible for all other development and commercialization activities for IONIS-FXI_Rx. Since this agreement has multiple elements, we evaluated the deliverables in this arrangement when we entered into the agreement and determined that certain deliverables have stand-alone value. Below is a list of the three units of accounting under our agreement:



The exclusive license we granted to Bayer to develop and commercialize IONIS-FXI_Rx for the treatment of thrombosis;



The development services we agreed to perform for IONIS-FXI_Rx; and



The initial supply of API.

We determined that each of these three units of accounting have stand-alone value. The license we granted to Bayer has stand-alone value because it gives Bayer the exclusive right to develop IONIS-FXI_Rx or to sublicense its rights. The development services and the initial supply of API each have stand-alone value because Bayer or another third party could provide these items without our assistance.

Measurement and allocation of arrangement consideration

Our collaborations may provide for various types of payments to us including upfront payments, funding of research and development, milestone payments, licensing fees and royalties on product sales. We initially allocate the amount of consideration that is fixed and determinable at the time the agreement is entered into and exclude contingent consideration. We allocate the consideration to each unit of accounting based on the relative selling price of each deliverable. We use the following hierarchy of values to estimate the selling price of each deliverable: (i) vendor-specific objective evidence of fair value; (ii) third-party evidence of selling price; and (iii) best estimate of selling price, or BESP. BESP reflects our best estimate of what the selling price would be if we regularly sold the deliverable on a stand-alone basis. We recognize the revenue allocated to each unit of accounting as we deliver the related goods or services. If we determine that we should treat certain deliverables as a single unit of accounting, then we recognize the revenue ratably over our estimated period of performance.

We determined that the allocable arrangement consideration for the Bayer collaboration was $100 million and we allocated it based on the relative BESP of each unit of accounting. We engaged a third party, independent valuation expert to assist us with determining BESP. We estimated the selling price of the license granted for IONIS-FXI_Rx by using the relief from royalty method. Under this method, we estimated the amount of income, net of taxes, for IONIS-FXI_Rx. We then discounted the projected income to present value. The significant inputs we used to determine the projected income of the license included:



Estimated future product sales;



Estimated royalties on future product sales;



Contractual milestone payments;



Expenses we expect to incur;



Income taxes; and



An appropriate discount rate.

We estimated the selling price of the ongoing development services by using our internal estimates of the cost to perform the specific services and estimates of expected cash outflows to third parties for services and supplies over the expected period that we will perform the development services. The significant inputs we used to determine the selling price of the ongoing development services included:



The number of internal hours we will spend performing these services;



The estimated cost of work we will perform;



The estimated cost of work that we will contract with third parties to perform; and



The estimated cost of drug product we will use.

We determine the selling price of our API consistently for all of our partnerships. On an annual basis, we calculate our fully absorbed cost to manufacture API. We then determine the unit price we will charge our partners by dividing our fully absorbed costs by the quantity of API we expect to produce during the year.

For purposes of determining BESP of the services we will perform and the API in our Bayer transaction, accounting guidance required us to include a markup for a reasonable profit margin.

Based on the units of accounting under the agreement, we allocated the $100 million upfront payment from Bayer as follows:



$91.2 million to the IONIS-FXI_Rx exclusive license;



$4.3 million for ongoing development services; and



$4.5 million for the delivery of API.

Assuming a constant selling price for the other elements in the arrangement, if there was an assumed ten percent increase or decrease in the estimated selling price of the IONIS-FXI_Rx license, we determined that the revenue we would have allocated to the IONIS-FXI_Rx license would change by approximately one percent, or $0.9 million, from the amount we recorded.

Timing of revenue recognition

We recognize revenue as we deliver each item under the arrangement and the related revenue is realizable and earned. For example, we recognized revenue for the exclusive license we granted Bayer for IONIS-FXI_Rx in the second quarter of 2015 because that was when we delivered the license. We also recognize revenue over time. Our collaborative agreements typically include a research and/or development project plan outlining the activities the agreement requires each party to perform during the collaboration. We must estimate our period of performance when the agreements we enter into do not clearly define such information. We estimate the period of time over which we will complete the activities for which we are responsible and use that period of time as our period of performance for purposes of revenue recognition. We then recognize revenue ratably over such period. We have made estimates of our continuing obligations under numerous agreements and in certain instances the timing of satisfying these obligations change as the development plans for our drugs progress. Accordingly, our estimates may change in the future. If our estimates and judgments change over the course of our collaboration agreements, it may affect the timing and amount of revenue that we recognize in future periods.

The following are the periods over which we are recognizing revenue for each of our units of accounting under our Bayer agreement:



We recognized the portion of the consideration attributed to the IONIS-FXI_Rx license immediately because we delivered the license and earned the revenue;



We are recognizing the amount attributed to the ongoing development services for IONIS-FXI_Rx over the period of time we are performing the services; and



We will recognize the amount attributed to the API supply when we deliver it to Bayer. During the six months ended June 30, 2016, we recognized $3.2 million related to a portion of the API we delivered to Bayer during the first half of 2016.

Multiple agreements

From time to time, we may enter into separate agreements at or near the same time with the same customer. We evaluate such agreements to determine whether they should be accounted for individually as distinct arrangements or whether the separate agreements are, in substance, a single multiple element arrangement. We evaluate whether the negotiations are conducted jointly as part of a single negotiation, whether the deliverables are interrelated or interdependent, whether fees in one arrangement are tied to performance in another arrangement, and whether elements in one arrangement are essential to another arrangement. Our evaluation involves significant judgment to determine whether a group of agreements might be so closely related that they are, in effect, part of a single arrangement. For example, in 2012 and 2013, we entered into four collaboration agreements with Biogen:



In January 2012, we entered into a collaboration agreement with Biogen to develop and commercialize nusinersen for spinal muscular atrophy, or SMA. As part of the collaboration, we received a $29 million upfront payment and we are responsible for global development of nusinersen through completion of Phase 2/3 clinical trials.



In June 2012, we entered into a second and separate collaboration agreement with Biogen to develop and commercialize a novel antisense drug targeting DMPK, or dystrophia myotonica-protein kinase. As part of the collaboration, we received a $12 million upfront payment and we are responsible for global development of the drug through the completion of a Phase 2 clinical trial.



In December 2012, we entered into a third and separate collaboration agreement with Biogen to discover and develop antisense drugs against three targets to treat neurological or neuromuscular disorders. As part of the collaboration, we received a $30 million upfront payment and we are responsible for the discovery of a lead antisense drug for each of three targets.



In September 2013, we entered into a fourth and separate collaboration agreement with Biogen to leverage antisense technology to advance the treatment of neurological diseases. We granted Biogen exclusive rights to the use of our antisense technology to develop therapies for neurological diseases as part of this broad collaboration. We received a $100 million upfront payment and we are responsible for discovery and early development through the completion of a Phase 2 clinical trial for each antisense drug identified during the six-year term of this collaboration, while Biogen is responsible for the creation and development of small molecule treatments and biologics.

Under our collaboration agreement, in July 2016, Biogen exercised its option to license nusinersen. Our other three collaboration agreements with Biogen give Biogen the option to license one or more drugs resulting from the specific collaboration. Similar to our collaboration agreement for nusinersen, if Biogen exercises an option, it will pay us a license fee and will assume future development, regulatory and commercialization responsibilities for the licensed drug. We are also eligible to receive milestone payments associated with the research and/or development of the drugs prior to licensing, milestone payments if Biogen achieves pre-specified regulatory milestones, and royalties on any product sales from any drugs resulting from these collaborations.

We evaluated all four of the Biogen agreements to determine whether we should account for them as separate agreements. We determined that we should account for the agreements separately because we conducted the negotiations independently of one another, each agreement focuses on different drugs, there are no interrelated or interdependent deliverables, there are no provisions in any of these agreements that are essential to the other agreement, and the payment terms and fees under each agreement are independent of each other.

Milestone payments

Our collaborations often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and/ or commercialization events. These three categories of milestone events reflect the three stages of the life-cycle of our drugs, which we describe in more detail in the following paragraphs.

Prior to the first stage in the life-cycle of our drugs, we perform a significant amount of work using our proprietary antisense technology to design chemical compounds that interact with specific genes that are good targets for drug discovery. From these research efforts, we hope to identify a development candidate. The designation of a development candidate is the first stage in the life-cycle of our drugs. A development candidate is a chemical compound that has demonstrated the necessary safety and efficacy in preclinical animal studies to warrant further study in humans.

During the first step of the development stage, we or our partners study our drugs in Investigational New Drug, or IND,

-enabling studies, which are animal studies intended to support an IND application and/or the foreign equivalent. An approved IND allows us or our partners to study our development candidate in humans. If the regulatory agency approves the IND, we or our partners initiate Phase 1 clinical trials in which we typically enroll a small number of healthy volunteers to ensure the development candidate is safe for use in patients. If we or our partners determine that a development candidate is safe based on the Phase 1 data, we or our partners initiate Phase 2 studies that are generally larger scale studies in patients with the primary intent of determining the efficacy of the development candidate.

The final step in the development stage is Phase 3 studies to gather the necessary safety and efficacy data to request marketing authorization from the Food and Drug Administration, or FDA, and/or foreign equivalents. The Phase 3 studies typically involve large numbers of patients and can take up to several years to complete. If the data gathered during the trials demonstrates acceptable safety and efficacy results, we or our partner will submit an application to the FDA and/or its foreign equivalents for marketing authorization. This stage of the drug’s life-cycle is the regulatory stage.

If a drug achieves marketing authorization, it moves into the commercialization stage, during which our partner will market and sell the drug to patients. Although our partner will ultimately be responsible for marketing and selling the partnered drug, our efforts to discover and develop a drug that is safe, effective and reliable contributes significantly to our partner’s ability to successfully sell the drug. The FDA and its foreign equivalents have the authority to impose significant restrictions on an approved drug through the product label and on advertising, promotional and distribution activities. Therefore, our efforts designing and executing the necessary animal and human studies are critical to obtaining claims in the product label from the regulatory agencies that would allow us or our partner to successfully commercialize our drug. Further, the patent protection afforded our drugs as a result of our initial patent applications and related prosecution activities in the United States and foreign jurisdictions are critical to our partner’s ability to sell our drugs without competition from generic drugs. The potential sales volume of an approved drug is dependent on several factors including the size of the patient population, market penetration of the drug, and the price charged for the drug.

Generally, the milestone events contained in our partnership agreements coincide with the progression of our drugs from development, to marketing authorization and then to commercialization. The process of successfully discovering a new development candidate, having it approved and ultimately sold for a profit is highly uncertain. As such, the milestone payments we may earn from our partners involve a significant degree of risk to achieve. Therefore, as a drug progresses through the stages of its life-cycle, the value of the drug generally increases.

