IONIS PHARMACEUTICALS INC (IONS) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This financial review presents our operating results for each of the two years in the period ended December 31, 2021, and our financial condition at December 31, 2021.
Refer to our 2020 Form 10-K for our results of operations for 2020 compared to 2019. Except for the historical information contained herein, the following discussion contains forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically
under Item 1A of Part I of this report, “Risk Factors.” In addition, the following review should be read in conjunction with the information presented in our consolidated financial statements and the related notes to our consolidated financial
statements as indexed on page F-1.

Overview

As noted in our Business Overview in Part I of this report, we are a leader in RNA-targeted
therapeutics. We believe our medicines, which are based on our novel antisense technology, have the potential to pioneer new markets, change standards of care and transform the lives of people with devastating diseases. We currently have three marketed
medicines- SPINRAZA, TEGSEDI and WAYLIVRA. We also have a rich late-stage pipeline of medicines, primarily focused on our cardiovascular and neurology franchises. Within our late-stage pipeline, we have six medicines in Phase 3 development for eight
indications. For further details on our business refer to the Business section of Part I of this report.

Financial Highlights

The following is a summary of our financial results (in millions):

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Our revenue for 2021 increased compared to 2020 due to significant partner payments across our cardiology and neurology
franchises. Our commercial revenue for 2021 included SPINRAZA royalties, TEGSEDI and WAYLIVRA revenue and licensing and other royalty revenue. As a result of our distribution agreements with Sobi for TEGSEDI and WAYLIVRA, our commercial revenue from
product sales shifted to revenue from distribution fees based on net sales generated by Sobi. We completed the transition of our TEGSEDI and WAYLIVRA commercial operations in Europe and our TEGSEDI commercial operations in North America to Sobi in the
first and second quarters of 2021, respectively.

We earn our R&D revenue from multiple sources that can fluctuate depending on the timing of events. Our R&D
revenue increased in 2021 compared to 2020 primarily due to the joint development and commercialization collaboration we entered into with AstraZeneca in 2021.

Our operating expenses, excluding $90 million of expenses related to the Akcea Merger and restructured European operations we incurred in
2020, increased in 2021 compared to 2020 due to an increase in R&D expenses, partially offset by a decrease in SG&A expenses. Higher R&D expenses were primarily driven by our ongoing investments in advancing our Phase 3 programs, expanding
the number of Phase 3 studies and advancing and expanding our mid-stage pipeline. Additionally, we invested in our technology resulting in higher R&D expenses, which was primarily driven by the $35 million we paid in 2021 to license Bicycle’s
technology. As anticipated, our SG&A expenses were lower in 2021 compared to 2020 due to operating efficiencies we achieved from integrating Akcea and restructuring our commercial operations.

At December 31, 2021, we had $2.1 billion in cash and short-term investments, compared with $1.9 billion as of December 31, 2020, enabling us to accelerate investments in our strategic priorities, while maintaining a strong
financial foundation.

Business Segment

In 2021, we began operating as a single segment, Ionis operations, because our chief decision maker reviews operating
results on an aggregate basis and manages our operations as a single operating segment. Previously, we had operated as two operating segments, Ionis Core and Akcea Therapeutics. We completed the Akcea Merger in October 2020 and fully integrated Akcea’s
operations into ours as of January 1, 2021.

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the U.S.
As such, we make certain estimates, judgments and assumptions that we believe are reasonable, based upon the information available to us. These judgments involve making estimates about the effect of matters that are inherently uncertain and may
significantly impact our quarterly or annual results of operations and financial condition. Each quarter, our senior management reviews the development, selection and disclosure of such estimates with the audit committee of our board of directors. In
the following paragraphs, we describe the specific risks associated with these critical accounting estimates and we caution that future events rarely develop exactly as one may expect, and that best estimates may require adjustment. Our significant
accounting policies are outlined in Note 1, Organization and Significant Accounting Policies, in the Notes to the Consolidated Financial
Statements.

The following are our significant accounting estimates, which we believe are the most critical to aid in fully
understanding and evaluating our reported financial results:

In 2021, we determined the estimation of our income taxes was no longer a critical accounting estimate because we
recorded a valuation allowance against the entirety of our net deferred tax assets in the fourth quarter of 2020.

