Ionis Pharmaceuticals, Inc. — FY2022 Form 10-K Summary
Business context and reporting period
Ionis Pharmaceuticals is a biotechnology company focused on RNA-targeted and other genetic medicines. This Form 10-K covers the fiscal year ended December 31, 2022, with unaudited fourth-quarter comparisons to 2021. Ionis marketed SPINRAZA, TEGSEDI and WAYLIVRA and had seven medicines in Phase 3 development. Eplontersen and tofersen were under regulatory review for potential 2023 launches.
Key financial metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $587.4 million | $810.5 million | Down 27.5% |
| Commercial revenue | $303.4 million | $342.4 million | Down 11.4% |
| R&D revenue | $284.0 million | $468.1 million | Down 39.3% |
| Operating expenses | $997.6 million | $840.6 million | Up 18.7% |
| Loss from operations | $(410.2) million | $(30.2) million | Higher loss |
| Net loss | $(269.7) million | $(28.6) million | Higher loss |
| Basic and diluted loss per share | $(1.90) | $(0.20) | Higher loss |
| Cash flow from operations | $(274.4) million | $30.8 million | Reduced by $305.2 million |
| Cash, cash equivalents and short-term investments | $1,986.9 million | $2,115.0 million | Down $128.1 million |
Reported operating margin was approximately (69.8%) and net margin was approximately (45.9%). Revenue included $242.3 million of SPINRAZA royalties, $30.1 million of TEGSEDI and WAYLIVRA revenue, $207.2 million of collaborative agreement revenue and $76.8 million of eplontersen joint-development revenue.
Research, development and patent expense was $833.1 million, including $80.0 million for the Metagenomi gene-editing license. Selling, general and administrative expense was $150.3 million. Stock-based compensation was $100.3 million.
Liquidity, debt and cash flow
- Year-end cash and short-term investments were approximately $2.0 billion, including $276.5 million of cash and cash equivalents and $1.710 billion of short-term investments.
- Operating cash use was $274.4 million. Investing cash use was $262.6 million, partly offset by $254.1 million of real-estate sale proceeds. Financing cash use was $55.3 million, including $50.7 million of debt principal repayments.
- Outstanding convertible notes included $632.5 million of 0% notes due April 2026 and $548.8 million of 0.125% notes due December 2024. Carrying value of the notes was $1.167 billion at year-end.
- Total contractual obligations were $1.494 billion, including convertible debt, leases, mortgage obligations and other commitments. The filing states that no off-balance-sheet arrangements existed.
- Ionis sold and leased back its Carlsbad headquarters for net proceeds of approximately $202.6 million and recorded a $150.1 million gain. It used $51.3 million of proceeds to repay the related mortgage.
Material changes versus the prior comparable period
- Revenue declined primarily because 2021 included a $200 million AstraZeneca upfront payment for eplontersen. SPINRAZA royalties also declined year over year, reflecting foreign-exchange effects and competition, particularly in Europe.
- R&D spending increased substantially as Ionis expanded its late-stage pipeline and Phase 3 activity. Eplontersen, olezarsen, donidalorsen and ION363 development spending increased.
- Ionis recognized $80 million of R&D expense for the Metagenomi gene-editing collaboration in the fourth quarter of 2022.
- Operating loss increased to $410.2 million from $30.2 million, while net loss increased to $269.7 million from $28.6 million.
- Fourth-quarter 2022 revenue was $151.9 million versus $440.0 million in the prior-year quarter. Fourth-quarter operating expenses were $359.9 million versus $219.4 million, primarily due to the Metagenomi payment.
- Fourth-quarter net loss was $52.4 million despite the $150.1 million real-estate gain; fourth-quarter 2021 included $224.6 million of net income, substantially benefiting from the AstraZeneca upfront payment.
- Ionis added or expanded major strategic arrangements, including the Metagenomi gene-editing collaboration and Roche licensing of IONIS-FB-LRx. It also regained rights to fesomersen after Bayer discontinued its development program.
Guidance, outlook, commentary and risks
Management did not provide formal quantitative revenue, earnings or cash-flow guidance in the supplied filing text. Management stated that its cash and short-term investments were sufficient to fund operations in the short and longer term, while emphasizing continued investment in commercial readiness and the pipeline.
- Eplontersen: U.S. NDA submitted in December 2022 for ATTRv-PN; AstraZeneca is responsible for 55% of global Phase 3 development costs and has non-U.S. commercialization rights, subject to specified exceptions.
- Tofersen: FDA PDUFA date was April 25, 2023, with European review also underway. Biogen is responsible for development, regulatory and commercialization costs.
- Olezarsen: BALANCE Phase 3 enrollment was complete, with data expected in the second half of 2023; the FDA granted fast-track designation in January 2023.
- Pelacarsen: Novartis completed enrollment in the Phase 3 Lp(a) HORIZON cardiovascular outcomes study.
- Management identified substantial risks from clinical and regulatory failure, competition, reimbursement and pricing pressure, manufacturing and supply-chain constraints, reliance on collaborators, intellectual-property challenges, product safety, cybersecurity, litigation and macroeconomic or geopolitical events.
- TEGSEDI has a U.S. boxed warning and REMS requirements, while WAYLIVRA and TEGSEDI require monitoring that may limit patient adoption. SPINRAZA faces competition from gene therapy and oral therapies.
- Ionis recorded a $7.7 million net litigation settlement expense in 2022 related to the Akcea take-private litigation. Other unusual items included the real-estate gain and the Metagenomi license expense.
- Clinical development cost accruals were $116.5 million at December 31, 2022. The filing identifies the estimate as a critical audit matter and notes that a hypothetical 10% increase would have increased pre-tax loss by approximately $11.6 million.
Most important facts for investors to verify
- Whether eplontersen and tofersen obtained regulatory approval and achieved commercial launches after the filing date.
- The timing and results of Phase 3 programs for olezarsen, donidalorsen, ION363, pelacarsen and other pipeline medicines.
- SPINRAZA demand, pricing, foreign-exchange effects and competitive pressure, especially in Europe.
- Cash burn, future operating cash requirements and the ability to fund commercial expansion and new manufacturing facilities.
- The December 2024 maturity of the $548.8 million 0.125% convertible notes and potential dilution from convertible notes and warrants.
- The economic impact of the January 2023 Royalty Pharma transaction, including the $500 million upfront payment, relinquished future royalties and conditional milestones of up to $625 million.
- Potential obligations and execution risks associated with the Carlsbad sale-and-leaseback and planned Oceanside manufacturing facility.
- Coverage, reimbursement, product-label restrictions, post-marketing safety obligations and the status of outstanding litigation and tax matters.