Development milestones in our partnerships may include the following types of events:



Designation of a development candidate. Following the designation of a development candidate, IND-enabling animal studies for a new development candidate generally take 12 to 18 months to complete;



Initiation of a Phase 1 clinical trial. Generally, Phase 1 clinical trials take one to two years to complete;



Initiation or completion of a Phase 2 clinical trial. Generally, Phase 2 clinical trials take one to three years to complete;



Initiation or completion of a Phase 3 clinical trial. Generally, Phase 3 clinical trials take two to four years to complete.

Regulatory milestones in our partnerships may include the following types of events:



Filing of regulatory applications for marketing authorization such as a New Drug Application, or NDA, in the United States or a Marketing Authorization Application, or MAA, in Europe. Generally, it takes six to twelve months to prepare and submit regulatory filings.



Marketing authorization in a major market, such as the United States, Europe or Japan. Generally it takes one to two years after an application is submitted to obtain authorization from the applicable regulatory agency.

Commercialization milestones in our partnerships may include the following types of events:



First commercial sale in a particular market, such as in the United States or Europe.



Product sales in excess of a pre-specified threshold, such as annual sales exceeding $1 billion. The amount of time to achieve this type of milestone depends on several factors including but not limited to the dollar amount of the threshold, the pricing of the product and the pace at which customers begin using the product.

We assess whether a substantive milestone exists at the inception of our agreements. When a substantive milestone is achieved, we recognize revenue related to the milestone payment immediately. For our existing licensing and collaboration agreements in which we are involved in the discovery and/or development of the related drug or provide the partner with access to new technologies we discover, we have determined that the majority of future development, regulatory and commercialization milestones are substantive. For example, we consider most of the milestones associated with our strategic alliance with Biogen substantive because we are using our antisense drug discovery platform to discover and develop new drugs against targets for neurological diseases. We also consider milestones associated with our alliance with Alnylam Pharmaceuticals, Inc. substantive because we provide Alnylam ongoing access to our technology to develop and commercialize RNA interference, or RNAi, therapeutics. In evaluating if a milestone is substantive we consider whether:



Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement;



The achievement of the milestone involves substantive effort and can only be achieved based in whole or in part on our performance or the occurrence of a specific outcome resulting from our performance;



The amount of the milestone payment appears reasonable either in relation to the effort expended or to the enhancement of the value of the delivered items;



There is no future performance required to earn the milestone; and



The consideration is reasonable relative to all deliverables and payment terms in the arrangement.

If any of these conditions are not met, we do not consider the milestone to be substantive and we defer recognition of the milestone payment and recognize it as revenue over our estimated period of performance, if any. Further information about our collaborative arrangements can be found in Note 6, Collaborative Arrangements and Licensing Agreements.

Licensing and royalty revenue

We often enter into agreements to license and sell our proprietary patent rights on an exclusive or non-exclusive basis in exchange for upfront fees, milestone payments and/or royalties. We generally recognize as revenue immediately those payments for which we have no significant future performance obligations and for which we are reasonably assured of collecting the resulting receivable.

Cash, cash equivalents and short-term investments

We consider all liquid investments with maturities of three months or less when we purchase them to be cash equivalents. Our short-term investments have initial maturities of greater than three months from date of purchase. We classify our short-term investments as “available-for-sale” and carry them at fair market value based upon prices for identical or similar items on the last day of the fiscal period. We record unrealized gains and losses as a separate component of comprehensive income (loss) and include net realized gains and losses in gain (loss) on investments. We use the specific identification method to determine the cost of securities sold.

We have equity investments in privately and publicly held biotechnology companies that we have received as part of a technology license or collaboration agreement. At June 30, 2016, we held ownership interests of less than 20 percent in each of the respective companies.

We account for our equity investments in publicly held companies at fair value and record unrealized gains and losses related to temporary increases and decreases in the stock of these publicly-held companies as a separate component of comprehensive income (loss). We account for equity investments in privately held companies under the cost method of accounting because we own less than 20 percent and do not have significant influence over their operations. At June 30, 2016, we held two cost method investments in Atlantic Pharmaceuticals Limited and Kastle. Realization of our equity position in these companies is uncertain. When realization of our investment is uncertain, we record a full valuation allowance. In determining if and when a decrease in market value below our cost in our equity positions is temporary or other-than-temporary, we examine historical trends in the stock price, the financial condition of the company, near term prospects of the company and our current need for cash. If we determine that a decline in value in either a public or private investment is other-than-temporary, we recognize an impairment loss in the period in which the other-than-temporary decline occurs.

Inventory valuation

We capitalize the costs of raw materials that we purchase for use in producing our drugs because until we use these raw materials they have alternative future uses. We include in inventory raw material costs for drugs that we manufacture for our partners under contractual terms and that we use primarily in our clinical development activities and drug products. We can use each of our raw materials in multiple products and, as a result, each raw material has future economic value independent of the development status of any single drug. For example, if one of our drugs failed, we could use the raw materials for that drug to manufacture our other drugs. We expense these costs when we deliver the drugs to our partners, or as we provide these drugs for our own clinical trials. We reflect our inventory on the balance sheet at the lower of cost or market value under the first-in, first-out method, or FIFO. We review inventory periodically and reduce the carrying value of items we consider to be slow moving or obsolete to their estimated net realizable value. We consider several factors in estimating the net realizable value, including shelf life of raw materials, alternative uses for our drugs and clinical trial materials, and historical write-offs. We did not record any inventory write-offs for the six months ended June 30, 2016 and 2015. Total inventory was $7.7 million and $6.9 million as of June 30, 2016 and December 31, 2015, respectively.

Research, development and patent expenses

Our research and development expenses include wages, benefits, facilities, supplies, external services, clinical trial and manufacturing costs and other expenses that are directly related to our research and development operations. We expense research and development costs as we incur them. When we make payments for research and development services prior to the services being rendered, we record those amounts as prepaid assets on our condensed consolidated balance sheet and we expense them as the services are provided.

We capitalize costs consisting principally of outside legal costs and filing fees related to obtaining patents. We amortize patent costs over the useful life of the patent, beginning with the date the United States Patent and Trademark Office, or foreign equivalent, issues the patent. We review our capitalized patent costs regularly to ensure that they include costs for patents and patent applications that have future value. We evaluate patents and patent applications that we are not actively pursuing and write off any associated costs. We recorded charges primarily related to the write-down of intangible assets of $0.1 million for the three months ended June 30, 2016 and 2015, and $0.4 million and $0.2 million for the six months ended June 30, 2016 and 2015, respectively.

Long-lived assets

We evaluate long-lived assets, which include property, plant and equipment and patent costs acquired from third parties, for impairment on at least a quarterly basis and whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of such assets.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Basic and diluted net income (loss) per share

We compute basic net income (loss) per share by dividing the net income or loss by the weighted-average number of common shares outstanding during the period. For the three and six months ended June 30, 2016 we incurred a net loss, therefore we did not include dilutive common equivalent shares in the computation of diluted net loss per share because the effect would have been anti-dilutive. Common stock from the following would have had an anti-dilutive effect on net loss per share for the three and six months ended June 30, 2016:



Dilutive stock options;

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Unvested restricted stock units;

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Employee Stock Purchase Plan, or ESPP;



2¾ percent convertible senior notes; and



1 percent convertible senior notes.

For the three and six months ended June 30, 2015, we had net income. As a result, we computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during those periods. Diluted common equivalent shares for the three and six months ended June 30, 2015 consisted of the following (in thousands except per share amounts):

Three months ended June 30, 2015	Income (Numerator)		Shares (Denominator)		Per-Share Amount

Income available to common shareholders	$	35,648		119,742	$	0.30
Effect of diluted securities:
Shares issuable upon exercise of stock options				3,974
Shares issuable upon restricted stock award issuance				376
Shares issuable related to our ESPP				4
Shares issuable related to our 2¾ percent notes		1,047		3,683
Income available to common shareholders, plus assumed conversions	$	36,695		127,779	$	0.29

Six months ended June 30, 2015	Income (Numerator)		Shares (Denominator)		Per-Share Amount

Income available to common shareholders	$	18,931		119,348	$	0.16
Effect of diluted securities:
Shares issuable upon exercise of stock options				4,310
Shares issuable upon restricted stock award issuance				399
Shares issuable related to our ESPP				4
Income available to common shareholders, plus assumed conversions	$	18,931		124,061	$	0.15

For the three and six months ended June 30, 2015, the calculation excludes the 1 percent notes because the effect on diluted earnings per share would be anti-dilutive. For the six months ended June 30, 2015, the calculation excludes the 2¾ percent notes because the effect on diluted earnings per share would be anti-dilutive.

Accumulated other comprehensive income (loss)

We include unrealized gains and losses on investments, net of taxes, in accumulated other comprehensive income (loss) along with adjustments we make to reclassify realized gains and losses on investments from other accumulated comprehensive income (loss) to our condensed consolidated statement of operations. The following table summarizes changes in accumulated other comprehensive income (loss) for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Beginning balance accumulated other comprehensive income (loss)	$	(16,115	)	$	47,114		$	(13,565	)	$	39,747
Unrealized losses on securities, net of tax (1)		(10,738	)		(28,703	)		(13,288	)		(21,336	)
Net current period other comprehensive loss		(10,738	)		(28,703	)		(13,288	)		(21,336	)
Ending balance accumulated other comprehensive income (loss)	$	(26,853	)	$	18,411		$	(26,853	)	$	18,411

(1)

Other comprehensive income (loss) for the three months ended June 30, 2015 included income tax benefit of $5.1 million. There was no tax expense or benefit for the three and six months ended June 30, 2016 and the six months ended June 30, 2015.

Convertible debt

We account for convertible debt instruments, including our 1 percent and 2¾ percent notes, that may be settled in cash upon conversion (including partial cash settlement) by separating the liability and equity components of the instruments in a manner that reflects our nonconvertible debt borrowing rate. We determine the carrying amount of the liability component by measuring the fair value of similar debt instruments that do not have the conversion feature. If no similar debt instrument exists, we estimate fair value by using assumptions that market participants would use in pricing a debt instrument, including market interest rates, credit standing, yield curves and volatilities. Determining the fair value of the debt component requires the use of accounting estimates and assumptions. These estimates and assumptions are judgmental in nature and could have a significant impact on the determination of the debt component, and the associated non-cash interest expense.

We assigned a value to the debt component of our convertible notes equal to the estimated fair value of similar debt instruments without the conversion feature, which resulted in us recording our debt at a discount.