The following are descriptions of our critical accounting estimates.

Revenue Recognition

We earn revenue from several sources. The judgements and estimates we make vary between each source of our revenue. At
contract inception, we analyze our collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards
dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808). For collaboration arrangements within the scope of ASC 808 that contain multiple elements, we first determine
which elements of the collaboration reflect a vendor-customer relationship and therefore within the scope of ASC 606. When we determine elements of a collaboration do not reflect a vendor-customer relationship, we consistently apply the reasonable and
rational policy election we made by analogizing to authoritative accounting literature.

We evaluate the income statement classification for presentation of amounts due from or owed to other participants
associated with multiple activities in a collaboration arrangement based on the nature of each separate activity. For example, in our eplontersen collaboration with AstraZeneca, we recognize funding received from AstraZeneca for co-development
activities as revenue. While, we recognize cost sharing payments to and from AstraZeneca associated with co-commercialization activities and co-medical affairs activities as SG&A expense and research and development expense, respectively

The following is a summary of the critical accounting estimates we make with respect to each of our significant revenue
sources.

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Commercial Revenue: SPINRAZA royalties and Licensing and other royalty revenue

We estimate our commercial revenue from SPINRAZA royalties based on reporting we receive from Biogen each quarter. We use
this reporting to calculate our royalty revenue based on our tiered contractual royalty rate for the given period based on annual cumulative net sales. We record our royalty revenue in the same period in which Biogen sells SPINRAZA. We also estimate
commercial revenue from licensing and other royalty revenue.

Commercial Revenue: TEGSEDI and WAYLIVRA revenue, net

We recognize product sales in the period when our customer obtains control of our products. Prior to our distribution
agreements with Sobi, we recorded TEGSEDI and WAYLIVRA commercial revenue at our net sales price, or transaction price, which included estimated reserves for discounts, returns, chargebacks, rebates and other allowances that we offered within contracts
between us and our customers, wholesalers, distributors, health care providers and other indirect customers. Our reserves reflected our best estimates under the terms of our respective contracts. Our historical reserve estimates have not been
materially different from our actual amounts. Under our agreements with Sobi, we transferred all reserves to Sobi and Sobi is responsible for any applicable reserves.

Research and development revenue under collaborative agreements

We recognize R&D revenue from numerous collaboration agreements. Our collaboration agreements typically contain
multiple elements, or performance obligations, including technology licenses or options to obtain technology licenses, R&D services, and manufacturing services. Upon entering into a collaboration agreement, we are required to make the following
judgements:

Our assessment of what constitutes a separate
performance obligation requires us to apply judgement. Specifically, we have to identify which goods and services we are required to provide under the contract are distinct.

To determine the transaction price, we review the amount of consideration we are eligible to earn under the agreement. We
do not typically include any payments we may receive in the future in our initial transaction price since the payments are typically not probable because they are contingent upon certain future events.

We are required to reassess the total transaction price at each reporting period to determine if we should include
additional payments in the transaction price that have become probable. For example, in the fourth quarter of 2021, we achieved a milestone payment for $7.5 million under our 2018 strategic neurology collaboration with Biogen. Prior to achieving this
milestone payment, we did not consider this payment probable. Upon achieving the milestone payment, we reassessed the total transaction price of our 2018 strategic neurology collaboration. We added this milestone payment to our total transaction price
under our collaboration.

When we allocate the transaction price to more than one performance obligation, we make estimates of the relative stand-alone selling
price of each performance obligation because we do not typically sell our goods or services on a stand-alone basis. The estimate of the relative stand-alone selling price requires us in some cases to make significant judgements. For example, when we
deliver a license at the start of an agreement, we use valuation methodologies, such as the relief from royalty method, to value the license. Under this method we are required to make estimates including: future sales, royalties on future product
sales, contractual milestones, expenses, income taxes and discount rates. Additionally, when we estimate the selling price for R&D services, we make estimates, including: the number of internal hours we will spend on the services, the cost of work
we and third parties will perform and the cost of clinical trial material we will use.

