IONIS PHARMACEUTICALS INC (IONS) FY 2024 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, 2024, and our financial condition as of December 31, 2024.
Refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our 2023 Form 10-K for our results of operations for 2023
compared to 2022. 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 Part I, Item 1A, 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 included in Part II, Item 8, Financial Statements and Supplementary Data, of this report.

Overview

As noted in our Business Overview in Part I, Item 1, Business, for three decades, we have invented medicines that we believe bring better futures to people with serious diseases. Today, as a
pioneer in RNA-targeted medicines, we continue to drive innovation in RNA therapies. We currently have six marketed medicines: TRYNGOLZA, WAINUA, SPINRAZA, QALSODY, TEGSEDI and WAYLIVRA. We also have a rich innovative late- and mid-stage pipeline in neurology, cardiology and rare diseases. We currently have nine medicines in Phase 3 development and additional medicines in early and mid-stage development.
Refer to Part I, Item 1, Business, for further details on our business and key developments in our medicines.

Results of Operations

Below we have included our results of operations for 2024 compared to 2023. Refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our 2023
Form 10-K for our results of operations for 2023 compared to 2022. The following table provides selected summary information from our consolidated statements of operations for 2024
and 2023 (in millions):

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Revenue

Total revenue for 2024 was $705.1 million compared to $787.6 million in 2023 and was comprised of the following (in millions):

Commercial revenue in 2024 included new sources of commercial revenue with the launch of WAINUA in the U.S. in late January 2024 and the
launch of TRYNGOLZA in the U.S. in late December 2024. SPINRAZA royalties in 2024 compared to 2023 were impacted from an annual order from a single country that did not recur in 2024.

R&D revenue decreased in 2024 compared to 2023 primarily due to the decrease in WAINUA joint development revenue as development
activities relating to ATTRv-PN wound down with the commercial launch of WAINUA. In addition, R&D revenue decreased due to the timing of significant partner payments.

WAINUA (Eplontersen) Collaboration with AstraZeneca

Our financial results for the years ended December 31, 2024 and 2023 reflected the cost-sharing provisions related to our collaboration with AstraZeneca to develop and
commercialize WAINUA for the treatment of ATTR. Under the terms of the collaboration agreement, AstraZeneca is currently paying 55 percent of the costs associated with the ongoing global Phase 3 development program. Because we are leading and
conducting the Phase 3 development program, we are recognizing as R&D revenue the 55 percent of cost-share funding AstraZeneca is responsible for, net of our share of AstraZeneca’s development expenses, in the same period we incur the related
development expenses.

As AstraZeneca is responsible for the vast majority of the medical affairs and commercial costs in the U.S. and all costs associated with
bringing WAINUA to market outside the U.S., we are recognizing cost-share funding we receive from AstraZeneca related to these activities as a reduction of our medical affairs and commercialization expenses, which we classify as R&D and selling,
general and administrative, or SG&A, expenses, respectively. We expect our medical affairs and commercialization expenses to increase as WAINUA advances toward the market under our collaboration with AstraZeneca.

The following table sets forth information on revenue and expenses under this collaboration (in millions):

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Our WAINUA joint development revenue in 2024 and 2023 includes a $30 million milestone payment from AstraZeneca that we earned when the
MHRA approved WAINUA for ATTRv-PN in the UK as WAINZUA and a $50 million milestone payment from AstraZeneca that we earned when the FDA approved WAINUA for ATTRv-PN in the U.S., respectively.

Operating Expenses

The following table sets forth information on operating expenses (in millions):

Operating expenses, excluding non-cash compensation expense related to equity awards, increased slightly in 2024 compared to 2023.
SG&A expenses increased year over year primarily due to the launches of WAINUA and TRYNGOLZA, including establishing the TRYNGOLZA field team in the second quarter of 2024, and advancing launch preparation activities for donidalorsen. R&D
expenses were essentially flat year over year as several late-stage studies ended.