At January 1, 2016, we adopted the amended accounting guidance to simplify the presentation of debt issuance costs. As a result of this amended guidance, we reclassed our debt issuance costs in all periods presented from other assets to the carrying amount of the related debt liability on our consolidated balance sheet. We are amortizing our debt issuance costs and debt discount over the life of the convertible notes as additional non-cash interest expense utilizing the effective interest method.

Segment information

We have two operating segments, our Ionis Core segment and Akcea Therapeutics, which includes the operations of our wholly-owned subsidiary, Akcea Therapeutics, Inc. We formed Akcea to develop and commercialize drugs for patients with serious cardiometabolic diseases caused by lipid disorders. We provide segment financial information and results for our Ionis Core segment and our Akcea Therapeutics segment based on the segregation of revenues and expenses that our chief decision maker reviews to assess operating performance and to make operating decisions. We use judgments and estimates in determining the allocation of shared expenses to the two segments.

Stock-based compensation expense

We measure stock-based compensation expense for equity-classified awards, principally related to stock options, restricted stock units, or RSUs, and stock purchase rights under our ESPP, based on the estimated fair value of the award on the date of grant. We recognize the value of the portion of the award that we ultimately expect to vest as stock-based compensation expense over the requisite service period in our condensed consolidated statements of operations. We reduce stock-based compensation expense for estimated forfeitures at the time of grant and revise in subsequent periods if actual forfeitures differ from those estimates.

We use the Black-Scholes model to estimate the fair value of stock options granted and stock purchase rights under our ESPP. The expected term of stock options granted represents the period of time that we expect them to be outstanding. We estimate the expected term of options granted based on historical exercise patterns. For the six months ended June 30, 2016 and 2015, we used the following weighted-average assumptions in our Black-Scholes calculations:

Employee Stock Options:

	Six Months Ended June 30,
	2016		2015
Risk-free interest rate		1.5%		1.5%
Dividend yield		0.0%		0.0%
Volatility		58.4%		53.6%
Expected life		4.5 years		4.5 years

ESPP:

	Six Months Ended June 30,
	2016		2015
Risk-free interest rate		0.5%		0.1%
Dividend yield		0.0%		0.0%
Volatility		69.4%		56.2%
Expected life		6 months		6 months

The fair value of RSUs is based on the market price of our common stock on the date of grant. RSUs vest annually over a four-year period. The weighted-average grant date fair value of RSUs granted to employees for the six months ended June 30, 2016 was $43.79 per share.

We did not grant stock options or RSUs to our Board of Directors during the six months ended June 30, 2016 and 2015.

The following table summarizes stock-based compensation expense for the three and six months ended June 30, 2016 and 2015 (in thousands). Our consolidated non-cash stock-based compensation expense includes $3.1 million and $1.0 million of stock-based compensation expense for Akcea employees for the three months ended June 30, 2016 and 2015, respectively, and $6.3 million and $1.5 million of stock-based compensation expense for Akcea employees for the six months ended June 30, 2016 and 2015, respectively.

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Research, development and patent expenses		$	14,492		$	10,465		$	29,262		$	20,951
General and administrative			4,768			3,140			10,102			5,959
Total non-cash stock-based compensation expense		$	19,260		$	13,605		$	39,364		$	26,910

The amount of non-cash stock-based compensation expense we recognized in the first half of 2016 has increased compared to the same period in 2015 because the average fair value of unvested stock options has risen due to the increase in the exercise price of the stock options we have granted over the past several years. As of June 30, 2016, total unrecognized estimated non-cash stock-based compensation expense related to non-vested stock options and RSUs was $75.0 million and $20.8 million, respectively. We will adjust total unrecognized compensation cost for future changes in estimated forfeitures. We expect to recognize the cost of non-cash stock-based compensation expense related to non-vested stock options and RSUs over a weighted average amortization period of 1.4 years and 1.6 years, respectively.

Impact of recently issued accounting standards

In May 2014, the FASB issued accounting guidance on the recognition of revenue from customers. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what the entity expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance as originally issued is effective for fiscal years, and interim periods within that year, beginning after December 15, 2016. In July 2015, the FASB issued updated accounting guidance to allow for an optional one year deferral from the original effective date. As a result, we will adopt this guidance beginning on January 1, 2018. The guidance allows us to select one of two methods of adoption, either the full retrospective approach, meaning the guidance would be applied to all periods presented, or modified retrospective, meaning the cumulative effect of applying the guidance would be recognized as an adjustment to our opening accumulated deficit balance. We are currently determining the adoption method and the effects the adoption will have on our consolidated financial statements and disclosures.

In August 2014, the FASB issued accounting guidance on how and when to disclose going-concern uncertainties in the financial statements. This guidance will require us to perform interim and annual assessments to determine our ability to continue as a going concern within one year from the date that we issue our financial statements. The guidance is effective for fiscal years, and interim periods within that year, beginning after December 15, 2016. We will adopt this guidance in our fiscal year beginning January 1, 2017. We do not expect this guidance to have any effect on our consolidated financial statements.

In January 2016, the FASB issued amended accounting guidance related to the recognition, measurement, presentation, and disclosure of certain financial instruments. The amended guidance requires us to measure and record equity investments, except those accounted for under the equity method of accounting that have a readily determinable fair value, at fair value and for us to recognize the changes in fair value in our net income (loss), instead of recognizing unrealized gains and losses through accumulated other comprehensive income, as we currently do under the existing guidance. The amended guidance also changes several disclosure requirements for financial instruments, including the methods and significant assumptions we use to estimate fair value. The guidance is effective for fiscal years, and interim periods within that year, beginning after December 15, 2017. We will adopt this guidance on January 1, 2018 and we will make any adjustments to beginning balances through a cumulative-effect adjustment to accumulated deficit on that date. We are currently determining the effects the adoption will have on our consolidated financial statements and disclosures.

In February 2016, the FASB issued amended accounting guidance related to leasing, which requires us to record all leases longer than one year on our balance sheet. When we record leases on our balance sheet under the new guidance, we will record a liability with a value equal to the present value of payments we will make over the life of the lease and an asset representing the underlying leased asset. The new accounting guidance requires us to determine if our leases are operating or financing leases, similar to current accounting guidance. We will record expense for operating type leases on a straight-line basis as an operating expense and we will record expense for finance type leases as interest expense. The new lease standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. We must adopt the new standard on a modified retrospective basis, which requires us to reflect our leases on our consolidated balance sheet for the earliest comparative period presented. We are currently assessing the timing of adoption as well as the effects it will have on our consolidated financial statements and disclosures.

In March 2016, the FASB issued amended guidance to simplify certain aspects of share-based payment accounting. The amended share-based payment standard is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted in any interim or annual period. We will adopt this guidance on January 1, 2017. We are currently assessing the adoption methods as well as the effects this amended guidance will have on our consolidated financial statements and disclosures. The following are the main aspects of the updated guidance that will impact us:



Recognition of excess tax benefits and tax deficiencies: The amended guidance requires us to recognize excess tax benefits and tax deficiencies as income tax expense or benefit in our statement of operations on a prospective basis.



Classification of certain share-based payment activities on our statement of cash flows: The amended guidance requires us to classify the following items on our statement of cash flows as follows:



We will classify excess tax benefits as an operating activity. We may adopt this update either prospectively in the period of adoption or adjust our cash flow statement for each period we present.



We will classify amounts we withhold in shares for the payment of employee taxes as a financing activity. For this update, we must adjust our cash flow statement for each period we present.



Accounting for forfeitures: The amended guidance allows us to choose to account for forfeitures when they occur or continue to estimate them. If we adopt this change and begin accounting for forfeitures when they occur, we must adopt it using a modified retrospective approach, which requires us to reflect an adjustment on our consolidated balance sheet through a cumulative-effect adjustment to our stockholders’ equity at the beginning of the period of adoption.

In June 2016, the FASB issued guidance that changes the measurement of credit losses for most financial assets and certain other instruments. If we have credit losses, this updated guidance requires us to record allowances for these instruments under a new expected credit loss model. This model requires us to estimate the lifetime expected credit loss, which represents the portion of the amortized cost basis we do not expect to collect. This change will result in us remeasuring our allowance in each reporting period we have credit losses. The new standard is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for periods beginning after December 15, 2018. When we adopt the new standard, we will make any adjustments to beginning balances through a cumulative-effect adjustment to accumulated deficit on that date. We are currently assessing the timing of adoption as well as the effects it will have on our consolidated financial statements and disclosures.

Investments

6 Months Ended

Jun. 30, 2016

Investments [Abstract]

Investments

As of June 30, 2016, we had primarily invested our excess cash in debt instruments of the U.S. Treasury, financial institutions, corporations, and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody’s, Standard & Poor’s, or S&P, or Fitch, respectively. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The following table summarizes the contract maturity of the available-for-sale securities we held as of June 30, 2016:

One year or less	55%
After one year but within two years	32%
After two years but within three and a half years	13%
Total	100%

As illustrated above, at June 30, 2016, 87 percent of our available-for-sale securities had a maturity of less than two years.

All of our available-for-sale securities are available to us for use in our current operations. As a result, we categorize all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

At June 30, 2016, we had an ownership interest of less than 20 percent in two private companies and two public companies with which we conduct business. The privately-held companies are Atlantic Pharmaceuticals Limited and Kastle and the publicly-traded companies are Antisense Therapeutics Limited and Regulus. We account for equity investments in the privately-held companies under the cost method of accounting and we account for equity investments in the publicly-traded companies at fair value. We record unrealized gains and losses as a separate component of comprehensive income (loss) and include net realized gains and losses in gain (loss) on investments.