The R&D revenue we recognize each period is comprised of several types of revenue, including amortization from upfront
payments, milestone payments, license fees and other services. Each of these types of revenue require us to make various judgements and estimates.

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Amortization from Upfront Payments

We recognize revenue from the amortization of upfront payments as we perform R&D services. We
use an input method to estimate the amount of revenue to recognize each period. This method requires us to make estimates of the total costs we expect to incur to complete our R&D services performance obligation or the total length of time it will
take us to complete our R&D services performance obligation. If we change our estimates, we may have to adjust our revenue. Refer to Note 6, Collaborative Arrangements and Licensing Agreements, for further discussion of the cumulative catch up adjustment we made.

Milestone Payments

When recognizing revenue related to milestone payments we typically make the following judgements and estimates:

License Fees

When we grant a license for a medicine in clinical development, we generally recognize as R&D revenue the total amount
we determine to be the relative stand-alone selling price of a license when we deliver the license to our partner. For example, in 2021, we received a $200 million upfront payment when we entered into an agreement with AstraZeneca to jointly develop
and commercialize eplontersen. Refer to Note 1, Organization and Significant Accounting Policies, for our revenue recognition policy. We discuss
the estimates we make related to the relative stand-alone selling price of a license in detail above under “Allocating the transaction price to each of our performance obligations.”

Estimated Liability for Clinical Development Costs

We have numerous medicines in preclinical studies and/or clinical trials at clinical sites throughout the world. On at
least a quarterly basis, we estimate our liability for preclinical and clinical development costs we have incurred and services that we have received but for which we have not yet been billed and maintain an accrual to cover these costs. These costs
primarily relate to third-party clinical management costs, laboratory and analysis costs, toxicology studies and investigator grants. We estimate our liability using assumptions about study and patient activities and the related expected expenses for
those activities determined based on the contracted fees with our service providers. The assumptions we use represent our best estimates of the activity and expenses at the time of our accrual and involve inherent uncertainties and the application of
our judgment. Upon settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements. Our historical accrual estimates have not been materially different from our actual amounts.

As of December 31, 2021, a hypothetical 10.0 percent increase in our liability for preclinical and clinical development
costs would have resulted in an increase in our loss before income tax benefit and accrued liabilities by approximately $6.6 million.

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Results of Operations

Below we have included our results of operations for 2021 compared to 2020. Refer to our 2020 Form 10-K for our results of
operations for 2020 compared to 2019.

Years Ended December 31, 2021 and December 31, 2020

Revenue

Total revenue for 2021
was $810.5 million compared to $729.3
million in 2020 and was comprised of the following (amounts in millions):

Our revenue for 2021 increased compared to 2020 due to significant partner payments across our cardiology and neurology franchises. Our
commercial revenue for 2021 included SPINRAZA royalties, TEGSEDI and WAYLIVRA revenue and licensing and other royalty revenue. As a result of our distribution agreements with Sobi for TEGSEDI and WAYLIVRA, our commercial revenue from product sales
shifted to revenue from distribution fees based on net sales generated by Sobi. We completed the transition of our TEGSEDI and WAYLIVRA commercial operations in Europe and our TEGSEDI commercial operations in North America to Sobi in the first and
second quarters of 2021, respectively.

We earn our R&D revenue from multiple
sources that can fluctuate depending on the timing of events. Our R&D revenue increased in 2021 compared to 2020 primarily because we earned more revenue from license fees in 2021 than in 2020. Our R&D revenue in 2021 was comprised of $252
million from our cardiovascular franchise, including $200 million from AstraZeneca for its license of eplontersen and a $25 million milestone payment from Novartis when Novartis achieved 50 percent enrollment in the Phase 3 Lp(a) HORIZON study of
pelacarsen. Additionally, our R&D revenue in 2021 included $168 million from our neurology franchise, with $60 million
from Biogen for advancing ION306, our medicine in development for SMA based on new Ionis chemistry, and from advancing several other neurology targets.