Non-cash compensation expense related to equity awards increased in 2024 compared to 2023 due to increased headcount and a higher stock
price on the grant date of annual equity awards in 2024 compared to 2023. We believe non-cash compensation expense related to equity awards is not indicative of our operating results or cash flows from our operations.

Cost of Sales

Our cost of sales is comprised of costs related to our commercial revenue, which consisted of manufacturing costs, including certain fixed
costs, transportation and freight, indirect overhead costs primarily associated with the manufacturing and distribution of TRYNGOLZA, TEGSEDI and WAYLIVRA and certain associated period costs.

The following table sets forth information on cost of sales (in millions):

Research, Development and Patent Expenses

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

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

Drug Discovery

We use our proprietary technologies 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 drug discovery research, and that of our partners. Drug discovery is also the function that is responsible for advancing our core technology. This function is also responsible for making
investments in complementary technologies to expand the reach of our technologies.

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The following table sets forth information on drug discovery expenses (in millions):

Drug discovery expenses, excluding non-cash compensation expense related to equity awards, decreased in 2024 compared to 2023. In 2023, we
recognized $15 million in R&D expense for licensing Vect-Horus’ platform technology.

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):

Our development expenses, excluding non-cash compensation expense related to equity awards, were essentially flat in 2024 compared to
2023. We expect our development expenses will continue to be stable as several late-stage studies end and we reallocate resources toward earlier stage programs.

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. Because we always have numerous
medicines in preclinical and varying stages of clinical research, the fluctuations in expenses from medicine to medicine, in large part, offset one another. If we partner a medicine, it may affect the size of a trial, its timing, its total cost and the
timing of the related costs.

Medical Affairs

Our medical affairs function is responsible for funding and coordinating investigator-sponsored trials, communicating scientific and
clinical information to healthcare providers, medical professionals and patients, and managing publications.

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The following table sets forth information on medical affairs expenses (in millions):

Medical affairs expenses, excluding non-cash compensation
expense related to equity awards, increased in 2024 compared to 2023 as we continued advancing our late-stage pipeline.

Manufacturing and Development Chemistry

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

The following table sets forth information on manufacturing and development chemistry expenses (in millions):

Manufacturing and development chemistry expenses, excluding
non-cash compensation expense related to equity awards, decreased in 2024 compared to 2023 due to the timing of manufacturing performed by our contract manufacturing organizations for drug product related to several late-stage programs. Refer to the
section titled, Manufacturing, in Part I, Item 1, Business, for further details on the activities and types of costs we incur
in our manufacturing process.

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, information technology costs, procurement costs and waste disposal costs. We call these costs R&D support expenses.

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

R&D support expenses, excluding non-cash compensation expense related to equity awards, were essentially flat in 2024 compared to
2023.

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Selling, General and Administrative Expenses

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 SG&A 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 and QALSODY.

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

SG&A expenses, excluding non-cash compensation expense related to equity awards, increased in 2024 compared to 2023 due to the
launches of WAINUA and TRYNGOLZA, including establishing the TRYNGOLZA field team in the second quarter of 2024, and advancing launch preparation activities for donidalorsen.
We expect SG&A expenses to increase as we continue to invest in our independent commercial launches.

Investment Income

Investment income for 2024
was $107.0 million compared to $89.0
million for 2023. The increase in investment income was primarily due to an increase in interest rates associated with our investments during
a majority of 2024 compared to 2023. In addition, our cash available for investing increased due to the $489.1 million net proceeds we received from our public common stock offering in September 2024. Refer to Part IV, Item 15, Note 8, Stockholders’ Equity, in the Notes to the Consolidated Financial Statements for further details on the public offering.

Interest Expense

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

Interest expense for 2024 was $17.0 million compared to $12.7 million for 2023. In June 2023, we completed a $575.0 million offering of our 1.75% Notes and repurchased $504.4 million in principal of our 0.125% Notes.
As a result, beginning in the second quarter of 2023, our interest expense related to our convertible notes included interest expense incurred for our 1.75% Notes. Interest expense in 2024 included a full year of interest expense related to our 1.75%
Notes.