The following is a summary of our investments (in thousands):

			Gross Unrealized
June 30, 2016	Cost (1)		Gains		Losses			Estimated Fair Value
Available-for-sale securities:
Corporate debt securities	$	179,005	$	52	$	(82	)	$	178,975
Debt securities issued by U.S. government agencies		44,765		15		—			44,780
Debt securities issued by the U.S. Treasury		13,063		11		—			13,074
Debt securities issued by states of the U.S. and political subdivisions of the states (2)		88,043		12		(92	)		87,963
Total securities with a maturity of one year or less		324,876		90		(174	)		324,792
Corporate debt securities		191,442		945		(165	)		192,222
Debt securities issued by U.S. government agencies		31,950		5		(1	)		31,954
Debt securities issued by the U.S. Treasury		8,983		14		—			8,997
Debt securities issued by states of the U.S. and political subdivisions of the states		29,682		78		(26	)		29,734
Total securities with a maturity of more than one year		262,057		1,042		(192	)		262,907
Total available-for-sale securities	$	586,933	$	1,132	$	(366	)	$	587,699
Equity securities:
Regulus Therapeutics Inc.	$	7,162	$	1,888	$	(833	)	$	8,217
Total equity securities	$	7,162	$	1,888	$	(833	)	$	8,217
Total available-for-sale and equity securities	$	594,095	$	3,020	$	(1,199	)	$	595,916

			Gross Unrealized
December 31, 2015	Cost (1)		Gains		Losses			Estimated Fair Value
Available-for-sale securities:
Corporate debt securities	$	181,670	$	5	$	(250	)	$	181,425
Debt securities issued by U.S. government agencies		50,559		1		(19	)		50,541
Debt securities issued by the U.S. Treasury		2,604		—		(3	)		2,601
Debt securities issued by states of the U.S. and political subdivisions of the states (2)		79,414		18		(88	)		79,344
Total securities with a maturity of one year or less		314,247		24		(360	)		313,911
Corporate debt securities		258,703		3		(1,705	)		257,001
Debt securities issued by U.S. government agencies		38,956		—		(244	)		38,712
Debt securities issued by states of the U.S. and political subdivisions of the states		48,552		3		(243	)		48,312
Total securities with a maturity of more than one year		346,211		6		(2,192	)		344,025
Total available-for-sale securities	$	660,458	$	30	$	(2,552	)	$	657,936
Equity securities:
Regulus Therapeutics Inc.	$	7,162	$	17,630	$	—		$	24,792
Total equity securities	$	7,162	$	17,630	$	—		$	24,792
Total available-for-sale and equity securities	$	667,620	$	17,660	$	(2,552	)	$	682,728

(1)

Our available-for-sale securities are held at amortized cost.

(2)

Includes investments classified as cash equivalents on our condensed consolidated balance sheet.

Investments we consider to be temporarily impaired at June 30, 2016 were as follows (in thousands):

			Less than 12 months of temporary impairment					More than 12 months of temporary impairment					Total temporary impairment
	Number of Investments		Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Corporate debt securities		103	$	96,050	$	(65	)	$	43,526	$	(182	)	$	139,576	$	(247	)
Debt securities issued by U.S. government agencies		2		4,999		(1	)		—		—			4,999		(1	)
Debt securities issued by states of the U.S. and political subdivisions of the states		89		42,285		(42	)		18,897		(76	)		61,182		(118	)
Regulus Therapeutics Inc.		1		2,168		(833	)		—		—			2,168		(833	)
Total temporarily impaired securities		195	$	145,502	$	(941	)	$	62,423	$	(258	)	$	207,925	$	(1,199	)

We believe that the decline in value of these securities is temporary and for our debt securities is primarily related to the change in market interest rates since purchase. We believe it is more likely than not that we will be able to hold our debt securities to maturity. Therefore we anticipate full recovery of our debt securities’ amortized cost basis at maturity. A portion of our equity investment in Regulus declined below our cost basis during the latter part of June 2016. We believe that the decline is temporary and we have the intent and ability to continue to hold this investment to allow for its recovery in market value.

Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Line of Credit Arrangement [Abstract]

Fair Value Measurements

We use a three-tier fair value hierarchy to prioritize the inputs used in our fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets, which includes our money market funds and treasury securities classified as available-for-sale securities and our investment in equity securities in publicly-held biotechnology companies; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, which includes our fixed income securities and commercial paper classified as available-for-sale securities; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions. The majority of our securities have been classified as Level 2. We obtain the fair value of our Level 2 investments from our custodian bank or from a professional pricing service. We validate the fair value of our Level 2 investments by understanding the pricing model used by the custodian banks or professional pricing service provider and comparing that fair value to the fair value based on observable market prices. During the six months ended June 30, 2016, there were no transfers between our Level 1 and Level 2 investments. We recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

We measure the following major security types at fair value on a recurring basis. The following summary breaks down the fair-value hierarchy that we valued each security with at June 30, 2016 and December 31, 2015 (in thousands):

	At June 30, 2016		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
Cash equivalents (1)	$	68,737	$	68,737	$	—
Corporate debt securities (2)		371,197		—		371,197
Debt securities issued by U.S. government agencies (3)		76,734		—		76,734
Debt securities issued by the U.S. Treasury (2)		22,071		22,071		—
Debt securities issued by states of the U.S. and political subdivisions of the states (4)		117,697		—		117,697
Investment in Regulus Therapeutics Inc.		8,217		8,217		—
Total	$	664,653	$	99,025	$	565,628

	At December 31, 2015		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
Cash equivalents (1)	$	88,902	$	88,902	$	—
Corporate debt securities (2)		438,426		—		438,426
Debt securities issued by U.S. government agencies (2)		89,253		—		89,253
Debt securities issued by the U.S. Treasury (2)		2,601		2,601		—
Debt securities issued by states of the U.S. and political subdivisions of the states (4)		127,656		—		127,656
Investment in Regulus Therapeutics Inc.		24,792		24,792		—
Total	$	771,630	$	116,295	$	655,335

(1)

Included in cash and cash equivalents on our condensed consolidated balance sheet.

(2)

Included in short-term investments on our condensed consolidated balance sheet.

(3)

At June 30, 2016, $16.0 million was included in cash and cash equivalents on our condensed consolidated balance sheet, with the difference included in short-term investments on our condensed consolidated balance sheet.

(4)

At June 30, 2016 and December 31, 2015, $20.1 million and $7.5 million, respectively, were included in cash and cash equivalents on our condensed consolidated balance sheet, with the difference included in short-term investments on our condensed consolidated balance sheet.

We did not have investments that were valued with significant unobservable inputs, or Level 3 investments, at June 30, 2016 and December 31, 2015.

Other Fair Value Disclosures

Our 1 percent and 2¾ percent notes had a fair value of $350.6 million and $89.8 million, respectively, at June 30, 2016. We determine the fair value of our notes based on quoted market prices for these notes, which are Level 2 measurements because the notes do not trade regularly.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Line of Credit Arrangement

6 Months Ended

Jun. 30, 2016

Line of Credit Arrangement

5. Line of Credit Arrangement

In June 2015, we entered into a five-year revolving line of credit agreement with Morgan Stanley Private Bank, National Association, or Morgan Stanley. Under the credit agreement, we can borrow up to a maximum of $30 million of revolving credit for general working capital purposes. Under the credit agreement interest is payable monthly in arrears on the outstanding principal at a rate based on our option of:

(i)	a floating rate equal to the one-month London Interbank Offered Rate, or LIBOR, in effect plus 1.25 percent per annum;

(ii)	a fixed rate equal to LIBOR plus 1.25 percent for a period of one, two, three, four, six, or twelve months as elected by us; or

(iii)

a fixed rate equal to the LIBOR swap rate during the period of the loan.

Additionally, we will pay 0.25 percent per annum, payable quarterly in arrears, for any amount unused under the credit facility beginning after June 2016. As of June 30, 2016 we had $8.5 million in outstanding borrowings under the credit facility, which we used to fund our capital equipment needs in 2015 and is consistent with our historical practice to finance these costs. As of June 30, 2016, our outstanding borrowings under this credit facility were at a weighted average interest rate of 1.72 percent.

The credit agreement includes customary affirmative and negative covenants and restrictions. We are in compliance with all covenants of the credit agreement.