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Operating Expenses

Operating expenses for 2021
were $840.6 million, and decreased compared to $901.3
million for 2020. The decrease was principally due to $89.6
million of operating expenses related to the Akcea Merger and restructured European operations we incurred in 2020. Excluding expenses related to the Akcea Merger and restructured European operations, our operating expenses for 2021 increased
compared to 2020 due to an increase in R&D expenses, partially offset by a decrease in SG&A expenses. Higher R&D expenses were primarily driven by our investments in advancing our Phase 3 programs. Additionally, we recognized $35 million in
R&D expense in 2021 for licensing Bicycle’s technology. Lower SG&A expenses primarily reflected operating efficiencies achieved from integrating Akcea and restructuring our commercial operations.

Our operating expenses were as follows (in millions):

In order to analyze and compare our results of operations to other similar companies, we believe it is important to
exclude non-cash compensation expense related to equity awards from our operating expenses. We believe non-cash compensation expense related to equity awards is not indicative of our operating results or cash flows from our operations. Further, we
internally evaluate the performance of our operations excluding it.

Cost of Sales

Our cost of sales consisted of manufacturing costs, including certain fixed costs, transportation and freight,
indirect overhead costs associated with the manufacturing and distribution of TEGSEDI and WAYLIVRA and certain associated period costs.

Our cost of sales were as follows (in millions):

Our cost of sales, excluding non-cash compensation expense related to equity awards, for 2021 were consistent with
2020.

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Research, Development and Patent Expenses

Our research, development and patent expenses consist of expenses for antisense drug discovery, antisense drug
development, manufacturing and development chemistry and R&D support expenses.

The following table sets forth information on research, development and patent expenses (in millions):

Antisense Drug Discovery

We use our proprietary antisense technology to generate information about the function of genes and to determine the value
of genes as drug discovery targets. We use this information to direct our own antisense drug discovery research, and that of our partners. Antisense drug discovery is also the function that is responsible for advancing our antisense core technology.
This function is also responsible for making investments in complementary technologies to expand the reach of antisense technology.

Our antisense drug discovery expenses were as follows (in millions):

Antisense drug discovery expenses, excluding non-cash compensation expense related to equity awards, increased in 2021
compared to 2020 primarily due to $35 million in R&D expense that we recognized in 2021 for licensing Bicycle’s technology as discussed above.

Antisense Drug Development

The following table sets forth drug development expenses, including expenses for our marketed medicines and those in Phase
3 development for which we have incurred significant costs (in millions):

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Our development expenses, excluding non-cash compensation expense related to equity awards, increased in 2021 compared to
2020 primarily due to our numerous ongoing Phase 3 programs in addition to our advancing and expanding mid-stage pipeline.

We may conduct multiple clinical trials on a drug candidate, including multiple clinical trials for the various
indications we may be studying. Furthermore, as we obtain results from trials, we may elect to discontinue clinical trials for certain drug candidates in certain indications in order to focus our resources on more promising drug candidates or
indications. Our Phase 1 and Phase 2 programs are clinical research programs that fuel our Phase 3 pipeline. When our medicines are in Phase 1 or Phase 2 clinical trials, they are in a dynamic state in which we may adjust the development strategy for
each medicine. Although we may characterize a medicine as “in Phase 1” or “in Phase 2,” it does not mean that we are conducting a single, well-defined study with dedicated resources. Instead, we allocate our internal resources on a shared basis across
numerous medicines based on each medicine’s particular needs at that time. This means we are constantly shifting resources among medicines. Therefore, what we spend on each medicine during a particular period is usually a function of what is required
to keep the medicines progressing in clinical development, not what medicines we think are most important. For example, the number of people required to start a new study is large, the number of people required to keep a study going is modest and the
number of people required to finish a study is large. However, such fluctuations are not indicative of a shift in our emphasis from one medicine to another and cannot be used to accurately predict future costs for each medicine. And, because we always
have numerous medicines in preclinical and early stage clinical research, the fluctuations in expenses from medicine to medicine, in large part, offset one another. If we partner a medicine, it may affect the size of a trial, its timing, its total cost
and the timing of the related costs.