Interest Expense Related to Sale of Future Royalties

We recorded $73.5 million and $68.8 million of interest expense related to the sale of future royalties in 2024 and 2023, respectively. These amounts are related to the Royalty
Pharma Investments, or Royalty Pharma, transaction, in which we sold a minority interest in our future SPINRAZA and pelacarsen royalties to Royalty Pharma for a $500 million upfront payment and $625 million of potential future payments. Refer to Part
IV, Item 15, Note 7, Long-Term Obligations and Commitments, in the Notes to the Consolidated Financial Statements for further details.

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Loss on Investments

We recorded a $2.9 million and
$1.9 million loss on investments for 2024 and 2023, respectively. The period-over-period fluctuation in our loss on investments was primarily
driven by changes in the fair value of our investments in privately held and publicly traded biotechnology companies.

Other Income (Expense)

In 2023, we completed a $575.0 million offering of our 1.75%
Notes and used $488.2 million of the net proceeds to repurchase $504.4 million in principal of our 0.125% Notes. As a result of these repurchases, we recorded a $13.4 million gain on early retirement of debt in 2023, which reflects the difference
between the amounts we paid to repurchase portions of our 0.125% Notes and the net carrying balance of the liability at the time that we repurchased the debt. Refer to Part IV, Item 15, Note 7, Long-Term Obligations and Commitments, in the Notes to the Consolidated Financial Statements for further
details regarding our convertible debt.

Income Tax Expense (Benefit)

We recorded an income tax benefit of $6.2 million for 2024 compared to an income tax expense of $32.3 million for 2023.

The income tax benefit during 2024 primarily related to adjustments to prior year tax return positions for the royalty purchase agreement
with Royalty Pharma and deductions related to foreign SPINRAZA royalties.

The decrease in income tax expense for 2024 compared to 2023 primarily related to the impact of the Royalty Pharma transaction in 2023. We
reflected the Royalty Pharma transaction as a taxable sale, which required us to include the proceeds from the sale, net of currently deductible issuance costs, as taxable income in 2023.

We continue to maintain a full valuation allowance on all our net deferred tax assets.

Net Loss and Net Loss per Share

We generated a net loss of $453.9
million for 2024 compared to $366.3
million for 2023. Our net loss increased for 2024
compared to 2023 primarily due to factors discussed in the sections above. Basic and diluted net loss per share for 2024 were $3.04 compared to $2.56 for 2023. Our net loss per share increased for 2024 compared to 2023 primarily due to factors discussed in the sections above.

Liquidity and Capital Resources

We have financed our operations primarily from research and
development collaborative agreements. We also financed our operations from commercial revenue from SPINRAZA royalties and TEGSEDI and WAYLIVRA commercial revenue. In addition, we began receiving commercial revenue from WAINUA royalties in
2024. From our inception through December 31, 2024, we
have earned approximately $7.9 billion in revenue. We have also
financed our operations through the sale of our equity securities, the issuance of long-term debt, the sale leaseback of facilities and the sale of future royalties. From the time we were founded through December 31, 2024, we have raised net proceeds of approximately $2.6 billion from the sale of our equity securities, which includes our sale
of 11.5 million shares of common stock for net proceeds of $489 million in September 2024. Additionally, from our inception through December 31, 2024, we have borrowed approximately $2.7 billion under long-term debt arrangements and received proceeds of approximately $0.5 billion from the sale of future royalties to finance a portion of our operations.

Our working capital increased from 2023 to 2024 primarily due to a decrease in current liabilities as a result of lower deferred contract
revenue as of December 31, 2024 compared to December 31, 2023. During the same period, our long-term obligations did not change significantly.