Collaborative Arrangements and Licensing Agreements	6 Months Ended
Collaborative Arrangements and Licensing Agreements	Jun. 30, 2016
Collaborative Arrangements and Licensing Agreements [Abstract]
Collaborative Arrangements and Licensing Agreements	6. Collaborative Arrangements and Licensing Agreements Below, we have included our collaborations with substantive changes during the first half of 2016 from those included in Note 6 of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. Strategic Partnership Biogen We have established four strategic collaborations with Biogen focused on using antisense technology to advance the treatment of neurological and neuromuscular disorders. These collaborations combine our expertise in creating antisense drugs with Biogen's expertise in developing therapies for neurological disorders. We and Biogen are currently developing six drugs to treat neurological diseases under these collaborations, including nusinersen, IONIS-DMPK-2.5_Rx, IONIS-SOD1_Rx, and three drugs to treat undisclosed neurodegenerative diseases, IONIS-BIIB4_Rx,IONIS-BIIB5_Rx and IONIS-BIIB6_Rx. In addition to these six drugs, we and Biogen are evaluating numerous additional targets for the development of drugs to treat neurological diseases. Nusinersen In January 2012, we entered into a collaboration agreement with Biogen to develop and commercialize nusinersen for the treatment of SMA. Recently we announced that nusinersen met the primary endpoint pre-specified for the interim analysis of ENDEAR, our Phase 3 trial evaluating nusinersen in infantile-onset (consistent with Type 1) SMA. The analysis found that infants receiving nusinersen experienced a statistically significant improvement in the achievement of motor milestones compared to those who did not receive treatment. Nusinersen demonstrated an acceptable safety profile in the trial. As a result of these findings, Biogen exercised its option to develop and commercialize nusinersen globally and paid us a $75 million license fee in July 2016. Based on the results of the pre-specified interim analysis, the ENDEAR study will be stopped and participants will be able to transition into the SHINE open-label study in which all patients receive nusinersen. Additionally, participants enrolled in the sham-controlled arm of EMBRACE, a Phase 2 study which also included infantile-onset patients, will have the opportunity to receive nusinersen. The other studies in the nusinersen program, including CHERISH (later-onset consistent with Type 2) and NURTURE (pre-symptomatic infants), will continue as planned in order to collect the data to demonstrate the safety and efficacy of nusinersen in these populations. Biogen is now responsible for all nusinersen development, regulatory and commercialization activities and costs. We will complete the Phase 3 studies and work with Biogen on regulatory filings. We will also work together to transition the clinical programs for nusinersen that we are conducting to Biogen. We and Biogen are well along in preparing the U.S. and E.U. regulatory dossiers, and Biogen plans to file marketing applications in the U.S. and E.U. in the next few months, with other countries to follow. Under the terms of the agreement, we received an upfront payment of $29 million, which we are amortizing through February 2017. Over the term of the collaboration, we are eligible to receive up to an additional $346 million in a license fee and payments, including up to $121 million in substantive milestone and other payments associated with the clinical development of nusinersen prior to licensing and up to $150 million in substantive milestone payments if Biogen achieves pre-specified regulatory milestones. We are also eligible to receive tiered royalties up to the mid-teens on any sales of nusinersen. We have exclusively in-licensed patents related to nusinersen from Cold Spring Harbor Laboratory and the University of Massachusetts. We will pay Cold Spring Harbor Laboratory and the University of Massachusetts nominal amounts when we receive sublicense revenue and milestone payments and a low single digit royalty on sales of nusinersen. From inception through June 2016, we have received more than $160 million in payments for advancing nusinersen. In the first half of 2016, we earned $11.5 million in milestone payments for advancing nusinersen. In July 2016 we received $75 million from Biogen when Biogen licensed nusinersen, which is not included in our second quarter revenue and cash amounts. We will earn the next milestone payment of up to $60 million if Biogen receives regulatory approval for nusinersen. Neurology In December 2012, we and Biogen entered into a third and separate collaboration agreement to develop and commercialize novel antisense drugs to up to three targets to treat neurological or neuromuscular diseases. We are responsible for the development of each of the drugs through the completion of the initial Phase 2 clinical study for such drug. Biogen has the option to license a drug from each of the three programs through the completion of the first Phase 2 study for each program. We are currently advancing IONIS-BIIB4_Rx under this collaboration. If Biogen exercises its option for a drug, it will assume all further global development, regulatory and commercialization responsibilities for that drug. Under the terms of the agreement, we received an upfront payment of $30 million, which we are amortizing through December 2020. Over the term of the collaboration, we are eligible to receive up to an additional $259 million in a license fee and substantive milestone payments per program. We are eligible to receive up to $59 million in development milestone payments to support research and development of each program, including amounts related to the cost of clinical trials. We are also eligible to receive up to $130 million in milestone payments per program if Biogen achieves pre-specified regulatory milestones. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any drugs resulting from each of the three programs. From inception through June 2016, we have received $43 million in payments under this collaboration. In February 2016, we earned a $3 million milestone payment for further advancing IONIS-BIIB4_Rx. We will earn the next milestone payment of up to $10 million for the continued development of IONIS-BIIB4_Rx. During the three and six months ended June 30, 2016, we earned revenue of $9.4 million and $30.7 million, respectively from our relationship with Biogen. This revenue represented 25 percent and 41 percent of our total revenue for the three and six months ended June 30, 2016, respectively. In comparison, we earned revenue of $17.8 million and $57.0 million for the same periods in 2015, respectively, which represented 15 percent and 31 percent of our total revenue for those periods, respectively. Our condensed consolidated balance sheet at June 30, 2016 included deferred revenue of $79.4 million related to our relationship with Biogen. Research, Development and Commercialization Partners GSK In March 2010, we entered into an alliance with GSK using our antisense drug discovery platform to discover and develop new drugs against targets for rare and serious diseases, including infectious diseases and some conditions causing blindness. Our alliance currently comprises five drugs in development, including our Phase 3 drug IONIS-TTR_Rx. We are responsible for completing the Phase 3 study we are currently conducting for IONIS-TTR_Rx. GSK has the option to license IONIS-TTR_Rx. If GSK exercises its option it will pay us a license fee. GSK has the exclusive option to license the other drugs resulting from this alliance at Phase 2 proof-of-concept for a license fee. If GSK exercises its exclusive option for any drugs resulting from this alliance, it will be responsible for all further global development, regulatory and commercialization activities for such drug. Under the terms of the agreement, we received $38 million in upfront and expansion payments, which we are amortizing through March 2017. In October 2012, we and GSK amended the original agreement to reflect an accelerated clinical development plan for IONIS-TTR_Rx. We are currently evaluating IONIS-TTR_Rx in a Phase 3 development program. We have completed enrollment in the Phase 3 study in patients with FAP. From inception through June 2016, we have earned $60 million from GSK related to the development of IONIS-TTR_Rx, primarily in milestone payments. In addition, under the amended agreement, we and GSK increased the regulatory and commercial milestone payments we can earn should IONIS-TTR_Rx receive marketing authorization and meet pre-agreed sales targets. In addition to IONIS-TTR_Rx, we have four drugs in development with GSK. We are developing two antisense drugs we designed to reduce the production of viral proteins associated with hepatitis B virus, or HBV, infection; IONIS-HBV_Rx and IONIS-HBV-L_Rx, a follow-on drug using our LICA technology. We are also developing IONIS-GSK4-L_Rx and IONIS-RHO-2.5_Rx, which are antisense drugs we designed to treat ocular diseases. In March 2016, we and GSK amended the development plan for IONIS-HBV_Rx to allow GSK to conduct all further development activities for this program. Under our agreement, if GSK successfully develops all five drugs for one or more indications and achieves pre-agreed sales targets, we could receive license fees and substantive milestone payments of more than $1.0 billion, including up to $168.5 million for the achievement of development milestones, up to $363.5 million for the achievement of regulatory milestones and up to $338 million for the achievement of commercialization milestones. Through June 2016, we have received more than $154 million in payments under this alliance with GSK. In the first quarter of 2016, we earned a $1.5 million milestone payment when GSK initiated a Phase 1 study of IONIS-HBV-L_Rx. We will earn the next milestone payment of up to $1.5 million if we further advance a program under this collaboration. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any product that GSK successfully commercializes under this alliance. During the three and six months ended June 30, 2016, we earned revenue of $2.0 million, and $7.0 million, respectively, from our relationship with GSK, which represented five percent and nine percent, respectively, of our total revenue for those periods. In comparison, we earned revenue of $4.3 million and $20.8 million for the same periods in 2015, respectively, which represented four percent and 11 percent of our total revenue for those periods, respectively. Our condensed consolidated balance sheet at June 30, 2016 included deferred revenue of $3.9 million related to our relationship with GSK. Janssen Biotech, Inc., a pharmaceutical company of Johnson & Johnson In December 2014, we entered into a collaboration agreement with Janssen Biotech, Inc. to discover and develop antisense drugs that can be locally administered, including oral delivery, to treat autoimmune disorders of the gastrointestinal tract. Janssen has the option to license drugs from us through the designation of a development candidate for up to three programs. Prior to option exercise we are responsible for the discovery activities to identify a development candidate. If Janssen exercises an option for one of the programs, it will be responsible for the global development, regulatory and commercial activities under that program. Under the terms of the agreement, we received $35 million in upfront payments, which we are amortizing through December 2018. We are eligible to receive an additional up to nearly $800 million in license fees and substantive milestone payments for these programs, including up to $175 million for the achievement of development milestones, up to $420 million for the achievement of regulatory milestones and up to $180 million for the achievement of commercialization milestones. In addition, we are eligible to receive tiered royalties up to the near teens on sales from any drugs resulting from this collaboration. From inception through June 2016, we received nearly $37 million in payments under this collaboration with Janssen, not including the $10 million license fee we earned in July 2016 when Janssen licensed IONIS-JBI1-2.5_Rx from us. We will earn the next milestone payment of $5 million if Janssen chooses another target to advance under this collaboration. Kastle Therapeutics In May 2016, we entered into an agreement with Kastle under which Kastle acquired the global rights to develop and commercialize Kynamro. Kynamro is approved in the United States for use in patients with homozygous familial hypercholesterolemia to reduce low density lipoprotein-cholesterol, apolipoprotein B, total cholesterol and non-high density lipoprotein-cholesterol as an adjunct to lipid lowering medications and diet. Under the terms of the agreement, we are eligible to receive up to $95 million, which includes the $15 million up-front payment we received in May 2016, a $10 million payment in May 2019 and up to $70 million in sales milestones. Beginning in 2017, we are eligible to earn tiered royalties on global sales of Kynamro that average in the mid to low teens. In addition, we also received a 10 percent common equity position in Kastle. Because realization of our equity position is uncertain, we recorded a full valuation allowance. Sanofi Genzyme will earn a three percent royalty on sales of Kynamro and three percent of non-royalty cash payments we receive from Kastle. During the three and six months ended June 30, 2016, we earned revenue of $15 million from our relationship with Kastle, which represented 39 percent and 20 percent of our total revenue for those periods, respectively.

Segment Information and Concentration of Business Risk

6 Months Ended

Jun. 30, 2016

Segment Information and Concentration of Business Risk [Abstract]

Segment Information and Concentration of Business Risk

We have two reportable segments Ionis Core and Akcea Therapeutics, our wholly owned subsidiary. Segment loss from operations includes revenue less operating expenses attributable to each segment.

In our Ionis Core segment we are exploiting a novel drug discovery platform we created to generate a broad pipeline of first-in-class or best-in-class drugs for us and our partners. Our Ionis Core segment generates revenue from a multifaceted partnering strategy.

We formed Akcea to develop and commercialize drugs for patients with serious cardiometabolic diseases caused by lipid disorders. Moving our lipid drugs into a company that we own and control ensures that our core focus at Ionis remains on innovation while allowing us to maintain control over and retain more value from our lipid drugs. To date, Akcea has not earned any revenue.

The following table shows our segment revenue and loss from operations for the three and six months ended June 30, 2016 and June 30, 2015 (in thousands), respectively.

Three Months Ended June 30, 2016	Ionis Core			Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	22,455		$	—		$	—	$	22,455
Licensing and royalty		16,015			—			—		16,015
Total segment revenue	$	38,470		$	—			—	$	38,470
Loss from operations	$	(34,152	)	$	(14,805	)	$	30	$	(48,927	)

Three Months Ended June 30, 2015	Ionis Core		Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	119,658	$	—		$	—	$	119,658
Licensing and royalty		770		—			—		770
Total segment revenue	$	120,428	$	—			—	$	120,428
Income (loss) from operations	$	53,535	$	(8,919	)	$	30	$	44,646

Six Months Ended June 30, 2016	Ionis Core			Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	57,670		$	—		$	—	$	57,670
Licensing and royalty		17,675			—			—		17,675
Total segment revenue	$	75,345		$	—		$	—	$	75,345
Loss from operations	$	(72,790	)	$	(30,847	)	$	60	$	(103,577	)

Six Months Ended June 30, 2015	Ionis Core		Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	181,551	$	—		$	—	$	181,551
Licensing and royalty		1,461		—			—		1,461
Total segment revenue	$	183,012	$	—		$	—	$	183,012
Income (loss) from operations	$	51,210	$	(15,953	)	$	60	$	35,317

The following table shows our total assets by segment at June 30, 2016 and December 31, 2015 (in thousands), respectively.

Total Assets	Ionis Core		Akcea Therapeutics		Elimination of Intercompany Activity			Total
June 30, 2016	$	883,519	$	63,728	$	(136,138	)	$	811,109
December 31, 2015	$	995,852	$	66,306	$	(114,258	)	$	947,900

We have historically funded our operations from collaborations with corporate partners and a relatively small number of partners have accounted for a significant percentage of our revenue. Revenue from significant partners, which is defined as ten percent or more of our total revenue, was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Partner A		39 %		0 %		20 %		0 %
Partner B		25 %		15 %		41 %		31 %
Partner C		10 %		76 %		7 %		50 %
Partner D		5 %		4 %		9 %		11 %

Contracts receivables from one and two significant partner(s) comprised approximately 94 percent and 99 percent of our contracts receivables at June 30, 2016 and December 31, 2015, respectively.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 34
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8981-108599

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9038-108599

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 33
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8971-108599

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8595-108599

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8380-108599

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8933-108599

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 26
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8844-108599

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 35
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8984-108599

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9031-108599

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9054-108599

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8538-108599

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 29
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8864-108599

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8924-108599

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8906-108599

+ Details

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Cash, Cash Equivalents and Short-Term Investments

Revenue Recognition

Arrangements with multiple deliverables

Identifying deliverables and units of accounting



The exclusive license we granted to Bayer to develop and commercialize IONIS-FXI_Rx for the treatment of thrombosis;



The development services we agreed to perform for IONIS-FXI_Rx; and



The initial supply of API.