Manufacturing and Development Chemistry

Expenditures in our manufacturing and development chemistry function consist primarily of personnel costs, specialized
chemicals for oligonucleotide manufacturing, laboratory supplies and outside services. Our manufacturing and development chemistry function is responsible for providing drug supplies to antisense drug development and our collaboration partners. Our
manufacturing procedures include testing to satisfy good laboratory and good manufacturing practice requirements.

Our manufacturing and development chemistry expenses were as follows (in millions):

Manufacturing and development chemistry expenses, excluding non-cash compensation expense related to equity awards,
decreased in 2021 compared to 2020 due to costs we incurred to manufacture API for olezarsen and eplontersen in 2020.

R&D Support

In our research, development and patent expenses, we include support costs such as rent, repair and maintenance for
buildings and equipment, utilities, depreciation of laboratory equipment and facilities, amortization of our intellectual property, informatics costs, procurement costs and waste disposal costs. We call these costs R&D support expenses.

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The following table sets forth information on R&D support expenses (in millions):

R&D support expenses, excluding non-cash compensation expense related to equity awards, increased in 2021 compared to
2020. The increase was primarily related to increased personnel and occupancy costs to support advancing our pipeline and our technology.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses include personnel and outside costs associated with the
pre-commercialization and commercialization activities for our medicines and costs to support our company, our employees and our stockholders including, legal, human resources, investor relations, and finance. Additionally, we include in selling,
general and administrative expenses such costs as rent, repair and maintenance of buildings and equipment, depreciation and utilities costs that we need to support the corporate functions listed above. We also include fees we owe under our in-licensing
agreements related to SPINRAZA.

The following table sets forth information on SG&A expenses (in millions):

SG&A expenses, excluding non-cash compensation expense related to equity awards, decreased in 2021 compared to 2020 due to operating
efficiencies achieved from the Akcea Merger and restructuring our commercial operations. Non-cash compensation expense related to equity awards decreased in 2021 compared to 2020 due to reduced headcount as a result of the Akcea Merger and
restructuring our commercial operations. In addition, our SG&A expenses in 2020 included non-cash stock-based compensation expense of $42.0 million related
to the Akcea Merger and restructured European operations.

Investment Income

Investment income for 2021
was $10.0 million compared to $30.6
million for 2020. The decrease in investment income was primarily due to a decrease in interest rates during 2021 compared to 2020.

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Interest Expense

The following table sets forth information on interest expense (in millions):

Gain on Investments

Gain on investments for 2021 was $10.1 million compared to $16.5 million for 2020. During 2021, we revalued our investments in Bicycle and ProQR because we recognize publicly traded equity securities at fair value and recognized gains of $7.1 million and
$1.8 million on our investments, respectively. During 2020, we revalued our investments in three privately held companies, Dynacure, Suzhou-Ribo and Aro Biotherapeutics
because the companies sold additional equity securities that were similar to the equity we own. As a result of these observable price changes in 2020, we recognized a total gain of $14.8 million on our investments in these companies during 2020
because the sales were at higher prices compared to our recorded value.

Early Retirement of Debt

As a result of the debt offering and debt repurchase completed in April 2021, we recorded an $8.6 million loss on early
retirement of debt, reflecting the early retirement of a portion of our 1% Notes. The loss on the early retirement of our debt is the difference between the amount we paid to retire our 1% Notes and the net carrying balance of the liability at the time
that we retired the debt.

Income Tax Expense (Benefit)

We recorded an income tax benefit of $0.6 million for 2021 compared to an income tax expense of $345.2 million for 2020.
Our 2020 income tax expense included a non-cash tax expense of $341 million related to an increase in the valuation allowance recorded against Ionis’ U.S. federal net deferred tax assets in 2020. We now maintain a valuation allowance against all our
consolidated U.S. federal and state net deferred tax assets. Refer to Note 5, Income Taxes, in the Notes to our consolidated financial statements
for further details on our valuation allowance.

Net Loss

We generated a net loss of $28.6
million for 2021 compared to $479.7
million for 2020. Our net loss decreased for 2021 compared to 2020 primarily due to the valuation allowance we recorded in 2020 as a result of
the Akcea Merger, as discussed above in the income tax expense (benefit) section. In addition, our revenue increased and expenses decreased year-over-year, as discussed above in the revenue and expenses sections, respectively.