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The following table summarizes our contractual obligations, excluding our liability related to the sale of future royalties, as of December 31, 2024. The table provides a breakdown of when obligations become due. We provide a more detailed description of the major components of our
debt in Part IV, Item 15, Note 7, Long-Term Obligations and
Commitments, in the Notes to the Consolidated Financial Statements.

Our contractual obligations consist primarily of our convertible debt. In addition, we also have a facility mortgage, facility leases,
equipment financing arrangements and other obligations. We believe our cash, cash equivalents and short-term investments, as well as plans for cash in the future, will be sufficient to fund our planned operations and these obligations. 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 Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, and Note 7, Long-Term Obligations and Commitments, in the Notes to the Consolidated Financial Statements for the significant terms of each convertible debt instrument.

Operating Facilities

Refer to Part IV, Item 15, Note 7, Long-Term Obligations and Commitments, in the Notes to the Consolidated
Financial Statements for further details on our operating facilities.

Operating Leases

Refer to Part IV, Item 15, Note 7, Long-Term Obligations and Commitments, in the Notes to the Consolidated
Financial Statements for further details on our operating leases.

Royalty Revenue Monetization

In 2023, we entered into a royalty purchase agreement with Royalty Pharma to monetize a portion of our future SPINRAZA and pelacarsen
royalties we are entitled to under our agreements with Biogen and Novartis, respectively. Refer to Part IV, Item 15, Note 7, Long-Term Obligations and Commitments, in the Notes to the Consolidated Financial Statements
for further details on this agreement.

Other Obligations

In addition to contractual obligations, we had outstanding purchase orders as of December 31, 2024 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, securing lines of credit or executing royalty monetization agreements. 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.

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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 Part IV, Item 15, 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:

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 Accounting Standards Codification, or ASC, Topic 808, Collaborative Arrangements,
or 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 are therefore within the scope of ASC 606, Revenue from Contracts with Customers. 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.

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

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 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.

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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 that we recognize immediately or amortize over the period in which we satisfy our performance obligation. Each of these types of revenue require us to make various judgements and estimates.

R&D Services with 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 amount of effort it will take us to complete our R&D
services performance obligation. If we change our estimates, we may have to adjust our revenue.

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. Refer to Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, in the Notes to the Consolidated Financial Statements 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, 2024, a
hypothetical 10 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 of approximately $7.7 million.

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Liability Related to Sale of Future Royalties

In 2023, we entered into a royalty purchase agreement with Royalty Pharma to monetize a portion of our future SPINRAZA and pelacarsen
royalties we are entitled to under our agreements with Biogen and Novartis, respectively. Under our agreement with Royalty Pharma, we calculate the liability related to the sale of future royalties, effective interest rate and the related interest
expense using our current estimate of anticipated future royalty payments under the arrangement, which we periodically reassess based on internal projections and information from our partners who are responsible for commercializing the medicines. The
amount that Royalty Pharma will receive under the agreement is based on sales of SPINRAZA, our currently commercialized medicine, and pelacarsen, a product candidate that is not currently commercialized. As such, the repayment amounts that we estimate
related to projections of future pelacarsen revenues contain more subjective estimation which we believe could lead to larger changes in estimates in the future. If there is a material change in our estimate, we will prospectively adjust the effective
interest rate and the related interest expense.

There are numerous factors, most of which are not within our control, that could materially impact the amount and timing of future royalty
payments, particularly those from Novartis for pelacarsen, and could result in changes to our estimate of future royalty payments to Royalty Pharma. Such factors include, but are not limited to, the regulatory approval and commercial sales of
pelacarsen, competing products or other significant events. These factors and other events or circumstances could result in reduced royalty payments from sales of pelacarsen, which would result in a reduction of our non-cash royalty revenue and
non-cash interest expense over the life of the agreement. Conversely, if sales of pelacarsen are more than amounts we estimated, the non-cash royalty revenue and non-cash interest expense we record would be greater over the life of the arrangement.