Measurement and allocation of arrangement consideration



Estimated future product sales;



Estimated royalties on future product sales;



Contractual milestone payments;



Expenses we expect to incur;



Income taxes; and



An appropriate discount rate.



The number of internal hours we will spend performing these services;



The estimated cost of work we will perform;



The estimated cost of work that we will contract with third parties to perform; and



The estimated cost of drug product we will use.

For purposes of determining BESP of the services we will perform and the API in our Bayer transaction, accounting guidance required us to include a markup for a reasonable profit margin.

Based on the units of accounting under the agreement, we allocated the $100 million upfront payment from Bayer as follows:



$91.2 million to the IONIS-FXI_Rx exclusive license;



$4.3 million for ongoing development services; and



$4.5 million for the delivery of API.

Timing of revenue recognition

The following are the periods over which we are recognizing revenue for each of our units of accounting under our Bayer agreement:



We recognized the portion of the consideration attributed to the IONIS-FXI_Rx license immediately because we delivered the license and earned the revenue;



We are recognizing the amount attributed to the ongoing development services for IONIS-FXI_Rx over the period of time we are performing the services; and



Multiple agreements



Milestone payments

During the first step of the development stage, we or our partners study our drugs in Investigational New Drug, or IND,

Development milestones in our partnerships may include the following types of events:



Designation of a development candidate. Following the designation of a development candidate, IND-enabling animal studies for a new development candidate generally take 12 to 18 months to complete;



Initiation of a Phase 1 clinical trial. Generally, Phase 1 clinical trials take one to two years to complete;



Initiation or completion of a Phase 2 clinical trial. Generally, Phase 2 clinical trials take one to three years to complete;



Initiation or completion of a Phase 3 clinical trial. Generally, Phase 3 clinical trials take two to four years to complete.

Regulatory milestones in our partnerships may include the following types of events:



Commercialization milestones in our partnerships may include the following types of events:



First commercial sale in a particular market, such as in the United States or Europe.



Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement;



The amount of the milestone payment appears reasonable either in relation to the effort expended or to the enhancement of the value of the delivered items;



There is no future performance required to earn the milestone; and



The consideration is reasonable relative to all deliverables and payment terms in the arrangement.

Licensing and royalty revenue

Cash, cash equivalents and short-term investments

Inventory Valuation

Inventory valuation

Research, Development and Patent Expenses

Research, development and patent expenses

Long-Lived Assets

Long-lived assets

Use of Estimates

Use of estimates

Basic and Diluted Net Income (Loss) per Share

Basic and diluted net income (loss) per share



Dilutive stock options;



Unvested restricted stock units;



Employee Stock Purchase Plan, or ESPP;



2¾ percent convertible senior notes; and



1 percent convertible senior notes.

Three months ended June 30, 2015	Income (Numerator)		Shares (Denominator)		Per-Share Amount

Income available to common shareholders	$	35,648		119,742	$	0.30
Effect of diluted securities:
Shares issuable upon exercise of stock options				3,974
Shares issuable upon restricted stock award issuance				376
Shares issuable related to our ESPP				4
Shares issuable related to our 2¾ percent notes		1,047		3,683
Income available to common shareholders, plus assumed conversions	$	36,695		127,779	$	0.29

Six months ended June 30, 2015	Income (Numerator)		Shares (Denominator)		Per-Share Amount

Income available to common shareholders	$	18,931		119,348	$	0.16
Effect of diluted securities:
Shares issuable upon exercise of stock options				4,310
Shares issuable upon restricted stock award issuance				399
Shares issuable related to our ESPP				4
Income available to common shareholders, plus assumed conversions	$	18,931		124,061	$	0.15

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Beginning balance accumulated other comprehensive income (loss)	$	(16,115	)	$	47,114		$	(13,565	)	$	39,747
Unrealized losses on securities, net of tax (1)		(10,738	)		(28,703	)		(13,288	)		(21,336	)
Net current period other comprehensive loss		(10,738	)		(28,703	)		(13,288	)		(21,336	)
Ending balance accumulated other comprehensive income (loss)	$	(26,853	)	$	18,411		$	(26,853	)	$	18,411

(1)

Convertible Debt

Convertible debt

Segment Information

Segment information

Stock-Based Compensation Expense

Stock-based compensation expense

Employee Stock Options:

	Six Months Ended June 30,
	2016		2015
Risk-free interest rate		1.5%		1.5%
Dividend yield		0.0%		0.0%
Volatility		58.4%		53.6%
Expected life		4.5 years		4.5 years

ESPP:

	Six Months Ended June 30,
	2016		2015
Risk-free interest rate		0.5%		0.1%
Dividend yield		0.0%		0.0%
Volatility		69.4%		56.2%
Expected life		6 months		6 months

We did not grant stock options or RSUs to our Board of Directors during the six months ended June 30, 2016 and 2015.

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Research, development and patent expenses		$	14,492		$	10,465		$	29,262		$	20,951
General and administrative			4,768			3,140			10,102			5,959
Total non-cash stock-based compensation expense		$	19,260		$	13,605		$	39,364		$	26,910

Impact of Recently Issued Accounting Standards

Impact of recently issued accounting standards



Classification of certain share-based payment activities on our statement of cash flows: The amended guidance requires us to classify the following items on our statement of cash flows as follows:



We will classify excess tax benefits as an operating activity. We may adopt this update either prospectively in the period of adoption or adjust our cash flow statement for each period we present.



We will classify amounts we withhold in shares for the payment of employee taxes as a financing activity. For this update, we must adjust our cash flow statement for each period we present.



Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2016

Changes in Accumulated Other Comprehensive Income (Loss)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Beginning balance accumulated other comprehensive income (loss)	$	(16,115	)	$	47,114		$	(13,565	)	$	39,747
Unrealized losses on securities, net of tax (1)		(10,738	)		(28,703	)		(13,288	)		(21,336	)
Net current period other comprehensive loss		(10,738	)		(28,703	)		(13,288	)		(21,336	)
Ending balance accumulated other comprehensive income (loss)	$	(26,853	)	$	18,411		$	(26,853	)	$	18,411

(1)

Weighted-Average Assumptions - ESPP

ESPP:

	Six Months Ended June 30,
	2016		2015
Risk-free interest rate		0.5%		0.1%
Dividend yield		0.0%		0.0%
Volatility		69.4%		56.2%
Expected life		6 months		6 months

Stock-Based Compensation Expense

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Research, development and patent expenses		$	14,492		$	10,465		$	29,262		$	20,951
General and administrative			4,768			3,140			10,102			5,959
Total non-cash stock-based compensation expense		$	19,260		$	13,605		$	39,364		$	26,910

Employee Stock Options [Member]

Weighted-Average Assumptions

Employee Stock Options:

	Six Months Ended June 30,
	2016		2015
Risk-free interest rate		1.5%		1.5%
Dividend yield		0.0%		0.0%
Volatility		58.4%		53.6%
Expected life		4.5 years		4.5 years

Investments (Tables)

6 Months Ended

Jun. 30, 2016

Investments [Abstract]

Contract Maturity of Available-for-Sale Securities

The following table summarizes the contract maturity of the available-for-sale securities we held as of June 30, 2016:

One year or less	55%
After one year but within two years	32%
After two years but within three and a half years	13%
Total	100%

Summary of Investments

The following is a summary of our investments (in thousands):

			Gross Unrealized
June 30, 2016	Cost (1)		Gains		Losses			Estimated Fair Value
Available-for-sale securities:
Corporate debt securities	$	179,005	$	52	$	(82	)	$	178,975
Debt securities issued by U.S. government agencies		44,765		15		—			44,780
Debt securities issued by the U.S. Treasury		13,063		11		—			13,074
Debt securities issued by states of the U.S. and political subdivisions of the states (2)		88,043		12		(92	)		87,963
Total securities with a maturity of one year or less		324,876		90		(174	)		324,792
Corporate debt securities		191,442		945		(165	)		192,222
Debt securities issued by U.S. government agencies		31,950		5		(1	)		31,954
Debt securities issued by the U.S. Treasury		8,983		14		—			8,997
Debt securities issued by states of the U.S. and political subdivisions of the states		29,682		78		(26	)		29,734
Total securities with a maturity of more than one year		262,057		1,042		(192	)		262,907
Total available-for-sale securities	$	586,933	$	1,132	$	(366	)	$	587,699
Equity securities:
Regulus Therapeutics Inc.	$	7,162	$	1,888	$	(833	)	$	8,217
Total equity securities	$	7,162	$	1,888	$	(833	)	$	8,217
Total available-for-sale and equity securities	$	594,095	$	3,020	$	(1,199	)	$	595,916

			Gross Unrealized
December 31, 2015	Cost (1)		Gains		Losses			Estimated Fair Value
Available-for-sale securities:
Corporate debt securities	$	181,670	$	5	$	(250	)	$	181,425
Debt securities issued by U.S. government agencies		50,559		1		(19	)		50,541
Debt securities issued by the U.S. Treasury		2,604		—		(3	)		2,601
Debt securities issued by states of the U.S. and political subdivisions of the states (2)		79,414		18		(88	)		79,344
Total securities with a maturity of one year or less		314,247		24		(360	)		313,911
Corporate debt securities		258,703		3		(1,705	)		257,001
Debt securities issued by U.S. government agencies		38,956		—		(244	)		38,712
Debt securities issued by states of the U.S. and political subdivisions of the states		48,552		3		(243	)		48,312
Total securities with a maturity of more than one year		346,211		6		(2,192	)		344,025
Total available-for-sale securities	$	660,458	$	30	$	(2,552	)	$	657,936
Equity securities:
Regulus Therapeutics Inc.	$	7,162	$	17,630	$	—		$	24,792
Total equity securities	$	7,162	$	17,630	$	—		$	24,792
Total available-for-sale and equity securities	$	667,620	$	17,660	$	(2,552	)	$	682,728

(1)

Our available-for-sale securities are held at amortized cost.

(2)

Includes investments classified as cash equivalents on our condensed consolidated balance sheet.