Net Loss Attributable to Noncontrolling Interest in Akcea Therapeutics, Inc.

Our noncontrolling interest in Akcea on our statement of operations for 2020 was a net loss of $35.5 million. This amount represents the portion of Akcea’s net loss that third parties owned for the period from January 1, 2020 until we acquired 100 percent of Akcea in October 2020.
After we completed the Akcea Merger in October 2020, we no longer recorded any adjustment related to noncontrolling interest for Akcea’s net loss.

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Net Loss Attributable to Ionis Pharmaceuticals, Inc. Common Stockholders and Net Loss per Share

We had a net loss attributable to our common stockholders of $28.6 million for 2021 compared to $444.3 million in 2020. Basic and diluted net loss per share for 2021 were each $0.20. Basic and diluted net loss per share for 2020 were each $3.18.

Liquidity and Capital Resources

We have financed our operations primarily
from research and development collaborative agreements. We also finance our operations from commercial revenue from SPINRAZA royalties and TEGSEDI and WAYLIVRA commercial revenue. From our inception through December 31, 2021, we have earned approximately $5.8 billion in revenue. We have also financed our operations
through the sale of our equity securities and the issuance of long-term debt. From the time we were founded through December 31, 2021, we have raised net proceeds of approximately $2.0 billion from the sale of our equity securities. Additionally, we borrowed approximately $2.1 billion under long-term debt arrangements to finance a portion of our operations over the same
time period.

Our cash, cash equivalents and short-term
investments, debt obligations and working capital increased from 2020 to 2021, primarily as a result of receiving more than $760 million in payments from partners in 2021 and issuing $632.5 million of 0% Notes (due in April 2026). This increase was
partially offset by our repurchase of $247.9 million of our 1% Notes in April 2021 and payment of the remaining principal balance of our 1% Notes with $62.0 million of cash at maturity in November 2021. At December 31, 2021, we had $2.1 billion of
cash and short-term investments on hand. We believe our cash and short-term investment balance is sufficient to fund our operations in the short-term and in the longer-term. In 2021 our working capital increased because our cash and
investments increased as discussed above.

The following table summarizes our contractual obligations as of December 31, 2021. The table provides a breakdown of when obligations become due. We provide a more detailed description of the major components of our debt in Note 3, Long-Term Obligations and Commitments.

Our contractual obligations consist primarily of our convertible debt. In addition, we also have facility mortgages, facility leases,
equipment financing arrangements and other obligations. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash
settlement with the respective taxing authorities. Therefore, we have excluded our gross unrecognized tax benefits from our contractual obligations table above. We have not entered into, nor do we currently have, any off-balance sheet arrangements (as
defined under SEC rules).

Convertible Debt and Call Spread

Refer to our Convertible Debt and Call Spread accounting
policies in Note 1, Organization and Significant Accounting Policies, and Note 3, Long-Term Obligations and Commitments,
in the Notes to our consolidated financial statements for the significant terms of each convertible debt instrument.

Research and Development and Manufacturing Facilities

Refer to Note 3, Long-Term Obligations
and Commitments, in the Notes to our consolidated financial statements for further details on our research and development and manufacturing facilities.

Operating Leases

Refer to Note 3, Long-Term Obligations and
Commitments, in the Notes to our consolidated financial statements for further details on our operating leases.

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Other Obligations

In addition to contractual obligations, we had outstanding purchase orders as of December 31, 2021 for the purchase of
services, capital equipment and materials as part of our normal course of business.

We may enter into additional collaborations with partners which could provide for additional revenue to us and we may
incur additional cash expenditures related to our obligations under any of the new agreements we may enter into. We currently intend to use our cash, cash equivalents and short-term investments to finance our activities. However, we may also pursue
other financing alternatives, like issuing additional shares of our common stock, issuing debt instruments, refinancing our existing debt, or securing lines of credit. Whether we use our existing capital resources or choose to obtain financing will
depend on various factors, including the future success of our business, the prevailing interest rate environment and the condition of financial markets generally.