Temporarily Impaired Investments

Investments we consider to be temporarily impaired at June 30, 2016 were as follows (in thousands):

			Less than 12 months of temporary impairment					More than 12 months of temporary impairment					Total temporary impairment
	Number of Investments		Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Corporate debt securities		103	$	96,050	$	(65	)	$	43,526	$	(182	)	$	139,576	$	(247	)
Debt securities issued by U.S. government agencies		2		4,999		(1	)		—		—			4,999		(1	)
Debt securities issued by states of the U.S. and political subdivisions of the states		89		42,285		(42	)		18,897		(76	)		61,182		(118	)
Regulus Therapeutics Inc.		1		2,168		(833	)		—		—			2,168		(833	)
Total temporarily impaired securities		195	$	145,502	$	(941	)	$	62,423	$	(258	)	$	207,925	$	(1,199	)

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Assets Measured at Fair Value on a Recurring Basis

	At June 30, 2016		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
Cash equivalents (1)	$	68,737	$	68,737	$	—
Corporate debt securities (2)		371,197		—		371,197
Debt securities issued by U.S. government agencies (3)		76,734		—		76,734
Debt securities issued by the U.S. Treasury (2)		22,071		22,071		—
Debt securities issued by states of the U.S. and political subdivisions of the states (4)		117,697		—		117,697
Investment in Regulus Therapeutics Inc.		8,217		8,217		—
Total	$	664,653	$	99,025	$	565,628

	At December 31, 2015		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
Cash equivalents (1)	$	88,902	$	88,902	$	—
Corporate debt securities (2)		438,426		—		438,426
Debt securities issued by U.S. government agencies (2)		89,253		—		89,253
Debt securities issued by the U.S. Treasury (2)		2,601		2,601		—
Debt securities issued by states of the U.S. and political subdivisions of the states (4)		127,656		—		127,656
Investment in Regulus Therapeutics Inc.		24,792		24,792		—
Total	$	771,630	$	116,295	$	655,335

(1)

Included in cash and cash equivalents on our condensed consolidated balance sheet.

(2)

Included in short-term investments on our condensed consolidated balance sheet.

(3)

(4)

Segment Information and Concentration of Business Risk (Tables)

6 Months Ended

Jun. 30, 2016

Segment Information and Concentration of Business Risk [Abstract]

Segment Information

The following table shows our segment revenue and loss from operations for the three and six months ended June 30, 2016 and June 30, 2015 (in thousands), respectively.

Three Months Ended June 30, 2016	Ionis Core			Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	22,455		$	—		$	—	$	22,455
Licensing and royalty		16,015			—			—		16,015
Total segment revenue	$	38,470		$	—			—	$	38,470
Loss from operations	$	(34,152	)	$	(14,805	)	$	30	$	(48,927	)

Three Months Ended June 30, 2015	Ionis Core		Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	119,658	$	—		$	—	$	119,658
Licensing and royalty		770		—			—		770
Total segment revenue	$	120,428	$	—			—	$	120,428
Income (loss) from operations	$	53,535	$	(8,919	)	$	30	$	44,646

Six Months Ended June 30, 2016	Ionis Core			Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	57,670		$	—		$	—	$	57,670
Licensing and royalty		17,675			—			—		17,675
Total segment revenue	$	75,345		$	—		$	—	$	75,345
Loss from operations	$	(72,790	)	$	(30,847	)	$	60	$	(103,577	)

Six Months Ended June 30, 2015	Ionis Core		Akcea Therapeutics			Elimination of Intercompany Activity		Total
Revenue:
Research and development	$	181,551	$	—		$	—	$	181,551
Licensing and royalty		1,461		—			—		1,461
Total segment revenue	$	183,012	$	—		$	—	$	183,012
Income (loss) from operations	$	51,210	$	(15,953	)	$	60	$	35,317

The following table shows our total assets by segment at June 30, 2016 and December 31, 2015 (in thousands), respectively.

Total Assets	Ionis Core		Akcea Therapeutics		Elimination of Intercompany Activity			Total
June 30, 2016	$	883,519	$	63,728	$	(136,138	)	$	811,109
December 31, 2015	$	995,852	$	66,306	$	(114,258	)	$	947,900

Revenue from Significant Partners

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Partner A		39 %		0 %		20 %		0 %
Partner B		25 %		15 %		41 %		31 %
Partner C		10 %		76 %		7 %		50 %
Partner D		5 %		4 %		9 %		11 %

Significant Accounting Policies, Revenue Recognition (Details) $ in Thousands	1 Months Ended				3 Months Ended		6 Months Ended
	Sep. 30, 2013 USD ($)	Dec. 31, 2012 USD ($) Target	Jun. 30, 2012 USD ($)	Jan. 31, 2012 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($) AccountingUnit	Jun. 30, 2016 USD ($) Agreement Category Stage	Jun. 30, 2015 USD ($)
Revenue Recognition [Abstract]
Revenue earned					$ 38,470	$ 120,428	$ 75,345	$ 183,012
Number of categories of milestone events \| Category							3
Number of stages of life-cycle of drugs \| Stage							3
Minimum [Member]
Revenue Recognition [Abstract]
Period to complete IND-enabling animal studies							12 months
Period to complete Phase 1 clinical trial							1 year
Period to complete Phase 2 clinical trial							1 year
Period to complete Phase 3 clinical trial							2 years
Period to prepare and submit regulatory filings							6 months
Period to obtain marketing authorization from applicable regulatory agency							1 year
Pre-specified product sales threshold included in commercialization milestones							$ 1,000,000
Maximum [Member]
Revenue Recognition [Abstract]
Period to complete IND-enabling animal studies							18 months
Period to complete Phase 1 clinical trial							2 years
Period to complete Phase 2 clinical trial							3 years
Period to complete Phase 3 clinical trial							4 years
Period to prepare and submit regulatory filings							12 months
Period to obtain marketing authorization from applicable regulatory agency							2 years
IONIS-FXI [Member]
Revenue Recognition [Abstract]
Upfront fee received						$ 100,000
Number of units of accounting \| AccountingUnit						3
Upfront payment allocated to exclusive license						$ 91,200		91,200
Upfront payment allocated to ongoing development services						4,300		4,300
Upfront payment allocated to delivery of API						$ 4,500		4,500
Assumed percentage change in estimated selling price						10.00%
Percentage change in earned revenue based on assumed change in estimated selling price						1.00%
Amount by which earned revenue would change based on assumed change in estimated selling price						$ 900
Revenue earned							$ 3,200
Collaboration Agreements [Member]
Revenue Recognition [Abstract]
Revenue earned					$ 9,400	$ 17,800	$ 30,700	$ 57,000
Number of collaboration agreements \| Agreement							4
Number of remaining collaboration agreements with option to license drugs \| Agreement							3
Nusinersen [Member]
Revenue Recognition [Abstract]
Upfront payment recorded as deferred revenue				$ 29,000
DMPK [Member]
Revenue Recognition [Abstract]
Upfront payment recorded as deferred revenue			$ 12,000
Neurology [Member]
Revenue Recognition [Abstract]
Upfront payment recorded as deferred revenue		$ 30,000
Number of targets \| Target		3
Strategic Neurology [Member]
Revenue Recognition [Abstract]
Upfront payment recorded as deferred revenue	$ 100,000
Term of collaboration agreement							6 years

Significant Accounting Policies, Investments and Inventory Valuation (Details) $ in Thousands	Jun. 30, 2016 USD ($) Investment	Dec. 31, 2015 USD ($)
Cash, Cash Equivalents, and Short-term Investments [Abstract]
Number of cost method investments \| Investment	2
Inventory Valuation [Abstract]
Inventories \| $	$ 7,668	$ 6,899

Significant Accounting Policies, Research, Development and Patent Expenses (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Patents [Member]
Research, Development and Patent Expenses [Abstract]
Write-down	$ 0.1	$ 0.1	$ 0.4	$ 0.2

Significant Accounting Policies, Basic and Diluted Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Income (Numerator) [Abstract]
Income available to common shareholders		$ 35,648		$ 18,931
Dilutive effect of 2 3/4 percent notes		1,047
Income available to common shareholders, plus assumed conversions		$ 36,695		$ 18,931
Shares (Denominator) [Abstract]
Shares used in computing basic net income per share (in shares)	120,798	119,742	120,698	119,348
Effect of Diluted Securities [Abstract]
Shares issuable upon exercise of stock options (in shares)		3,974		4,310
Shares issuable upon restricted stock award issuance (in shares)		376		399
Shares issuable related to our ESPP (in shares)		4		4
Shares issuable related to our 2 3/4 percent notes (in shares)		3,683
Shares used in computing diluted net income per share (in shares)	120,798	127,779	120,698	124,061
Per-Share Amount [Abstract]
Basic net income (loss) per share (in dollars per share)	$ (0.47)	$ 0.30	$ (0.99)	$ 0.16
Diluted net income (loss) per share (in dollars per share)	$ (0.47)	$ 0.29	$ (0.99)	$ 0.15
2 3/4 Percent Convertible Senior Notes [Member]
Basic and Diluted Net Loss per Share [Abstract]
Interest rate on convertible senior notes	2.75%	2.75%	2.75%	2.75%	2.75%
1 Percent Convertible Senior Notes [Member]
Basic and Diluted Net Loss per Share [Abstract]
Interest rate on convertible senior notes	1.00%	1.00%	1.00%	1.00%	1.00%

Significant Accounting Policies, Accumulated Other Comprehensive Income (Loss) (Details) - USD ($)
$ in Thousands

3 Months Ended

6 Months Ended

Jun. 30, 2016

Jun. 30, 2015

Jun. 30, 2016

Jun. 30, 2015

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Beginning balance

$ 200,790

Ending balance

$ 111,213

111,213

Accumulated Other Comprehensive Income (Loss) [Member]

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Beginning balance

(16,115)

$ 47,114

(13,565)

$ 39,747

Ending balance

(26,853)

18,411

(26,853)

18,411

Unrealized Losses on Securities [Member]

Accumulated Other Comprehensive Income (Loss) [Roll Forward]

Other comprehensive loss before reclassifications, net of tax

^[1]

(10,738)

(28,703)

(13,288)

(21,336)

Net current period other comprehensive loss

(10,738)

(28,703)

(13,288)

(21,336)

Income tax benefit included in other comprehensive income

$ 0

$ 5,100

$ 0

[1]	Other comprehensive income (loss) for the three months ended June 30, 2015 included income tax benefit of $5.1 million. There was no tax expense or benefit for the three and six months ended June 30, 2016 and the six months ended June 30, 2015.

Significant Accounting Policies, Convertible Debt and Segment Information (Details) - Segment	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015
Segment Information [Abstract]
Number of operating segments	2
1 Percent Convertible Senior Notes [Member]
Convertible Debt [Abstract]
Interest rate on convertible senior notes	1.00%	1.00%	1.00%
2 3/4 Percent Convertible Senior Notes [Member]
Convertible Debt [Abstract]
Interest rate on convertible senior notes	2.75%	2.75%	2.75%

Significant Accounting Policies, Stock-Based Compensation Expense - Weighted-Average Assumptions (Details)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Employee Stock Options [Member]
Weighted-Average Assumptions [Abstract]
Risk-free interest rate	1.50%	1.50%
Dividend yield	0.00%	0.00%
Volatility	58.40%	53.60%
Expected life	4 years 6 months	4 years 6 months
ESPP [Member]
Weighted-Average Assumptions [Abstract]
Risk-free interest rate	0.50%	0.10%
Dividend yield	0.00%	0.00%
Volatility	69.40%	56.20%
Expected life	6 months	6 months

Significant Accounting Policies, Stock-Based Compensation Expense (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stock-based Compensation Expense [Abstract]
Stock-based compensation expense	$ 19,260	$ 13,605	$ 39,364	$ 26,910
Stock Options [Member]
Unrecognized Compensation Expense [Abstract]
Unrecognized compensation expense related to non-vested stock options	75,000		$ 75,000
Weighted average period for recognition			1 year 4 months 24 days
Stock Options [Member] \| Board of Directors [Member]
Stock-based Compensation Expense [Abstract]
Options granted (in shares)			0	0
RSUs [Member]
Stock-based Compensation Expense [Abstract]
Vesting period			4 years
Unrecognized Compensation Expense [Abstract]
Unrecognized compensation cost related to non-vested RSUs	20,800		$ 20,800
Weighted average period for recognition			1 year 7 months 6 days
RSUs [Member] \| Employees [Member]
Stock-based Compensation Expense [Abstract]
Weighted-average grant date fair value (in dollars per share)			$ 43.79
RSUs [Member] \| Board of Directors [Member]
Stock-based Compensation Expense [Abstract]
Units granted (in shares)			0	0
Research, Development and Patent Expenses [Member]
Stock-based Compensation Expense [Abstract]
Stock-based compensation expense	14,492	10,465	$ 29,262	$ 20,951
General and Administrative [Member]
Stock-based Compensation Expense [Abstract]
Stock-based compensation expense	4,768	3,140	10,102	5,959
Akcea Therapeutics [Member]
Stock-based Compensation Expense [Abstract]
Stock-based compensation expense	$ 3,100	$ 1,000	$ 6,300	$ 1,500

Investments, Contract Maturity of Available-for-Sale Securities (Details)	Jun. 30, 2016 Company
Contract Maturity of Available-for-Sale Securities [Abstract]
One year or less	55.00%
After one year but within two years	32.00%
After two years but within three and a half years	13.00%
Total	100.00%
Percentage of available-for-sale securities with a maturity of less than two years	87.00%
Ownership Interests in Private and Public Companies [Abstract]
Number of privately-held companies in which the entity has an equity ownership interest of less than 20%	2
Number of publicly-held companies in which the entity has an equity ownership interest of less than 20%	2

Investments, Summary of Investments (Details) - USD ($)
$ in Thousands

Jun. 30, 2016

Dec. 31, 2015

$ 594,095

$ 667,620

3,020

17,660

(1,199)

(2,552)

Available-for-sale Securities [Member]

595,916

682,728

^[1]

586,933

660,458

1,132

(366)

(2,552)

Available-for-sale Securities [Member] | Securities with Maturity of One Year or Less [Member]

587,699

657,936

^[1]

324,876

314,247

(174)

(360)

Available-for-sale Securities [Member] | Securities with Maturity of More than One Year [Member]

324,792

313,911

^[1]

262,057

346,211

1,042

(192)

(2,192)

Corporate Debt Securities [Member] | Securities with Maturity of One Year or Less [Member]

262,907

344,025

^[1]

179,005

181,670

(82)

(250)

Corporate Debt Securities [Member] | Securities with Maturity of More than One Year [Member]

178,975

181,425

^[1]

191,442

258,703

945

(165)

(1,705)

Debt Securities issued by U.S. Government Agencies [Member] | Securities with Maturity of One Year or Less [Member]

192,222

257,001

^[1]

44,765

50,559

(19)

Debt Securities issued by U.S. Government Agencies [Member] | Securities with Maturity of More than One Year [Member]

44,780

50,541

^[1]

31,950

38,956

(1)

(244)

Debt Securities issued by the U.S. Treasury [Member] | Securities with Maturity of One Year or Less [Member]

31,954

38,712

^[1]

13,063

2,604

(3)

Debt Securities issued by the U.S. Treasury [Member] | Securities with Maturity of More than One Year [Member]

13,074

2,601

^[1]

8,983

Debt Securities issued by States of the U.S. and Political Subdivisions of the States [Member] | Securities with Maturity of One Year or Less [Member]

8,997

^[1],[2]

88,043

79,414

(92)

(88)

Debt Securities issued by States of the U.S. and Political Subdivisions of the States [Member] | Securities with Maturity of More than One Year [Member]

87,963

79,344

^[1]

29,682

48,552

(26)

(243)

Equity Securities [Member]

29,734

48,312

7,162

1,888

17,630

(833)

Equity Securities [Member] | Regulus Therapeutics Inc. [Member]

8,217

24,792

7,162

1,888

17,630

(833)

$ 8,217

$ 24,792

[1]	Our available-for-sale securities are held at amortized cost.
[2]	Includes investments classified as cash equivalents on our condensed consolidated balance sheet.

Investments, Investments Temporarily Impaired (Details) $ in Thousands	Jun. 30, 2016 USD ($) Investment
Temporarily Impaired Investments [Abstract]
Number of investments \| Investment	195
Estimated fair value, less than 12 months of temporary impairment	$ 145,502
Unrealized losses, less than 12 months of temporary impairment	(941)
Estimated fair value, more than 12 months of temporary impairment	62,423
Unrealized losses, more than 12 months of temporary impairment	(258)
Estimated fair value, total temporary impairment	207,925
Unrealized losses, total temporary impairment	$ (1,199)
Corporate Debt Securities [Member]
Temporarily Impaired Investments [Abstract]
Number of investments \| Investment	103
Estimated fair value, less than 12 months of temporary impairment	$ 96,050
Unrealized losses, less than 12 months of temporary impairment	(65)
Estimated fair value, more than 12 months of temporary impairment	43,526
Unrealized losses, more than 12 months of temporary impairment	(182)
Estimated fair value, total temporary impairment	139,576
Unrealized losses, total temporary impairment	$ (247)
Debt Securities issued by U.S. Government Agencies [Member]
Temporarily Impaired Investments [Abstract]
Number of investments \| Investment	2
Estimated fair value, less than 12 months of temporary impairment	$ 4,999
Unrealized losses, less than 12 months of temporary impairment	(1)
Estimated fair value, more than 12 months of temporary impairment	0
Unrealized losses, more than 12 months of temporary impairment	0
Estimated fair value, total temporary impairment	4,999
Unrealized losses, total temporary impairment	$ (1)
Debt Securities issued by States of the U.S. and Political Subdivisions of the States [Member]
Temporarily Impaired Investments [Abstract]
Number of investments \| Investment	89
Estimated fair value, less than 12 months of temporary impairment	$ 42,285
Unrealized losses, less than 12 months of temporary impairment	(42)
Estimated fair value, more than 12 months of temporary impairment	18,897
Unrealized losses, more than 12 months of temporary impairment	(76)
Estimated fair value, total temporary impairment	61,182
Unrealized losses, total temporary impairment	$ (118)
Equity Securities [Member] \| Regulus Therapeutics Inc. [Member]
Temporarily Impaired Investments [Abstract]
Number of investments \| Investment	1
Estimated fair value, less than 12 months of temporary impairment	$ 2,168
Unrealized losses, less than 12 months of temporary impairment	(833)
Estimated fair value, more than 12 months of temporary impairment	0
Unrealized losses, more than 12 months of temporary impairment	0
Estimated fair value, total temporary impairment	2,168
Unrealized losses, total temporary impairment	$ (833)

Fair Value Measurements, Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands

Jun. 30, 2016

Dec. 31, 2015

Jun. 30, 2015

Transfers from Level 1 to Level 2

$ 0

Transfers from Level 2 to Level 1

595,916

$ 682,728

1 Percent Convertible Senior Notes [Member]

$ 8,217

$ 24,792

Interest rate on convertible senior notes

1.00%

Fair value of convertible notes

$ 350,600

2 3/4 Percent Convertible Senior Notes [Member]

Interest rate on convertible senior notes

2.75%

Fair value of convertible notes

$ 89,800

Recurring Basis [Member]

Cash equivalents

^[1]

68,737

$ 88,902

Recurring Basis [Member] | Corporate Debt Securities [Member]

8,217

24,792

Total assets

664,653

771,630

Recurring Basis [Member] | Corporate Debt Securities [Member] | Cash and Cash Equivalents [Member]

^[2]

371,197

438,426

Recurring Basis [Member] | Debt Securities issued by U.S. Government Agencies [Member]

16,000

Recurring Basis [Member] | Debt Securities issued by the U.S. Treasury [Member]

76,734

^[3]

89,253

^[2]

Recurring Basis [Member] | Debt Securities issued by States of the U.S. and Political Subdivisions of the States [Member]

^[2]

22,071

2,601

Recurring Basis [Member] | Debt Securities issued by States of the U.S. and Political Subdivisions of the States [Member] | Cash and Cash Equivalents [Member]

^[4]

117,697

127,656

Recurring Basis [Member] | Quoted Prices in Active Markets (Level 1) [Member]

20,100

7,500

Cash equivalents

68,737

88,902

Recurring Basis [Member] | Quoted Prices in Active Markets (Level 1) [Member] | Corporate Debt Securities [Member]

8,217

24,792

Total assets

99,025

116,295

Recurring Basis [Member] | Quoted Prices in Active Markets (Level 1) [Member] | Debt Securities issued by U.S. Government Agencies [Member]

Recurring Basis [Member] | Quoted Prices in Active Markets (Level 1) [Member] | Debt Securities issued by the U.S. Treasury [Member]

Recurring Basis [Member] | Quoted Prices in Active Markets (Level 1) [Member] | Debt Securities issued by States of the U.S. and Political Subdivisions of the States [Member]

22,071

2,601

Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]

Cash equivalents

Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate Debt Securities [Member]

Total assets

565,628

655,335

Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Debt Securities issued by U.S. Government Agencies [Member]

371,197

438,426

Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Debt Securities issued by the U.S. Treasury [Member]

76,734

89,253

Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Debt Securities issued by States of the U.S. and Political Subdivisions of the States [Member]